February 11, 2024

Decoding the Bull vs. Bear Market: Predicting Stock Market Trends

If you are a trader, you may be aware of bull and bear markets. But if you are only beginning to trade, you might be yearning to know the difference between the two. So, without getting technical, we will help you understand this.

While a bull market is where the economy is expansive and the stock market is high in value, a bear market is the contrary. Here, the economy is constantly shrinking with a deteriorating stock market value.

Both bull and bear markets are two important forms of market trends that define the state of the financial market across the globe. Let us learn more about them so you can predict stock market trends better.

Decoding The Bull Market

When the stock prices shoot up by at least 20% since the last time, it denotes a bull market. Typically, bull markets can last up to a decade. During this time, investors are more confident about their operations as the market is doing well, and there is less likelihood of losses. Thankfully, bull markets exist for a longer period of time when compared to bear markets. So, the market trend analysis needs to be leveraged accordingly.

How Are Bull Markets Caused?

When the economy of a nation is already strong or on the path of strengthening is when one can refer to a bull market. They also lead to aggravation in corporate profits, where the investor’s confidence naturally shoots up. During this time, investors are also more excited about participating in the bull markets since the returns are expected to be higher.

What Are The Features Of The Bull Market?

Firstly, you may experience an aggravation in the trading volume. This may occur because more investors are willing to participate in buying and holding securities for better gains. The securities also generally achieve better valuations since investors are much more willing to pay for them.

If companies perform properly in the bull market, they can also choose to reward shareholders. This is typically done by improving the dividends. So, if you are an income-focused investor, this might be thoroughly attractive to you.

Decoding The Bear Market

A market where the stock prices decline below 20% and keep deteriorating may be referred to as a bear market. When issues in the Gross Domestic Product escalate, people start losing jobs, or stock market value goes down significantly, you can expect a bear market. That is why learning about share market trend analysis to understand how the bear market can impact these sectors is significant.

How Are Bear Markets Caused?

Inflation and rising interest rates are the two important causes of the bear market. Bearish phases may also trigger if global factors and recession start to intensify their characteristics. Generally, bear markets may last up to 9.6 months, depending upon the severity of its phase.

Winding Up!

Both bull and bear markets come with their fair share of characteristics. Before you indulge in trading, it is vital that you understand each one of them vividly so that you can make trading effortlessly as per the market conditions.

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