Every good investor knows the difference between a bull market and a bear market. A bear market is when the market goes down for a long time. Upward moving markets are bull markets. If a stock is doing well, people say that it is bullish. It is bearish if the price is going down. Of course, there is more to bull and bear markets than that, as you will soon find out.
- Markets Can Both Go Up and Down
These terms are only used to talk about long-term changes in the market, not short-term ones. This is because prices can sometimes go up even during a bear market.
A Look Back at the Economy
Most of the time, the stock market shows how the economy is doing. When the economy is in a bull market, unemployment is low and interest rates are reasonable. Most of the time, bear markets happen when the economy is slowing down. When investors lose faith, companies may start letting people go. At its worst, a bear market that lasts too long can cause panic selling, which can cause the market to crash. Investors who are too excited can make the bull market go too far. It causes a bubble in the market that will eventually pop.
- When to get paid
Even though you can make the most money when the market is going up, you can also make money when the market is going down. Investors can make money from each type of market if they know what makes it unique. When the market is up, as you might expect, investors want to buy more stock. People have extra money they want to put into stocks because the economy is doing well and people are making more money. This makes it so there aren't enough of them, which drives up prices even more. During bear markets, on the other hand, prices go down, so investors want to sell their stocks and put their money into fixed-return instruments like bonds. As money is taken out of the stock market, there is more supply than there is demand. This makes prices go down even more.
- Bull markets are the best places to make money.
A bull market is the best time to make money. You'll make the most money if you start right at the beginning. During a bull market, any dips in the market are short-lived and should be fixed soon. Prices can't keep going up forever, though, so the investor needs to be able to tell when the market is at its highest point and sell.
- When To Buy
Bear markets are times when you can buy stocks at cheap prices. Investing near the end of a bear market is the best way to make money. Prices will probably go down before they go up again, so the investor should be ready for a loss in the short term. During bear markets, another way to invest is to sell short. When you short sell, you sell stock you don't own in the hope that the price will go down further. This way, when it's time to deliver the stock, you can buy it for less than you sold it for.
