What is Bull and Bear Market? Learn of Short and Long Positions (2024)

FAQs

What is Bull and Bear Market? Learn of Short and Long Positions? ›

In a bullish market, investors are very optimistic, and this is reflected in investors taking long positions as they feel prices will rise further. Conversely, in a bearish market, the market sentiment is quite pessimistic and reflected by investors taking a lot of short positions.

A bull market refers to major upswing in the markets, while a bear market is a pronounced market downturn. Bull markets often correspond to periods of economic and job growth; bear markets are often tied to periods of economic decline and a shrinking economy.

A bullish market is a time when the demand is higher than the supply of shares and results in the rising of the share prices. A bearish market is a time when the supply is higher than the demand for the shares and results in the fall of the prices of the shares.

Bulls charge forward and bears hibernate

). In a bear market, investors pull back (like bears hibernating). Prices start to hover and go down, and people wait and see more before investing additional money in stocks and bonds.

Having a “long” position in a security means that you own the security. Investors maintain “long” security positions in the expectation that the stock will rise in value in the future. The opposite of a “long” position is a “short” position. A "short" position is generally the sale of a stock you do not own.

A bull market is commonly defined as a period of time when major stock market indexes are generally rising, with market indexes eventually reaching new highs. (Reminder: A stock market index is a collection of stocks that are tracked over time to gauge their overall performance.

The current bull market started in October 2022, when the S&P 500 reached its most recent low. Since then, the index has swelled about 35 percent.

Bulls are generally powered by economic strength, whereas bear markets often occur in periods of economic slowdown and higher unemployment. Instead of wanting to buy into the market, investors want to sell, often fleeing for the safety of cash or fixed-income securities. The result is a seller's market.

During a bullish market, when the MACD line crosses above the signal line, it is a bullish signal, indicating that the uptrend is gaining momentum. This can be an entry point for long positions. On the other hand, when the MACD line crosses below the signal line, it is a bearish signal.

It can be easy to confuse your financial market animals — both bulls and bears are large, strong and known for territorial behavior. But in a bull market, stock market values rise at least 20% from a recent low, whereas in a bear market, average stock values drop by at least 20% from a recent peak.

How do you make money in a bear market? ›

But you can maximise your chances of a profit in a bear market by following bearish-friendly strategies. These include diversifying your holdings, focusing on the long-term, taking a short-selling position, trading in 'safe haven' assets and buying at the bottom.

A bear market is a downward trend in financial markets, indicating a weakening economy and a loss of investor confidence. Generally, a market is considered a bear market when prices have declined more than 20%. Bear markets can be as short as a few weeks or as long as a several years.

Although a bear market may have a few occasional “relief rallies,” the general trend is downward. Bear markets are characterized by investors' pessimism and low confidence. During a bear market, investors often seem to ignore any good news and keep selling investments, which pushes prices even lower.

In the trading of assets, an investor can take two types of positions: long and short. An investor can either buy an asset (going long) or sell it (going short).

Some of the common indicators that predict stock prices include Moving Averages, Relative Strength Index (RSI), Bollinger Bands, and MACD (Moving Average Convergence Divergence). These indicators help traders and investors gauge trends, momentum, and potential reversal points in stock prices.

The investor made a profit of Rs. 50 per share, or Rs. 5,000 in total, by selling the stock high and buying it back low. This is an example of a short position, where the investor made a bet that the stock price would fall and was rewarded with a profit when it did.

One way to capitalize on the rising prices of a bull market is to buy stocks early on and sell them before they reach their peak. In a bear market, where there is more loss potential, investing in equities should be done with great prudence, since you are likely to incur a loss — at least initially.

The bottom line. When a bear strikes, you can see share prices falling hard and market values getting lower. Mentally, this may trigger your sense to "buy low," which is generally a smart thing to do.

A bear market is a downward trend in financial markets, indicating a weakening economy and a loss of investor confidence.

A bull market is a period of time in financial markets when the price of an asset or security rises continuously. The commonly accepted definition of a bull market is when stock prices rise by 20%.