Bull Market Definition & Meaning

Financial markets have two main trends which they follow throughout time. Prices are either going up or going down. Even though not all markets worked out well, it does emphasize the necessity of understanding when you are in a bull market as well as how to profit from it.

A bull market is defined as a certain situation in which prices are rising or are projected to rise inside a financial market. The bull market is most commonly associated with the stock market; however, it can also refer to any tradable asset, including currencies, commodities, real estate, and bonds. In bull markets, getting access to a wide range of instruments can help diversify risk.

While security prices go up and drop relatively constant throughout the trading process, the phrase “bull market” is usually reserved for extended periods where a substantial percentage of the security prices is rising. It was found that a bull market can continue to happen for several months or years. As prices normally keep on going up, investors make much profit at any price they bought the investment. Investors weep over the end of the bull market at 20% as the bear market starts.

A bull market could last once prices have increased for such a long time that investors think prices will keep going up. In some kind of a self-fulfilling prophecy—a concept being used investing which refers to investors producing market circumstances—investors’ beliefs regarding stock prices affect the prices themselves, resulting in higher prices as investors are driving the prices to rise. When prices start to rise, the same percentages are being used to indicate the start of a bull market.

Recognizing A Bull Market

Recognizing a bullish market might be quite tricky because stock market prices are regularly fluctuating. In addition, the concept of a bull market largely depends on the investor’s objectives and holding period, since intraday traders may view a periodic high to be a bullish trend.

However, a general definition of a stock market bull is a sustained high accompanied by a substantial gain in stock prices of at least 20% or more. The following measures can be used to determine these bullish trends: lower bond yields, volatility index, and market rally.

Causes

It is indeed impossible to accurately predict how markets will move. Prices are affected by economic and psychological aspects. Prices are driven up by strong demand and a lack of supply for securities. In other words, whenever a large number of people would like to buy securities but only a small number of them are willing to sell, prices rise. Businesses tend to have higher profit figures amid a strong economy than it was during the recession.

A bull market exists among countries that have basically strong policies in place, as well as a good implementation system in place to assure adequate production of products and services, and appropriate market circumstances to encourage sales. Moreover, when a country’s unemployment rate is extremely low and individual per capita income is increasing, speculative demand is increasing as people have the money to spend, signifying a bullish market trend.