The History of Bull and Bear Markets

You should not construe any such information or other material as legal, tax, investment, financial, or other advice. Nothing contained herein shall constitute a solicitation, recommendation, endorsement, or offer by Crypto.com to invest, buy, or sell any crypto assets. Returns on the buying and selling of crypto assets may be subject to tax, including capital gains tax, in your jurisdiction. As a crypto user, you’ll inevitably run into a number of bull and bear markets. Despite their differences, crypto holders can optimise their strategies to maximise the opportunity presented in each market. Hence, it is vital to understand the dynamics of bull and bear markets.

This is due to the predictability of human behaviour and the cyclical nature of our emotions-actions. This is one of the great benefits of a market downturn and one of the key differences between bear markets vs bull markets for attentive and astute investors. When looking at the differences between bear markets vs bull markets, the former is often seen by observers as a decline of 20% from a previous high.

Are there any rules to defining bull and bear markets?

Whether it’s better to buy stocks in a bull vs. bear market isn’t a simple question; every market is unique, as are each individual’s circumstances. Investing in any kind of market comes with risk, including the risk that you could lose money, so it’s important to understand best practices for investing in both bull and bear market phases. Since WWII, bear markets have taken 13 months on average to go from peak to trough and 27 months to get back to breakeven. The longest bear market in history ended in March 1942, lasted 61 months, and cut the S&P 500 Index by 61%. By and large, investors look for a 20% gain from a low point and steady gains over at least a six-month period to understand when a bear market has ended.

That is the reason professionals use investment tools to help with technical analyses. Moving averages, support or resistance, and Relative Strength Index (RSI) are leading indicators. Making money off bearish events can impair an investor’s judgement in future decisions. Predicting a market downturn is not always easy and can cost you money. A bearish trend speaks of a receding economy with a stagnant or decreasing GDP.

Bulls and bears

Sometimes a market may go through a period of stagnation as it tries to find direction. In this case, a series of upward and downward movements would actually cancel-out gains and losses resulting in a flat market trend. A short-term secondary trend when there is an increase of 10-20% of the market’s value during an extended bear market. When the market is in the Run-Up phase, it is called a bull bulls vs bears definition market, while in the Run-Down phase it is a bear market. “Defensive stocks will lose ground in a bear market, but tend to lose less than average, supported by steady demand for their products and, often, generous dividends,” write Smith and Burrows. By employing a dollar-cost averaging strategy of investing a fixed dollar amount over regular periods, investors can lower their average buy-in cost.

But there are steps investors can take to prepare for market turmoil and insulate their portfolios. For example, keep an eye on indicators such as Treasury yields or the Cboe Volatility Index (VIX) for signs of escalating concern among market professionals. The VIX, known as the “fear gauge,” often spikes higher during periods of market or political tumult. https://www.bigshotrading.info/blog/margin-trading/ We have a basic stock trading course, swing trading course, 2 day trading courses, 2 options courses, 2 candlesticks courses, and broker courses to help you get started. Each day we have several live streamers showing you the ropes, and talking the community though the action. We don’t care what your motivation is to get training in the stock market.

Bull and bear markets: What to know about each

The term bear had been in use prior to the breaking of the South Sea Bubble; however, the affair brought bear into widespread use. The bear sold a borrowed stock with a delivery date specified in the future. This was done with the expectation that stock prices would go down and the stock could be bought back at the lower price, with the difference from the selling price kept as profit. This type of selling was used by many people involved in an early eighteenth-century scandal in England known as the South Sea Bubble. Bull markets describe a period of growth for a stock, an industry, entire markets, while bear markets reflect a decline.

• The desirable economic projections that typify a bull market contribute to great price performances.
• The term “bull vs. bear” denotes the ensuing trends in stock markets – whether they are appreciating or depreciating in value – and what is the investors’ outlook about the market in general.
• In the case of equity markets, a bull market denotes a rise in the prices of companies’ shares.
• This type of market encourages buying, as the conditions are favourable.
• A bull market begins when investors feel that prices will start, then continue to rise; they tend to buy and hold stocks in the hope that they are right.

Because markets are characterized by cyclical rises and falls (as highlighted earlier), the generally-accepted threshold is a price decline of 20% from a peak, and which lasts for two or more months. And with a life of more than a decade, it was twice as long as the average bull run of the post-WWII period. On the flip side, a bear run implies a widespread and sustained downward trend.

A few extreme examples of bear markets are the Great Recession around the 2008 financial crisis and the Great Depression, which roughly began with the stock market crash of 1929. In contrast, the post-World War II economic boom is considered an example of a bull market. That’s because at any given time the market is usually described as one or the other—meaning they alternate as part of an ongoing cycle.