What do Bull Market and Bear Market mean?

Bull Market and Bear Market are two terms that are used to refer the stock market trend for a particular period. It is an assumed tendency of stock market to go in a particular direction over time.  

Bull Market and Bear Market (Image Reference)

A stock market where the price of stocks and bonds are in a trend of rising over a particular period is termed as “Bull Market”. Buying and selling of stocks and bonds follow the same rule that is used in terms of other buy and sell that is “The Theory of Supply and Demand”. When more people are interested in buying a stock, the owners of that stock will certainly hold and eventually they would love to sell that in higher price. Thus the price increases and in this way the whole market goes up when the demand of majority of stocks in a stock exchange is high. The financial health of a stock is the main reason behind the increase or decrease of price of that stock.

Bull market is characterized by investor’s confidence, high expectation and optimism that a rising trend will continue over a period of time due to some better performance of the corporations those are listed in the stock market and improvements of economic indicators that affect the stock price. A bullish trend in the stock market starts after the country’s general economy shows clear signs of growth or recovery from economic downturn .

One the other hand the term “Bear Market” refers to the stock market where the stock prices are declining continuously due to lose of investor’s confidence, pessimism, fear and thinking that the stock price will continue to fall for a certain period of time. The investors do rarely try to buy more shares and sell their current shares. Bear trend comes mainly for certain negative changes to the economic indicators that affect stock market as a whole.

There is no hard and first definition or explanation when a market should be called as bear market but it is said that if the general index fall more than 20% over a period of just two months, that stock market can be called as bear market.

The use of the terms “Bulls” and “Bears” in the stock market comes from the way bulls and bears attack each other while they fight. The words have been used as a metaphor. Bulls thrust their horns up into the air and bears swipe their paws down. So, the price rising is “Bull Trend” and price fall is “Bear trend”