What is a bull and bear market?

What is a bull and bear market?

Everyone has heard such concepts as «bulls» and «bears» regarding the stock exchange. However, not everyone knows these are the two main strategies of traders.

Let’s explore who bulls and bears are:

Bulls are traders who expect the price to rise, enter into a contract to buy assets, and wait for the next rise to sell higher, profiting from the difference in value. The bulls stimulate the increase in asset prices. Bears play short, enter into contracts to buy, and wait for asset prices to decline to purchase the asset as cheaply as possible. The bearish strategy is pulling prices down.

When we speak of «bull» and «bear» markets, we consider the current state.

A bull market has a rising trend when prices are growing or foreseen to grow, and traders expect prices to continue rising in the future. In contrast, the bear market is expecting prices to drop and shows that there are more bears than bulls.

Bull and bear markets can be applied to the whole market or just one asset. The main thing is that different strategies might be used depending on the market state.

The simplest one is to open a long position on the bull market and open short positions on the bear market. However, always remember about potential losses and manage your risks carefully.