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Is the Market Bullish or Bearish? A Look at the Common Indicators

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Is the Market Bullish or Bearish? A Look at the Common Indicators

Bullish market, bearish market: you might have heard the terms in the news, read about it somewhere in the newspaper or someone might tell you that you should buy a stock when the market is bullish. But do you know what these terms really mean? As an investor, what should you do in both markets? This article will give you a better idea of the two types of markets, the common indicators and how to profit in both markets.

What are Bull and Bear Markets?

Bull market and bear market are used to describe a market condition, basically, how the market is doing and whether the market prices are going up or down. Both terms are usually used to describe the stock market, but they can also be used to describe any markets, be it commodities, forex or bonds.

Bull Market

Bull Market

A bull market is a market that is on the rise. It is marked by significant and long-term increase in market share prices. During this time, investors have increasing confidence in the market where there are a lot of buying activities in the stock market. The economy is strong and employment rates are also high. A general economic recovery usually follows a bullish trend in the stock market.

Indications of a bull market:

  • More buyers than sellers in the stock market as many investors are buying shares but few are willing to sell
  • Positive market sentiment as more people are interested to invest in the market hoping to make profits
  • Consumer spending rises as people have more money to spend on retail items thus strengthens the economy

Bear Market

Bear Market

A bear market is the opposite of a bull market which is a market that is on the decline. During this time, share prices are on continuous fall and investors sell their shares as they lose confidence in the market. The economy is slowing down and unemployment rates are high. The market is said to enter into a bear market when it falls by more than 20%.

Indications of a bear market:

  • More investors are willing to sell their shares than buying resulting in falling market prices
  • Negative market sentiment as people are not willing to invest in the stock market thus driving the market prices down
  • Consumer spending declines because people are not willing to spend more on retail items as they are more keen to save money

What an Investor Should Do in a Bull Market

A bull market opens the opportunity for investors to gain profit as market prices are rising. To make money, investors should buy early in the trend when the prices are still low and sell when the prices are at their peak.

What an Investor Should Do in a Bear Market

As market prices are on the decline, the chance of loss is great. You are more likely to lose your money before gaining some profit. However, you can still make money in a bear market by short selling or choosing safer investments.

Understanding what the market is doing will help you make a better investment decision

Conclusion

It is important for you to understand long-term market trends such as the bull and bear markets as both have a large influence over your investments. Understanding what the market is doing will help you make a better investment decision. You can do this by looking at the common indicators such as share prices, the economy, market sentiments and consumer spending.

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Wan Zuraiha Wan Zakaria is a staff writer at Oriental Pacific Futures (OPF) where she writes on investment and trading. OPF is a futures and options broker based in Kuala Lumpur, Malaysia and provides electronic trading, brokerage and clearing services to retail and institutional traders since 2007. OPF is licensed under the Securities Commissions of Malaysia and offers cash-settled derivatives instruments traded on Bursa Malaysia, as well as select major derivatives exchanges around the world.

Oriental Pacific Futures articles published on the Corporate Website (www.opf.com.my) may be reprinted, reposted or distributed free for educational purposes only on the condition that Oriental Pacific Futures and the Corporate Website link information http://www.opf.com.my are included. However, other organizations are invited to link to articles that are available in the public area of the Oriental Pacific Futures’ Learning Resources website. No additional permission is needed for such a link.

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