Bull and bear market
A bull market is a sustained period of rising share prices and optimism, while a bear market is a sustained period of falling prices and pessimism.
What they are
The names come from how the animals attack: a bull thrusts its horns up, a bear swipes its paws down. In Hindi you will also hear tejadi for a rising market and mandi for a falling one.
A common rule of thumb calls it a bear market when a major index falls about 20% or more from its peak, and a bull market when it rises about 20% or more from a low. There is no official definition; it describes the mood and direction over months, not days.
How to recognise them
In a bull market, prices make higher highs and higher lows, most shares trade above their long moving averages, dips get bought quickly, and good news is rewarded. In a bear market, the opposite happens: rallies fade, bad news hits hard and more shares trade below their 200-day average.
Inside every bull market there are sharp falls, and inside every bear market there are strong rallies. A 10% drop in a bull market is often called a correction, not a bear market.
Why it matters
The same strategy can behave very differently in each. Buying breakouts tends to work better when most shares are rising. In a bear market, many breakouts fail and protecting capital matters more.
Long-term investors have historically lived through many bull and bear phases. Panic-selling near the bottom of a bear market and buying heavily near the top of a bull market are among the most costly mistakes.
Measuring from peak and trough
An index peaks at 20,000 and falls to 15,500 over eight months. That is a fall of 4,500 ÷ 20,000 = 22.5%, which many would call a bear market. It then climbs back to 19,000. From the low, that is a rise of 3,500 ÷ 15,500, about 22.6%, which many would call the start of a new bull market.
Common mistakes
- Calling one bad week a bear market.
- Assuming a bull market will last forever and taking on too much risk.
- Selling everything in panic near the end of a bear market.
An index falls 8% from its peak in three weeks. What is this usually called?
- A pullback or correction, not necessarily a bear market
- A bear market, by definition
- A bull market
Show the answer
A pullback or correction, not necessarily a bear market. A bear market usually refers to a deeper, longer fall, commonly around 20% or more. Short falls of under 10% happen often within bull markets.
Common questions
What is the difference between a bull and a bear market?
A bull market is a long period of rising prices and optimism. A bear market is a long period of falling prices and pessimism.
How long do bear markets last?
It varies a lot. Some last a few months, others much longer. No one can reliably predict the length in advance.
What should a beginner do in a bear market?
This site does not give investment advice. In general, beginners benefit from understanding their own risk, avoiding panic decisions and not using borrowed money.
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