“Bulls” and “Bears”, these are the name of two animals very commonly used in stock exchanges around the world. They are not really animals but two types of traders and brokers that function with own motives to maximize their earnings. “Bulls” try to push the market up and the “Bears” wants the market to be low.
No one is sure how these two animals came to be used as a symbol of two different moods of share markets; however, there are is one popular theory that floats around.
On the other hand, there is another type of traders and brokers who wants the market to go down, so that they can sell, stocks which they not yet possessed, at a higher price and buy at a cheaper price in future and deliver. They are called “Bear” because they swat at victims with paws in downward motion to the ground. A Bear market is when the prices moves consistently downward.
A Bearish investor is pessimistic, always moves cautiously, expects the market will go down while bulls are brave ready to go ahead and charge.
Why Bulls And Bear In Stocks?
The terms Bull & Bear are used because of their resemblances in nature, attitude, actions and sentiment with the market situation and operators. The correct origins of these expressions are not clear. Many say may be these expressions are used from the ways they charge or attack its prey. When the trend of the market is upward, it is measured as bull market, if it is going downward, it is a bear market.
Charles Dow, an American journalist, said, Bull-Bear Market is nothing more than investors’ mindset, it is an assumption, notions or methods held by them.
Some are of opinion that, a 250 days Moving Index average is treated as bull- bear line, if the present index drops below the line the market is bearish, if it goes up then bullish.
A bull market develops from exceptional optimistic situations while a bear market is the outcome of extremely gloomy situations.
Difference Between Bull And Bear Market
Bear market exists when there is an air of widespread pessimism. People anticipate further losses unless they sell. Market is geared by negative sentiment. The example of the most famous bear market was the Great depression of 1930 that lasted over 2 years. There is no consensual definition for bear market is available, still it can be expressed grossly as a substantial drop of 20% or more in the major stock market index from a recent high for a period more than one year.
A correction must not be confused with a bear market. Corrections are short lived; bear markets are long with deep bottoms.
Bull Market is associated with investors’ confidence. It motivates them to buy more and sell at a higher price in future.