Of Bulls & Bears

Wondered what Bulls and Bears stand for and why the terms are used? 

Bulls thrust their heads forward and upwards to attack their enemies.  The rising market too moves upwards and investors are optimistic.  They are like bulls ready to charge with their heads held high.

The bear swipes it paws downwards while attacking its enemies.  The market too moves down and investors are pessimistic. They put their heads down and move forward slowly.

So a rising market is a bull market and a falling market is a bear market. Investors can be bullish or bearish.

A bearish market can result in economic distress. In such a market, it will be tough for the buyers and investors to spot down the stocks that are profitable. Short selling becomes the order of the day with investors who want to take advantage of the situation and make profits.  Short sale is sale of stocks that not owned by the seller but promised to be delivered.  It is a complex concept and is explained in greater detail in the article on short selling.  Other investors would prefer to wait on sales of shares. They hope that by waiting the market trend will reverse soon.  They may even purchase shares in anticipation of the reversal of trends.   

As a bull market or a bear market is inevitable.  What goes up must come down. That is the law of nature. An investor must be smart enough to foresee things. A smart and intelligent investor will make profit, what ever may be the market situation. Usually the duration of bear market is short. To avoid getting hurt from a bear market, the investor must act quickly by foreseeing trends and should move part of his possessions into investments which are cash equivalent.

It should be noted that Bull markets tend to end with a sudden upward thrust and investors must watch out for this.  However bull markets tend to move very slowly. A bear market usually starts with a mini crash and reaches the depths very quickly.

Closely associated with the terms bulls and bears are the terms correction and bear rally.  What is market correction?   It is a market adjustment that happens.  Market correction is often defined as a drop of 10-20% during a bull phase.  It is different from the bear market as it is of a short duration. It is an ideal time for value strategy investors to buy stocks as good stock can be purchased at a small price. Sometimes a correction foreshadows a bear phase.  A bear rally happens when the market rises temporarily during a bear phase.

The best option for a cautious, first time investor in a stock market, is to invest for long term.  A sensible strategy is to get a good, valuable stock in the course of bull or bear markets and to await the appropriate time to sell.  While it is difficult to foretell when to move in and when to move out, intelligent investing is wholly possible for those who are willing to spend time and energy studying the movement of stocks during the different phases of the market. Investment and exits must be timed correctly and wrong timing can cause havoc to your finances.

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