In short: A Bull Market when stocks in general go up about 20% we call it a bull market.
A bull market is the market condition when prices continue to rise. Markets follow two general trends over time. Either prices are in an upswing (increase) or they are in a downswing (decrease). Think of a bull market as when a bull uses its horns in an upward motion. When prices fall over a period of time, that’s a bear market. Think of a bear swiping downward with its claws, knocking the market down.
A bull market and bear market are used when describing the trends of securities. These include stocks, bonds, commodities, and other types of investments. Investors can also take a bullish or bearish stance, depending upon their outlook. To be bullish is to believe that an investment’s price will rise. To be bearish is to believe that the price will fall.
The bull market is the type most desired for the majority of investors. If you are new to investing, it helps to understand what drives the bull market so that you can take advantage of the money-making opportunities that are present within this type of market.
What Is a Bull Market?
A bull market is the condition of a broad market or a single market in which prices are continuously rising. Investors make money at any price at which they buy an investment because prices generally continue to rise.
A bull market generally lasts until prices have risen for so long that investors begin to believe that prices will continue going up. Investors’ belief about stock prices influence the prices themselves in a self-fulfilling prophecy—a term used in investing that refers to investors creating the market circumstances—which results in higher prices because investors are causing the prices to rise.
Much of the volatility in markets is due to investor sentiment, or how investors in general feel prices are going to swing. World events, the business cycle, and the opinions of investing icons are all examples of factors that influence investors to cause price fluctuations.
When prices fail to fall over time, investors enter a state of irrational exuberance. They begin bidding prices above the actual underlying value, wildly over-valuing the investments. This creates what is known as an asset bubble, where prices rise until the supply of the assets resists any more rise in price. Investors begin to panic and sell; the bubble bursts and prices begin to fall.
If prices fall 10% or less, it is considered to be a market correction. At 20%, the bull market is mourned by investors as the bear market begins. The same percentages are used when prices begin to rise to announce the return of a bull market.
