In the investing world, the terms "bull" and "bear" are frequently used to refer to market conditions. These terms describe how stock markets are doing in general—that is, whether they are appreciating or depreciating. And as an investor, the market's direction is a major force that has a huge impact on your portfolio. So, it's important to understand how each of these market conditions may impact your investments.
When a market, instrument, or sector is upward, it is generally referred to as a bull market.
Although the term bull market can be used loosely to refer to any strong market activity, it is often used in the financial markets when the price of an asset rises 20% or more from its previous low point.
Typically, a bull market arises when investors are optimistic about the future performance of an asset or the overall market indexes.
While a 20% increase in market prices is often the start of a bullish trend, most signs of an impending bull market are not that clear.
Traders use technical analysis to help them recognize bullish signals
A few examples of technical indicators include moving averages (MAs), the Moving Average Convergence Divergence (MACD), Stochastic, and the Relative Strength Index (RSI).
The opposite of a bull market is a bear market, which occurs when investors feel pessimistic.
Falling prices (bearish trend) create a negative market sentiment, and as traders feel less confident, they tend to sell more and more, causing a further decrease in prices and often what is known as capitulation.