Bull market is the opposite of a Bear market as it is a market behavior that indicates an uptrend. As a trader, you should be familiar with the words ‘bear market’ and ‘bull market’. In this article, we will be diving into the bull market to see how it works and how to invest in the bull market.
What Is Bull Market?
A bull market is the state of a financial market in which prices are rising or are expected to rise. The term “bull market” is most commonly used to refer to the stock market, but it can also refer to anything that is traded, such as bonds, real estate, currencies, and commodities.
Because security prices rise and fall essentially continuously during trading, the term “bull market” is usually reserved for extended periods in which a large portion of security prices rise. Bull markets can last for months or even years.
Understanding The Bull Market
Bull markets are characterized by optimism, investor confidence, and expectations that strong results will last for a long time. It is difficult to predict when market trends will change on a consistent basis.
Part of the problem is that psychological effects and speculation can sometimes play a significant role in market behavior.
There is no specific and universal metric used to identify a bull market. Nonetheless, perhaps the most common definition of a bull market is a situation in which stock prices rise by 20%, usually after a drop of 20% and before a second 20% decline.
Since bull markets are difficult to predict, analysts can typically only recognize this phenomenon after it has happened. A notable bull market in recent history was the period between 2003 and 2007. During this time, the S&P 500 increased by a significant margin after a previous decline; as the 2008 financial crisis took effect, major declines occurred again after the bull market run.12
Type of market trend
There are three patterns of price movement behavior :
- Uptrend: the higher price movement
- Downtrend: the lower price movement
- Sideways: the horizontal price movement
How to Make a Profit from A Bull Market
Investors could make a profit from a bull market if they previously purchased the assets before the trend happens. The higher the price rises, the more profit they will get. When the price hits its peak, investors can earn maximum profit from the asset.
Unfortunately, no one can pinpoint the exact peak price of the asset. Due to its volatility property, an asset price might go up and down at any time. However, there are some strategies traders can use to make a profit from the bull run, including bull run crypto.
According to Investopedia, here are some strategies traders can use during the bullish period.
Buy and hold
Buy and hold is the most basic bull market strategy. The idea is to buy and hold an asset for a period of time until the price hits the trader’s expected exit point. When it hits, the trader may sell the asset and earn a profit from the price difference.
This strategy relies heavily on the investor’s confidence about the future price of the asset if the trader believes it will go bullish.
Advanced buy and hold
Advanced buy and hold strategy is a variation of buy and hold strategy, with a slight difference to the original strategy. This method focuses on the regular purchase of an asset even though the price increases. The trader should keep purchasing as long as the price is still within the expected range.
One common application of this strategy is investor keeps purchasing a fixed amount of asset over a period of time. This act of purchasing should always continue as long as the price moves within the investor’s allocated price range.
Retracement is a short period when assets’ price drops. During this period, the assets’ price drops temporarily before jumping back. It is a short window of chance that every investor looks forward to because even during a bull market, sometimes the price will drop.
Some investors use this method to find any possibility for the asset price to drop. By doing so, they hope the price will quickly rebound. Thanks to the cheaper purchase price, investors will be able to gain profits from the spread.
Full swing trading
Full swing trading is probably the most aggressive way to utilize the bull market. In this strategy, investors employ short-selling and other techniques to get maximum profits from the assets’ price difference during the bull run.
It’s impossible to say when a bull market will end. But it always does after an external force influences investors’ perceptions of the future and stock prices appear overpriced.
Despite inevitable dips, the stock market has never failed to rise over a long time horizon. So not investing in the market means missing out in the long run. Individual investors, like a savvy matador, should keep an eye on the bull’s movements and adjust accordingly — but always keep their overall strategy and goals in mind.