Bull Market

What Is A Bull Market?

The term “Bull Market” refers to a condition in the financial market where stock prices go up continuously.

Deeper Definition

The bull market refers to a continuously rising market. The term applies mainly in the stock market, but other assets such as cryptocurrency, real estate, commodities, or foreign currencies can also have bull markets.

Typically, the prices of securities tend to rise and fall. So for a market condition to qualify as a bull market, prices have to go up for an extended period. Bull markets may last for months and rarely years. While there is no standard metric to identify a bull market, it is usually marked by a 20% increase in stock prices after a drop of 20% and another 20% decline.

Consumer confidence significantly impacts financial markets, such as stocks, bonds, and commodities. Typically, when a country’s economy is on an upward trend and the unemployment level is low, people tend to buy and hold securities as a form of investment or savings. Because people keep buying and only a few people are selling, securities prices will continue going up. 

During a bull market, investors who trade are known as bulls. A bull is an investor who buys and holds a financial asset hoping that its value will increase within a short period to sell it and profit. It is common for bulls to engage in margin trading when the market keeps going up. Margin trading involves borrowing funds from a broker to trade a financial asset to increase potential profits significantly.

Bull Market Example 

Generally, Bull Market refers to a market condition where the prices of financial assets keep rising. Though the term is commonly used in the stock market, it also applies to other financial markets. For instance, in the cryptocurrency market, the bull market in 2017 saw Bitcoin’s price rise from $20,000 at the end of November to $41,500 on 8th January.

During a bull market, stock prices go up. However, there would also be periods where the stock prices drop briefly before continuing the upward trend. When that occurs, it is known as Retracement. Depending on their strategy, investors may buy more stocks during the retracement period and sell them higher when the bull run continues.