The financial markets have their own mythology. If you are new to this market, you may often hear investor say that the bull has taken over or the bears are in charge. This has become standard terms that even though you are new in the financial market, you’re expected to know these terms. So what is the meaning and how do they come about it?
Where did bull and bear terms come from?
The origins of these expressions are undecided. But the explanation is that bulls and bears are usually pitted together in a fighting ring and the terms “bull” and “bear” are derived from the way the two animals attack each other. That is, bear strike downward while the bull thrust its horn upward – this is while a downtrend is considered to be “bear market” while the upward is referred to as “bull market.”
Understanding the Bull Market
In this market, the price of a stock tends to go up over some time – this could be weeks, months, or years. Usually, the average length is about ninety-seven months. In practice, this means that the financial market has more people that want to sell than those that want to buy. The term is most common and used when the economy is growing.
Understanding the Bear Market
The stocks are headed down when you hear people say we are in the bear market. And this means the numbers of sellers is more than the buyers. Usually, these markets use to be shorter in duration with an average period of approximately eighteen months. Whenever the stock falls for a few days or weeks, this process is usually called correction or pullback. Some investors essentially make money during this period; they buy stock late in a bear market in anticipation that the shares will rise again.