Bull Market
Candlefocus EditorDuring a bull market, stock prices tend to rise more quickly than usual. When investors become more confident in their investments, they tend to buy more stocks and sell less. As stock prices rise higher, this encourages more investors to purchase the stocks, leading to a positive feedback loop. Consequently, stock prices move further and further up, forming a long-term, positive trend with the underlying stocks.
Bull markets are typically limited when the economy slows down or when the underlying stocks cease to rise. When the markets turn bearish, it signals a period of economic weakness and a decrease in confidence in the market. Investors typically sell their stocks in anticipation of a stock price decline, as this will help them limit their losses. Consequently, stock prices fall as investors reduce their positions. During a bear market, stock prices fall much more quickly than they normally rise in a bull market.
Traders commonly employ several strategies to make the most of a bull market. Increased buy and hold is a popular strategy, where investors buy stocks and hold onto them, without selling them. The goal of this strategy is to wait for stock prices to increase further and reap profits when it eventually does. Retracement is another strategy, where investors buy stocks and look to sell them at a higher price after they appreciate. This strategy requires traders to have sufficient market knowledge and good timing in order to make a profit.
Bull markets are generally characterized by an increase in investor confidence, an increase in trading activity, strong underlying corporate earnings and rising productivity. For those with an appetite for risk, it can be a very lucrative period of time to invest. But traders should also be mindful about bear markets, as the market can easily turn downward in a short amount of time. With vigilant and prudent trading, however, it may be possible to rake in some good profits during a bull market.