What is a bull market?
A bull market is one that is a rising market that is encountering increasing investor confidence.
Asset markets will go up and down continuously during trading. In periods where prices are rising over a continuous period of time, the market can be defined as a bull market or an uptrend one. Although the origins are unclear, most people associate these terms with the way a bull strikes; pushing its horns up. These markets can last for months or even years, although the exact dates cannot be determined until later. Along with a rise in prices, it increases investor confidence as they become optimistic or “bullish” about price increases.
Unfortunately, investor confidence does not last forever, which can lead to a strong downward price movement and the beginning of a bear market.
How to invest in a bull market?
Investors often try to take advantage of a bull market by buying as low as possible and expecting asset prices to rise.
When the market is bullish, investors will often try to take advantage of rising prices by buying stocks as early as possible in the bull cycle and selling them when they peak. Any losses incurred during a bull market will be temporary, allowing investors to continue investing with the confidence that they will make a return.
Popular strategies include “follow the trend,” in which investors will select currencies that are already in a strong uptrend to benefit from the rest of the bullish momentum. Another well-known strategy is known as “buy and sell”, in which users will hold their coins during the uptrend and sell when prices are as high as possible.
That said, it is always considered unwise to time the market. Instead, the principle of dollar cost averaging or investing equal dollar amounts at specific time intervals can help investors benefit from corrections and crashes as much as possible.
What is a bear market?
Bear markets are noticed when asset prices drop along with investor confidence and corporate earnings.
Much like when a bear attacks by sliding down its claws, a bear market is the opposite of a bull market and is generally observed when an asset class falls more than 20% over an extended period of time (approximately two months). Bear markets often occur after a recent spike. A bear market can last a few weeks or several years.
During these periods, the main sentiments of investors are usually fear, uncertainty and doubt, hence the acronym FUD. New investors often avoid participating in a bear market for these reasons.
How to invest in a bear market?
Investors often view bear markets as opportunities to build lower positions over time while waiting for the next cryptocurrency uptrend.
Bear markets can be difficult for beginners to trade as the higher chances of losses often rank them. However, buying during a bear market can pay off when the cycle reverses and asset prices rise. The only problem is that no one can determine how long the fall can be missed or how much prices can fall. So the biggest risk becomes making a purchase prematurely or missing the opportunity to make a profitable investment.
For these reasons, investors are encouraged to build their positions over time. Users can continue to add new positions as prices fall rather than trying to time the market floor. In this way, investors can take advantage of the new lower prices as they fall.
For more seasoned investors, short selling is another popular strategy in bear markets. Short selling occurs when traders sell borrowed cryptocurrencies at a high price, with the intention of buying them back at a new lower price.
Why is it important to consider the type of market?
Different markets will require different strategies to execute successful trades.
Bull and bear markets will have a great influence on your investment portfolio. Therefore, all investors should consider the type of market they are investing in to create the best strategy to mitigate risks in their portfolio.
That said, when looking at the long term, the stock market has always shown positive performance over time.