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Bull And Bear Market The Basics Of Stock Exchange Prices Explained Simply

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Why bull and bear?

The bull and bear have a long tradition as stock exchange symbols. However, it is unclear what historical origins these two animals have in the stock market world. A popular legend has it that in the 17th century, exhibition fights between bears and bulls took place near London’s trading post. Consequently, he has used this analogy in his stock market reports. That too should have happened in the 17th century.

However, it is undisputed why bulls stand for rising prices and bears for falling prices. A fighting bull thrusts its horns upwards and triumphs in the end with its head held high. A bear, on the other hand, prefers to avoid fighting and looks for an escape route. But if he is forced to fight, he likes to strike from top to bottom with his strong paw.

THE BULL MARKET OR “BULL MARKET”

If there is an economic upswing in a region or an industry, this usually leads to a “bull market” or “bull market”. This denotes longer lasting price increases. It is also said that the stock market is “bullish” or “bullish” in phases of economic boom.

THE BEAR MARKET OR “BEAR MARKET”

During economic downturn or even recession there is often a “bear market” or “bear market”. Often the bear market follows a long phase of price stagnation at a high level. A typical persistent bear market arises when investors lose confidence in a security, industry, or region. The market is then “bearish” or “bearish” for a period of time.

What is a bear market rally?

A bear market rally describes the state of a strong price recovery that immediately follows a strong devaluation during a bear market. The market is not yet bullish here, instead the price levels off at a medium level during a bear market rally. As a result of the panic-like sales described, share prices fall unnaturally sharply in a bear market – this is offset again in a bear market rally.

What are bull traps in financial jargon?

Not bulls fall into the bull traps on the stock market, but investors. This is because they mistakenly interpret short-term price increases as a bull market. But instead of rising further, prices then stagnate or fall. The bull trap snaps shut and investors sit on papers that they can only sell for less than their purchase value.

What are bear traps in financial jargon?

In the bear traps on the stock market, there are no bears, but investors. Here shares are sold due to short-term falling prices. Investors sense a bear market – but if prices recover, they miss out on profits. The bear trap snaps shut and investors watch as others do good business with the stocks they have just sold.

How can investors benefit from the bull market and the bear market?

In order to profit from bullish and bearish markets, you have to recognize them early enough to then buy or sell. In any case, the longer a bull or bear market lasts, the more suspicious investors should become and look particularly carefully before making their decisions. Because no bear or bull market lasts forever!

PROFIT FROM THE BULL MARKET

In order to benefit from a bullish market phase, investors need to recognize this early on and buy the corresponding securities. It is very difficult for laypeople to recognize a bull market in time. However, it helps to keep a close eye on business and stock market news.

Selling at the right time is just as important as buying in time. Inexperienced investors often sell very early when stock prices have just started to rise. The best timing to sell is when prices, i.e. when the bull market is over, start stagnating or falling again.

In summary:

  • Recognize bull market in good time
  • Buy stocks early in the bull market
  • Sell ​​stocks at the end of the bull market
  • Benefit from the bear market

A bearish market phase is more of a phase of crisis on the stock market. That is why it is first of all important to recognize the bear market in good time and to sell the corresponding securities in good time. In this way you avoid having to sell papers at a loss. If you have sold your paper on time and survived the bear market, then is often a good time to invest in promising securities. Bear markets therefore always offer opportunities. But be careful: not every bear market is followed by a bull market or a bear market rally. Often, prices simply stagnate for a long time at a certain level or fall again.

Summarized:

  • Recognize bear market in good time
  • Sell ​​stocks early in the bear market
  • Check buying opportunities at the end of the bear market

During a bear market, however, advanced investors can not only avoid losses, but also proactively generate profits. Namely via so-called “put options” or “short sales” or “short positions”. However, these are relatively complex and risky instruments that should only be used by experienced investors.

What are bullish-bearish clauses?

A bullish-bearish clause is usually not used on the stock exchange, but on commodity markets. In long-term transactions, the problem for sellers and buyers is always that market prices can change significantly over time. If prices rise, the seller tends to have an advantage, but if prices fall, the buyer benefits. A bull clause becomes relevant when prices rise. If the prices rise so much that the buyer no longer accepts them, the seller can withdraw from the purchase contract. He can then sell to another buyer.

A bearish clause, on the other hand, becomes relevant when prices fall. If the prices drop so much that the seller cannot accept the prices, the buyer can withdraw from the purchase contract. He can then buy from another seller. A bullish-bearish clause is the combination of both clauses and is particularly popular because it spreads the risk equally for buyers and sellers. This reduces the risk of long-term sales contracts for both parties and makes it easier to conclude long-term contracts.

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