Bull Market and Characteristics of Bull Market

By: EconomyWatch   Date: 23 November 2010

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The Bull Market concept is applicable for markets where bonds or stocks or currencies or commodities are traded. But, the term Bull Market is most frequently used in respect of stock markets.

Existence Period of Bull Market

No Bull Market can continue to exist for a very long period, as the prices cannot rise infinitely. After a certain point prices has to go down. The Bull Markets lasts generally for a few months and in these months high volume of trading takes place in Bull Market.In the Bull Market, Bull is the investor who expects price level to rise and buys a type of security or commodity in hope of earning high profit by reselling it in the future when the price rise will take place.

Basis of Bull Market

As all the operations in the Bull Market take place on the basis of price rise or expectation of price rise, the Bull Market is essentially characterized by optimism, investors’ confidence on market trends and by the expectation that the price level will continue to rise. So, the Bull Market is primarily based on the investor’s belief that the upward trend of price levels will continue in the long term. Bull Market signifies that the economy of the country is strong and suggests high level of employment.

Characteristics of Bull Market

Supply and Demand Characteristics- In Bull Market, strong demand and weak supplies of securities and commodities happen to exist. This is something very natural; because in a market with the expectation of price rise, many investors are willing to buy securities and commodities but few are willing to sell. And for this strong demand and weak supply, price levels continue to rise even higher.

Effects on Economy-When a Bull Market exists, the businesses earn huge profits as the people have enough money to spend and also the willingness to spend. This in turn strengthens the economy.

Importance of Investor Psychology-For a Bull Market investors’ psychology is something very much important. What investors perceive about the market has a direct effect on the movement of prices. In an ideal Bull Market every prospective investor wants to invest with the aim of earning profit.

Investing in Bull Market

To gain highest levels of profits, an investor in the Bull Market should buy early in the upward trend of prices and should sell when the price level reaches the peak. But, it is really tough to guess the peak of price level, after which the prices will fall. Though, it is more likely for the investors to earn profits rather than suffering from loss in a Bull Market as the prices are on rise. Even if there are losses they are obviously negligible and temporary. In a Bull Market, more volume of investment raises the chances of good returns. And a good understanding of long-term market trends can take the level of returns to a new high.




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