What is bear market? Determine the market status Bull market
- 1. What is bear market?
- 2. What is Bull market?
- 3. Origin of Bear market and Bull market?
- 4. Strategic orientation of Bear market and Bull market?
- 4.1 Bear market Strategic Direction
- 4.2 Strategic direction of the Bull market
- 5. What are the characteristics of Bull market and Bear market?
- 5.1 Supply and Demand for Securities
- 5.2 Investor Sentiment
- 5.3 Changes in economic activity
- 5.4 Measuring market changes
- 6. How to determine the market state of the Bull market and the bear market
- 7. How do investors handle the Bull market and the Bear market period?
- 7.1 During a Bull market
- 7.2 During the Bear market period
The terms “Bear market” and “Bull market” are very familiar to crypto investors - describing the market's overall trend. In any cycle a bear market is a fear and a bull is a win for investors. Therefore, to determine the market status most accurately, investors should refer to this article of BHO Network to better understand.
1. What is bear market?
Bear market - a downtrend market describes a state where the investment market shows signs of decline. This has a substantial psychological impact on investors.
A market is considered a bear market when prices have fallen by at least 20% from their previous and most recent highs over the past 2 months. As a result, the value of the company's stock falls and investors feel pessimistic about buying more. When a bear market is bad enough it becomes a recession or bankruptcy.
2. What is Bull market?
Bull market - an uptrend period refers to a state of the market that is growing. In a Bull market, investors are confident that the uptrend will continue in the long term and need to invest more.
When a market is considered a Bull market, a gain of at least 20% in that market should be maintained for at least two months. The company's stock has been on a steady rise and feels like this will continue in the long term. This will help investors feel more secure and optimistic about their trading.
3. Origin of Bear market and Bull market?
Even if you know Bear market and “what is Bull market”, many of you still have difficulty understanding. From what origin can one associate this crypto term with the two symbols bull and bear. As mentioned, cows and bears are two animals with unique attack methods. And they always make their prey pitiful, even irretrievable.
Like the market that bears its name, their prey will immediately try to avoid the blow, whether up or down, when they lower their claws. The method of attack is similar, but there are fierce opponents between bulls and bears.
Fundamentally, that continued decline from recent peaks isn't the only indicator that a bear market is underway. There are other economic indicators that investors should keep an eye on. This makes it possible for them to determine if a bear market is taking place. Some of the hands include loan interest rates, inflation and employment or unemployment rates.
However, the relationship between the economy and the bear market is even simpler than that. When investors notice that an economy is shrinking, there are concerns that corporate profits will soon begin to decline. And, this pessimism caused them to sell off their assets, thus pushing the market lower.
As Scott Nations, author of The Anxious Investor: Mastering the Mental Game of Investment, puts it, investors often overreact to bad news. Bear markets are usually shorter than Bull markets. According to a recent report by CNBC, the bear market lasts about 289 days.
However, a Bull market can even be longer than 991 days. Additionally, an Invesco data analysis report shows that the average inter-market loss in bear markets is 33%. So bear markets are often less effective than the average 159% Bull market rally.
While no one knows how long a bear market can last, there are a few tips on how to get through it.
It's almost the same on today's exchanges, traders will rely on the opportunities of these two markets. Then make the best decision to get more profit later. If the market goes up, they will buy and sell at the last minute, hoping to make money.
On the contrary, when the market shows signs of decline. Many people will sell quickly to avoid losses, but some people take advantage of waiting for the market to rise and then sell. After all, they are always aimed at increasing profits, but you can fall prey to both of these markets if you are not sharp enough.
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4. Strategic orientation of Bear market and Bull market?
As an investor, there's probably nothing one can do to prevent adverse market conditions or the overall economy's rise. However, we can take many potential options to protect our investments.
4.1 Bear market Strategic Direction
Price Averaging (DCA)
- Price Averaging (DCA) is an investment strategy in which an investor regularly buys a fixed amount of USD of a specific asset, regardless of the price of that asset in dollars. This strategy is based on the belief that the price will generally pick up the pace and eventually trend up in a bull run over time.
- When mastering these conservative investing methods, an investor's purchase price is averaged over each purchase. This method can help the investor enjoy the price drop benefits and avoid the “peak swing”. After all, the bear market is both scary in the investment world and an opportunity to buy digital assets at the lowest price.
Diversify your portfolio
- For investors with multiple asset classes in their portfolio, the impact of the bear market may not be so severe. When a bear market occurs, the price of assets will generally fall, but not all purchases will fall equally.
- So this valuable strategy ensures that an investor with a mix of assets that lose a lot of value and assets that don't lose too much value in their portfolio on a single drop. As a result, the total loss from the portfolio will be reduced to a minimum.
- During a long bear market cycle, several companies (mainly small and fledgling companies) gradually wear out in this cycle. While other older companies have better balance sheets that can withstand extreme conditions for the time needed.
- Therefore, anyone who wants to invest in stocks should look for stocks of companies that have been in business for a long time. Those are defensive stocks. And they are usually more stable and reliable in a bear market.
- Bonds can also provide investors with some returns in bear markets. Because bond prices often move inversely to stock prices. Thus, bonds are an essential component of a perfect portfolio, helping investors cope with the pain of a bear market.
Index Funds or Exchange Traded Funds (ETFs)
- Several sectors are expected to perform well during a market downturn, including the utilities and consumer goods sectors. And more than any other, these sectors can be called “stable assets”. Investing in the sectors mentioned above through an index fund or exchange-traded fund (ETF) can be brilliant.
- This is because each index fund or ETF includes shares of different companies.
Prepare your mind of steel
- There is no doubt that the bear market will cause many investors to run away and never look back. Their will and endurance will also be tested. However, as history has proven, the bear market does not last forever and neither does the current market.
- According to Hartford Funds, more than 26 bear markets have occurred since 1928. And, each one of those bear markets was immediately followed by a Bull market, yielding more than enough profit to cover any losses that might be incurred.
So it's important to be less upset about a bear market, especially if you're making a long-term investment, such as retirement. Because in the end, the bull cycles you witness along the way will outweigh the bearish ones.
4.2 Strategic direction of the Bull market
Usually, investors will buy stocks early to take advantage of the general increase in the market price and sell when the price peaks to make a profit, whether the market is bullish or not (only after they happen), these strategies are also potentially risky.
Buy and hold
- One of the proper strategies for a Bull market is to buy a particular stock and hold it, until the Bull market is over you can sell that stock at a profit. .
- Or the investor can continue. buy more shares than you hold, increase your holding rate every time the price goes up a little, so you take advantage of the opportunity price increases and you can exit flexibly if the market ends abruptly.
- This is a holding activity for days or weeks. Swing Traders regularly monitor the market to identify trends during this period, they have more time to analyze the market than themselves.
- With hourly and daily trades, analytic units are usually more stable, each transaction usually has more time to make a profit because the price often follows the previous forecast (but the profit is still the same). lower than position trading).
5. What are the characteristics of Bull market and Bear market?
Although market conditions rise or fall to be marked by the direction of stock prices, investors still need to be aware of the critical characteristics of the Bull market and the Bear market, which BHO Network will discover immediately.
5.1 Supply and Demand for Securities
A Bull market usually has high demand and low market supply. In other words, many investors want to buy securities, but few are willing to sell them. As a result, stock prices will rise as investors compete for available equity.
In contrast, in a bear market, more people sell than buy. Demand is significantly lower than supply, and stock prices fall.
5.2 Investor Sentiment
Since market behavior is influenced and determined by how individuals perceive and react to it, investor sentiment and sentiment will affect the market's performance go up or go down. Stock market performance and investor sentiment are interdependent.
During a Bull market, investors are willing to enter in the hope of making a profit, while market sentiment is often negative in a bear market. Investors started shifting their money from stocks to fixed income as they waited for a positive move in the stock market.
In short, falling stock prices are shaking investor confidence. This motivates investors to keep their money out of the market. Thus, causing a general drop in prices as the cash outflow increases.
5.3 Changes in economic activity
Because companies whose shares are traded on the stock exchange are agents of the large economy. Therefore, the stock market and the economy are closely related.
Bear markets are associated with a weak economy. Most businesses can't make huge profits because consumers aren't spending enough. This drop in earnings directly affects the stock market.
In a Bull market, the opposite happens. People have more money to spend and are willing to pay it. This stimulates and strengthens the economy.
5.4 Measuring market changes
The critical factor determining whether a market goes up or down is not just the market's gut reaction to a particular event, but its long-term performance. Small movements only represent short-term trends or market corrections. A bull or bear market can only be determined over a longer time.
However, not all long-term market movements can be called bullish or bearish. The market can sometimes go through a period of stagnation that will try to find direction. In this case, a series of upward and downward moves would cancel out the gains and losses that caused the market to trend sideways.
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6. How to determine the market state of the Bull market and the bear market
The essential factor determining the state of the market up or down is not the immediate reaction to a particular event, but the way the market behaves in a long time. Small movements represent only a short-term trend or their correction.
In addition, long-term market volatility will only be bullish or bearish. It is sometimes possible to go through a period of sideways, with no apparent movement trend.
7. How do investors handle the Bull market and the Bear market period?
In uncertain times like now you have to take a close look at the market before making any decisions. Whether it's a bull or bear market affects your strategy. However, you still have the benefits of investing in both. Here is some information for investors on these two markets.
7.1 During a Bull market
If the market is bullish, the best thing to do is identify the trend and buy the stock early. You can then sell your shares when the market peaks.
At the same time, you should consider long-term investment strategies during Bull markets as any losses will be short-lived.
During a Bull market, at this point, the stock price needs to continue to grow. Therefore, you should consider the investments that you can hold. Bull markets usually last longer than bear markets. As the economy picks up, find low-risk funds to invest in that will increase your returns over time.
7.2 During the Bear market period
Saving in a bank:
For those with keen investment ability, margin channel will not be desirable while your assets are almost exclusively preserved by you and do not help much in growth.
However, with high liquidity, this will be a very suitable asset protection channel when the market goes down.
- Vietnamese people with the concept of "eating firmly, wearing durable" from ancient times have a habit of hoarding gold. With high liquidity, gold is a reasonably secure channel with enduring value only after savings deposits. Gold is also considered a haven in times of crisis, war, inflation or disease. Lowest risk asset safe, great for protecting your assets.
- With recent strong fluctuations in the stock market, bonds still attract the attention of many investors.
- An investment product issued by companies, but unlike stocks, bonds are not affected by companies' business results. Moreover, the interest rate of bonds is always more attractive than the interest rate of savings deposits.
- Looking back, government bonds remained stable while the total volume of corporate bond issuance in the first quarter of 2022 was even higher than in the same period last year.
- To invest in bonds, what should be done is that investors should carefully research companies, choose only reputable companies, and should not buy bonds with high interest rates, higher than 13%/year. The higher the yield on the bond, the higher the risk.
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Reading this article, do you understand "what is Bear market"? And what is Bull market? Blockchain and cryptocurrencies are still very young market compared to the traditional financial market. You will also see many blockchain projects fall to the brutality of the bear market if they are not carefully prepared and do not focus on developing their products. To learn more, visit the BHO Network for more helpful information.
Published on June 15, 2022
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