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| Some Definitions about Day-Trading / Part 3 |
| What means : BULL- or BEAR MARKET ? |
Definition of a Bull market
A bull market tends to be associated with increasing investor confidence, motivating investors to buy in anticipation of further capital gains. The
longest and most famous bull market was in the 1990's when the U.S. and many other global financial markets grew at their fastest pace ever.
In describing financial market behavior, the largest group of market participants is often referred to, metaphorically, as a herd. This is especially
relevant to participants in bull markets since bulls are herding animals. A bull market is also described as a bull run.
The Dow Theory attempts to describe the character of these market movements (for more info about the Dow Theory : Click here).
A bull market tends to be associated with increasing investor confidence, motivating investors to buy in anticipation of further capital gains. The
longest and most famous bull market was in the 1990's when the U.S. and many other global financial markets grew at their fastest pace ever.
In describing financial market behavior, the largest group of market participants is often referred to, metaphorically, as a herd. This is especially
relevant to participants in bull markets since bulls are herding animals. A bull market is also described as a bull run.
The Dow Theory attempts to describe the character of these market movements (for more info about the Dow Theory : Click here).
Definition of a Bear market
A bear market tends to be accompanied by widespread pessimism. Investors anticipating further losses are motivated to sell, with negative Prices
fluctuate constantly on the open market; a bear market is not a simple decline, but a substantial drop in the prices of a range of issues over a
defined period of time. By one common definition, a bear market is marked by a price decline of 20% or more in a key stock market index from a
recent peak over at least a two-month period. However, no consensual definition of a bear market exists to clearly differentiate a primary market
trend from a secondary market trend.
Bear market rally
A bear market rally is sometimes defined as a rise of at least 10%, but not more than 20%.
Notable bear market rallies occurred in the Dow Jones index in after the 1929 stock market crash leading up to the market bottom in 1932, as well
as throughout the late 1960s and early 1970s. The Japanese Nikkei stock average has been typified by a number of bear market rallies since the
late 1980s while experiencing on overall downward trend.
A bear market tends to be accompanied by widespread pessimism. Investors anticipating further losses are motivated to sell, with negative Prices
fluctuate constantly on the open market; a bear market is not a simple decline, but a substantial drop in the prices of a range of issues over a
defined period of time. By one common definition, a bear market is marked by a price decline of 20% or more in a key stock market index from a
recent peak over at least a two-month period. However, no consensual definition of a bear market exists to clearly differentiate a primary market
trend from a secondary market trend.
Bear market rally
A bear market rally is sometimes defined as a rise of at least 10%, but not more than 20%.
Notable bear market rallies occurred in the Dow Jones index in after the 1929 stock market crash leading up to the market bottom in 1932, as well
as throughout the late 1960s and early 1970s. The Japanese Nikkei stock average has been typified by a number of bear market rallies since the
late 1980s while experiencing on overall downward trend.
CAUSES of a Bull - Bear Market
Both bull and bear markets may be fueled by sound economic considerations and/or by speculation and/or investors psychological biases. The
stock market is controlled by people and, as a result, emotions. Expectations play a large part in financial markets and in the changes from bull to
bear environments. More precisely, attention should be paid to positive surprises and negative surprises. The tendency is for positive surprises to
characterise a bull market (when the news continually tends to exceed investor's expectations) and conversely negative surprises tend to
characterise the bear market (with expectations disappointed).
Both bull and bear markets may be fueled by sound economic considerations and/or by speculation and/or investors psychological biases. The
stock market is controlled by people and, as a result, emotions. Expectations play a large part in financial markets and in the changes from bull to
bear environments. More precisely, attention should be paid to positive surprises and negative surprises. The tendency is for positive surprises to
characterise a bull market (when the news continually tends to exceed investor's expectations) and conversely negative surprises tend to
characterise the bear market (with expectations disappointed).
| Back to definitions : click here |
| Trader : Herman Bogaerts -- Tradersname : Freedom E-Mail : Herman.Bogaerts@Wanadoo.fr --- Admin@DayTrader-Generation.com |
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| Daytrader-Generation “No Gambling but True Working Tools to Achieve Profit” "Day-Trading, Business of the Future !" |
Secondary market trends
A secondary trend is a temporary change in price within a primary trend. These usually last a few weeks to a few months. A temporary decrease
during a bull market is called a correction; a temporary increase during a bear market is called a bear market rally.
Whether a change is a correction or rally can be determined only with hindsight. When trends begin to appear, market analysts debate whether it is
a correction/rally or a new bull/bear market, but it is difficult to tell. A correction sometimes foreshadows a bear market.
Correction
A market correction is sometimes defined as a drop of 10% to 20% (25% on intraday trading) over a short period of time. It differs from a bear
market mostly in that it has a smaller magnitude and duration. Because of depressed prices and valuation, market corrections can be a good
opportunity for value-strategy investors. If one buys stocks when everyone else is selling, the prices fall and therefore the P/E ratio goes down.
Also, one is able to purchase undervalued stocks with a highly probable upside potential.
A secondary trend is a temporary change in price within a primary trend. These usually last a few weeks to a few months. A temporary decrease
during a bull market is called a correction; a temporary increase during a bear market is called a bear market rally.
Whether a change is a correction or rally can be determined only with hindsight. When trends begin to appear, market analysts debate whether it is
a correction/rally or a new bull/bear market, but it is difficult to tell. A correction sometimes foreshadows a bear market.
Correction
A market correction is sometimes defined as a drop of 10% to 20% (25% on intraday trading) over a short period of time. It differs from a bear
market mostly in that it has a smaller magnitude and duration. Because of depressed prices and valuation, market corrections can be a good
opportunity for value-strategy investors. If one buys stocks when everyone else is selling, the prices fall and therefore the P/E ratio goes down.
Also, one is able to purchase undervalued stocks with a highly probable upside potential.