News headlines are positive and squiggly green lines dominate your Shares app. Yep, life is good when in a bull market.
It happens when prices in the stock market, crypto market or even NFT market shoot up, typically by around 20%. When this happens, a lot of people jump on the bandwagon and start buying, causing the market to keep increasing.
Of course, this isn't the only factor that causes a bull market. Companies reporting strong bottom lines (their overall profit) and improving investor confidence are just other examples that help prices surge.
A bull market can be extremely profitable for a trader. Numerous trades of buying and selling in a rising market can make for a lot of gains if someone knows what they're doing.
As with all trading though, there's risk. How do we know we’ve hit the top and the only way is back down?
Are we in a "bull market"?
The best way to tell if we're in a bull market is to track large index funds such as the S&P 500 and the Dow Jones Industrial Average. Keep in mind the period of time you're focusing on when looking at a bull market; a 24-hour change won't tell the same story as what has happened over the last 5 years. Always remember to keep context in mind when looking at a rising market!
Bull markets are a lot more common in crypto due to how volatile life is there (an hour in the crypto market is a year in the stock market, after all). Bitcoin moving 10% isn't that newsworthy, whereas the S&P moving 5% often makes for front page news. Again, context is everything.
Why is it called a "bull market"?
If you've read our piece on bear markets, then you might have an idea where the term bull market gets its name from.
When a bull attacks prey, their horns move in an upwards motion, and this is said to resemble a market going up. Admittedly, it's not the investing world's best analogy, but we move.
Bull and bear markets both have the terms 'bullish' and 'bearish' associated with them, too. Simply put, if someone is 'bullish' on a company then they believe that company is likely to perform well. For example:
“Have you seen Tesla's latest dog feature mode? I'm bullish on them this year.”
Make sure to let us know which company or projects you’re bullish about!
For a less optimistic read, visit our article on what a bear market is.
For other guides, check out our pieces on:
As with all investing, your capital is at risk.
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