Bulls and Bears – Primary Market Trends
Firstly the bull is a buyer and the bear is “always” a seller. The bull buys because he wants to make money, (don’t we all?). In a “bull market” novice traders rush into every reasonable opportunity they can afford. These trades are not based on good management or risk control.
Please try not to get caught up in this market hype. If you start to chase prices upwards there is a very good chance you will pay too much for them, only to watch the share price start to recede when the buying panic is over.
A bull market tends to be associated with increasing investor confidence, motivating investors to buy in anticipation of further capital gains. In describing financial market behaviour, the largest group of market participants is often referred to, 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 bear is more complicated and can sell for different reasons. This can be just to lock in a profit because he thinks the share price is about to go down. The most fearful of the bears sets the lowest price for the day. This is done by offering to sell his shares at this level.
A bear market tends to be accompanied by widespread pessimism. Investors anticipating further losses are motivated to sell, with negative sentiment feeding on itself in a vicious circle. 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.