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How Can You Leverage From Bull and Bear Market Conditions

Bull and Bear markets play an integral role in the professional life of each and every investor. The ability to recognize these two conditions before they occur offers traders the opportunity to increase their success potential. 

How Can You Leverage From Bull and Bear Market Conditions

As such, we are all compelled to fully grasp the meaning of bull and bear markets; how to recognize them, what’s special about them and most importantly, how to act once either trend is identified.

Generally speaking, bull and bear represent two opposite market conditions. A bull market signifies strong market condition, while a bear market denotes weak market conditions. You can identify both of these market conditions in most tradable markets, including stocks, commodities and currencies.


3 key influential events that may trigger bull and bear market conditions:

1.       Global economic distresses

2.       Release of nationwide economic data

3.       Overall business performance of organizations


What is a Bull Market?

A bull market represents a market on the rise. This market condition symbolizes the same characteristics as the animal it stands for, particularly muscularity.

During bull market conditions it is common to observe a healthy and strong economy and subsequently an incline in employment levels. As a result the market share price increases in the market.

Despite investors’ common misconception bull market conditions don’t solely refer to the stock market. The term relates to all markets and can be observed in the bonds, commodities and currencies markets as well.

In addition to the rising market share prices, bull markets are also expressed through investors’ emotions. Bull market conditions provoke high levels of confidence and hope along with optimism amongst the investors. 


Early signs to identify a Bull Market

The foremost indicator for a bull market is the increase in demand and decrease in supply. The consequence of such changes in demand and supply for a market result in a higher market share price.

Therefore leveraging a higher investment potential from a bull market requires you to keep a close eye on the market state of supply and demand.

Positive sentiment may also be interpreted as a sign for an upcoming bull market. In this case, you will observe high levels of confidence amongst the rest of the investors, which in turn will result in an increase in trading volumes, indicating bull market conditions.


How should you act during bullish trends?

Once you identify a bullish trend, where the market share price is rising, investors display high levels of confidence, demand has increased and supply has decreased, make sure you place a “Call option” in the trades you execute.

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What is a Bear Market?

A bear market represents a depreciated market. In other words, the value of market share price drops and investors feel skeptic, expressing pessimism towards their investments.

Every so often bear market conditions are triggered by the weakening of the economy, as well as by escalating unemployment levels. All of which cause a sharp decrease in market share prices.


Early signs to identify a Bear Market

Conversely to the bull market signs, in a bear market the market share price decreases, since more people are interested in selling rather than buying shares.  

In addition, and again alternatively to bull markets, bear market investors depict negative sentiments. Due to the lack of confidence investors hold in regards to the market condition, they prefer to keep their capital to themselves instead of investing it in the markets. 


How should you act during bearish trends?

It is imperative that you identify a bearish trend as it starts emerging. And if you succeed in doing so, make sure to place a “Put option” in the trades you execute, in order to accomplish consistent profits.  


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