Home » BiostocksPro » Stock Market Investment » Stock Investment Basics

What is a Bull Market?

If you have ever read the financial section or researched the stock market, you have probably heard the term bull market. What is a bull market, and what effect does it have? A bull market refers to when the prices of stocks have gone up steadily over an extended time period. A bull market means a market that is going up instead of down. Normally during a bull market, the economy of the country is stable and strong, and unemployment is low. The assumption by the investors is usually that the market will continue the upward swing. The opposite of a bull market is a bear market. A bull market can be described by some characteristics that occur, and investors should watch these characteristics closely to determine what trades to make.

A bull market is not simply stocks that are on the rise in price. There are some other factors that can affect the type of market and how trades are being done as well, and this is also true in a bear market or any other market type. One of these factors is the level of supply and demand for securities for trading. A bull market will exhibit signs of a strong demand for securities against a weak supply for them. Many traders and investors want to purchase securities, but most traders and investors do not want to sell, and this will cause the market price to go up in response. Because investors want securities but they are in short supply, the investors are willing to pay a higher price for them, and this is what causes the stock price to rise.

Another factor concerning a bull market is the psychology involved. The psychology of the investors is an important factor, because the of the market is based in part on the behavior and mindset of the investors. The performance of the stock market and the psychology of the investors are dependent on each other, and the thoughts and fears of investors will determine whether the market goes up or down. This is a fundamental principle, and the psychology of investors will determine how the market reacts. During a bull market investors want to buy, because the price is going up, and investors are confident that buying stock can be profitable if this trend continues. A bull market means plenty of investors trying to buy and share in the wealth in the hopes that the market prices continue to rise. Investors will pull money out of fixed income securities that pay less, and invest in the stock market instead.

Another factor that plays a part in a bull market, or any market fluctuations and trading activities, is the economic activity. There is a very strong link between the economy and the stock market, as the past months have shown. Businesses are the base for the stocks that are traded on the market, and the economy has a huge effect on these businesses. In a bull market, the economy is strong and stable, and economic growth and activity are high. Consumer spending is high, because people have extra money, and this strengthens the economy and raises the market price of the stocks. This is because businesses are making profits and can afford to expand, leading to even more potential profits.

A bull market can be risky, however, because eventually what goes up must come down, and the volume of trading in a bull market is high. This can have an effect known as the bubble effect, because stocks rise so high they become overvalued, and eventually the bubble will burst and the market can collapse swiftly.

The information supplied in this article is not to be considered as medical advice and is for educational purposes only.