Learning to Plan for Bear and Bull Market

Bear markets and bull markets occur in the U.S. stock market, in foreign markets, commodities markets and virtually all organized markets or exchanges in existence. A bear market is simply a descending trend in prices, while a bull market is an increasing pattern. This is not a recent trend. These market fluctuations have taken place during trading history.

Prices vary in any market, and over a time frame values are either increasing or falling. The value pattern is either rising or declining. Imagine it like this: when a bear attacks it comes in high and tears the victim down; when a bull charges it comes in low and rears its head up when it attacks.

These trends may last only a few months or several years, and investors endeavor to forecast the direction. To meet the criteria by general explanation, a plunge of 20% or more from a earlier market high, or a rise of 20% from a preceding market low must transpire to have a recurring trend.

Why are investors so anxious about these market trends? As a broad process, the majority of investors become profitable in a bull market and experience a decline in a bear market. You would be very successful as an investor if you could forecast the variation in development. Speculators can generate profits in every market-if they guess the future cycle accurately.
The lengthy position is how the majority of traders make revenue. Put differently, they keep their stocks for an extended period hoping the market trend will be up. Alternative investors, gambling that values will fall, use the short position. Defer short positions to the investors that trade with a higher-than-average risk. Values rise more regularly than they drop in the stock market. Put differently, customarily, the U.S. stock market cycle is up.

As confident as bull markets can be, bear markets can be conversely disastrous. A bear market evolved in late 2007. US stocks in general lost approximately 40 percent of their worth in the year that followed. Because of this, foreign markets did worse as well.

Learning to plan for market fluctuations should be the goal of any amateur investor. Don't let a bear market scare you, and do not let it steer you from the investment environment. Fearful selling of your stocks and mutual funds will not be the wise course. Record of market fluctuations confirms a bull market will come back in the foreseeable future.

As a matter of fact, learn to invest. If you sustain a well balanced group of stocks, bonds and money market securities, you might lose a bit in bear markets. Your position shouldn't be destroyed, and your funds should improve in the next bull market.

It is imperative to remember, market fluctuations come and go; but traditionally, the trend has always progressed higher.