What is Bull and bear market?
Buqa va ayiq bozori
In short
A bull market is a sustained rise; a bear market is a decline of 20% or more from the peak.
Also known as: bull market, bear market
A bull market is a sustained period of rising prices; a bear market is a decline of 20% or more from the most recent peak. The names come from how the animals attack: a bull thrusts its horns upward, a bear swipes its paw downward.
How they're defined
- Bear market: an index or stock closes at least 20% below its latest peak.
- Correction: a 10–20% decline — milder than a bear market.
- Bull market: no official threshold; a 20% rise from the latest low is often treated as the start of a new bull market.
These definitions are confirmed only in hindsight: you know a 20% drop happened, but not in advance where it will stop.
Why it matters to traders
The market regime strongly affects strategy results. In a bull market buying dips often works; in a bear market the same approach can produce a string of losses, and sharp but short rallies are common. That's why many traders factor in the broad trend (for example whether an index is above or below its 200-day moving average) and adjust size and risk. Historically, US bull markets have lasted longer than bear markets, but that's no guarantee for the future.
Peak to trough, approximate, price index without dividends. Each time the market eventually recovered, but that is no guarantee for the future.
Example
Illustrative: an index peaks at 5,000 points and falls to 3,900.
- Decline: (5,000 − 3,900) ÷ 5,000 = 22% → a bear market.
- Rise needed to regain the peak: 1,100 ÷ 3,900 ≈ 28.2%.
- A 20% rise from the low: 3,900 × 1.2 = 4,680 — many would call this the start of a new bull market, even though the index is still 6.4% below its peak.
Mistakes and tips
Don't try to call the bottom of a bear market — 'cheap' can become 'cheaper'; act in stages.
Don't mistake bull-market gains for skill: compare your results with the market in your trading journal.
Review your strategy and risk level when the market regime changes.
Frequently asked questions
- How long does a bear market last?
- It varies: from a few months to several years. Past averages don't predict the future.
- What should you do in a bear market?
- There's no universal answer. Many reduce risk and position sizes, while long-term investors continue planned, staged buying.
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