What is the difference between a bull market and a bear market?

The term bear or bull market describes how a particular section of the stock market is performing at any given time.If prices are rising it is considered a bull market.If prices are falling then it is a bear market. It is however, possible to earn a profit in either market.It is important to understand the concepts of supply and demand in order to do well in either the bear or the bull market.

History
It is said that the bear and bull markets got their names from their attack methods.Historically it was the nature of the bear to swipe down at its opponent.The bull, on the other hand, would swipe up with its horns to attack a predator.Thus the bear represents downward trends and the bull represents up-ward trends.Another possible origin for the use of these two particular animals was the bear and bull fights that used to be popular.The two animals were considered to be opposites, so too are the markets they represent.

Bear Market
A bear market refers to a market where the prices are falling.In a bear market investors believe that prices will continue to decrease.This down-ward trend means a weak economy and low employment rates (which include worker lay-offs). In a bear market the share prices are usually low.Share prices are low because investors are looking to sell.Investors see this down-ward trend and anticipate that in the future the stock that now has some value will decrease in value.Because so many shares are available, demand is low.When demand for shares is low, the shares are not as expensive. As with bull markets, bear markets are driven by investor expectations, emotions and reason.In a bear market, the investor sees that his shares are depreciating in value.He is afraid that he is going to loose all of his money and thus is anxious to sell.This type of investor is then more likely to take his money out of the stock market and into a place where he is guaranteed an increase.This only perpetuates the bear market.As more and more investors pull their money out of stocks the condition of the market decreases.

Bull Market
A bull market refers to a market where prices are rising.In a bull market investors believe that prices will continue to increase.This up-ward trend means a strong economy and high employment levels.In a bull market the share or stock prices are usually high.The prices of these shares are high because there is a lot of demand for them.Other investors want these shares because they see that the company is doing well and assume that it will continue to appreciate in value.The current share owners are more reluctant to sell their shares, making the shares that are available very valuable and thus more expensive.As with bear markets, bull markets are driven by investor expectations, emotions and reason.In a bull market, the investor sees that his shares are appreciating in value.He hopes to make more and more money and looks to buy more shares as a way of doing this.This investor has seen the pay-off of taking a risk and is more likely to keep putting money into the stock market.As a result, more money is put into the market and the condition of the stock market increases.

Although the current condition of the stock market is up for debate and depends on the period of time you choose to examine, the long term results of the market have yielded positive returns.