Stocks Basics: Battle of Bull and Bear

The stock market is not every one’s cup of tea, especially if you are not used to hearing words like small cap, indices, liquidity, margins and the likes. Such heavy jargon is the salient feature of knowledge that one needs to know before stepping into the market. At least, if one wants to be thorough with what one is doing. Moreover, when these words are used related to each other, in one sentence, one gets all the more perplexed. However, these words are different from the basic words, which depict the trend of the stock market.

Bull and BearThese words are ‘bull’ and ‘bear’, and have been known to make the image of a market. These stock market terms date back to the nineteenth century. One may think that like the other terms related to stocks, these two terms may also have a long mathematical calculation behind them. However, this is incorrect. Although, the origin of the terms is slightly undefined, their meaning is crystal clear. ‘Bull’, refers to the investor, who has the opinion that an individual stock, or the entire market, is one that is progressive or will rise in value. Whereas, ‘bear’, refers to the investor, who believes in the opposite of what is mentioned above.

Same is the case of a market. When the market is going up, is it is called a bull market, and when it is going down, it is called a bear market. The kind of market is usually determined, by a fall or rise of 20%. However, the battle of the bull and bear has been going on forever. This is, because both these trends and natures of an investor are based on their opinions regarding the market. Such opinions are based on the perception an investor has of the trend the market is in or will be in the future. However, the basis of the all important opinions formed by the investors is made up of many factors, which may be dependent or independent of each other. These factors may be based on facts and be real, or may be imaginary. However, whatever the nature of these factors is, they will all lead to a bull or a bear market. Usually, the difference between the two markets starts developing with a change in the activity of the economy.

However, the difference comes when the change is opposite of each other. For instance, one would consider the market to be bullish (taking an upturn), if there is a long term boost in the currency’s value, or a group of powerful companies exceeds their expected earnings for the quarter. However, if this picture is made negative, then the market would be considered bearish. This is because if the change is positive, the investors tend to see a brighter future for the company, thereby becoming the cause for a probable increase in the stock price. However, if the change is negative, the investors would envision a future, where the company would decrease in its value, consequently causing a decrease in the stock price.

One must take into account, the way the psychology of the investor changes in relation to the current or future conditions of the market. It is actually the investors who create a future trend that they themselves manage to predict. This is because, seeing the condition of a company, they either withdraw or invest in a stock, thereby becoming a reason for an upward or downward trend in the market. Hence, the battle of the bull and bear is a never-ending one, and one that cannot be either won or lost. Even if there is victory or loss, it is bound to change with the next turn of events it the economy.