Bull and Bear Market: What They Are and How They Differ

Bulls and bears are probably the first animals a beginner meets in trading. It sounds mysterious, but behind these words is a simple thing: which way the market is broadly looking right now, up or down. Understanding the current phase matters, because the same strategy works differently in a rising and a falling market, and confusing them is costly.

I trade only with the trend, that is my base. Working against the trend brings no long-term result; you can guess a bounce, but the potential of a move is always with the move in the main direction. So the first thing I always do is define which phase the market is in, and then fit my actions to it. Let's go through both phases and how to act in each.

In this article we'll cover:

• a bull market is a long rise in prices and optimism, a bear market a long fall and pessimism;
• a move of about 20 percent from a peak or bottom is often a guide, but trend durability matters more;
• in the bull phase the crowd buys on greed, in the bear it sells in panic on fear;
• the phase should be defined by market structure and volume, not by emotions and news headlines.

First the definitions and where these animals even came from, then the differences to the point.

What a bull and a bear market are — a definition

Bull market — a long period of steady price growth, when most assets get more expensive and participants are optimistic. A bear market is the opposite phase, a long fall in prices against a backdrop of pessimism and caution. In crypto a drawn-out bear market is also called a crypto winter.

The names came from the behaviour of animals: a bull tosses its opponent with horns from below upward, while a bear presses down with its paw from above, hence rise and fall. As a guide the twenty-percent rule is often used: a rise of about 20 percent from a previous bottom is taken as the start of a bull phase, and a fall of 20 percent from a peak as the start of a bear one. But the percent is only a rough marker. Reality is created not by a figure but by trend durability: the market really goes down or up, and participants en masse behave accordingly. And it is important to remember the market is cyclical, the phases replace one another, and after every bear market a bull one comes sooner or later, and vice versa.

In short.A bull is steady growth and crowd greed, a bear is a fall and fear; the 20 percent from a peak or bottom is only a rough marker, trend durability decides.

How a bull and a bear market differ

The difference is not only in price direction but in participant behaviour, and it is by behaviour that the phase is easier to recognize.

In a bull market optimism reigns. Prices rise, trading volumes are high, beginners come in crowds and buy up assets hoping for further growth, often on greed and the fear of missing the move. Bulls, that is buyers, open long positions counting on selling higher. In a bear market everything is mirrored. Prices fall, capitalization and activity shrink, and so-called FUD spreads among participants, that is fear, uncertainty and doubt. Under these emotions the crowd panic-sells assets, which speeds the fall even more. Bears, that is sellers, earn on the decline in this phase by opening short positions. The result is a simple picture. A bull market is growth, optimism, high volumes and greed. A bear one is fall, pessimism, contraction and fear. Both phases are normal and naturally replace each other, and the problem is not that a bear market comes but that a beginner does not understand which phase they are in and trades against it. Recognizing the phase in time matters more than guessing the exact top or bottom.

In short.Read the phase by behaviour: a bull shows high volumes and buying on greed, a bear shows contraction and panic selling on fear.

How a trader should act in each phase

The main rule is simple, and it is the core of how I trade: trade in the direction of the main trend. In the bull phase it is more logical to look for buy entries on pullbacks down, in the bear one the reverse, to enter sells on bounces up. Going against the phase, catching a bottom in a falling market or shorting a confident rise, is a game with low odds. In a bear market it is especially dangerous to catch falling knives, that is to buy an asset only because it has dropped a lot: until the down-trend is broken, cheap easily becomes cheaper.

Here is the key point that sets my approach apart. The phase I define not by news and not by the crowd's mood, but by market structure and volume. Headlines and emotions lag and often turn a beginner around at exactly the wrong moment. A phase change is confirmed not by panic in the tape but by a break of structure on the chart: a breakout and hold past a key level, a change in the character of volumes, an asset passing from the crowd to large capital. This isn't personal advice, it is just my logic: first see confirmation of a trend change on the chart, and only then join, rather than guess the reversal in advance. From practical guides: in a mature bull phase it is sensible to partly take profit on the rise, and in a bear one to keep part of the capital in cash and not rush to buy every dip. How to read a trend and its strength I cover in the topics on the anatomy of trends and market phases, and the basics in the course sections on market phases and trend strength.

In short.I trade with the trend and define the phase by structure and volume, not by news; in a bear I don't catch knives until the down-trend is broken.