How to Survive Bull and Bear Markets

The stock market is a never-ending cycle of rising and falling share prices. A company can become worth millions in one night or reach a zero value in a matter of a few hours. The chances for the latter happening through unfair means has reduced drastically when demat accounts for holding stock shares and securities were adopted in India after 1996. Demat accounts are a method of recording securities electronically which reduces the need for physical paper certificates.

The best demat accounts in India have become secure after the burst of technological advances which has led to the use of advanced software for storing and facilitating stock exchange. However, all of these have been drastically affected due to the rapid transition of stock shares and prices due to the bull markets and bear markets.

The change in bear and bull markets-

  • ‘Bear’ and ‘bull’ are the denotations given to the stock market when it depreciates and appreciates in value. Most of the time these terms denote the perception and the attitude of an investor during market changes.
  • Bull stands for an optimistic investor attitude or investor confidence which promotes buying more shares.
  • Bear stands for a pessimistic investor attitude or lack of investor confidence which prevents them from buying shares. This continues the downward spiral of market depreciation.

How to make market change estimates-

  • The performance of a market over the long term is a better indicator of a bull market or a bear market. The knee-jerk reaction is the outcome of years of a sluggish or booming economy. Gauging small term changes and trends can mislead analysts because it can also be a market. A longer time period will provide details about a bull or bear market.
  • It is possible that the past two weeks have shown a bullish trend whereas there has been a bearish trend observed in the past 2 years. Laymen would predict a market reversal, but analysts would first check the change in market indices. If there has been a 15-20% change in the market, then it is possible that there is a new direction in market trends. These changes are then manipulated by investors after a complete inspection of the market and economic conditions.
  • This also means that there is a possibility of stagnation period instead of a secular bull or bear market. Every long movement in the market cannot be accredited to bull or bear conditions as sometimes the stagnation period lasts as the market is looking for a new direction. It is also possible that most of the upward trends cancel out the downward trends and this results in a flat market trend.

Investors must make prudent decisions after gauging the market trends. The wisest technique is to buy and accumulate shares and sell them when the market has reached its peak. Although it is impossible to predict the peaks and bottoms of the share market trends, there can be a probabilistic determination before making the right choice. A loss in a bull market is a temporary loss, but a loss in the bear market adversely affects companies and investors.

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