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What is Bull Market? 3 Things You Should Know

With the rise of the great world of cryptocurrencies and their increasing popularity among investors, there has been the birth of several new terms like crypto whales, bear markets, bull markets, candlesticks, and so on. For a newbie in the crypto market, it can be very difficult to wrap their head around so many terms while managing the volatility in the prices of their crypto assets. To help you get started with your journey and gain knowledge of this industry and investments, in general, we are helping you to take a step forward and learn about what is a bull market. Here are three things that you should definitely know about bull markets. 

What is Bull Market?

A bull market refers to a period in the course of financial markets when the prices of the assets, typically cryptocurrencies or other securities are increasing. Specifically, when the prices of the currencies witness a rise in prices by more than 20% between two declines of 20%, it is known as a bull market. Now a financial market can not be called a bull market if the price of one or two securities is increasing. For a market to go into a bullish phase, the prices of a wide range of securities must increase by over 20%. 

Features of a Bull Market

There are certain features that indicate an approaching bull market. Here are some distinct features of a bull market. They can help you analyze the market condition and predict whether it is a bull market or not. 

  • Generally, when the GDP of a country is booming and the economy is strengthening, a bull market may come into existence.
  • When the unemployment rates in a country are dropping and the corporate companies are making huge profits, the markets may become bullish. This is because the investors have more money in their hands to invest. So they begin investing in a varied number of securities. This, in turn, leads to rising in the prices of securities.
  • Thirdly, when the investors are more confident about their investments and tend to buy more, bullish markets may appear.
A Brief History of Bitcoin Bear Markets | by Mosaic | Mosaic Blog | Medium
History of Bull Market

Investing in a Bull Market

Technically, an investor should refrain from investing their money during a bull market. This is the advice that most inexperienced investors will give to the newbies. If you ask a smart investor, on the other hand, they will always have well-designed approaches to get profits out of a market, even when it is bullish. So, here are some investment strategies that you can use to make profits from a bull market. 

Try Full Swing Trade

Full swing trade is a special kind of trading where investors aim to short-sell their crypto assets. They do so in order to make maximum gains from the bullish markets. In this, the investors buy and hold on to their assets for several weeks or a maximum of two months. Though the investment approach may yield competent yields to the investors, it also includes a significant amount of risks. The key is to find a trade setup that offers a favorable risk to reward ratio. The investors have to analyze the candlesticks patterns for several days for a particular cryptocurrency and then devise a proper strategy. The strategy must highlight the entry as well as exit points for the investor in the bullish market. 

Retracement

Retracement refers to the period when the prices of a security exhibit a reverse trend as compared to the general trend of the market. For example, retracement is said to happen when the price of the security falls for a small period of time. This is unlike the general behavior of the bull market, that is, the increase in the price of a security. Adopting a retracement approach for buying the securities or cryptocurrencies in this case, can help investors find a discounted purchase price. This can greatly increase the profit-making potential of an investor. 

Buy and Hold

Buying the assets and holding on to them is the best way to invest in a bull market. Since the prices increase during bull markets, the investors’ confidence also increases. This leads to investors buying more assets. Similar confidence is presented by a large number of investors in the market. This continuously leads to an increase in the prices of the assets throughout the bullish market period. So, the investors must buy their assets at the onset of a bull market and hold on to them till the end to reap great profits on their investments. 

Then increased buy and hold is an extension of the buy and hold approach. The only difference here is that it involves additional risks. In this method of investing in a bull market, the investor expands their share in the particular security, every time the price of the security goes up by a predefined amount. The investors continue to do so until the price of the security keeps increasing. However, it is very important to note here that this approach is good only for the securities having enough intrinsic value. This is to ensure that when the bull market phase ends, the price of the security doesn’t fall so quickly and adversely. This is why this technique of increased buy and hold consists of additional risks.

Conclusion

Predicting the onset of a bull market can be a bit tricky. However, investors do not need to worry about that, since market analyzers do the work for them. All the investors have to do is design an investment strategy that works best for them. We strongly advise investors to keep the price volatility of crypto assets in their minds while working on their strategies. 

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