What is a Bull Market?

A bull market is characterized by rising prices and growing optimism. Here’s what that really means.

In technical terms, a bull market is defined as one in which each successive advance of the primary trend peaks higher than the one preceding it. In English, that means the overall market is trending upwards and investors feel generally positive.

A major uptrend can last from several weeks to several months and is otherwise known as a bull market. The converse is true for a major downward, or bear market.

These major trends shouldn’t be mistaken for smaller movements, though. Nor should the movement of a few stocks be expected to move the entire market. Again, we’re talking about the overall movement of the market here.

Within a major uptrend or downtrend, several secondary reactions occur against the trend, lasting for a few days, weeks or even months, but they don’t necessarily change the definition of the overall trend.

In the stock market, for example, prices may drop precipitously, even during a powerful bull market, for several weeks at a time. This is known as a “correction.” If the uptrend is still in place, a rally will then ensue.

To put this in context, since 1926, a bear market has come along an average of about every six or seven years. The average bear market has lasted 1.3 years and with an average loss to the bottom of 38%. And that number factors in the Great Depression. The average bull market has lasted 6.6 years with an average cumulative total return of 339%. Since 1926, it has been a bull market about 86% of the time.

Regardless of bull or bear markets, strong stocks will always be worth investing in. To learn more, and to start investing yourself, download your FREE copy of our report, How to Invest in Stocks and Other Investing Basics.