Bull vs Bear Market: How to Remember the Difference
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A bull market is a sustained period of rising prices, and a bear market is a sustained period of falling prices. By the usual rule of thumb, a bear market starts when an index falls 20 percent or more from a recent high, and a bull market starts when it rises 20 percent or more from a recent low.
That 20 percent line is a convention, not a law. No regulator sets it and no committee declares it. It is simply the number the financial press settled on, which is why you'll sometimes see people argue about the exact day a bear market "officially" began.
A memory trick that actually works
Think about how each animal attacks. A bull thrusts its horns upward. A bear swipes its paws downward. Bull means up, bear means down.
The story behind the names is less tidy. One explanation traces "bear" to an old saying about selling the bearskin before the bear has been caught, which became a way to describe people selling something they didn't yet own. The bull was then attached as the natural opposite. Nobody can prove the chain, so treat it as a likely story rather than a settled fact.
The numbers people use
- Bull market: a rise of 20 percent or more from a recent low, usually in a broad index.
- Bear market: a fall of 20 percent or more from a recent high.
- Correction: a fall of 10 percent or more, but less than 20. Uncomfortable, and far more common than bear markets.
The 20 percent threshold is doing a lot of work here, and it is arbitrary. A market that falls 19 percent and then recovers never gets the bear label. One that falls 20.1 percent does. The underlying experience for anyone holding through it is nearly identical.
How long each one lasts
Historically, bull markets in major stock indexes have tended to run for years, while bear markets have tended to run for months up to a couple of years. That asymmetry is one reason long-term investors stay invested through the bad stretches.
But averages hide wide variation. The 2020 crash took the S&P 500 down more than 30 percent in about a month, one of the fastest bear markets on record, and it recovered far quicker than most people expected. The 2022 decline was slower and more grinding, with the index falling roughly a quarter from its high before finding a floor. Both were bear markets, and they felt completely different to live through.
Past patterns describe what happened, not what will. A bear market that lasts a month and one that lasts two years are both entirely possible.
What each one feels like
Bull markets feel easy. Most things go up, dips get bought, and confidence spreads. The danger is that it teaches bad habits. Someone who started investing in a long bull run may believe they are skilled at picking assets when the tide was doing most of the work.
Bear markets feel personal. Every account balance is a small daily reminder. Headlines are bleak, and it is very tempting to sell simply to make the discomfort stop. This is where paper hands and diamond hands stop being memes and start being real decisions with real consequences.
The label always arrives late
Here is the catch that trips people up. You only know you were in a bear market once the fall passes 20 percent, which means most of the damage has usually already happened. And you only know a new bull market has begun after prices have already climbed a fair way off the bottom.
Markets have a habit of bottoming when the news still looks terrible, and topping when it looks wonderful. That is why an old market adage says bull markets climb a wall of worry: the recovery begins while most people are still nervous.
Traps inside each market
Both phases contain moves that fool people. Inside a bear market, sharp rallies can look like the end of the decline, which is the classic dead cat bounce. Inside a bull market, sudden drops can look like the start of a crash when they are just routine pullbacks, and that is the situation the idea behind buying the dip was built for.
The trouble is that a dip and the start of a bear market look exactly the same on day one. Only the following weeks show which one you were in.
Bull and bear in other markets
The words travel beyond stocks. You'll hear about bull and bear markets in crypto, gold, housing and currencies. The 20 percent rule is applied loosely elsewhere, and volatile assets often swing that far in weeks, so the labels get thrown around more casually. Crypto in particular can move through both in a single year.
How to think about it without predicting it
Trying to guess which market you are in is a game with poor odds. A more useful question is how you would behave in each one. If your plan only works while prices rise, it is a bull market plan, not a plan. If you would panic-sell a 25 percent fall, it is better to find that out through position sizing now than through a bad afternoon later.
There is a way to find out short of waiting for the next bear market, which is to look honestly at what you did in the last one. Our trading journal records whether you stuck to your own plan on each trade and totals what that decision was worth in dollars. A rising market flatters everybody. A journal is the thing that separates the part of your results that was you from the part that was the tide.
Knowing the vocabulary helps you read the news. Having decided your own rules in advance is what actually helps your account.
Vesterfy makes phone cases for people who plan for both directions. Our tough case with the green bull is one of them, and the full range lives in the Trader and Investor collection. For more market vocabulary, see our trader slang glossary.
Educational content only, not financial advice. Nothing here is a recommendation to buy or sell any asset. Markets carry risk, including total loss.