What is a Bull Market?

By Walker England | February 13, 2020

So, you want to run with the bulls? Well, before sprinting off it’s necessary to know exactly what a bull market is. The great news is, once a bull market has been identified, a trader can employ a variety of strategies to simply buy the market!

Bull Market Definition

A bull market represents a market that consistently rises and can be relentless in its pursuit of higher prices, providing continuous potential buying opportunities.

Notable Technical Characteristics of a Bull Market

Most bull markets have a series of notable characteristics. Namely, prices are continually rising to new highs. Technical traders may note that new bull markets will have breakouts in which they quickly impulse higher giving an image on a graph that almost looks like a series of stair steps. These higher highs and higher lows provide ample buying opportunities. Traders can typically look for bull markets to continue until new lows are made.

Buy Based Opportunities

  • Continually Rising Prices
  • Breakouts to New Highs
  • Buy Based Opportunities

Bull vs. Bear Markets

If markets can be bullish, they can also be bearish. The key difference between bull and bear markets is the direction. Bearish markets are known for falling and falling rapidly. Traders charting markets typically assess bearish markets by noting a series of continuous lower lows. As the old saying goes, markets can take the stairs up, but often take the window down! If new lows are being made, don’t worry, strategic traders have the opportunity to capitalize in falling markets by quickly switching to a sell side strategy.

Bear Markets Are Characterized By:

  • New Lower Lows
  • Drastic Falling Prices
  • Selling Opportunities

Example of Bull Markets

Now that we know what to look for in a bull market, let’s look at some examples.

S&P 500 Multi-Year Bull Market

One of the most clear-cut bull markets can be found in U.S. Stocks during the period from 2009 – 2019). As of December 18, 2019, the S&P 500 was trading off all-time highs and had risen over 15% for the year! From the low of 665.7 in 2009, the bulls have been running in the S&P 500 to the December 2019 high of 3253.5. That’s a total return of 388%!

S&P 500 stock chart showing multi-year highs

Gold Market Bull Market

Bull markets can also be found in commodity markets. After ranging sideways for multiple years, Gold began experiencing a fresh bull market in 2019. With this resurgence of directional movement, ample opportunities have been provided for buy side traders. From the 2018 lows found at $1,160.06 to the September 2019 high of $1,556.88, Gold has risen as much as 34%!

Gold stock chart showing an uptrend that began in 2019

Bull Market Strategies

When markets are rising rapidly, there are countless ways to take advantage of the opportunities. Some of the most common techniques include the tried and tested buy and hold strategy. If prices are rising, a trader simply buys long and holds on for the duration of the move, only closing a trade when the bull run ends. Continuing the buy and hold strategy after the onset of a bear market could result in the loss of previous gains, which then have to be recovered before realizing higher highs in one’s portfolio.

Traders may also consider a swing-based strategy. A swing trader will wait patiently for a dip and buy when the market swings back up towards new higher highs. If you are a fan of buying low and selling high, this may work for you. An example of market swings at work may be seen in the Citigroup Inc. chart example below. Each time the market dipped traders had the opportunity to buy which would have resulted in profits as the market continued to progress higher.

Stock chart showing dips that present potential opportunities for swing traders

Lastly, traders may consider trading breakouts. Breakout traders look for bullish market movement to cause the creation of higher highs. When a new high is created, traders may look to buy with the new surge of fresh bullish momentum. An example of this can be seen on the QQQ daily example chart below. As the market stair steps higher, breakout traders will be looking to buy as the uptrend progresses.

QQQ chart showing potential opportunities for breakout traders

Final Trader Tips for Bull Markets

Traders should always be on the lookout for market direction. If a market is rising, the best tip traders can take is to look for buying opportunities. While this tip may seem obvious, it isn’t uncommon when markets are rising aggressively for a novice’s first instinct to be to sell. Selling into a fresh bull market can be catastrophic to an account balance!

Bull market traders should also always be on the lookout for a change in the trend and they should be prepared to manage risk appropriately. While it is tempting to just let your trades run forever, even the strongest trends will correct or reverse at some point. Consider using a trailing stop in long trends and watch for lower lows that may terminate a bull run.

Use leverage judiciously! This final tip holds true for any market. Leverage, when used correctly, can help maximize gains. However, it is wise to remember that even when bull markets are running strong anything can happen. While it is tempting to overuse leverage for gains, a little prudence and proper use of trading tools can also help minimize losses.

About the Author
Walker England

Walker England became an active trader just prior to the dot-com bust. This early experience in risk management taught him valuable lessons he shares with his students as an Online Trading Academy Instructor.

This content is intended to provide educational information only. This information should not be construed as individual or customized legal, tax, financial or investment services. As each individual's situation is unique, a qualified professional should be consulted before making legal, tax, financial and investment decisions.

The educational information provided in this article does not comprise any course or a part of any course that may be used as an educational credit for any certification purpose and will not prepare any User to be accredited for any licenses in any industry and will not prepare any User to get a job. Past results are not a guaranty of future performance.

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