Friday, 15 July 2022 16:40

The role of sentiment within the stock market

The role of bullish vs bearish sentiment The role of bullish vs bearish sentiment pixabay

Trading is largely based on emotions and this principle has governed buying and selling for thousands of years.

 

Researchers have become well acquainted with all the laws that govern markets and the stock market. What is a bear market? What are the characteristics of a bull market? Find the answers below!

Bull market - growth and optimism in the markets

Economic growth drives the economy and makes investors want to spend more. Such a situation is then called a bull market. The prices of stocks and bonds go up, so investors are eager to invest in profitable projects.

For this reason, it is the bull market that is so desirable and good for the development of the economy, which stimulates development and encourages investors to invest money in the stock market. The bull market is a signal of economic development, so it is characterized by very specific economic conditions.

Bear market - decline and depression

Declines, depression and panic is a sign of a bear market. Such a slump can last for a long time, especially if the economic crisis begins to affect not only specific countries, but also the whole world. A prime example of a bear market was the economic crisis in 2008, when the real estate speculative bubble burst. A bear market is a period in which investors are afraid to invest.

Why does an investor need to be well aware of stock market sentiment?

The role of bullish vs bearish sentiment is extremely important, as it enables very accurate investment planning. Watching stock market sentiment is therefore a real foundation that ensures a proper understanding of the market situation. This makes investing in a given period safe and guarantees profit. This is the reason why it is essential to have a proper understanding of the stock market situation, to observe the sentiment and analyze individual stocks.

What can be the result of investing capital during the wrong stock market sentiment? This depends mostly on what stage of the cycle is at the moment. At the very beginning of a bull market, the situation is still relatively salvageable, however, investing a large sum of money before a major stock market plunge can completely sink an investor.

That's why it is crucial to be able to recognize the stock market sentiment. If you are interested in this topic, you can learn more here.

 
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