What is the difference between a bull market and a bear market?

Where the bull and the bear come from

The names come from how each animal attacks. A bull thrusts its horns upward, like a market pushing prices higher. A bear swipes its paw downward, like a market dragging prices lower. The imagery has been used around stock exchanges for centuries and it stuck because it is easy to remember.

You will also hear the adjectives bullish and bearish. They describe expectations rather than the market itself: a trader who is bullish on gold expects the price of gold to rise, and a bearish trader expects it to fall. Someone can be bullish on one asset and bearish on another at the same time.

What defines each phase

There is no law that draws the line, but there is a widely used convention. A bear market is a decline of at least 20% from recent highs that lasts weeks or months. A bull market is a sustained advance from the lows, often measured with the same 20% threshold. A shallower drop of around 10% is called a correction, and corrections happen far more often than full bear markets.

The percentage is only a label, though. The real difference is behavior. In a bull market, good news fuels the rise and bad news gets shrugged off. In a bear market the polarity flips: even genuinely good news fails to hold prices up, because most participants are looking for a chance to sell into every bounce. Same facts, opposite reactions. That is why traders say sentiment matters as much as fundamentals.

• Bull market: higher highs and higher lows, optimism, dips get bought.
• Bear market: a drop of 20% or more from the highs, fear, rallies get sold.
• Correction: a roughly 10% pullback, common and often short-lived.
• Sideways or ranging market: price drifts within a band with no clear trend.

Worked example: one full cycle in numbers

Imagine a stock index that starts the year at 4,000 points. Over eighteen months it climbs to 5,200 points, a gain of 30%. Headlines are upbeat, more people keep entering the market, and every small dip gets bought quickly. That is a textbook bull market.

Then the picture turns. The index falls from 5,200 to 4,050 points over seven months, a decline of roughly 22%. It has crossed the 20% threshold, so by convention this is now a bear market. Along the way there are recoveries, say from 4,400 up to 4,700, that then fade and roll over. These temporary rebounds inside a downtrend are called bear market rallies, and they regularly trap beginners who assume the decline is over.

Notice the timing too: the rise took eighteen months, the fall only seven. That asymmetry is typical. Declines tend to be faster and sharper than advances, because fear moves people more violently than optimism does.

Why bear markets are normal, and the third state everyone forgets

Historically, major markets go through bear phases several times per decade. A bear market is not the system breaking; it is how markets deflate excesses and reprice assets. Every bear market so far has eventually been followed by a new cycle, although nobody knows in advance how long any particular one will last. Knowing this does not make a decline pleasant, but it helps you avoid panicking as if something unprecedented were happening.

There is also a third state that gets far less attention: the ranging or sideways market, where price drifts within a band for long stretches with no clear trend at all. Markets actually spend a lot of their time there, and many beginners lose money trying to trade a trend that simply does not exist. It is worth being honest about the base rate: without education and risk management, most beginners lose money in every phase, not just the falling ones.

Tradebook teaches market phases step by step in short gamified micro-lessons, so you learn to recognize bull, bear and ranging conditions on real charts before any real money is involved.