Bull market vs bear market
Written by an ex-institutional trader. What bull and bear markets are, where the names come from, the 20 percent rule, what causes each, the market cycle (shown with a diagram), and how investors typically navigate them.
Direct answer
A bull market is a sustained period of rising prices and optimism; a bear market is a sustained fall, commonly defined as a drop of 20 percent or more from recent highs, with widespread pessimism. The terms apply to shares, forex, crypto and other markets. A common memory aid: a bull attacks by thrusting its horns up, while a bear swipes its paws down.
Bull markets are driven by a strong economy, rising confidence and buying demand, and can last for years. Bear markets are driven by recession fears, rising rates or shocks, and tend to be sharper but shorter. Markets move in cycles between the two, and no one can reliably time the exact turns. Understanding which environment you are in helps set expectations, but trying to perfectly call tops and bottoms is where most investors come unstuck.
The definitions
A bull market is a sustained period of rising prices and optimism. A bear market is a sustained period of falling prices and pessimism, commonly defined as a drop of 20 percent or more from recent highs. The terms apply across shares, forex, crypto and other markets.
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Where the names come from
The popular explanation is in how each animal attacks: a bull thrusts its horns upward, symbolising rising prices, while a bear swipes its paws downward, symbolising falling prices. So a bull market heads up and a bear market heads down. It is a simple memory aid that has stuck for centuries.
The market cycle
Markets move in cycles between the two phases. The diagram shows the broad shape: a rising bull phase, a peak, a falling bear phase, and a trough, before the cycle repeats.
The hard part is that the turns are only obvious in hindsight. Nobody reliably calls the exact top or bottom in advance.
What causes each
- Bull markets are driven by a strong or improving economy, rising corporate earnings, low or falling interest rates, and growing investor confidence that feeds buying demand.
- Bear markets are driven by recession fears, rising interest rates, falling earnings, or sudden shocks, which trigger selling and a shift to pessimism.
Sentiment amplifies both: optimism builds on itself in a bull market, and fear feeds on itself in a bear market.
Side by side
| Feature | Bull market | Bear market |
|---|---|---|
| Direction | Prices rising | Prices falling (20%+ from highs) |
| Sentiment | Optimism, confidence | Fear, pessimism |
| Typical duration | Often years | Often shorter, but sharp |
| Common drivers | Strong economy, low rates | Recession fears, rising rates, shocks |
| Investor mood | Greed, FOMO | Caution, capitulation |
This is general information, not financial advice. Last reviewed: 2026-06-02.
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Frequently asked questions
What is the difference between a bull market and a bear market?
A bull market is a sustained period of rising prices and optimism, while a bear market is a sustained period of falling prices and pessimism, commonly defined as a drop of 20 percent or more from recent highs. Bull markets reflect a confident, growing market and can last for years; bear markets reflect fear and tend to be sharper but shorter. The terms apply across shares, forex, crypto and other markets.
Why are they called bull and bear markets?
The most popular explanation is in how each animal attacks: a bull thrusts its horns upward, symbolising rising prices, while a bear swipes its paws downward, symbolising falling prices. So a bull market means prices are heading up and a bear market means they are heading down. The terms have been used in finance for centuries and are now standard worldwide.
How long do bull and bear markets last?
It varies, but historically bull markets tend to last longer than bear markets. Bull markets in shares have often run for several years, while bear markets are typically shorter, often months to a couple of years, though they can be sharp and painful. There is no fixed length; each cycle depends on the economy, interest rates and events. Crypto cycles tend to be faster and more extreme than share-market cycles.
Should you sell in a bear market?
That depends entirely on your goals, time horizon and risk tolerance, and this is general information rather than advice. Many long-term investors avoid panic-selling in bear markets because they risk locking in losses and missing the eventual recovery, and some continue buying through dollar cost averaging. Others reduce risk if their circumstances require it. What history shows is that trying to perfectly time the exit and re-entry is extremely difficult, which is why a clear plan set in advance matters more than reacting to fear.
What is a market correction versus a bear market?
A correction is usually defined as a fall of 10 percent or more from recent highs, while a bear market is a deeper fall of 20 percent or more. So a correction is a smaller, often shorter pullback, and a bear market is a larger, more sustained decline. Corrections are common and frequently recover quickly; bear markets are less frequent and tend to coincide with weaker economic conditions.
Do bull and bear markets apply to crypto and forex?
Yes. The terms apply to any market, including crypto and forex, not just shares. Crypto in particular is known for dramatic bull and bear cycles, with large rallies followed by deep drawdowns, often more extreme and faster than share markets. In forex, individual currencies can be in bullish or bearish trends against others. The same psychology of optimism and pessimism drives all of them.
