How to trade in a bull market

What is a bull market?

A bull market is an occurrence where a financial market, instrument or sector is on an upward trajectory over a long period of time.

Bull market characteristics

The bull market definition may be focused on a strong upward trajectory of price movements, but this inclination is also associated with factors such as:

• A succession of higher highs and lower lows, ultimately reaching the climax
• Short-term market corrections (or pullbacks) after successive highs
• More demand than supply
• Strong economic conditions
• Trader and investor psychology with significant bullish sentiments

Bull market example

A bull market is demonstrated by market prices with higher highs and higher lows over an extended period. This is typically coupled with features such as shallow pullbacks and a strong upward momentum.

Here’s an example of a bull run in the stock market:

This bull run was triggered by the Covid-19 pandemic, during which online shopping spiked significantly in the face of lockdown restrictions and extraordinary health concerns.

Bull market tendencies can also be tracked using indicators like a trend line, a single line which follows rising lows, and the moving average.

How to trade in a bull market

With us, you can trade in a bull market by speculating on market price movements. Here’s how:

Trading in a bull market

Bull market trading follows the expected prolonged rising of market’s price. So, traders will typically ‘buy’ (go long), meaning that they are taking a speculative position that matches the anticipation of an ongoing price climb.

With this sentiment top of mind, traders could opt for long positions using leveraged derivatives such as CFDs.

With us, you’ll trade using leverage, meaning that you’d only need to commit an initial deposit, known as margin, while getting full exposure. Leverage can increase both your profits and losses. Therefore, it’s vital that you manage your risk appropriately before opening a position.

Top 4 bull market strategies

Bull market trading strategies offer best practice techniques to consider when bull trading. Although these strategies are based on past performance, they do not guarantee future results.

Here are some bull market trading strategies you can employ when you think a market’s price is on the up:

"Buy" early in the bull run

While the exact onset of a bull run may be tricky to gauge, a method to confirm its recent commencement is the third touch of a price action on a single line (eg as seen in the higher highs and lower lows chart above). With an expected continued upward trajectory, this tends to be a good time to take a long position.

Don’t sit on losses for too long

Planning your exit beforehand can help in limiting losses. One way of doing this is deciding to close your position if the price closes below the trend line. Alternatively, you could opt to short-sell if you’re expecting a decline, be it sharp, steady, temporary, or sustained in a bearish manner, if you think that the bull run has run its course

Take profits at regular intervals

Aiming to lock in profits at regular intervals is one way you can secure, or maybe even stack up on, trading profits.

Follow the market momentum

It’s said that ‘the trend is your friend’. It’s important to note that despite the steady, prolonged increase of price in bull market runs, it still consist of both rising and falling share prices. This means that it’s possible to incur losses on a bull position in a bull market, or make a profit on a sell position. Therefore, it’s essential to analyse the goings-on of a bull trend comprehensively before making a move, whilst taking action timeously.

Bull markets vs bear market: what are the differences?

Bull markets and bear markets differ in several ways. Here are some key differences:

Trading in a bull market summed up

• A bull market occurs when a financial market, instrument or sector is on an upward trajectory over a long-term period
• Some indicators of a bull run are higher highs and higher lows, and a trend line which follows rising lows on the market’s price
• You can get exposure to bull markets through trading in markets such as stocks, ETFs, forex, commodities and indices
• Bull market trading strategies can be useful as they’re based on the past performance, but they do not guarantee future results
• Bull and bear markets may both derive their names from the animal kingdom, but they differ fundamentally, with stark contrasts

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