by A bull market implies a financial market condition where prices are rising or are expected to rise. While the term bull market is most commonly used for the stock market, it can actually be applied to almost any commodity that is traded, ranging from bonds to real estate. In the opinion of Kavan Choksi, prices of securities rise and fall essentially continuously during trading, the term bull market is mostly reserved for extended periods where a large chunk of the security prices go up. Bull markets may last for months or even years.
Kavan Choksi lists strategies that can help investors to benefit from a bull market
Investors who desire to benefit from a bull market must plan to buy early in for the purpose of taking advantage of rising prices and selling the stocks off after they have reached their peak. Even though it is not easy to determine when exactly the bottom and peak will take place, most of the losses in this market situation are minimal and usually temporary. There are a number of proven, prominent strategies that experienced investors utilize during bull markets. Here are a few of them:
- Buy and hold: One of the simplest strategies for stock market investment is simply buying a specific security and then holding onto it, with the plan to potentially sell it off in the future. If an investor has adequate confidence in the stocks of a certain company, they can hold onto it till the prices go up, as per their liking. The optimism that comes along with bull markets is vital in fueling the buy-and-hold approach.
- Increased buy and hold: This is just a variation of the strategy discussed above and tends to involve additional risks. The basic premise behind the increased buy-and-hold approach is that the investors shall continue to add to their holdings in a specific security as long as it continues to increase in price. A common approach for increasing holdings suggests that the investors would purchase an additional fixed quantity of shares for every increase in the stock price of a pre-set amount.
- Retracement additions: A retracement implies to a brief period wherein the general trend in the price of a certain security is reversed. It is unlikely that stock prices will only ascend even during a bull market. Instead, there are high odds of shorter periods of time in which small dips occur, even as the general trend continues upward. There are many investors who keep an eye out for retracements within a bull market and choose to buy the dip during these periods. Considering that the bull market would continue, the overall price of the security in question shall quickly move back up, retroactively offering the investor a discounted purchase price.
As per Kavan Choksi, among the most aggressive way to capitalize on a bull market would be by full-swing trading. Under this system, investors ideally short-sell and explore other techniques to squeeze out maximum gains as shifts occur within the context of a larger bull market.
