Bull Market
A bull market is a sustained period of rising prices, often defined for stock indices as a rise of 20% or more from a recent low.
“Bull market” is one of the most common phrases in finance. It describes a period when prices rise for a long time and investors feel optimistic. There is a simple rule of thumb for when one officially begins — a 20% rise from a low — but the more useful questions are what drives a bull market, how traders behave in one, and which mistakes it encourages. This entry answers them with numbers.
- Category
- Trading Basics
- Reading time
- 5 min
- Also called
- Bullish market, Bull run, Bull phase
- Updated
A bull market in plain words
A bull market is a time when stock prices are rising and sentiment is optimistic. Generally, it is said to occur when a broad market index rises by 20% or more over at least a two-month period.1
The name is often explained by how a bull attacks — thrusting its horns upward — though the true origin of the phrase is uncertain. The opposite is a bear market.
How to identify a bull market, step by step
Pick a broad index
The definition applies to a broad market, such as the S&P 500, not a single stock.
Find the most recent low
Measure from the lowest closing level of the previous decline.
Measure the rise
A gain of 20% or more from that low, sustained over at least two months, is the usual threshold.1
Check the trend structure
Higher highs and higher lows on weekly charts confirm the rise is a trend, not a bounce. See Trend.
Look at breadth
Healthy bull markets usually include many stocks rising, not only a few large ones.
Remember it is labelled after the fact
By the time a 20% rise is confirmed, a large part of the move has already happened.
Worked examples
Example 1 — Applying the 20% rule
BullAn index falls to a low of 3,200, then rises over five months to 3,900.
| Rise from the low | (3,900 − 3,200) ÷ 3,200 ≈ 21.9% |
| Period | Five months (more than two) |
| Bull market threshold reached at | 3,200 × 1.2 = 3,840 |
By the common definition, a new bull market is confirmed once the index closes above 3,840 — and dated back to the 3,200 low.
Example 2 — A pullback inside a bull market
CorrectionDuring a bull market the same index rises to 4,500, then drops to 4,050 before resuming its climb to new highs.
| Decline | (4,500 − 4,050) ÷ 4,500 = 10% |
| Label | A correction, not a bear market |
Declines of around 10% are commonly called corrections. Bull markets often include several before they end.
Example 3 — Leverage in a bull market
OverconfidenceA trader who has done well in a long rise increases position sizes. With $20,000, they hold $60,000 of stock using margin. The market then falls 15%.
| Loss on $60,000 | −$9,000 |
| As % of own money | −45% |
Rising markets make risk feel smaller than it is. A normal correction becomes a devastating loss with leverage. See Leverage.
A bull market, then a bear market
Bull market vs. bear market
| Aspect | Bull market | Bear market |
|---|---|---|
| Common definition | +20% from a low over at least two months1 | −20% from a high over at least two months2 |
| Sentiment | Optimistic1 | Pessimistic2 |
| Typical pullbacks | Bought by many traders | Rallies sold by many traders |
| Common mistake | Over-leveraging, ignoring risk | Trying to catch the bottom too early |
Why the market regime matters
Choosing a bias
In a bull market, long trades go with the main trend; shorts need extra care. See Long Position.
Buying pullbacks
Dips to support or a rising moving average are common entry points. See Pullback Trading.
Sizing
Strong trends tempt bigger positions; keeping risk per trade constant protects you when the regime changes.
Context for news
Bad news often has less effect in a strong bull market, and good news less effect in a bear market.
Advantages and disadvantages
Advantages
- Long positions benefit from the general upward drift.
- Pullbacks offer recurring, well-defined entry points.
- Optimism usually brings higher volume and liquidity.
Disadvantages
- Easy profits encourage overconfidence and excess leverage.
- Late-stage bull markets can end abruptly.
- The 20% threshold is only known after the fact.
- Valuations can rise beyond what fundamentals support.
Going deeper
Read as far as you need. Each level builds on the one before it.
A rule of thumb, not a law
Beginner
The 20% figure is a convention used by the media and many investors. Markets do not change behaviour at 19.9% or 20.1%.
Secular and cyclical bull markets
Intermediate
A secular bull market is a long, multi-year rise that may include several bear markets along the way; a cyclical bull market is a shorter rise within a longer trend. The terms are descriptive and their exact boundaries are debated.
Crypto and other markets
Advanced
The 20% convention comes from stock indices. Crypto assets routinely move 20% in weeks, so the label means less there; traders tend to describe crypto cycles by trend structure and by moving averages instead.
Common mistakes
Assuming the rise will continue
Every bull market ends. Keep stops and risk limits even when everything is rising.
Adding leverage after big gains
A string of profits is the most dangerous time to increase size. See Overconfidence Bias.
Chasing late
Buying only after the rise has become headline news often means buying high. See Fear of Missing Out.
Confusing a correction with the end
Bull markets often contain several 10% declines before they finish.
Check your understanding
Test yourself before moving on. Each answer comes with an explanation.
Key points to remember
- A bull market is a sustained rise with optimistic sentiment.
- Common definition: a broad index up 20% or more from a low over at least two months.
- Bull markets include corrections; a 10% fall is not the end.
- The label is confirmed only after a large part of the rise.
- Rising markets encourage overconfidence — keep risk per trade constant.
Frequently asked questions
How long do bull markets last?
Can a single stock be in a bull market?
What ends a bull market?
Further learning
- Bear Market
The opposite regime, and how it is defined.
- Trend
How to read the trend behind a bull market.
- Drawdown
Why protecting gains matters when the cycle turns.
- Leverage
The risk that grows quietly in rising markets.
Sources
This article is written in our own words. The sources below support the specific facts, rules and figures marked with a number in the text. Links open the original publisher’s page.
- Investor.gov (SEC). Bull Market (glossary) (opens in a new tab) Checked .
- Investor.gov (SEC). Bear Market (glossary) (opens in a new tab) Checked .
Read more elsewhere
- Investopedia: Bull Market (opens in a new tab)
Educational content, not financial advice. Examples use hypothetical prices and simplified costs; actual fees, margin rules and regulations vary by broker, market and country. We are not affiliated with any publisher linked above. Last reviewed . Report an error or request a source credit.