Almost all traders look forward to a time when the stock prices are on the rise and the market is doing well. This typically is referred to as a bull market. Kavan Choksi Professional Investor mentions that a bull market occurs when financial markets rise for a period of time. This time period can last for a few months to even years. A bull market provides investors with confidence that they may enjoy superior returns on their portfolios. Even though bull markets do not always necessarily mean that there will not be slight dips in the market, it is an indication of steady financial growth as the value of stocks and bonds tends to trend upward on the whole.
Kavan Choksi Professional Investor talks about how to trade and invest in a bull market
When the majority of people think of a bull, they generally visualize a strong animal charging forward. This essentially is how the market tends to perform metaphorically when the economy is doing well and unemployment levels are low. Bulls thrust their horns into the air, which symbolizes the rise in the stock market. Investor jargon also makes use of the word “bull” to in order to refer to someone who buys securities in the expectation of a price increase.
Here are a few bull market trading strategies one can opt to employ when they believe that the market is on a rise:
- Focus on dividend-paying stocks: Dividend stocks are offered through publicly-traded companies that share profits with shareholders via dividends. Successful companies that have a consistent history of increasing their dividends are likely to pay out more to the shareholders during a bull market. For investors, dividends can be a solid return, which they may either reinvest in the company or use as an income.
- Do not sit on losses for too long: Planning the exit in time is vital for limiting losses. One good way of doing so is by opting to close a position or sell off the assets if its price closes below the trend line. One may even choose to short sell in case they are expecting a decline. If an investor believes that the bull run has run its course, they need to be sharp, steady and sustained in a bearish manner.
- Take profits at regular intervals: Focusing on locking in profits at regular intervals can help secure or even stack up on trading profits.
- Buy call options: A fairly popular strategy in bull market trading is buying a call option. This is a contract with a due date that provides a person with the right to buy a certain asset at a specified price.
As Kavan Choksi Professional Investor says, one must remember that even with the steady, prolonged increase of price in bull market runs, it still comprises of both rising and falling share prices. This implies that it is possible to incur losses on a bull position in a bull market, as well as make a profit on a sell position. One must make it a point to comprehensively analyze the goings-on of a bull trend before making a move, and ensure to take timely action.
