The feature of investing that makes stochastic, as opposed to deterministic is the element of volatility and risk. Ideally, we’d want the condition of the market to always be “good”, so it’s definitive that our money will multiply and we’ll all make hefty returns on our investments.
Unfortunately, however, reality means that this is not the case. Investors have coined two main terms to describe the state of the market: bullish and bearish.
A bullish market is a condition of the market where the economy is a positive state, i.e employment is at a high level, unemployment is low, the country’s gross domestic product is high. A bearish market describes the exact opposite of this condition.
Informally, a bear market describes the state of the market when broad indices drop by roughly twenty percent. Such a market state can prove to be ideal to exercise “shorting”, where an investor can profit by stocks falling.
Another opportunity during a bull market is to buy low in the hopes that the market condition will later reverse and prove ideal to sell and consequently profit.
Regardless of the market condition, the key takeaway is to maintain discipline and not to let panic or irrational worries overwhelm you. In fact, mass sentiment can even influence market conditions, so it is wise to be cognizant and take advantage when such an opportunity presents itself.