Market Regimes

Chapter 2

Market Regimes

Market Regimes

Chapter 2

Market Regimes

Directional Regime


A bull is an investor who expects prices to rise and based on this hypothesis, he sometimes buys the underlying NIFTY or F&O stock, in hopes of reselling it later for a profit. A market that is in a bull trend is one in which prices are generally expected to rise. The bull trend in the underlying is characterised by higher tops and higher bottoms in price action.


A bear is an investor who is pessimistic on the markets and expects a downward trend in Nifty or F&O stocks which form the underlying for financial derivatives in India. The market is said to be in a bear trend when it is characterised by heavy pessimism about the declining market prices scenario. Bear trend in prices of  the underlying is characterised by lower tops and lower bottoms.

Non-Directional Regime


A sideways, rangebound move in the markets where price fluctuation on higher end and on the lower side is marginal. So, the market tends to move around the mean price and tends to mean revert rather quickly after a small fluctuation away from the mean price.


A bi-directional move in the markets where the price fluctuation is high on either side, i.e., above the mean or below the mean. So, market tends to be in rapidly changing trends in a short span of time. This phenomenon can be characterised as “jumps” in price action, either on the higher side or lower; mean reverting, only after a large price swing.


What are Market Regimes?

Market regime is a set of conditions which persist for a period of time, enabling option traders and market traders to trade in a certain manner.

What are different market regimes?

The different market regimes are bullish, bearish, oscillating and volatile.

What is an oscillating market?

A sideways, rangebound move in the markets is called an oscillating market.

Why do stocks oscillate?

Due to different market participants, there is always a seller of a stock for every buyer of a stock and their different actions, at different junctures, cause stocks to oscillate.

What are bullish signs?

Bullish market regime is characterised by higher tops and higher bottoms of the stock price, for the underlying being considered.