As a trader in any financial market, it is important to know how to outlive a bear market. Bear markets are often characterized by mass pessimism and falling price action. You can identify a bear market through declining price action, over an extended period of time. Price must break market structure to be regarded as a bear market. The preceding bit is important to note because, sometimes, it is likely to wrongly perceive an extended decline in price action as a bear market. To conclude on the validity of a bear market, price must break market structure on at least, the daily timeframe.
Outlasting a bear market as a cryptocurrency trader is even trickier as its price action is notorious for high volatility in either direction. This volatility could either be your worst nightmare or greatest blessing. The onus falls on you to decide. With an operational proper risk management system in place, I would daresay that, the latter is your portion(Amen!). Traders generally leverage on volatility to make the big bucks.
The crypto sphere has a large number of investors who have invested on one coin or the other, hoping it becomes the next bitcoin. In my opinion, I think the chances of that happening is roughly, one star in a billion galaxies. But you know what they say, ” never say never”. Moving on, traders who invest with similar intention earn themselves the title of, “Hodler”. A hodler is a name given to a long term holder of a coin or token – a person who is not looking to sell at every little percentage spike in price but, is in it for the long haul.
It is important to have certain tips, in this case. Because, unlike other asset classes that dump about 20% in price during a bear market, the cryptocurrencies take it to a whole new level of 60%-80%. If you are impatient like me, then you are and unwilling to sit through the bleed.
TIPS TO OUTLIVE THE BEAR MARKET
🌼DIVERSIFY YOUR PORTFOLIO: Do not go all in on one coin. There is a saying that goes, “Do not put all your eggs in one basket.” It is not because the basket is bad
🌼FEAR OF MISSING OUT (FOMO): You must not buy coins in FOMO. The market always presents us with several opportunities. FOMO is the reason why people buy at the peak, into falling price action.
🌼REVENGE TRADING: The market gives you what you demand of it, it is not your enemy. You must control your emotions when trading and not let the market decide your actions. A huge loss should not make you resort to even bigger risks with the intention of making back lost money. It would usually backfire.
🌼 AVOID HIGH LEVERAGE: This is very relative in application as, its determinant is, totally dependent on liquidity and trade margin
🌼 DOLLAR COST AVERAGE IN CAN BE COSTLY: Be intentional about the levels of support you decide to buy a coin with the expectation of catching a bounce. Averaging out on every dip may exhaust your stash and stir up impatience with the market when you realize that you have been trying to catch a falling knife.
The above mentioned are a few of the tips I use as a guide when trading in a bear market. Most are useful even during a bull market. I will be sharing more tips in subsequent posts. I hope that you may find some of these useful.
Success as a trader is not in how much you are able to make but, how much you are able to retain. And, how much a trader retains over is a function of his/her risk management system and trading guidelines or rules.