update 18 August 2021

Five Tips to Trade in a Bear Market

Bear markets are brutal when they hit. Fortunately, they tend to be much shorter when compared to Bull Markets. But if investors are not well equipped strategically, a small drop will make them panic sell, which could wipe away all their savings.

A Bear market is any market condition that shows a downtrend after a period of considerable growth. Most investors consider the bear market to be an indicator of a failing market and industry. But to a seasoned investor, the bear market represents an opportunity. Good assets come out of bear markets, and they’re usually ready for the subsequent bull market.

There are several strategies one can employ to trade and profit in a falling market successfully. The opportunity to make money is the same as in a bull market, if not more. Investors equipped with a set of fundamental skills and strategies will guide them through the storm and help them make a fortune even when everyone seems to be losing.

Here’s a list of the Top Five Tips for Traders to successfully trade in a Bear Market.

Risk Management

Thousands, if not millions of ‘traders,’ have entered the market since the 2017 bull run. Many of them seemed to have gotten off to a fantastic start with technical analysis. Then, it didn’t take much time for them to lose all of their money, simply because of their lack of risk management. A good risk managing strategy might be the difference between losers and winners in the crypto market. Due to its intense volatility and negligible correlation with traditional markets, managing one’s portfolio is of utmost importance.

It is good to have a set of investing strategies handy before getting into the market. An investor must be sure about their Risk preference, portfolio ratio, and other important markers before settling in. One advisable management strategy could be to continuously re-balance one’s portfolio based on market trends. Consumer services such as Shrimpy allow one to balance portfolios in a preassigned ratio, among other services, in the stride to manage their strategies effectively. Other risk managing tactics include position sizing, calculating risk to reward, and cutting off losses.

Be Sure about the Trend – Trend is your Friend

The most important task for a trader is to be certain about the current market trend. The word “trend” can mean many different things, but it is about being sure of the path the market is taking in this scenario. Trends can be categorized as either an “Uptrend” or a “Downtrend.” To be certain about the trend, you should look at various time scales, ranging from short term to long term. Once you are certain, market moves can be made accordingly to get the best outcome. Remember – “the Trend is Your Friend until the End”

In a downtrend, knowledge of derivative contracts such as futures can be really handy.

Learn about Crypto Futures

While volatile movements remove from any asset’s appeal, a certain amount of swing creates trading opportunities. This is something that many traders and speculators have been taking advantage of, especially in the crypto market. This is where knowledge of Cryptocurrency futures come in handy. A Future is a contract that allows you to hedge your position in case of market uncertainty. Using Futures, savvy traders can use the trend to either “long” or “short” crypto and earn profits. With futures, it doesn’t matter if it is the bull market or the bear, as long as one is smart enough to understand the market trend.

BitMEX, CME Bitcoin Future, etc. are some of the major crypto derivatives exchanges.

Use BTC as Base Pair

Although considered by many as “volatile” and “lacking fundamentals,” Bitcoin is still the spearhead of the crypto market. As of February 2020, Bitcoin single-handedly leads the market trend. Almost all “altcoins” show a high degree of correlation with Bitcoin’s movements. So, in times of downward trend, it is advisable to use BTC as a base pair instead of your native currency. Using BTC as the base comes with several advantages, the best of which is that, when the trend reverses, you would have more Bitcoin than when you previously started with.

Portfolio Diversification

Portfolio Diversification is one of the safest ways to crush through the Bear Market. Diversification can help mitigate the risk and volatility in a portfolio. In 2018, the Crypto Briefing Magazine published a report that supported claims that the correlations of altcoins with Bitcoin is quickly fading. This is due to assets becoming more independent of each other. Although diversification does not ensure profit or guarantee against loss, it is a trustworthy approach. According to a study conducted by researchers at Yale University, any portfolio should allocate at least 6% of its assets to Bitcoin. Due to Bitcoin’s market Dominance and sheer growth, a slight exposure to the crypto could do wonders.

Btc
Bitcoin
$43.279
price
3.75561%
price change
BUY NOW

In a crypto-only portfolio, diversification can mean allocating funds based on a token’s function. The functionality of tokens ranges from Utility to Security to Hybrid, meaning that each has a separate function of its own. It is an advisable strategy to allocate funds among different types of tokens based on each’s market dominance.

More posts

What Are Crypto Validators and How do They Work?

Crypto Validators are new "payment processors" in decentralized networks, and as such, they produce blockchain rewards. It sounds simple, doesn’t it? However, the definition of validators in crypto is much more complex than that. Also, the role of a validator may change depending on the consensus mechanism that each blockchain uses. In this guide to validators in blockchain, we take a closer look at this entity and its indispensable role. Furthermore, we analyze four validator use cases in different blockchains…

Historical Hardfork Events Every Crypto Enthusiasts Should Know About

Blockchains have been gaining attention since the history of crypto. The highly advanced systems help decentralize and streamline financial systems globally. As the blockchain systems grow, investors start noticing issues and propose an upgrade. However, for any upgrade to occur, blockchain requires the consensus of all participants. If there is no consensus, two factions with opposite ideas may form. The developers may choose to go ahead with the upgrade but maintain the status quo in the original chain. At that point,…

Future Crypto Events that we Should Look Forward to

The crypto world is growing at an interesting rate, with new projects coming up every other month as solutions to the financial world. For that, people around the world hold annual events to celebrate crypto progress while at the same time discussing the future. Top industry experts and project developers often organize these events inviting reputable people in the fintech industry to offer ideas and opinions on several topics about cryptocurrencies. Some of the events occur annually, while others are…

Understanding Cardano’s Non-Interactive Proofs of Proof-of-Work

Cardano, the fifth-largest cryptocurrency by market cap and soon to be the second-largest Dapp center, is one of the unique blockchain technologies of 2021. In addition, Cardano has a native coin named Ada, performing very well in the crypto markets.  However, Cardano as a network adopted a sidechain system, where the network runs two blockchains. The original blockchain, the Cardano settlement layer(CSL), deals specifically with powering the Ada currency and other settlements done with Ada. It leverages POS to release…

Understanding How ADA Delegation Rewards are Calculated

Founded by Charles Hoskinson, Cardano is a blockchain platform seeking a decentralized application (DApp) development platform. The Cardano platform runs on the Ouroboros consensus protocol. In addition, it leverages the Delegated Proof-of-Stake (DPoS) consensus mechanism meaning that users can delegate their ADA to other pools to be staked and earn rewards.  The two primary ways ADA coin holders can invest and earn rewards on the Cardano blockchain include; running their own stake and delegating their ADA to a staking pool.…

5 Unique Features of Proof-of-Stake Crypto Projects

Ironically, decentralization, one of crypto assets' vital features, is a potential Achilles heel too. Eliminating third parties from transactions enables peer-to-peer exchanges. However, the absence of a third party also creates loopholes for double-spending by mischievous parties. It's for this reason that networks agree on specific consensus mechanisms. They are the rules and procedures that all devices in a network follow in confirming that certain blockchain transactions are correct. They also help in protecting the network against malicious activities, thereby…

Understanding the Crypto Reset Time

Humanity hangs in the balance as the deadly Coronavirus affects various sectors, including healthcare, manufacturing, finance, and many more. Since the beginning of the outbreak, governments and citizens have had to adopt a new lifestyle that involves quarantine and social distancing practices.  To offset the current pandemic situation, global stakeholders at the World Economic Forum came up with a radical solution known as the Great Reset, which aims to change the global economy. The meeting, which took place in June…

Common BTC Price Chart Patterns Every Day Trader Should Know About

For several years now, market patterns have been used by expert crypto investors to maximize incomes. They do this by knowing the right time to enter the market. Crypto investors have also been beneficiaries of market chart patterns, with some identifying a position of great prospect and investing.  Being the most popular asset with the highest volatility rate, Bitcoin has shown many different market patterns that can help investors maximize incomes. So what are the most common patterns in the…

How to Minimize Risks When Trading Digital Assets

The cryptocurrency revolution is moving full-steam ahead with increasingly global acceptance. For instance, India has seen its residents invest over $6.6 billion in crypto assets in May 2021. That figure is even more impressive when we discover that it grew from nearly $923 million in April 2020. Today, trading in digital assets is no longer available only for a handful of geeky investors worldwide. Instead, many see the rise of DeFi and the increasing popularity of cryptocurrencies as a unique…

Scenarios When the Value of Bitcoin Could go to Zero

There's no doubt that bitcoin is the most valuable crypto asset of our day. According to coinmarketcap, when writing this, the price of Bitcoin was around $31k. Even more, the market cap was almost $600 billion, twice the value of the second largest crypto asset. Bitcoins market capitalization is larger than the value of the first ten altcoins combined.  Expert analysts have predicted that in the future, the prices of bitcoin could increase to about $300k. Looking at the past…