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If you’re familiar with financial markets such as crypto trading, you’re probably aware of bullish and bearish markets. The term “bull” and “bear” describe market conditions, and traders must know how to act in such conditions. A bullish market exists when traders are expecting crypto to increase in prices by up to 20%. In a bull market, investors are looking to invest their money due to increased investors’ confidence in the market. However, despite the rise in market prices, the bull market comes with increased risks that make trading cumbersome.
For both beginner and experienced crypto traders, trading in a bullish market is quite intimidating, especially if your emotions precede you. But what should you do when the markets are bullish? While there is no direct answer to this question, you can implement several investment strategies in a bullish market and come out successful. Here’s what you can do in a bullish market and come out profitable.
What Happens in a Bullish Market?
In a bull market, also referred to as a bull run, asset market prices rise. A bull market is used to describe a price increase in the financial markets, including bonds, commodities, Forex, cryptocurrencies, and real estate. While being bullish may mean a price rise, a bullish market run may also involve declining prices. Bull markets usually feature periods of price consolidation or decline without necessarily breaking up the major market trend. Nonetheless, a price uptrend is the main trend in a bullish market.
How to Trade in a Bullish Market
An ideal strategy in trading in a bullish market is going long and buying dips. This is because crypto prices are rising, and most traders will certainly be bullish. A reasonable trading strategy would be the buy and hold or the dollar-cost averaging strategy in long-term bull markets.
Sometimes in a bullish market, some traders would prefer to go bearish according to their trading strategies. Experienced and more professional traders would implement advanced trading strategies and decide on short-term bearish trades, i.e., shorting. However, this strategy doesn’t always work, and it’s crucial for trade according to the market trend, especially if you’re a novice trader. Many traders record enormous losses by trading against the prevailing market trend, such as short bull markets. Below are 6 trading strategies ideal in a bullish market.
6 Crypto Trading Strategies to Use When Markets are Bullish
Trade according to your financial plan
The best bet in surviving a bullish environment is to trade according to your financial plan. Your financial plan would indicate how you should balance your crypto portfolio according to the prevailing market conditions. By sticking to your financial plan, you’ll ensure that you earn profits at higher valuations and earn liquidity at lower prices.
Keep withdrawing your profits
Many crypto traders argue that withdrawing or booking profits is not an ideal strategy for long term investment. On the contrary, constantly churning out profits in a bullish market is a good trading strategy. The primary rule in financial markets is that: “If something is too good to be true, then it’s probably not true.” This rule should guide you in a bullish market. Keep churning out profits at regular intervals and maintain your portfolio according to your financial plan.
Employ the Systematic Investment Plan(SIP) in Trading
The Systematic Investment Plan (SIP) approach is a great trading strategy in bull markets. This strategy involves investing a consistent amount of money in a particular asset, say a crypto token. You’ll obviously want to buy an asset at a lower price in a bull run, hold it and sell it later for a higher price. You’re not always assured of a market rise, and you can end up entering a trade late, wait for too long for the prices to rise, or even record a loss. The better trading approach in a bull market is to adopt the SIP trading approach.
Don’t hold the assets for too long
Crypto assets are extremely volatile compared to other financial markets, such as stocks on Forex. Therefore, it’s not advisable to hold on to the assets for too long as the market can take a downside trend leading to massive losses. Always exit the market at a particular price based on your technical analysis. The best price to exit the market is at the technical support price level, or the price beyond which you cannot handle the further risk of losing your asset. All in all, knowing when to exit the market is a fundamental trading strategy in a bullish market.
Ride along with the market direction
As a crypto trader, it’s vital to note that a bull market takes a single direction. Therefore, you should always stick to the market momentum and never try to outguess the market. Therefore, buy high or buy using dips and be patient enough to increase the asset prices then sell higher. Always remember, the market direction is your friend, not the enemy.
Use crypto derivatives to hedge risks
Crypto derivatives, including futures and options, have gotten increased usability in the crypto space. As such, you can use crypto derivatives to hedge risk in a bull market and come out profitable. In a bull market, you’re not always guaranteed that the prices are going to rise forever. Prices may correct sharply, causing unwarranted losses. Therefore, it’s essential to hedge risks in a bear market by utilizing derivatives such as options. While they eat into your profits, derivatives will ensure you don’t record unnecessary losses.
Trading in a bullish market is not always a walk in the park. While you’re assured of profits, a small mistake can lead to major losses on investments. Typically, the best trading strategy in any market, whether bearish or bullish, follows the market momentum. In essence, bull markets present great profit-making opportunities both for novice and experienced traders. However, to come out profitable, it’s crucial to avoid mistakes by managing risks and knowing when to exit the market. The above strategies are great to deploy in a bullish market.