Bear market trading strategy: how to save and grow capital

This is far from news, and anyone, even the most inexperienced trader, has heard about the current bearish trend on thethe cryptocurrency market.Bitcoin, a safe haven, has hit below $27,000 at the time of this writing. We have not seen a similar price since the end of 2020. If this trend continues, the market will officially enter stagnation. Many experts argue that the market has already entered a bearish phase, and given the dynamics, most likely it is.

So, a logical question arises: how to “survive” in a bear market? Are there proven and effective trading strategies in such a situation?

Bull Market VS Bear Market

The bull market is an exciting, usually fun ride. When coins rise (and hit all-time highs), it's easy to be profitable.

But despite the simplicity and positive aurabull market, it is the bear market that can make you truly rich. Knowing the right strategies for trading in a bear market opens up a lot of opportunities for you.

A bear market is one of the best opportunities to earn more in a relatively short time. But let's get back to the bear market strategy later!

First, let's look at the difference between a bull market and a bear market.

bull market

Almost all cryptocurrencies are growing.Usually characterized by an uptrend. The bull market is formed due to the positive attitude of people towards their investments. And also, when things are going well in macroeconomics, which contributes to an increase in investment or spending.

As a rule, the market officially becomes bullish,when the price of an asset increases by 20% from its recent low. Positive sentiment, combined with a good economic environment, could lead the market into a sustained uptrend for many months or even years.

bear market

This is the opposite of a bull market.This is that terrible time when the prices of cryptocurrencies are falling and your entire portfolio is going red. Usually characterized by a downtrend. A bearish trend can be caused by a bad economic background, negative investor / trader sentiment, as well as any emergency crisis situations.

How long can a bearish trend last?For months and years. BUT, don't be scared, in fact, the bear market is not a problem for many experienced traders. If you have the knowledge and strategies to trade, in such a situation you have a chance to make significant profits in these “difficult” times.

So strategies...

When the market crashes, there is a state migration. And the only question is, do you know how to emerge victorious in this race.

Here are some proven ways to secure a winning position.

Selling short

She's the sameshort sale,shorts,short position,down game.This is an investment method in which traderscan profit from a fall in the price of an asset. How? This strategy is not called “short” for nothing, in other words small, low, since the trader himself is “small”: after all, you actually do not have assets that you want to sell.

Short selling works by borrowingasset and selling it at the current price. Later, the trader must buy back these assets in order to pay off. When the market falls, he has the opportunity to buy these assets at a significantly lower price. Thus, you will spend less money on buying assets and earn more on selling them.

Sounds cool, right?But there is also a negative point: shorting has many limitations. Your profit is limited, as most lenders set a certain term for the return of assets. This means that you will have to buy assets regardless of the market situation. And it turns out that while the profit is limited (by the term set by the lender), the losses can go far beyond the initial investment.

“Buy The Dip” or buying out drawdowns

When the market falls, many novice investors andtraders get scared, panic, and massively sell assets. This is where bold buyers enter the arena to seize the opportunity. In a bear market, you can greatly increase your portfolio with less investment; while in a bull market you get less for the same money. Following this logic, it is easy to understand why many traders use a bear market to accumulate more assets.

Easier said than done!

Decide what to buy in a bear marketreally difficult. Everything is turning red, uncertainty is growing. How to understand where the bottom is when the coin falls? Sometimes what appears to be a “fall” is simply market volatility.

So, here are two signals that will help you identify drawdowns. As a rule, the fall is

Time Correction in a Bull Market

or

A crash that leads to a bear market

See the cryptocurrency price chart for the year andtry to determine the long-term price trend. If you see the price moving up consistently, the drop is probably just a temporary correction. On the other hand, a reversal of the uptrend during the last month may indicate a long-term market crash.

Rule of thumb: It's safe to buy dips when price hits support.

Support is the price level on the trading chart,below which the asset will not fall. Support is assumed to be a price point at which buyers are more likely to buy and sellers are hesitant to sell, thereby pushing demand higher and with it the price of the asset.

The support level refers to the price level of a cryptocurrency below which it does not fall many times. These support levels are created due to the tendency of buyers to enter the market when the price falls.

Do not enter the market (or exit)

As a rule, traders become moreemotional during a bearish trend. A red portfolio can easily push a person into bad investment or trading decisions. Fear plays an important role in cryptocurrency trading, especially during a bear market. It can be the fear of missing out (FOMO), the fear of losing.

Whatever happens, DON'T PANIC! Remain calm at all times. Everything will return to normal sooner or later.

Crypto traders should be especially vigilant inregarding their emotions. To avoid the influence of fear and the bad decisions associated with it, you must adhere to a clear strategy and control your emotions. Otherwise, it is better to refrain from participating in trade altogether. Spend this time learning, researching, and getting ready for the bull market to come.

Let your money work

During a bearish trend, the worst thing you can do is follow your losses. Instead, you can take a strategically sound risk and earn.

Look for "safe havens" when investing in a bear market.

When you have a significant amount on hand,There are many other investment opportunities: you can invest in short-term bonds, commodities, real estate and other financial assets. If you are going to trade stocks, choose stocks with high dividend rates.

On the other hand, keeping cash is alsoa safe way to save money during a bear market. If you have no desire to delve into new opportunities, expand your horizons, just save time and money until “better” times.

Open smaller positions

A bear market is always uncharted territory. Traders need to proceed with caution.

Reducing position size is a key elementcrypto portfolio risk management. You can make trades that are too big for your account if you don't know how to balance your positions. As a result, you will become vulnerable when the market moves even a few points against you.

Don't put all your crypto in one basket.If you dedicate 100% of your account to one position, you can wipe out all your funds in one trade. Opening positions that make up the majority of your portfolio will limit trading opportunities - you will have to refuse trades that you might like to enter.

Using a fixed percentage limitper trade or fixed amount per trade are the recommended strategies to determine position size. A hard limit on every trade will help you absorb losses more easily, protect your capital, and keep you trading for another day.

Another proven way to protect yourcapital - averaging costs in dollars. With this strategy, you are less dependent on price volatility. Thus, you can decide in which cryptocurrency you can invest in the long term, how often and how much you want to allocate for this. For example, you can invest $10 a day or $100 a month in Bitcoin regardless of its current price.

Words of support during a bear market.

Be calculating while others are fearful, but remember to do so strategically.

Bear markets won't last forever. The red will eventually turn to green. When this happens, you will be able to sell the cryptocurrency that once fell for a much better price.

Apply proven cryptocurrency trading principles and stick to a trading strategy.

When the market is down and people are scared, the strategy goes out the window. People with advantageous positions sell them out of fear of uncertainty or doubt.

To avoid poor trading decisions during a bear market, adopt proven strategies  and stick with them no matter what.

And, as always, do your own research.