A bearish market chart
A BEARISH CHART
The Crypto street has been bloody in the past few days, losses across platforms are recorded. The Bears are really having a good time.
Some crypto assets are losing as much as 70%, others not so much. A lot is going on and people are apprehensive.
It’s not easy to hold your nerve as crypto-assets print double-digit losses.don't go about living in self-pity and regret, successful Traders are cut out for times like these.
Don't go the pity party route, raise your head there are few things to do to survive in a bear market,
4 THINGS TO DO IN A BEAR MARKET
1: Buy the DIP
Whenever the market is tanking everyone is usually in panic mode, most people are eager to sell off their assets in other to save what they can off their portfolios.
Traders who have extra cash will buy during this period while others are panic selling knowing that sooner or later the market will correct itself.
While buying the dip can be done in a single trade, the most recommended strategy is to implement something called “dollar-cost averaging (DCA).” This involves breaking up your reserve funds into smaller tranches and making several trades over time.
For example, let’s say you have $10,000 in reserve funds. A good DCA strategy would be to break up the amount into five tranches of $2000 or even 10 tranches of $1000 and place trades using those smaller amounts.
The thought behind this is, that it’s incredibly difficult to know exactly when an asset has bottomed out (reached the lowest price before reversing), so instead of spending all your money in one go as a Forex trader, it usually works out better to buy a small amount and waits to see if the asset falls in price further. If it does, buy a little more, and keep repeating the same.
Doing this will typically garner much better results than if you had invested all your capital in a single trade – unless, of course, you were lucky enough to go all-in at the perfect time.
2 Locate your best possible point of entry
For Forex traders that possess a basic or higher understanding of technical analysis – the practice of predicting an asset’s price movements based on chart trends, indicators, and patterns – it’s possible to use certain indicators to gauge when an asset has reached a bottom.
Of course, no indicator is completely foolproof, but they can often give you as a Forex trader a strong signal when to buy a dip.
A popular method is to use the Relative Strength Index (RSI) indicator – a momentum oscillator characterized by a channel and a line that oscillates in and out of it. There are two key elements to this tool:
Overbought: When the indicator line breaks out above the channel the asset in question is considered “overbought” – in other words, overvalued – and usually signals that prices will fall back down soon.
Oversold: When the indicator line breaks out beneath the channel the asset in question is considered “oversold,” or undervalued, and usually signals that prices will rise soon.
RELATIVE STANDARD INDEX
While these two signals can be used alone to the good effect they don’t always accurately predict bottoms or tops, particularly on lower time frames such as the four-hour, hourly or 30-minute options. A better method is to employ the RSI divergence strategy.
One thing to note about the RSI is it usually follows a similar pattern to an asset’s price, meaning when the price falls, the RSI indicator line also falls. However, there are times when the two lines move in opposite directions. This is known in Forex as an RSI divergence, and typically indicates the beginning of a trend reversal.
To spot a bottom, you will need to see if the RSI line makes a higher high while the corresponding price makes a lower low. Ideally, the RSI line will be near or into the oversold region on a larger time frame, such as the daily, to signal a strong reversal opportunity.
Below, we can see an RSI divergence on bitcoin’s daily chart (A) signaling a strong reversal in the trend followed by a rise in price. Three months later, another RSI divergence emerged (B), this time in the overbought region – signaling a bearish trend reversal that quickly followed.
3 Trade Forex with different types of assets.
It’s nearly impossible to accurately predict the bottom of a bear market, it’s also impossible to know exactly which of the assets will recover the fastest or go on to rally the highest.
One way to hedge your bets is to use ‘’Dollar-cost averaging’’ for a range of different assets. This might involve reducing your trade sizes even smaller, but, in doing so, you’ll reduce your overall risk. Of course, it’s not enough to randomly select assets and invest in them. You’ll want to perform rigorous due diligence first on each asset.
Previous all-time high: No currency is guaranteed to return to its all-time high, but it can give you an idea of what sort of potential it has.
Past performance: Look at the asset’s price history using tools like TradingView and see how well it has recovered during previous crashes. Does it correlate strongly with the rest of the market, or does it regularly outperform other leading assets? Previous performance is no guarantee of future price activity, but, again, it gives you a rough idea of what might be possible
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4 Practice self-control
Managing your emotions during bear markets is not as easy as it sounds. It’s often described as being the hardest thing to master when learning how to trade professionally.
Renowned American economists once said, “People who cannot master their emotions are not suited to profit from the investment process.”
An important step is to recognize that fear and greed are powerful motivators and can often lead to making snap judgments that end in losing trades. Having a concrete plan in mind before placing a trade can make all the difference between making a profit or losing money. This can simply be a case of saying, “When I see a bullish RSI divergence on the daily chart, I will allocate Xx amount to the trade, and take profit at Yy.”
Taking profit is another seemingly easy but difficult thing to master. Greed can often keep you in trade beyond your take profit level in the hope the asset will rise even higher in price. This increases the risk of the trade moving against you, especially if you don’t set stop losses.
Make sure you take profits, ensure you keep some capital in reserve for crashes, and remember to keep your cool when the bears move in.
In this business, GREED is good FEAR also is good but self-control is the key.
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