Trading during a bear market, a ranging accumulating market, and a bull market in the world of crypto are all very different beasts. With the recent parabolic advance away from the $3100 bottom and above the previous 2018 yearly support, the reversal from the bear market to bull market is now confirmed. After getting battered and bruised in a bear market, it can take traders and investors quite some time to shift gears and trade in a fast-moving bull market. Here are a few tips from our traders at Crypto.IQ that have proven to be lucrative from bull markets of the past.
- Don’t Fight the Trend
Throughout the bear market, going long and buying dips were the trades with by far the lowest probability of success. The reverse is true in a bull market; buying dips and longing pullbacks should be the bulk of the trades taking place from here until the end of this macro bull cycle. Forget about the profits you made shorting and selling bounces before those profits are washed away by trying to replicate the results as the tide washes upwards. You do not have to nail every bit of volatility the market produces. Even if you believe the market is due for a pullback, don’t bother shorting. Instead, focus on dialing in where you believe the market will dip, if it does, and dial in your levels where you will place your bids to get back on the trend.
A trend will persist often much longer than one expects. Calling a reversal and trying to nail the top of an entire trend is a fool’s game. You are much better off buying dips and going long until the trend does reverse and stops you out, confirming a reversal.
- Stay Curious
The reason you put yourself into the position to capture the profits of the highest performing asset in this decade is your intense curiosity. Keep that same hunger for knowledge alive and never brush off new projects and opportunities without doing your own research. During 2017, the life-changing gains came from the unheard of low market capitalization coins, ICOs, masternodes, staking coins, airdrops and many other things that took a bit more effort than just buying and holding Bitcoin. When the flood of new money begins to pour in, many will look to find “the next Bitcoin.” They will fall for the age-old misconception that a cheap coin will pump due to it simply being cheap. This is conceptually illogical, but by embracing and utilizing market participant psychology in your favor, you can profit from situations like these. We have already seen a new trend of Initial Exchange Offerings which have gone on to see increases of even up to 10x on Binance ($MATIC). These IEOs have very few previous holders looking to get out of their investment which reduces selling pressure, thus increasing the ability for price to rise expansively. Those who scoffed at the idea of IEOs missed out on these gains and will kick themselves one day looking back. Separate your emotions and ego from your ability to profit. Not every coin has to be a disruptive paradigm shifting technology for you to profit from it.
- Utilize Simple Trend Following Technical Systems
There are technical analysis indicators that flourish in a trending market. By observing these trend following systems, you can better time entries when looking to buy during pullbacks and thus compound your gains.
For example, the Ichimoku cloud is an indicator system comprised of a series of moving averages that not only shows the health of the trend but also levels of special interest in terms of support and resistance. By using the settings of 20, 60, 120, 30, you can set this indicator up to be geared specifically for 24/7 crypto markets. In an uptrend, placing bids at the kijun (red moving average) and cloud edges on the daily chart can make for epic entries, allowing you to ride entire trends.
- Capture Profits using Stop Losses
It is a common misconception that, once a trade goes your way, the trade becomes a free trade, and the risk has disappeared. This leads to unrealized profits turning into dust and sometimes even losses. Management during a trade is just as — if not more — important than trade selection itself. It is all too common for one to get comfortable in a winning position, expecting a coin to go up forever, only to have it reverse and take out half your profits.
A simple solution to this is a stop loss being placed in profit, either manually or by way of a trailing stop loss. A trailing stop loss will automatically slide up along with price based on a preset range determined before the stop is placed. A very simple technique one can use to manually slide a profit up along with the trend involves the Williams fractal indicator. This indicator points out swing lows in which you can place a stop loss. Using this technique on the weekly chart works especially well for long-term positions. For example, during the 2016-2017 run-up, this method allowed traders to capture a 12x on BTC itself without being stopped out and only having to adjust a stop loss eight separate times.
- Keep Your Emotions in Check
A crypto bull run is an outstanding roller coaster of emotions, most of which are positive due to the amount of money you can make when the tide begins to rise. This can lead to a sense of hubris that will cloud your judgment and produce an ego and bias that hinders you from seeing situations for what they truly are. FOMO runs rampant during these massive runs and is the main cause of people losing money, even in a bullish market. Self-awareness is a superpower in trading and especially in times of irrational exuberance. Stay grounded and let charts guide you. You will not catch every pump and you also won’t capture the entire move on the pumps you do catch. Take profits on the way up, and remember the only constant in markets is change itself. There will be a bear market that follows this bull market just like the bear market that followed the last bull market.