Why Bear Markets Are Great For Trading
Trading long in a bear market is not as dangerous or crazy as it seems. It all depends on what stage of the bear market you decide to trade. What we have seen in the past month or two is definitely not the time to be going long. Ideally, you want to be relatively certain the bottom is in before embarking on a trading adventure. There are certain zones that offer a fairly good guarantee for certain trades. For example, I mentioned that I shorted from the $32K zone all the way down to the $22K zone. Despite the fact that BTC had already dumped towards $25K the charts were in fact telling a story of further downside.
To many this was foolish and quite a number of individuals took the opportunity to tell as much. However, it’s more important to gather confluence when it comes to opening a trade. Present and past price action are merely one piece of a “confluence puzzle”. Just because the price has dropped to a previous level does not indicate that it cannot revisit or drop further. This is exactly what transpired and what was considered foolish has since been validated as safe. Closing shorts at $22K offered more than enough safety when you consider that the price dropped to $17.600. This was the time to short. Likewise, once a bottom appears to be in traders will look to a season of day trades and perhaps swing trades.
The Comfort That A Cycle Bottom Provides
Once you can identify a bottom you can simultaneously begin to strategize your trades knowing that the “bottom level” is unlikely to be lost. Bear markets proceed upwards from this point but are generally knocked back at various points along the journey. This makes for a great trading environment. Given, that there are times that can be a bit boring due to extended sideways chop, there are still opportunities. A lot of the risk is now removed due to the trend having pivoted in an upward direction, albeit slowly. Provided that you are not utilizing leverage, a trade that goes against you will soon come back into play.
Maximize The Time
This is when hodlers will also begin accumulating again, which oftentimes causes the market to initiate a false rally. Once again, this is where traders can really capitalize. This area of a bear market is great for traders and in essence, is where a bear market begins a slow transition into a bull market. However, as mentioned, you really do want to see a bottom confirmation. Even though BTC is currently trading above $21K the charts are still painting a very bearish picture. The upward trend line from $17.500 is busy being lost as I am writing. There is also a robust bearish divergence on the daily chart that can’t be ignored. My guess is that another sharp correction is looming.
The next year or so might be a bit boring for most but traders have an opportunity to capitalize on the many false attempts to move higher. Historically over time, there doesn’t appear to be much price appreciation during this period of a bear market. However, trading opportunities are plentiful for the disciplined trader who keeps his greed in check.