So Very Important
When bear markets arrive, market participants generally tend to behave exactly as they did during the bull market. In other words, they continue to buy. The narrative changes somewhat, as now a “buy” is considered a bargain. However, it’s simply a case of the “dip keeps dipping”. I tried to communicate this numerous times throughout this bear market. I also explained how dollar cost averaging should only be exercised closer to a perceived bottom. The dollar cost-averaging strategy is ideal for fairly stable, or even bullish markets. Scheduling buys as a market continues lower, is not actually smart. Dollar-cost averaging in cash into an investment account is different. This amount can later be deployed at lower levels.
For example, I repeatedly made reference to the multiple pumps above $20K. Instead of entering the market, that capital would have been better utilized by being set aside. Even buying at these levels now is far more powerful, even as the market edges lower. There was sufficient data to suggest that markets would edge lower. However, this is only uncovered by doing research. Many who promote DYOR don’t even practice it themselves. A lot of investors are quite familiar with the Crypto playbook. However, knowing something and actually doing it are two separate things. If you want to succeed in a bear market, you have to abandon bull market practices… they don’t work!
One of the healthy benefits of playing both sides of the market is the neutralization of a bullish bias, or any bias, for that matter. Being able to trade in either direction, ultimately causes market participants to become more neutral. Why would you want a bullish bias in a bear market? Before I continue, let’s just clarify some terminology that some might not be aware of. When you buy an asset with the hope of an increase in price it is categorized as a “long” position. On the other hand, a trade that benefits as the price moves lower is called a “short” position. If you are not shorting in a bear market, you are missing out.
Observing the market with the ability of being able to go long or short enables market participants to gain a more objective, and subsequently, accurate view. In the event that a market participant is limited and only able to go long, the bias will ultimately begin to dominate the decisions being made. This is exactly how buyers at $25K are completely blindsided and unable to see the danger in what they view to be the beginning of an upward move to $35K. The bullish bias is at the foundation of every decision being made. This can be equated to wearing summer clothes in winter. While a more objective trader who is able to go long or short is like someone who has a cupboard full of both summer and winter clothes.
Don’t underestimate the deceptive power of a bias that is unsubstantiated. Those who were laughing at the bearish traders above $20K have learned nothing. Many are still smirking at those calling lower lows. It is important to note that upside is not indicative of a trend reversal. Lower lows can still materialize after strong upward moves. Being teachable is at the heart of advancement. If you are unteachable, that which you knew five years ago is the same as what you know and understand today.
Learning something new involves the acceptance and acknowledgment that my understanding is limited, or incomplete. Being unable to reach this point, simultaneously means that stagnation has kicked in. This is yet another reason why 90% of retail traders lose money consistently. Remaining flexible and teachable is imperative if you wish to mature as a trader, or in any arena, for that matter. Data dictates the bias, not emotions, and a bias is established by the confluence within the data.
In a bull market, the bias should be bullish. As in a bear market, the bias should be bearish. These viewpoints can change for moments of the season, provided there is sufficient confluence to support adjustment. However, the amount of Crypto enthusiasts that have maintained a bullish stance throughout this bear market is staggering. In hindsight, those who are able to process and think clearly are now able to see how foolish it was. Plan B is one such influencer who has maintained a bullish narrative throughout this year. As I have said, permabulls and permabears are both incorrect.
One can be long-term bullish on an asset and still acknowledge bearish seasons within the journey. To not factor in bearish seasons can only mean one of two things:
There is unfortunately no other explanation, apart from perhaps, hopium. Imagine shorting through a bull market. In the same light, as crazy as that sounds, it’s the equivalent of being bullish in a bear market. See you next time!