There is no relief yet in sight for the crypto market, which continues to suffer from extremely low prices, leading to low trading volumes and open interest. The crypto casino that attracted millions of visitors a year ago has now become a ghost house of disappointment. While many advocates have already left the ship, all that remains are day traders and determined investors. Despite the current bear market’s complexity and economic uncertainty, experts agree that there are still some ways for crypto traders to survive the crypto winter.
Everyone’s a genius during a bull market, but how should one trade in a bear market?
The crashing cryptocurrency market has already adversely affected the portfolio of many wannabe millionaires, and many crypto traders are still uncertain about the best course of action to take. This is understandable, however. How do you forecast the future of an asset correlated to macroeconomic conditions that have reached historic levels of uncertainty? What strategies should be employed if the market is experiencing a steep down cycle with no clear endpoint for the asset? Here’s what we found!
Why Trading Is Essential for Crypto?
If you think traders give crypto a bad name, just imagine an industry without them.
Without traders, the crypto market is incapable of having liquid markets, and without liquid markets, institutional interest is non-existent. In the absence of institutional interest, the crypto industry would remain small, poorly funded, less innovative, and more susceptible to regulatory interference.
For many successful traders in the crypto market, one of the least interesting features of crypto assets is their price. I’m sure most crypto investors reading this are confused at the moment. It is true that I completely agree with that reaction. However, I would like to point out that crypto has the potential to give good returns both in the short term as well as in the long term. The fact remains, trading plays an essential role in the growth of the industry, and deserves more respect and appreciation than it generally receives from the general public.
Taking a closer look at this is worthwhile. Let’s first define “trading.”. Trading is defined as buying and selling crypto assets and derivatives on a short-term time horizon with the aim of making a profit. While crypto trading, which often resembles gambling, depends less on fundamentals than on market timing. A good trader can take advantage of market signals to predict price direction, and an excellent trader can identify changes in sentiment that can alter momentum without the need for new information.
The market opportunity is what draws most traders to crypto, not cryptocurrencies!
Money is the main motivation for many individual crypto traders. The volatile nature of cryptocurrency assets is cited as one of the major reasons for crypto traders to trade them. Even when several platforms offer impressive leverage schemes, volatility is what many crypto traders consider their strongest asset.
With cryptocurrency prices falling rapidly since late November, now all that remains are bold players brave enough to confront the sea of volatility. And that is what crypto trading is all about. Find out “Is This The Right Time For Crypto Trading?” for yourself.
5 ways to survive during the crypto bear market
While crypto assets are printing double digit losses on a daily basis, keeping your nerve can be very difficult to do. The good news is that you don’t have to bury your head in the sand if you follow these five simple steps properly.
1. Buy the Crypto Dip with Dollar-Cost Averaging (DCA)
Crypto traders are all too likely to be on the wrong side of the market when markets turn wildly volatile, but that doesn’t mean they have to sit there and watch their portfolio plummet.
During the bear phase, you have the opportunity to accumulate your favorite crypto tokens at a bargain price. As a result, it is crucial to invest during this phase as opposed to when the price is sky-high during a Bull phase. When the market enters a bear phase, “Buy the Dip” is a common slang phrase to indicate buying.
This dip can also be purchased in a lump sum, i.e., investing all your money at once. Alternatively, you can use Dollar Cost Averaging (DCA), also known as a Systematic Investment Plan (SIP).
The DCA strategy involves buying small quantities of crypto tokens over the course of time. Therefore, if you want to invest $100,000 in ETH (Ethereum) Token, you would divide this investment into several purchases instead of investing it all at once (lumpsum investment). In the next 100 days, you buy $1000 worth of ETH every day.
There are two ways in which DCA strategy can benefit you:
- Investing in this way reduces the impact of price volatility and allows you to average your investment costs over time
- By keeping a small amount of money invested in your favorite crypto token, you will maintain discipline in your investment process
When the prices return back to their previous highs, the dip buyers will therefore stand to gain a nice profit, as well as a return on their investment.
In essence, this is similar to the infamous financial advice of Warren Buffett, “When there’s blood on the streets, you buy!”
2. Identify the best Entry Point using Indicators
The vast majority of crypto traders live away from the bright glow of dual Tradingview monitors and becoming a TA expert will be beyond your skill set. If you become adept at timing your entries and exits, you stand a better chance of selling near the top instead of falling for the hodl meme and suffering another decline.
Certain technical indicators can help crypto traders gauge when an asset has reached a bottom if they understand the basics of technical analysis, which is the practice of predicting an asset’s price movements based on chart trends, indicators and patterns.
While no indicator is perfect, they can often give you a very strong indication of when to buy a dip. A popular method is to use Relative Strength Index (RSI) – which is characterized by a channel that oscillates between two lines. This tool is composed of two elements:
- Overbought: When the indicator line crosses above the channel, the asset is considered “overbought” – that is, overvalued – which usually signals a price drop.
- Oversold: When the indicator line breaks out below the channel, the asset is considered “oversold,” or undervalued, and prices are usually expected to rise shortly.
However, for shorter timeframes such as four hours, hourly or 30 minutes, these two signals do not always accurately predict bottoms or tops. The RSI divergence strategy is a better method.
In general, the RSI indicator line follows a similar pattern to an asset’s price, which means when the price falls, so does the RSI line. Both lines can, however, move in opposite directions at times. An RSI divergence typically indicates the start of a trend reversal. Look for a rising RSI line and a falling price to spot a bottom. In a larger timeframe, such as the daily chart, an oversold RSI line will signal a good reversal opportunity.
3. Scalp your way to Profit from a Bear Market
Markets that are unpredictable can be a good time to increase profit if we can take advantage of small price movements. Scalping involves little more than free time and a willingness to constantly buy and sell throughout the day. Since scalpers can only make small profits from each trade, they must carry out hundreds of transactions every day in order to earn a significant profit. However, if not executed carefully, these short-term trades can also result in significant losses.
While this entails hundreds of transactions a day, it is more dedicated than day trading. Even though it’s somewhat dangerous, it’s a valid strategy for crypto traders to see profits especially when the crypto market is down.
The lives of scalpers are fast-paced. It’s crucial to be observant, instinctive, quick-witted, and stoical under pressure because you’re constantly processing new information. The crypto traders who follow this strategy primarily rely on charts with shorter time frames and technical analysis. It is also helpful to use momentum indicators on price charts such as a stochastic oscillator, relative strength index, and moving averages.
AximTrade’s free online trading course led by the pros can help you master the Scalping strategy.
4. Margin Trading
Margin trading is the act of trading cryptocurrencies with money you have borrowed from the brokerage. Thereby, whatever profits or losses you make as a result of borrowing money will be multiplied by the amount that you borrow.
Margin trading is a great opportunity for crypto traders who want to increase the size of their positions by using leverage. It allows them to gain more exposure to the market for a smaller initial investment. Failing to grasp it, however, can affect the outcome of the trade either negatively or positively, amplifying profits and losses.
Trading this way should only be performed by experienced traders. During a bear market, it’s certainly a more effective way to maximize profits, but it’s crucial for new traders to take precautions. Losing this much can be very costly, as it accounts for both the full value of the trade and not just the amount required to open it.
5. Don’t fall victim to FOMO
Although it may seem obvious, managing your emotions in bear markets is not as simple as it seems. Conscious trading is often considered one of the most challenging things to learn. Benjamin Graham, a renowned American economist, once stated, “Individuals who cannot master their emotions are ill-suited to profit from the investment process.”
No matter which asset you choose, fear of missing out (FOMO) plays a substantial role in trading. The point here is to avoid investing your money simply because others advise you to do so. There is a lot to deal with when it comes to profiting from some random altcoin that everyone is talking about. In most cases, when you learn about a project, it’s already too late.
Accept smaller wins and limit the losses!
The first step is to realize fear and greed are powerful motivators and can lead to snap judgments that lead to losses. Before placing a trade, you should have a concrete plan in mind. In the hope that the asset will rise even higher in price, greed can lead you to stay in trade beyond your take profit level. Trading psychology has a profound effect on how much profit you can make, and it is no less important than trading knowledge and experience in creating a successful trader.
Although you might feel disappointed if you didn’t get in on the dip this time, another crypto crash is likely in the near future. Don’t forget to take profits, save some capital for crashes, and don’t lose your cool when the bears come.
Dogecoin Soars as Elon Musk’s Twitter Deal Nears Completion!
During the past 24 hours, the price of dogecoin (DOGE) rose nearly 16% as the self-proclaimed Dogefather Elon Musk’s purchase of Twitter neared completion. The DOGE price has been a proxy for Musk’s popularity. Moreover, the entrepreneur has consistently influenced the token’s price through his statements.
The price of DOGE was slightly over 7 cents at the time of writing. Over the last six weeks, it has been hovering below 6 cents. According to Elon Musk, he will not sell his Dogecoin holdings any time soon, as he stated in a tweet: “I will keep supporting Dogecoin”.
Advantages of Trading Crypto with AximTrade
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Disclaimer: The above information provided is for informational & educational purposes only. Crypto products and NFTs can be highly risky. There may be no regulatory recourse for any loss from such transactions. Trading can lead to losses, so please do so at your own risk.