Trading 101: Trading Tips to Make Money in a Bear/Correction Market

2022/01/29 11:22:16

During a bull market, anyone can make money. Just pick a coin and wait for its price to go up. Those who study the crypto market may have gotten even luckier and made larger profits by investing in the largest movers of the year, such as alternative layer 1's, metaverse plays, NFTs, or even meme coins. This market cycle has been incredible, to say the least. With that said, many of us had our sights set even higher.

We have all heard the incredibly bullish price predictions made by experts for where they see the price of Bitcoin going to this cycle. Ranging from the low-end of $100k to more bullish predictions of even potentially reaching $500k. But, what if the prices don't actually reach those milestones? What if the crypto market takes a turn for the worse and that ignites the next bear market? What should you do when the music in this game of musical chairs stops and the rush to find a chair of safety begins?

Here are your trading tips to make money in crypto bear market and survive bear market corrections.

Running Towards Safety In Blue Chips

While we are all in this crypto market to make money, sometimes the most important move is to trade to preserve it. In this case, that would mean running towards the blue-chip coins in the space, such as Bitcoin. While Bitcoin dropped from its all-time high price of $20k in 2017, it went down to under $4k in 2018. A percentage of nearly 80%.

Similarly, the BTC/USD price fell precipitously from an all-time high of $68,932 in November 2021 to a low of $17,592 in June 2022. A drop of nearly 74%.

There are two key things to pay attention to in this scenario. It held up better than many altcoins that would see their prices eventually drop up to 99% from their all-time high price.

Even more significant was how quickly it began to recover. Speaking about the 2017 fall, Bitcoin recovered to $14k, 70% of its previous all-time high, while many altcoins were still hovering near their bottoms, yet to recover. While the 2022 fall is yet to recover, and the BTC/USDT coin is still trading near $22k in the crypto bear market.

Use Shorting Strategies to Hedge Downside Risks

One of the key characteristics of the crypto bear market is the tendency for prices to drop drastically from their all-time highs for an extended period. If you believe prices will continue to dip even further, there are trading strategies to make an extraordinary amount of money in a bear market. Shorting the crypto bear market is one of the trading strategies to do this and might be an option that appeals to you.

Shorting is when a trader performs technical and fundamental analysis to predict that crypto assets are going to decline further. If their technical analysis is right, they can make a significant amount of money. In fact, shorting is one of the few ways to make money in crypto when the price of the asset actually goes down, which is perfect during bearish market conditions. While shorting, you're able to sell assets that you don't even own. Instead, the borrowed crypto is sold at current prices, which is what happens when making a short trade. If you feel confident, shorting can be a great way to maximize your profits.

Of course, there is a risk to this as well. If the trade goes the other way, there is a chance that you could be liquidated and lose everything. Never bet more than you are willing to lose.

Check out KuCoin's complete guide on How to Short Cryptocurrencies. This covers every possible way of shorting in crypto trading for newbie and experienced traders. from futures trading, margin trading, and scalp trading in the crypto bear market. It also discusses mastering margin trading strategies.

Trade into Stablecoins

If you have a risk appetite, crypto markets can be some of the greatest times to multiply all your money invested in the crypto industry. Similar to shorting, if you believe the market will continue to drop heavily, there are great ways to make money in a crypto bear market.

One of these options is trading into stablecoins. The thought is that you would sell your crypto into stablecoins near the market top. Then, while the bear market is in turmoil and the value of those coins plummeting in value. The fiat value of your stablecoins remains the same. There are even ways to earn a yield on those stablecoins via lending or DeFi while you hold them. Once you believe that the coin of your choice has reached its price bottom, that is the time to trade back into your desired coins. It definitely require fundamental and technical analysis skills.

During the summer of 2021, if you would have sold Bitcoin near the top of $68k, held onto stablecoins until Bitcoin reached its bottom of near $17k, and then re-bought Bitcoin. You could have more than doubled the amount of Bitcoin in your crypto asset portfolio. All without spending any additional cash.

Although, there is a risk that comes with taking this approach. Timing the bear market can be an extremely difficult task even for experienced traders. There is always the chance that you could sell your Bitcoin holdings at $64k, and then the price could keep rising, which would result in you having to buy your Bitcoin back at a more expensive price.

Dollar-Cost-Averaging

There is a famous phrase that says, “time in the market is more important than timing the market.” That is exactly the thesis behind dollar-cost-averaging, which is essentially buying fixed amounts of crypto at set intervals of time. This allows you to catch a nice average of the volatility of your crypto. The swings upward, the quiet periods in the middle, and also the dips downwards. You no longer need to worry about timing the market with the perfect purchasing price. Knowing that you are catching a great average of all price movements.

This is typically a strategy that is used by traders who have a long-term timeframe and are planning to be in the market for several years. In fact, people who do DCA often perform better over the long term than those who only lump-sum purchases. DCA isn't a trading strategy for scalp trading, and it's more of a swing trade strategy for newbies and experienced traders. It allows traders just to set it and forget it. Allowing you to not worry about day-to-day price fluctuations. Living a much more stress-free life.

If you have never experienced a bear market before, this might just be the strategy that helps you to survive the cycle. It is very easy to get caught up in the FUD during the bear market, which might result in causing you to sell your crypto much sooner than you had initially planned

Buying The Dips

In the crypto bear market, dollar-cost-averaging will be the best option as it is the least risky trading strategy. But, think back to March of 2020 when the unexpected covid crypto crash occurred. Causing the price of Bitcoin to drop to $3,200, Ethereum to $80, and Cardano to $0.03. At that time if you had lump sum purchased and bought the dip, it could be an event that forever transformed your financial future. Since then Bitcoin has gone up nearly 12x, Ethereum 20x, and Cardano 50x. This is why you must always set aside cash for those days that prices are extremely deep in the red.

If you always go all-in each time you get paid with no remaining cash, you will never be able to take advantage of those dips. There is nothing worse than seeing an opportunity of a lifetime sitting right in front of you, but not having the resources to do anything about it. The Crypto bear market is filled with these great buying opportunities.

Many of those large price spikes downwards occur for only a few moments before they are boughten up and the price quickly bounces back upwards. The chance of you being on your computer ready to buy as those drops happen is quite low. It is more likely that you will either be doing something else or possibly sleeping. This is why setting low-bid limit orders can be an extremely useful tool. Setting a limit order for a “dream” price that you would like to buy your coin at, and then letting the exchange do the work for you. Beyond the limit orders in the spot or futures market, there are also crypto trading bots doing this job for you. KuCoin Trading Bot is one of them, you can create your bot for a trading pair and automate the trading of buying the low and selling the high automatically.

Check out KuCoin's 8 Tips for KuCoin Trading Bot and making money.

Having that bid automatically filled if prices ever reach that level. As always, there is a risk that comes along with this. There is the risk of catching a falling knife when attempting to buy the dip. This means that prices could potentially continue to dip even further after you've made your purchase.

Just Hodl

If you are a person of patience and conviction, bear markets are the time when most investors make money. While similar to buying the dips, buying low and selling high is much more of a long-term investment process that requires patience. Looking at the coins that have been hurt the most in corrections or bear markets and are also extremely undervalued. This part requires you having put in your own research, knowing the market and which coins will most likely recover. Having knowledge of the project's key fundamentals and the future that the crypto market is likely heading towards is a priceless skill to have here.

For example, look back to the previous bear market when Ethereum had dropped under $100, or Cardano had dropped under $0.03. At the time the market FUD was intense and there were debates on whether crypto was a bubble and would ever recover. Knowing that smart contract blockchains were the future and would see huge growth would have been great alpha knowledge to have. In retrospect now, those prices were amazing buying opportunities.

Unlike buying the dips on deep red days, buying the lows or bottoms of coins is a game of patience. If you were to have bought ETH or ADA in those situations above, it would have required you to HODL them for more than two years to see them recover to their all-time high price and ultimately surpass them before selling to maximize your profits. But this is when all the money is made. If you have the patience and diamond hands required to hold onto these assets for an extended period, you will be greatly rewarded.

Conclusion

We all dream about bull markets and how prices might go to the moon. Allowing us to transform our lives and possibly gain financial freedom. But, the truth is that most of the real gains are made by the hard work you put in during the crypto bear market. When the market is quiet, and no one is paying attention. Putting in the work now to learn about crypto and what will be the next big movement will allow you to get in early and reap all of the benefits.

The big question isn't how much your crypto portfolio is worth or how many coins you have. But what are you doing to improve your position and improve in this space? This is what will make all of the difference. That is when you will understand that bear markets are the best times to create wealth.