How to Manage Bear Markets
Market Meditations | January 25, 2022
? Who Let the Bears Out?
1) Manage Your Emotions
- These kinds of markets are a breeding ground for revenge trading.
- In other words, aggressively and emotionally taking positions to make up for money lost.
- The sad truth is the following: the market doesn’t care about you.
- That is, the market doesn’t care if you had $200k and you now have $100k.
- And so, trying to make your money back is no different to trying to make $100k from nothing!
✅ TIP: Low time frames in particular produce a lot of market noise and may tempt you to enter trades more often. Particularly if you’ve just lost a chunk of money. Always remember that lower time frames are risky and analysis done on higher time frames tends to be more reliable.
? ACTION: Tread these waters carefully, with an understanding of risk, reward and probability of success. Always good to have a look through our resources:
- Risk to Reward Ratio
- Only Stop Loss Guide You’ll Ever Need
- All in One Guide to Using Leverage
- Expectancy and Risk of Ruin
Finally, for more on controlling your emotions there is a wealth of Trading Psychology books such as Trading For A Living. Alternatively, you may decide to practise mindfulness: just 10 minutes meditation a day can have serious benefits.
2) Study Narratives
- In a bull market all crypto prices and projects do well.
- This makes it hard to identify trends and narratives.
- During more bearish markets, outlier pumps and strengths are clues as to what assets will do well in the future (when conditions are more neutral or bullish).
- It’s through outlier pumps and narrative spotting that Market Meditations was able to flag key narratives early:
- Layer 1s
- Exchange Tokens
- Metaversal / NFT Gaming Tokens
- And much more!
✅ TIP: Join our free email list if you’d like insights as to what trends and narratives are emerging.
? ACTION: Use this time to monitor price feeds like CoinMarketCap to see which cryptos are showing some strength. Or consider DefiLlama to see where there is still development activity. For instance, later in this newsletter, you’ll see building activity is still thriving on Fantom! Finally, consider on-chain analytics to observe trends, one of our favourite platforms for this is Nansen. Every Wednesday we create reports on On-Chain Analysis which are shared for free on our newsletter.
3) Build Your Network
- Herd mentality is entering a trade based on someone else’s analysis.
- It can be profitable in the short term but if you blindly follow others without understanding the context, you can be sure it won’t work in the long run.
- Whilst there is much to learn from big crypto publishers and profiles, it is essential to only select aspects you agree with and what fits in your own trading system.
? ACTION: One of the best ways to develop your own understanding of the crypto markets is to interact with cryptos, projects and protocols more. Ask questions on Twitter, level up your DYOR by asking questions on project Telegram’s and importantly, familiarize yourself with Discord. There are so many great Discord servers with communities who share knowledge and help each other. If you don’t want to spend financial capital at the moment, build your social capital! Resources to help with DYOR:
