7 Smart Tips For Navigating A Bear Market
Bear markets can be a challenging time to trade or invest, especially for beginners. However, there are some strategies to consider when navigating a bear market.
For clarity, a bear market is a widespread decrease in asset prices of at least 20% from recent highs.
While it is true that no market can continue to rise indefinitely, bear markets also offer opportunities. They can be a great time to learn from your mistakes, gather more crypto knowledge, and get yourself ready for when the market rises again.
In this article, we’ll go over 7 smart tips for surviving a bear market to help you stay focused and weather the storms.
1. Think About The Long-Term
The bears control the market during a bear market. According to an old proverb, the best action in a bear market is to pretend a grizzly bear has attacked you in the woods. It would be risky to retaliate.
It can be tempting to leave the market when it is falling until asset values rise again. But doing so might result in expensive errors. You run the danger of locking in a permanent loss of cash if you sell after a sharp market decline.
The smart tip for surviving a bear market at this point will be to lay low and refrain from making any quick movements.
2. Dollar-Cost Averaging
You can use dollar-cost averaging (DCA) to divide your reserve cash into smaller sums and engage in several transactions over time. Adopting the DCA method in a bad market means you will be looking for investment opportunities when prices reach a specific target.
Using this method, you lessen the volatility effect while purchasing a significant number of financial assets all at once.
With the Binance Recurring Buy program, you can select the amount and the crypto coin you want to DCA from biweekly, weekly, or monthly schedules. This ensures that even in an unstable market, you will invest cautiously.
You can learn how to register for Recurring Buy in only four easy steps on Binance.
3. Diversify Your Portfolio
Your risk tolerance, time horizon, goals, and other factors will determine how you share your portfolio. But you can always avoid the potentially harmful consequences of putting all your financial eggs in one basket by using an effective asset allocation plan.
This is because the effects of bear markets might not be as severe for investors whose portfolios contain a wide variety of assets. While the prices of assets typically decline during bear markets, they are not always by the exact amounts.
Therefore, this wise method makes sure that your assets during a bear run have a mix of winners and losers. As a result, the portfolio’s overall losses will be lessened to the absolute minimum.
4. Trust The Fundamentals
For those who are interested in cryptocurrencies, bear markets can be depressing since they have to watch their portfolios suffer severe losses over what may be a very short period.
Most cryptocurrencies will suffer significant losses during the upcoming bear market, but some remain almost unfazed. But only a few people have the talent to know which ones will survive the general bear market and which ones will fall.
After all, despite 2018 being one of the worst bear markets on record for most cryptocurrencies, other coins like the Binance Coin (BNB) were able to buck the trend and keep most of their value.
While only a small portion will really see an increase in value, some will be able to hold their worth better than others. If you try to anticipate and identify the ones that might succeed, it may help you survive the bear market.
5. Consider Stable Coins
Now here is a fact: the majority of cryptocurrency traders still gauge their profits and losses in terms of their value in fiat, whether that is the value of the dollar or their local currencies.
Therefore, to avoid potential losses during a bear market, it may be wise to keep a portion of your cryptocurrency holdings in fiat-backed, audited stable coins like BUSD. Then, to be ready for whenever the market starts to rebound, you can convert more of your fiat assets into stable coins like BUSD.
6. Explore Staking Options
Staking is one approach to surviving and enhancing crypto assets amid a protracted downturn in the cryptocurrency market.
Staking might not be a popular tactic in a bad market. Still, for some cryptocurrencies, the initial investment required to meet the staking threshold is substantially lower than in a bull market.
So, you can continue to make minor gains consistently and earn passive income by locking your cryptocurrency on a blockchain for a limited period.
Consider Binance Earn to stake your crypto.
7. Increase Your Crypto Knowledge
Bear markets offer a much-needed break from the excitement of a bull market, even though they make it harder to make money while trading or investing on the long side.
But during this period, you can learn more about the market, determine what strategies are effective and ineffective, and better position yourself for the upcoming bull market.
Some of the more valuable topics you might want to review are:
Technical analysis – find market trends that point to a favorable entry or exit position;
Fundamental analysis – identify projects with long-term growth potential that are undervalued;
Sentiment analysis – comprehend the market’s general tone, fears, and hype;
Risk management – develop a plan, set a budget, and diversify your investments;
Trading strategy – investigate and test numerous trading approaches to become knowledgeable enough to handle more opportunities.
You’ll have the best chance of succeeding in a bull and bear market by ensuring you are adequately prepared and equipped to detect and take advantage of potentially profitable trading chances.
We’ve looked at what a bear market is and some valuable tips for surviving a bear market.
So, a basic rule is to avoid selling everything you own in a panic. Instead, take advantage of this opportunity to DCA, diversify your portfolio, explore staking options and stable coins, or even learn about other cryptocurrencies and reassess your holdings.
Studying the tips we’ve covered here, and an analytical outlook and practice may provide you with a competitive edge in the market. But remember that before engaging in any trading or investment activities, ALWAYS DYOR.
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