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Differences in Recurring Trading in a Bullish vs Bearish Market

2021-11-18

Key Takeaways

  • Different markets require different strategies to execute successful trades.

  • The Dollar Cost Average (DCA) strategy softens your portfolio from market volatility. 

  • Try our Recurring Buy function to schedule automatic DCAs on your Binance portfolio and save the hassle of making manual purchases.

The terms “bull” and “bear” are commonly used to describe market sentiments and have become monikers for state and overall dynamics of markets across both traditional and decentralized finance. The animal analogies are derived from the movements of the animals in question and mimic their behavior. Bears go into hibernation, meaning they become dormant and inactive. On the other hand, bulls go into a rage and charge, highlighting heightened levels of activity.

The terms are appropriately used to describe whether a project’s price is appreciating or depreciating in value or if the market’s collective attitude favors a cryptocurrency’s supply or demand. The market’s direction will heavily impact the direction of a user’s portfolio, meaning that all participants should understand market conditions in order to form timely buy or sell decisions. If you’re looking for a simple way to increase your crypto holdings at your preferred price, you can use our newly launched feature—Recurring Buy—to schedule automatic cryptocurrency purchases on a daily to monthly basis.

Bull Market

A bull market is where the conditions are generally favorable for traders to start acting quickly and decisively. It is typically described by a sustained increase in coin prices and an upward trend in general capitalization and activity of both small and large market players. Such upward trends also increase traders’ confidence and appetites as they become optimistic or “bullish” about market price increases and initiate trade actions.

Bear Market

In stark contrast, a bear market is indicated by downward trends, where coin prices continuously decrease and the market enters into a period of a trough followed by a recession and, in worst case scenarios, a depression. A bear market is typically noted when prices fall over 20% of their recent highs. During these periods, traders usually experience fear, uncertainty and doubt (FUD), which may drive new traders away from participating in a bear market and existing players from engaging in new trades.

Why is it important to understand the market conditions?

As contradictory as it may sound, some investors often see bearish markets as opportunities to lower their positions over time. Trader psychology and sentiment affect market trends as traders change in attitudes towards a project and thus, influence their decision to enter or exit their position. Given that psychology is largely collective, these decisions impact the market overall.

Different markets require different strategies to execute successful trades. As such, analyzing market sentiments can bring about insights into supply and demand or even potential future movements. Traders can also analyze trends to get a better understanding of the price changes and make decisions about which assets to buy or sell, depending on their potential over time in light of the current market situation. Overall, traders should combine technical and fundamental analysis with market sentiments to help determine their positions in the market.

Trading in Different Market Sentiments

Bullish Market

When the market is bullish, traders who are confident in the market may apply some of the following strategies: 

  • Buy and HODL – a classical, no-hassle strategy whereby users enter, hold their positions throughout the bull run and sell when prices are as high as possible.

  • Riding the trend – a strategy in which traders select coins that are on a strong uptrend and profit from their upward movement.

Bearish Market

In a bearish market, where sentiment is less optimistic, users may resort to other strategies, such as:

  • Buy the dip – an intuitive approach of taking advantage of low prices as good entry points in a bearish market.

  • Short selling – taking the short position to take profits from the downward trend on the market.

Automate your strategy

In both cases, users will have to manually monitor and determine price fluctuations and trends. However, there are some useful ways to automatically identify and execute cryptocurrency trades, such as:

  • Dollar cost average – an approach by which users set a desired amount and frequency of purchase to invest in a cryptocurrency for the long-term.

  • Trading bots or automated trading software, which allows traders to configure automated constructs to execute various trades based on a set of market factors.

What are the benefits of Dollar Cost Averaging (DCA) in different markets?

The advantages of dollar cost averaging include a number of important criteria that affect all traders operating on broader markets. First, the DCA gauges market price fluctuation impact. Second, it can maximize cryptocurrency portfolio yields by allowing traders to set a fixed price and frequency of purchase.

However, there are also potential risks and some disadvantages of dollar cost averaging. One way to implement the Dollar cost averaging method on Binance is through the Recurring Buy function.

How can I implement Recurring Buy on Binance?

Log in or register for a Binance account and then click [Buy Crypto]. Select [Credit/Debit Card] as your payment method and then select the fiat or crypto you want to purchase. The final step is to click “Enable” for the Recurring Buy function.

Please note: You can only view and use Recurring Buy after you have registered or logged into your Binance account. For a full “How to” guide, please read “How to Use Recurring Buy”.

Binance Recurring Buy lets you use Visa/Mastercard to set automatic DCAs for your crypto portfolio, saving you the time and hassle from constantly reading graphs, timing price trends and making manual purchases. Recurring Buy is available on both the Binance website and mobile app. 

Closing Thoughts

There are several different ways in which traders can react in different markets under various conditions and levels of overall activity. It is important to note that users should do their own research before making any buy or sell decisions and manage their own risks, considering the highly volatile and unpredictable nature of many assets. The DCA is a useful trading strategy that can help users seeking to invest in a cryptocurrency in the long run, providing a certain degree of clarity to market dynamics and fluctuations.

Ready to buy cryptocurrencies? Kickstart your cryptocurrency journey with Binance

Get started by signing up for a Binance.com account or download the Binance crypto trading app. Next, verify your account. After you have verified your account, there are three main ways to buy cryptocurrencies on Binance using cash: you can buy crypto with cash from Binance via bank transfer, card channels or e-wallets options.  

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Disclaimer: Cryptocurrency investment is subject to high market risk. Binance is not responsible for any of your trading losses. The opinions and statements made above should not be considered financial advice.

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