UNDERSTANDING THE BEAR MARKET-10% to @TRON-FAN-CUB

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Hello everyone and welcome to my blog.

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The financial markets follow established patterns. To make smarter financial selections, it's crucial to grasp the differences between these patterns. Different market trends, on the other hand, can result in drastically different market situations. How will you adjust to changing situations if you don't know what the underlying trend is?

A market trend is the overall direction of the market. In a bear market, prices are frequently falling. Bear markets can be difficult to trade or invest in, particularly for newbies.

WHAT IS A BEAR MARKET

When the price of a financial instrument falls, it is called a bear market. For rookie traders, bear markets can be quite dangerous. They can quickly result in significant losses, discouraging investors from returning to the financial markets. What is the reason for this?

"Stairs up, elevators down,". This indicates that uptrends are likely to be calm and steady, whereas downtrends are likely to be more abrupt and severe.

Many traders hurry to abandon the markets when the price begins to fall. They use this to stay in cash or lock in profits from long holdings. This can quickly create a domino effect, with sellers rushing to the exit prompting even more sellers to leave their positions, and so on. If the market is heavily leveraged, the collapse can be accentuated much more. The cascading effect of mass liquidations will be considerably stronger, resulting in a severe sell-off.

Bull markets, on the other hand, can go through euphoric periods. Prices are rising at an accelerated rate, correlations are higher than usual, and most assets are rising in lockstep.

In a bear market, investors are typically "bearish," meaning they believe prices will fall. This implies that investor sentiment is mainly negative. However, this does not necessarily imply that everyone in the market is actively shorting. This just suggests they anticipate lower prices and may be attempting to position themselves accordingly if the opportunity arises.

EXAMPLES OF BEAE MARKET

Many investors believe that Bitcoin has been in a macro bull trend since it began trading, as we've described. Does this rule out the possibility of bear markets within the bull market? No. Bitcoin has endured a nasty bear market since its rise to about $20,000 in December 2017.

_{Bitcoin crash in 2017 from $20k to $3k}

Piror to the above 2017/18 bear market, Bitcoin previously saw an 86% crash in 2014 from its 2013 high.

The prior bear market low range of roughly $3,000 has been retested but never broken as of July 2020. A stronger case might be made that a multi-year Bitcoin bear market is still ongoing if that low had been exceeded.

Because that level hasn't been broken, it's possible to argue that the crash in response to COVID-19 worries was simply a retest of the range. When it comes to technical analysis, there are no guarantees, only probabilities.

DIFFERENCE BETWEEN BEAR MARKETS AND BULL MARKETS

The distinction is obvious. In a bull market, prices rise, whereas in a bear market, prices fall.
Bear markets, for example, can have long periods of consolidation, i.e. price movement that is sideways or ranged. This is a period of low market volatility and low trading activity. This is true in bull markets, but it is more prevalent in bear markets. After all, most investors aren't interested in price drops over the long run.

Another item to think about is whether or not it's even possible to take a short position on an asset in the first place. Traders can only convey a pessimistic perspective on the market by selling for cash or stablecoins if they are unable to short an asset on margin or through derivatives. This can result in a lengthy, drawn-out downturn with minimal buyer interest, resulting in a gradual, uninteresting sideways price action.

HOW TO TRADE A BEAR MARKET

Trading and investing with the direction of the market trend is often a better choice. As a result, opening short bets could be another profitable approach in bad markets. Traders can profit from asset price declines this manner. These can be day trades, swing trades, or position trades, with the main goal of trading in the trend's direction. As a result, many contrarian traders may seek for "counter-trend" transactions, or bets that go counter to the dominant trend's direction. Let's have a look at how it goes.

Trading and investing with the direction of the market trend is often a better choice. As a result, opening short bets could be another profitable approach in bad markets. Traders can profit from asset price declines this manner. These can be day trades, swing trades, or position trades, with the main goal of trading in the trend's direction. As a result, many contrarian traders may seek for "counter-trend" transactions, or bets that go counter to the dominant trend's direction. Let's have a look at how it goes.

In the case of a bear market, this would imply taking a long position on a rally. This type of movement is referred to as a "bear market rally" or a "dead cat bounce." Many traders may jump at the chance to profit from a short-term price increase, making these counter-trend price surges exceedingly dangerous. The plan is for the decline to resume immediately following the rebound, at least until the overall negative market has been confirmed to be gone.

This is why profitable traders will take profits (around recent highs) and exit the market before the bear trend resumes. Otherwise, they risk remaining in their long position as the bear market persists. As a result, it's critical to emphasize that this is an extremely dangerous method. When attempting to grab a falling knife, even the most experienced traders might suffer enormous loses.

CONCLUSION

The bear market is what we are currently experiencing in the cryptocurrency market where we have seen Bitcoin drop to its all time low of the year. This post is for us to recall back and know that this isn't the first time something of such have happened and also to guide us on how to properly relate with the current market.