This article is to help beginners who have recently joined the space or those who are suffering with bear market PTSD thrive in a bull market. I do believe this article will also be a helpful recap for the more experienced folk out there.
I have outlined ten tips that will help people prepare for a bull market and I have explained why I think each tip is important. Reading this article will shape your mindset now, before things get too crazy and intense. Be prepared for what is about to come.
The two types of patience
Patience with a trade
Remaining patient is easier said than done. When I personally take a trade, I have already predefined my targets and my stop loss and I recommend you always go into a trade with a clear plan. In an ideal world, we set our alerts and forget about the trade whilst waiting for one of our predefined outcomes to hit. Easy, right?
However, we then have a browse on Twitter and see how everybody else is crushing it. Flipping alt coins for 2x, 5x, 10x and more, whilst our trade is still only at +2%. Our emotions tell us that we should be doing better and we should jump into these talked about coins as they may carry on running. So many traders close a stagnant position to jump into a pumping coin and it usually ends badly. I’ve actually experienced this myself a couple of times in the past.
FOMO’ing into a coin that is already up 150% in the last 24 hours is very rarely a good move. Remember, your original position will eventually pump. It’s important to understand that money flows in a bull market and this is where patience is required. In a nutshell, don’t chase pumps or FOMO.
Patience with the market
On a much broader scale, patience is also required with the general market structure. Unfortunately, pull backs are to be expected in a bull market as nothing goes up forever and these pull backs are actually a healthy sign. In the 2017 bull market, we actually seen Bitcoin retrace around 30–40% multiple times on it’s way to the top. It really is nothing to fear.
We might buy into a position just before a market pull back. During this time we may see a few coins with a lot of hype around them fight these pull backs, but for most of the market, there will usually be a short period of red on the way.
So what do we do in these situations? We have two options and it depends on what kind of trader/investor you are. We either a set a stop loss and look for other opportunities or we ride the dip and maybe even buy more at the lower prices. It is completely dependant on what your strategy and style is. There is no right or wrong here.
BTFD & HODL
The above leads nicely into our next point, Buy The F*cking Dip and Hold On for Dear Life. These two phrases were the meme’s of the bear market. Holding was not a good strategy as many coins retraced as much as -99%. Many people including myself still hold some of these bags as they sit in a wallet somewhere virtually worthless compared to what they once was.
I firmly believe that these two phrases are no longer meme’s in bullish conditions. It is a perfectly viable strategy and can work well for many who don’t have the time to monitor their holdings or don’t want to overtrade. It can actually prove to be a very simple yet profitable strategy in the correct market conditions.
Learn the basics of technical analysis
Regardless of your strategy, you may want to consider learning the basics of technical analysis (TA). TA can be as simple or as complex as you wish to make it, but understanding the basics such as support and resistance may help you maximise profits by giving you guidance on when to enter or exit a trade.
Typically speaking, buying at resistance or capitulating at support is not a good strategy. If you cannot identify these levels, you could be putting yourself at an immediate disadvantage.
Fundamental analysis (or FA) gets talked about a lot in crypto. Understanding what these projects are working on or what they have in the pipeline can be a huge advantage, especially in a bull market. Exciting news and events in a projects roadmap can build up a lot of hype which will usually reflect in the value of a project.
However, it’s important to remember that ideas are nothing without execution and until these projects are delivering results and proving to be a profitable organisation, there is a fair amount of risk attached to them. I personally never become too attached to a project and am always looking to exit my position with a profit. It is not within my strategy to find projects that I would like to invest in for the long term (multiple years). Crypto moves very fast and things can change very quickly.
The most common things I hear from new people joining the space is how such a coin is going to be the next Bitcoin or how ‘cheap’ a coin is. These people simply do not understand basic tokenomics such as circulating supply, total supply and marketcap.
I recommend that everybody has at least a basic understanding of tokenomics and how it can make you realise that 1 XRP will probably never be worth more than 1 Bitcoin. If you’re not familiar with tokenomics, go and take a look at the total supply of XRP and compare it against the total supply of Bitcoin. Multiply the current price of Bitcoin by the total supply of XRP and that is the marketcap required to see such an event. This may make things a little more clear. CoinGecko is a good place to find this information.
When things are going well, it’s very easy to become euphoric and feel invincible. You feel like you’re going to win every trade you take and because of this, you take a bigger position or even go all in. As mentioned earlier, the market will still have pull backs, so don’t think your position is bullet proof.
It is equally as important to remind yourself that being over exposed in a position comes with high risk and can actually effect your opportunity cost. You may be confident in your ability to make money, but what you don’t know is if that project is going to exit scam tomorrow and you’ll be back to $0. I hope it never happens to you, but unfortunately it does happen more often than it should and this is why going all in is never advised. Tying up all of your capital in one position is not the best approach.
The bottom line for me is: If you can’t sleep at night because of an open position, it means that your position is too big.
Be careful on Twitter
When the market is bullish, Twitter can be a dangerous place. Everybody is flexing their gains and this can often have a negative impact on someone who isn’t experiencing them same gains. I think it’s important to remember the first point in this article, that we should remain patient and not dive into a position that has already pumped. Secondly, be aware of the larpers. Many of the traders flexing these gains probably didn’t even take a position, but still tweet about it to fuel their ego. Remember: Larping doesn’t pay the bills.
You might feel the FOMO when you see people on Twitter sharing these trades, but remember that you don’t need to catch every move to make a profit. If Twitter gets too much, just take a break. You’ll probably be more focused without it anyway!
Taking profits & greed
It’s very easy to get greedy in a bull market. Them 20% gains that were once great in the bear market are not good enough anymore as we see coins moving 2x, 5x, 10x and more. However, all you need to do is have a few conversations from people who didn’t sell any of their holdings in late 2017/early 2018 to know that taking profits is a good idea.
Scaling out of a position is the most effective strategy to avoid any kind of disappointment or failure. Staggering your sell orders will prevent you from being greedy, but will also help you avoid selling too early. Catching the top of a trend is often down to luck and scaling out ensures that you secure solid profits along the way.
A moonbag is keeping a small percentage of a position open (often 5–10%) despite all of your targets being hit. This is an effective strategy in a bull market as coins can often keep running way after your targets have been reached. Keeping that 5–10% means that you can still reap some rewards if the coin continues to moon way past your predefined targets.
As mentioned above, taking profits is always a good idea, but there is a well known phrase which is “let winners run” and having a moonbag ensures that you can successfully do this to an extent.
Many coins will inevitably break all time highs and go into price discovery during a bull market. Although this is a great situation to find yourself in, it often makes it difficult to set targets as there is no previous price action to use as a guide.
Simply put, there is no resistance above so how do we know when to take profit? Many traders I have spoken with have shared that they use Fibonacci levels to help take profits in price discovery. Others have said that they use volume as an indication of when it looks like the top is in. Scaling out of a position in price discovery can once again be an effective strategy as we know that trying to catch the very top usually ends badly.
What I have addressed is just ten things that I will be focusing on myself as we approach the next bull market. I’m sure there are many more factors to consider and not all of the above will be applicable to you. I do believe this article will help many of you adapt to a more controlled and consistent strategy in the bull market rather than hoping for the best and winging it.
One last thing, if you’re thinking about which yacht you would like to buy or what colour Lambo you want, I’d take some profit :)
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Thanks for reading, Posty.
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