3 Ways to Profit in Bear Markets – Quick Guide

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The majority views bear markets as unfavorable; however, to some, it’s treated as just another day in the market.

Although you’ve more than likely heard the stories about companies losing sizeable amounts of money during bear markets, you’ve probably also heard of those handfuls of investors who have amassed wealth during the same period.

So how do they do it? How is it possible that some profit during market bear markets? Here are three ways.

Buy The Dips…

And sell the rips!

In a bull market, even during parabolic moves, no asset moves directly up without experiencing resistance or retracement.

In a bear market, the reverse is true. If an asset is trading at $100 and is expected to visit the $50 price range at the depths of the bear market, it usually doesn’t go directly from $100 to $50.

Instead, it may go from $100 to $75 and experience a slight bounce back up, or “relief rally,” before eventually heading back down past $75 and eventually to the target of $50. 

The goal is to buy the dip to $75 and sell on the way up (the rips) with the relief rally. The bounce-up is referred to as “the rip” as usual during these times, market volatility is high, and movements within the market are usually swift. Traders have turned to crypto auto trading solutions such as bots to combat the whipsaw-like price movement. 

This is perhaps the most common practice exercised by traders during bear markets. Many rinse and repeat this process throughout the market downtrend until a trend reversal is confirmed.

Slow and Steady

Many platforms make it easy to stake and earn interest off stablecoins which can be a great way to both scratch that trading itch and safely earn during a red market.

In fact, savvy investors in this space regularly incorporate the use of stablecoins into their trading strategy, especially during bear markets.

It can be a profitable way to increase your holdings in the coin of your choice if implemented effectively.

For instance, upon upswings, traders may swap their crypto holdings into a stable coin while they wait for a retrace and stake it in the meantime, as it could be hours, days, or even weeks before either re-testing lows or creating new lows. 

Arbitrage

There are thousands of cryptocurrency exchanges (along with many DEX’s or decentralized exchanges), and not all offer the same crypto at the same prices. 

For instance, if a crypto is listed on “Exchange A” for $1, but “Exchange B” has it listed for $1.05, a trader would purchase it from “Exchange A” for $1 and instantly sell it on “Exchange B” for $1.05, or a quick 5% profit.

There are traders whose entire strategy is based on arbitrage trading.

Of course, you have to be mindful of volatility, especially during a bear market. However, if you combine this method with buying on the dip approach, one could potentially maximize their profit potential. 

Taking Action

There are many ways to profit during a bear market, but it is vital to keep your eyes on the charts, “listening” to the data rather than the chatter of the markets.

Remember, the goal is to take “calculated” action; it’s a balance of not being scared to take action while not being too active or over-trading.

Each trader has their own strategy, and not one fits all, so starting by testing the ones above is a way to ensure that you will eventually find the best way for you to profit in a bear market.  

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