The bull market is called a market state where the price of an asset is steadily growing and is expected to continue to grow. This situation is characterized by a very optimistic mood of traders and long-term investors, who expect very pleasant gains on their long positions.
However, it is very important for these speculators to estimate when this market situation will occur to avoid potential losses.
How it all started? Why does the bull symbolizes the market growth and bear market decline? It comes from the way the animal attacks. A bull attacks from the bottom up and a bear from top to bottom.
How to anticipate the beginning of a bull trend?
There are several ways, but no one will guarantee you that you just bought a ticket in the next bull run. So, it is recommended to always find a confirmation in the combination of these trend indicators.
Heikin Ashi Candles
This special type of candle can easily tell you when to expect a change in trend. If you have a trend of red candles in a row and a green candle closes, you should consider buying and vice versa. These candles can be easily turned on in your Tradingview.
In the picture, we see a chart where one candle is one month, that is timeframe M. If you would stick to the Heikin Ashi’s strategy, you would sell at $10270 in February 2018 and buy for as much $5500 after 14 months, right?
We closed a higher low
For bull market it is specific that the following low is at a higher price level than the previous one.
Moving averages cross
The MA 50 crosses the MA 100 on the higher timeframe and then flies upwards.
The traded volume rises
As long-term investors are gradually buying-in for the bull market, their purchases are beginning to appear in the traded volume, and even scalpers are having much more new setups to be traded. Overall, this will trigger an avalanche of green volume and this volume often rises even before the price goes up and gives us time to identify the upcoming trend.
MACD and RSI
MACD begins to curve up from negative values to zero and the lines are crossed in a bullish direction, RSI steadily reaches values above 70.
We have overcome an important resistance
Another specific parameter is the fact that we are steadily above the price levels that have previously caused us problems.
In the picture, we see that bitcoin had a problem with the 4200 level for 3 months, which could not break through. However, when this resistance capitulated, a wave of buy-ins started.
An equally important factor for technical analysis are the fundamentals, such as an announcement of a large investment company including bitcoin in its portfolio.
Now we know how to recognize a bull run, but what trading strategies are used most often by traders?
Buy low and hold
The most common strategy is the so-called HODL strategy, where the trader either buys at the beginning of a new bull trend or gradually buys the dips in the previous bear trend. Although this strategy is the easiest, it is very inefficient, because sooner or later you will run out of money and you still need to have a predetermined target price where you plan to sell the cryptocurrency anyway. You can often wait several years before you close your position in a decent profit.
Buy low and gradually increase your position
The most popular strategy for medium-term traders is the form in which you try to estimate an entry into the upcoming bull run by the above-mentioned indicators, but you are entering only with a small part of your capital. If you have timed the enter badly and the market goes against you, you only take a loss on a small part of the investment and you can buy even cheaper then. On the contrary, if you hit the trend correctly, you will buy for the next part for each subsequent correction and cover the losses in the new positions by profit from the previous positions. Then you can start selling when you feel that the market is losing its strength or you are simply satisfied with the profit.
This strategy takes advantage of increased volatility, whether on bitcoin itself or on other altcoins. The trader looks for individual setups during a growing market and takes profits much earlier than the other types of traders. So in practice, he waits until a formation he knows is created and enters the market with the setup. The setup may be a bounce from a trend-line or a breakout from a triangle. This strategy is much more straightforward than others and requires much more experience. Even more advanced traders often get worse results than if they held the cryptocurrency.
Buy altcoins while Bitcoin is losing strength
For cryptocurrencies, there is one more strategy that is really specific for the cryptocurrency market. Since altcoins’ price is still strongly bound to bitcoin’s, they tend to follow his trend sooner or later. In practice, the trader first buys BTC and gradually buys his favorite altcoins, which slowly begin to strengthen as speculators gradually turn their BTC profits into them, often more than doubling their profits. The drawback of this strategy, however, is that BTC can catch such a strong bull trend that altcoins will steadily lag behind for the next few weeks.
We put FOMO aside and stick strictly to the trend
It is natural for us that we want to sell the asset when it goes down because we feel uncomfortable. On the contrary, we are in a hurry to buy when the pump is up, that’s a fact.
These feelings, however, have nothing to do in trading. If your strategy is based on buying a dip, try to stick with it. You’d be surprised how many people buy on the last wave up when the market goes parabolically 15% a day instead of selling their positions.
A bear market is the complete opposite of the bull market, speculators are closing their positions and add to their shorts.
While these markets are contradictory, they share some similar elements. If you can anticipate the approaching bull market with increasing volume, bear market, on the other hand, is distinguished by decreasing volume. In the same way, the quicker MA crosses the slower MA downwards in the opposite direction to the bull market, we are falling through the last support, closing a lower low and the market cap is steadily decreasing.
It is not so easy with strategies, they are rather for more experienced traders. Shorting works completely different than we are used to and we must first be familiar with trading on leverage, where we borrow cryptocurrency on the exchange. Just as in life, traders have to pay for interests in certain periods and that makes us even less profitable. In addition, the math itself is against us, because if BTC rises from 5k to 10k, you earned 100%, but if you borrowed BTC from 10k and it felt to 5k, your profit is only 50%. Shorting is therefore for the experienced and you will certainly do well if you avoid it at the beginning.
However, the bear market is not a period when you close the charts and go to do something else, one strategy is here for those who sold in time. It is called dip trading and often achieves large gains in a very short period of time. It consists of waiting for the market to flush properly and buying altcoins that fell even more than the Bitcoin itself. Once the waves are divergent on the RSI and the market has nowhere to fall, the expected short-term market regeneration, which can reach up to 15% appreciation, will come. In addition, the lower the market, the lower the short-term risk of loss and the better your risk/reward setup is. This is personally my favorite strategy and uses the panic sales of the market, where people surrender and the market often bounces back. Then your patience is rewarded with pleasant gains or a good buy-in for the continuing uptrend.
Warning: The information in this article is for reference only and is not an investment recommendation. Trading cryptocurrencies, options, derivatives, and other products are risky and may result in the loss of your entire capital.