How to trade in a cryptocurrency bearish market?
The cryptocurrency market is one of the most gainful markets in the world. However, no market is always money-making. If you look at the financial markets, you can see that the price of any asset determined by supply and demand may go down. The market in which cryptocurrency prices are constantly falling is known as the bearish market. Cycles in this market can sometimes take up to three years. However, there are ways for traders to make money in bear markets. You ask how? Stay with us.
What is the bearish market?
The cryptocurrency market is known for high price fluctuations. That's why it's hard to define a bear market. However, Normally, if the price of cryptocurrencies falls by at least 20% and this decline continues, we have entered the bearish market.
Bitcoin, for example, fell nearly 70 percent in 2017. It is an example of a bear market. The term bear is derived from the method of fighting bears that strike other animals on the head with their paws. It is what sellers do about prices.
In bearish markets, even if cryptocurrency projects have positive activity on their cryptocurrency, the price of that cryptocurrency will still go down. It is because of fear, uncertainty, and doubt (FUD) among holders and buyers.
Buyers usually buy cryptocurrencies to raise prices and make a profit. Now you may be wondering how to make a profit in a market where prices are falling?
How to make money in a bearish market?
Leverage
Prices are indeed falling in the bearish market, but it is sometimes seen that some cryptocurrencies are also rising in price. This price growth is usually less than 20%, but sometimes a cryptocurrency may experience 100% price growth.
If you are familiar with trading professionally, you will find a concept called leverage that can turn a bearish market into a bullish market for you. Leverage is a trading tool that allows you to multiply profits. When using leverage, you borrow some money from an exchange such as BitMex for trade. In that case, if you make a profit, your profit will be multiplied. If your cryptocurrency grows by 5%, you can increase it to 10% using Leverage 2.
In red markets, leverage can make you money. You have to find a cryptocurrency with potential price growth among thousands of declining cryptocurrencies and leverage its low growth.
Short Position
You must be wondering how to make a profit if there is no price growth cryptocurrency? The cryptocurrency market is a two-way market, and even if all cryptocurrencies are constantly declining in price, you can profit from it. Short positions allow you to do this.
A short position is a type of trade subset of futures contracts. Futures contracts are generally contracts in which the parties to a transaction undertake to trade crypto at a specified date in the future at a specified price.
Suppose you sell an Ethereum coin for $ 4,000. Ethereum is now priced at $ 3,800, but you still have $ 4,000 in cash in your account.
You can now repurchase that unit of Ethereum for $ 3,800. Eventually, you will have 1,052 Ethereum, or in other words, prevent your $ 200 loss.
You can also use the leverage to earn money in a downward market. In this case, your profit can be multiplied, and practically, the red market for you will not be different from the rising market.
Why is it hard to make money in the red and bearish market?
Here are two examples of making money in the bear market. However, using both methods requires experience.
Leverage multiplies losses just as it can multiply profits. Also, if you take an amount of loss, your capital will be zero. For this reason, it is recommended to use the lower leverage at the beginning of trading.
Short positions can also be dangerous. When you take a short position against the market trend, if the price of crypto goes up, you will lose money, and if this amount exceeds a certain limit, the exchange liquid you and take all your money. That is why it is vital to have a loss limit in the long position.
Artificial intelligence trading bot solves the problems
You either have to use leverage or position to make money in the falling market. Stop-loss and entry and exit points are also important. If you are a professional trader, you will realize how difficult it is to control the market in the fall. It is difficult for a variety of reasons.
Sometimes the falling price speed is too high and does not allow you to move your take-profit and stop loss. Artificial intelligence trading does this without human intervention. This software bot connects to your BitMEX exchange, automatically monitors the market, and determines take-profit and stop-loss for you. Another special feature of this bot is that it can move, stop loss and take profit non-manually.
Another problem traders face is the reverse market's mistakes when positioning short. Because the human mind is naturally accustomed to trading at a rising price, the possibility of making a mistake when market rules are reversed is very high. AI trading bot does not have this problem because its commands have been tested many times before launch.
Risk-free and saving profit is another challenge for new traders. Naturally, many traders in the market may profit, but before they can settle their calculations in the short position with the leverage, the price drops. An artificial intelligence trading bot automatically withdraws 8% of your capital from the position and takes risks after making a profit.
Liquidation is one of the essential problems that traders face. When your position approaches liquid, you either have to close the position immediately with a loss or add capital. Implementing any of these decisions is time-consuming, and you may be liquidated until they are implemented. According to your choice, the AI trading bot does not have such a problem and does both things in a fraction of a second.
Does the use of artificial intelligence require trading experience?
Short answer: No. You have to turn on the AI trading bot and connect it to the BitMex exchange. The trading bot automatically has default values for stop-loss, take-profit, and trading strategy that you can adjust. If you have basic knowledge, there is no need to worry. An artificial intelligence trading bot is supposed to make a profit for you without human intervention in the red market.