HOW TO HANDLE BEAR MARKETS LIKE A PRO
Financial markets do not exist to satisfy your desires. They are designed to cause the greatest possible damage to the largest segment of the investing population. They are designed to separate the cash from the 'retail money' into the 'smart money'. This is known as 'The Principle Of Maximum Adversity'.
In the crypto market, It's nearly impossible to determine the correct actions to take during a fast sell-off when emotions are running high. This is where your "risk management programming" comes in.
To handle the Beark Market better NEXT TIME, follow these steps:
1. Use Only Risk Capital
Investing is important, but so is eating and keeping a roof over your head. It's unwise to take short-term funds and invest them in crypto. Never invest money you cannot afford to lose.
2. Define Whether You're An Investor Or Trader
You need to define before you open a position if you're a trader or an investor. If you go into something with a long term hold mentality, you are not allowed to change that midway through. Long term holders are going to get in with risk capital and they don't care if they lose 90% of the position a week afterwards because they're thinking much longer term.
Traders are going to get in with tight stops built in and look to build the position by buying low and selling high.
Figure out which camp you belong to for each position and stick to it. You're allowed to define multiple strategies for your portfolio. Perhaps for your bigger positions, you're a long term investor while for the smaller ones you want to trade. That's completely viable as long as you define that going in.
3. Rule Number One Of Risk Management: Define Your Exits Before You Enter A Position
Your financial choices and decisions should be based on your objectives, risk tolerance and time horizon-- not on what everyone else is doing, or worse, moves based on market panic. The market is essentially a crowd; it reflects the aggregated view of all the participants. So in order to beat the market, you have to be willing to be different from everyone else. Risk management is one of the ways to do that.
Most of the market movement is driven by fear. Only when you truly DO NOT CARE about the outcome of a position will you be able to effectively manage it.
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Three great points. Everyone should have a financial plan. The most important thing is to do your own research!
Yes, definitely DYOR
In my opinion it's fear and greed that power the market movement. I think one needs to strike a balance between the two to go far
How does one strike a balance between fear and greed? 😐 I think greed comes as a result of FOMO.