If you are a small investor who has only recently started trading, you will undoubtedly be intimidated in the midst of a bull market. Your fear, understandably, will be how to trade bull markets and invest in bull markets. There are clearly no simple answers to the question. When small investors see the markets in a strong bull market, they are concerned that a correction is on the way. What should small investors do in such a situation? Here are some bullish market strategies to consider.
Maintain a high-quality project portfolio
At the start of a bull market, there are many good, bad, and ugly projects rallying with the market. As the bull market matures, markets become more selective in rewarding only certain projects with higher valuations. One of the basic rules of a bull market is to gradually move towards quality. With the rise in market valuations, your shift to safety must be gradual.
Maintain your profit margins.
Many investors wonder if churning and booking profits is consistent with a long-term approach to investing. Yes, it is! In the crypto market trading, there is a basic rule that "If something seems too good to be true, it probably isn't." When the markets are on a bullish trend, you must apply the same principle. Continue to take profits at regular intervals, though you can also re-enter the same assets at higher levels. In a bull market, profit is what is booked; everything else is just book profits.
Don't put off dealing with your losses for too long.
The problem with bull markets is that they can surprise you on both the up and down side. Assume you bought a trending coin with no actual use case at the height of the bull market in 2017. You'd still be sitting on huge losses. The most effective method is to mentally prepare to exit at a specific price. That could be the level of technical support or the price at which you are unwilling to risk your money. In either case, loss booking discipline is critical in a bull market.
Be on the side of market momentum.
This is a critical rule for small investors to follow during a bull market. A bull market is not unidirectional. However, as long as the bull market remains intact, the momentum is positive. You should always stay on the same side of momentum. So, you can either buy high and wait for the asset to rise in value, or you can buy on dips. In either case, you should never try to outsmart the market. Selling against momentum in a bull market can result in significant losses. Momentum is the message that the market is attempting to convey. If you believe otherwise, the market obviously knows something that you do not. Just pay attention to what the market is trying to tell you.
Futures contracts can be used to hedge your risk.
Derivatives may have been described as Weapons of Mass Destruction by Warren Buffett (WMD). In fact, futures trading can assist you in risk management during a bull market. When the markets are in a bull market, you never know when they will sharply correct. The best you can do is to hedge your downside risk by opening a short position. Of course, it may appear complicated at first, but all it takes is a little time to better understand these products.
Even in a bull market, small investors must maintain a long-term perspective. However, make certain that you understand the fundamentals of profit booking, position cutting, and market momentum.
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