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‍Bull Markets Explained

Whatever ways you may look at it, and no matter your bias of the current market conditions, one thing is for sure, the market is in a Bull run. It’s not looking likely to slow down in the coming days, weeks, and months. There seems to be increased optimism driving the hype and growth of this cycle. Many analysts have suggested that the current Bull run will be the largest in history, surpassing that of 2017. The scope of the article will be heavily dependent on the cryptocurrency market. With this current cryptocurrency rally, many people are wondering what period this cycle will end.

Market Cycle or Trends

The market is either in a Bullish trend (prices continuously rising) or a bearish trend (prices continuously decline). Both the Fundamental and Technical Analyst use trends to pick positions as it is counterproductive to go against the trend. It is still important to note that some traders adopt different styles of trading, such as mean reversion.

The start and end of a market cycle can be completely unpredictable and spontaneous. Often, analysts do not correctly get hold of the market trends until the market is well into the cycle. The market may be rational or irrational more like having a mind of its own. But, a noteworthy aspect of a trending market is the ability to take advantage of its price movements, whether in the short (sell) position or the long (buy) position.

“The trend is your friend until it stops being one” is a phrase used popularly by trend-following traders. It could also serve as a basis for a piece of vital advice on taking profitable positions in such cycles. 

The Bull market is a period of increasing optimism and greed. Tools have been created to measure this, such as Alternative.me. The bear market is characterized by increasing pessimism and fear. These emotions drive the price down as investors choose to short or hold their money in reserves.

Market trends are typically used in the stock market and other market types like cryptocurrencies, derivatives, forex, and index markets. The term Bull and Bear is associated with the movement of both animals when they make vicious attacks. For example, a Bear will attack its victim with its paw sliding down on them, while the Bull attacks by charging towards its victim. 

Currently, the crypto market is experiencing a boom, a charge in increasing optimism, and an increasing price, putting it in a bull market.

Bull Market

Bitcoin entered its current phase of the Bull run since the fall of last year, 2020. It started with the DeFi boom of August. Simultaneously, Bitcoin exceeded its All-Time High prices, causing alternative coins to take on such increasing buying pressure and price. Almost all major cryptocurrencies in the market have hit and surpassed their ATHs. Thus, it is essential to understand a bit of what makes a Bull market.

Characteristics of a Bull Market

Increased Buying Pressure: Market participants heavily bid on a coin/stock/commodity. It’s not smart to go against the trend by shorting; you may likely get Rekt (a term used to describe a trader or trade that is a continuously losing position). When buyers dominate the market, it is much easier to make money following suit.

New projects: You can’t take away the fact that people want to cash in hard on a Bull market. Increasing strings of new projects have arisen, trying to sell investors various forms of dreams. Newbies traders should beware of these occurrences in hype cycles.

Periodic Decline (Sharp Sells): Bull runs don’t mean that price will continually rage without having a bit of correction along the way. The price doesn’t move in a straight line, so it is fair that buyers tend to take profits and re-enter on retracements. Overall, in a Bullish market, the positive sentiments are high. 

Longer Timeframe: When looking at a Bull market trend, you typically look from a more extended timeframe. Traders typically use high time frames such as the 4HR, D, W, and M charts. These timeframes allow traders to track trends or months or even years. As with other market analysis techniques, the longer timeframes are more reliable and valid than shorter timeframes.

Understanding the characteristics of a Bull market is a fundamental first step. Knowing how to take advantage of the market is the next most important. 

Taking Advantage of the Bull Market

Buy and Hold Strategy: As mentioned earlier, it is unwise to fight a trend by taking a counter position. Your trades are most likely to hit their stop-loss price or get liquidated. A strategy for newbie traders and investors is to buy and hold a stock or coin in this market type. It’s much more comfortable than entry and exiting your positions sporadically.

Buying Retracement and Increasing Positions: Because the market is in an uprising trend, smart investors will take increased positions every time the market makes a correction. It is unlikely that the price will continuously go up. Corrections and slight reversal are expected. Every time the market makes such a declining price move, it corrects back upwards. Picking long-term positions is therefore healthy in this type of market trend.

Weaknesses of the Bull Market

The market is the playing ground where expertise is tested. In the Bull market, the novice trader is advised to stay with only verified projects. There will be plenty of projects out of thin air offering mouth-watering returns to steal from unsuspecting members of the community. Especially with mostly unregulated cryptocurrencies, the chances of losing your money are pretty high. 

In the Bull market, trade cautiously and be wary of fast market changes. There will be sharp market reversals like that witnessed during the Coronavirus pandemic. In a bullmarket, BTC has historically pulled back 30-40% about seven times in each cycle. Currently, BTC has only undergone two of these pullbacks.

In Conclusion

Anyone can profit from any market trend, whether a bull or bear market. What separates the novice from the experienced trader is the approach adopted. Due to sharp market declines and quick recoveries characterized in the bull market cycle, retracements often shake weak hands. Test, retest, and backtest your trading strategy to stay profitable. 

Lastly, don’t blindly jump into projects without doing your research; the possibility of losing your money is high—better more than less. For now, may the Bull be with you!

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