5 traders talk about trading during a market crash
The show must go on.
For this week’s Crypto Diaries, we asked 5 traders to tell us how they are navigating trading in the middle of a market crash.
Market cycles in crypto are interesting. One minute, it’s a bull market and the crypto hype is at an all-time high. The next minute, the mood changes because of consistent price crashes.
By all indications, the show must go on. Prices may be down, but crypto activities haven’t come to a complete halt. So we decided to ask 5 traders how they are navigating this interesting period.
But first, a quick definition of terms.
Bull market: A bull market in crypto refers to a period where the price of a particular cryptocurrency is rising. Investors’ confidence in a given cryptocurrency is high during a bull market, and there’s an overwhelming belief that the price will continue to grow.
Bear market: A bear market is when the price of a cryptocurrency falls for an extended period. Investors’ confidence is low during bearish markets, and the supply of crypto is higher than the demand.
Now let’s get into it.
I started trading during the bear market.
Let me explain: I always thought that trading was for professionals because I had little crypto knowledge. The only thing I was sure of was buying and ‘hodling’, which I stuck with.
In May 2022, I started trading because I was a member of the Bybit community, and the rewards I got for being a member could only be used to trade crypto. I had no choice but to finally learn how to do this. The other option was to let all my rewards go to waste.
I don’t have much context about what trading in a bull market is like, but it hasn’t been so hard trading in a bear market. A friend of mine gave me a pro-tip — he said to find and short coins that have recently pumped heavily. According to him, there is an 80% success rate, and this has mostly worked for me.
Nonetheless, the volatility can be a bit much, which is why I’m not touching spot trading at the moment. I’m only trading derivatives — a form of trading where you pair a coin or token with another coin and predict how the value of one coin will perform against the other.
One more thing; I don’t forget to trade with a stop loss. It’s one of the things trading in the bear market has taught me. If I lose my capital, I won’t have anything else to trade with so I don’t want to get there.
Essentially, navigating the bear market has encouraged me to be extra careful because things have a way of not going the way you want them to — and I’m always prepared for that. I’ve had the chance to learn so much, and I keep improving every day. Overall, I’m just grateful for all the learnings.
When I saw a friend make ₦20k (~$33) with ₦5k (~$8) during an hour trade in the spot market, I was sold on its possibilities. This was June 2021.
Luckily, I’m a fast learner and I’m also not shy to ask questions, so I asked my friend for help. He opened a Binance account, showed me how to navigate the market, and gave me signals from time to time.
I was having a good time because it was easy to trade — the market was constantly bullish, and I could take advantage of that because I got good signals almost everywhere I turned. However, I stuck with spot trading because I wanted to focus on only one thing. This was fine with me as I was making an average of $50 every week.
I started recording consecutive losses in January 2022, which was when I realised that something had changed. Consequently, the signals I depended on to trade were not as forthcoming, and as time progressed, they became less accurate — the bear market made sure of it.
There was a window in January where I made some profit from futures trading. But I got greedy and was punished for it during the price crash in February.
I haven’t recovered from that loss.
The past few months of the bear market have been interesting for me. I decided to put a pause on all forms of trading. While this meant giving up on my $50/week target, it’s also prevented me from losing more money. The way I see it, this is a waiting period, so I’m only ‘hodling’ stablecoins, doing more research and waiting for the next bull run.
Trading was fun when I started in 2020. A lot of my activities were on peer-to-peer trading platforms, and I would buy a coin on Remitano and wait for it to grow in value before I sold it on another platform. On a good day, I could make up to ₦20k (~$33).
It’s been about two years and a bear market since that time now, but I don’t think a lot has changed for me. The most noticeable change is that my calculative instinct is a bit more professional now. Bearish means a downward movement, which means that it’s now easier to record a loss, so a risk calculation policy is how I navigate this. I try my best to get my entry — the time I enter a trade — right.
I have made some losses, but I’ve also recorded good profits despite the bear market. Like I said, I’m very particular about my entry rate. Also, I take my profits every chance I get.
About the occasional losses: my thinking is that nobody should be willing to lose more than 1% of their principal capital in a trade. That’s what stop losses are for, and I’m not shy to use them.
In addition, I can confidently say that the bearish market has been a blessing in disguise. For starters, I can buy or invest in a higher quantity of cryptocurrencies at lesser prices — and this is a fine deal for me.
Ebubechukwu, age unknown
It was easy to trade in 2020 when I got started. A little YouTube playlist I found about how to navigate Binance and my little knowledge of price action trading, was the ammunition I needed to start.
And it was good. At least it was all good until the price crashes started this year.
Between then and now, I’ve lost my capital a couple of times while trading futures. As it stands, I’m not sure if it’s smart to continue the volumes of trades I used to do.
At the moment, I’ve pivoted into using the dollar-cost averaging method and my knowledge of price actions to buy into long-term projects. I still do spot trading on top centralised exchanges since most of the coins with high market caps are listed there. I believe that the higher a coin’s market cap, the lower the risk.
Earlier this year, I learned that people were making more profits from trading crypto, so I thought to go further than just ‘hodling.’ A senior colleague who traded crypto gave me the push I needed to start. At the time, I wasn’t good at technical analysis — a method of using previous price data to predict the future of the market — and relied on him for help until I got better at it.
On average, I was sure to make between $30 to $50 every week from trading crypto. However, since the bear market started, these numbers are no longer guaranteed. The only reason I still make within that range is that I have other means of earning from crypto other than day trading. Still, it’s been quite an adjustment.
One good thing about this change in market conditions is that I now know better and take out my profits as soon as I can. Greediness doesn’t pay in crypto, especially during a bear market.