Authored by: @hetty-rowan
Today we are going to take a closer look at the world of trading ... because even though we at LBI are not at all focused on trading and for our token the **HODL **principle is the only thing you need to master, (nice and easy anyway), it still is important that we also understand the principle of trading in order to at least understand in which part of the market we are.
A constant fight
That is one of the most important things to know if you want to start with cryptocurrency trading. Are we in a Bull market, or are we still in the Bear market? And where do those names come from? The Bull and the Bear? That has everything to do with how these two animals fight. And oh yes, we know all about it… they are constantly fighting each other. The Bull comes from below and strikes upwards with its horns to damage the enemy. A Bear comes from above, slapping its claws down to deal damage to the enemy.
So the Bull is hitting from the bottom up with its horns up, the market is rising… we have what is called the Bull Market.
The Bear hits from above with its claws down, the market collapses… we have the so-called Bear Market.
What do you prefer?
Which market is the best…? The answer to this is actually different for everyone. If you don't trade, a Bull Market is obviously better. But traders can also make a lot of profit in the Bear Market. HODL'ers… yes they are automatically not very happy with the Bear Markets. Or you must have a large bag of money and buy new bags of crypto in the Bear Markets.
Understand the market is important
But no matter what ... even if you are only HODL'er, it is important to understand the Bull and Bear Market. Because it is of course much better if you can convert your collected crypto into a Stablecoin, or into your local currency, in time, at the height of the Bear Market, so that you can buy back more once we reach the low point of the Bear market.
Respond to the market
So having said this… it should be clear. Without knowledge of the Bull and Bear Markets, and the different phases of these markets, you can never respond properly, and it is more luck than wisdom if you make a lot of profits. If you are in crypto, and we are all here… then it is advisable to gain your knowledge about this.
Knowing when to enter the market
Even if it is only to know when the Bull Market has reached its peak, and so you should in fact switch your crypto to a stable coin or local currency, or if you want to continue trading, you are at least aware of that the market is Bearish and will be Bearish for a while until the Bull strikes again. But it is also useful to know when the Bear Market is nearing its lowest point. That is of course the best point to enter, and also the start of the next Bull Market.
The Bull and Bear Market can both be divided into two phases, and these two phases can both be divided into three phases.
The two phases of the Bull Market are also known as;
- Accumulation phase
- Markup phase
The two phases of the Bear Market are also known as;
- Distribution phase
- Decline phase
All these phases can be divided into 3 time phases, early, middle and late.
A brief explanation of the different phases is;
In the Accumulation phase, many investors are filling their pockets, they accumulate the crypto. There is a lot of buying, but it is not yet completely clear whether we are going Bearish or Bullish. This is THE time to step in and buy the crypto you want in a cheap way.
The Markup phase is the last phase of the Accumulation phase, small increases in prices can be observed, and new investors are attracted by the increases. These new investors, and traders who enter, want to piggyback on the way up that is clearly coming at this stage. The FOMO strikes and ensures a further increase! But keep in mind, this stage is the most risky stage to enter the crypto markets!
The Distribution phase is the phase in which the biggest hype is over. Less and less money is being pushed into the market, and a free fall down starts. In this free fall is the distribution phase where many traders cash in their profits, and other traders still hope to be in a bullish phase.
The last phase is the Decline phase. The big money has been pulled from the market, and there is too little support to get the price up again. Confidence is diminishing, and traders are biding their time as they know that after this phase, the Accumulation phase will be reached again. And that is the time to get back on board… and take advantage of the beautiful road up again.
Recognize the cycles
As you can see, there is a circle in which it goes around. And so it is important to be able to recognize these cycles. The moment you can recognize this, you can board at a good time. And not entirely unimportant ... Get out at a good time to keep your profits SAFU, to increase your profits again with the next cycle.
But how do you recognize it?
And an important part is of course, … Learning to recognize the phases. How can you do that? I will tell you more about that next week, because believe me… If you don't know this yet, THIS is a great time to learn this together with me! I myself am still looking for my way in this, and learning. For next week I have the Candlesticks on my program, and that is an important part of learning to recognize which way a course will go.
I hope you will be back next week!