November 17, 2022 The goal nearing the end of a bull market is to “sell the top” or get as close to it as possible.
For the bear market, it’s trying to time or “catch” the absolute bottom; Unfortunately, rarely is either ever achieved.
Various factors make these tasks “nearly” impossible. For one, momentum moving in one direction often leads to swift and significant price spikes (especially in the crypto market), which makes it hard for traders to capitalize.
One main reason why trying to time the bottom may not be the most practical strategy for building your account size is that too much capital could be tied up in a single trade.
When dealing with these dynamics, sometimes it’s best to take a step back and consider incorporating certain trading tools into your strategy.
Although V-shaped recoveries have occurred in the past, they aren’t as common as one may think. It’s more likely that rounded bottom formations establish before trade action breaks away to the upside.
However, this activity usually doesn’t occur over a few hours, like days, sometimes weeks, or months.
Instead of getting caught up in the game of waiting for something that may not happen, which sometimes leads to traders becoming impatient and then making bad trades, using specific trading tools, such as copy trading, is a great way to take the pressure off of yourself, and leverage the experience and efforts of more advanced, and sometimes even professional traders.
As the name suggests, copy trading is when certain traders publish live trades for others to replicate. The traders copying these trades do so for a fee, which allows the publishing trader to monetize their efforts and services.
It’s a win-win for both parties as it incentivizes the main trader to share their knowledge and trade setups with often less experienced traders and provides the less experienced traders with tremendous value as it enables them to trade side by side with winning traders.
Copy trading can quickly be done even by the greenest of investors with limited to no experience trading with just a few clicks of their mouse.
It can also be used as a learning method as, over time, the one copying would be able to learn the provider’s strategy and see how it is applied in real-time and to different scenarios.
Copy trading is similar to another trading strategy called signal trading, where the more experienced trader periodically sends alerts or signals of when to buy or sell specific crypto for other traders to follow.
However, the main difference is that copy trading is fully automatized, while signal trading is usually not.
The publishing trader will usually display their track record, showing their winning vs. losing trades and how much they are up (or down) overall in profits expressed in percentages.
All traders are different, and so are their strategies, so it’s crucial that you take the time to find a trader whose trading approach and goals best align with yours.
You will surely see a vast range of results when it comes to the trader’s results, but also keep in mind that some traders have more conservative trading styles and strategies than others. It’s common to see those investors with an overall lower percentage return rate; however, their win rates also tend to be more consistent than others. Social proof, such as reviews and feedback from previous customers, can also be great mediums of information
Following traders with impressive returns yet low win rates may not be the best strategy for those with smaller account sizes unless they are disciplined and practice responsible capital management.
While it may be tempting to swing for the fences alongside those traders, they are usually more experienced and understand (and are willing) to lose a certain amount of trades to win that one big one. For newer traders, this can quickly eat into their bankroll.
Just as every trade requires due diligence and planning, the exit strategy for the trade deserves the same attention.
If you’re copying multiple traders during a bear market, will you continue to follow them once a large reversal in trend occurs?
Even if you are just manual trading, how will you shift your mindset when the time is right? Or, how will you even know if or when the time is right?
If you do not already have a plan mapped out for your future trade exits, the catalyst you would like to see in the market to confirm those conditions, then you may want to do so soon.
There’s much more that goes into planning how to catch the bottom than most think.
But remember, tools are significant assets to have in life at the right times, and if used correctly, they could provide substantial benefits.
Copy trading is indeed one of those few tools available for traders.
