Lesson #1: Introducing “Bear Trader”
A bear market is a general decline in the stock market over a period of time.
We are all annoyed when our favorite crypto is in the grip of this kind of market, and unfortunately, right now, we’re in the middle of a bear invasion…
But what the neophyte will realize less easily is that a bear market is actually an incredible opportunity to accumulate low-cost assets !
But… How to make profits in a doomed market ?
Bearish strategies are trading methods employed when the trader expects the asset price to move downwards. It is necessary to assess how low the stock price can go and the timeframe in which the decline will happen in order to select the optimum trading strategy. If all the elements are combined this opportunity is an extremely profitable strategic approach for the trader.
One of a well trader-known bearish strategy is called “Pyramidal trading” or “Pyramid Trading Strategy”. This strategy is really smart because it greatly increases your chances of making consistent returns as a crypto trader. It can even double your profits on a single trade!
But as profitable as Pyramid trading can be, it’s really time consuming, long to implement and can be very damaging if used improperly. Which is why Kryll.io wanted to take some time to provide a Pyramidal trading exemple and present you how to use this strategy to make potential profits on a bear market.
Nice intro dude, but how does “Pyramidal trading” works ?
Pyramid trading is a strategy that involves scaling into a bullish or bearish market by consolidating your position, buying or selling your assets strategically in order to increase your assets capital and add tokens to an existing position after the market makes a move in the intended direction (up or down).
The idea behind a pyramidal strategy is to fit the the market and try to buy coins when the market is falling; and sell them when it’s at his highest, just before a new bear/bull cycle.
In the event of a market downturn, the strategy will place successive purchases orders to buy your assets at a lower price and thus have the best possible weighted average price. In case of a bull market the strategy will sell your positions with a minimum average profit set in advance before starting the cycle again with more assets !
1Each buy can be done for an equal amount, or it can be made of a higher amount for a better leverage effect: by doing so, the trader gets closer to the market by trying to stick his average purchase price to the market price.
A good strategy can be for exemple :
- Trade 1 : market drop about 10%, buy 10% of my initial capital
- Trade 2: market drop again about 10%, buy 20% of my initial capital
- Trade 3: market drop again about 10%, buy 30% of my initial capital
- Trade 4: market drop again about 10%, buy 40% of my initial capital
For exemple, if I had bought about $1000 of BTC following this rule starting on December 18th (BTC drops from $19,000 to $13,000) I would have had 0.065 BTC instead of 0.052 …
So a cumulative average price of about $15,000, it’s a +25% profit compared with the initial price, that’s not insignificant !
But, our Pyramidal trading strategy is not only about optimise buying actions…
2Indeed, this strategy also aims to sell our assets if the market value exceeds our cumulative purchase value (plus our minimum profit), at any time. This allows us to accumulate more capital to bet on the next drop.
You will have understood, the deeper this pyramid is, the less risk is taken but the less short-term profits are important… everything is a matter of balance.
Can I implement this kind of strategy using kryll.io ?
YES WE CAN!
Our “Bear Trade” strategy (available on our demo platform) is indeed based on this strategy logic. As you can see from the image below, the strategy begins to monitor the market and buys a small amount of crypto-money. If the market rises it takes its profits and starts again, if the market continues in its fall it buys back a larger share. If the market goes up it takes its profits (11% increase being the minimum price to reach to mitigate the losses of the first trade), and so on…
If we run this strategy over our previous exemple period (from 18 Dec. to 24 Dec.) and look at the results we find that not only the strategy did work as we expected, but also it won about $180 when the market would have cost us $207! That is a real performance $448, nearly 61% in 7 days, just awesome!!
Obviously this is an initial pyramidal approach for a trading strategy, we could greatly improve it by adding bricks of technical analysis to consolidate the decision making, or even activate the resale only after a market downturn to try to reach the peaks as high as possible… But this is another story ;)
Sceptic ?
First of all, know that this kind of strategy is common in the world of traders and it is not always winning and is not suitable for bull markets. However, as it is very well adapted to the current market, we found it interesting and informative to share and talk about it today.
If you’re still doubtful, or just curious, we warmly invite you to try our demo, it’s FREE and WITHOUT any REGISTRATION!
Interested by our platform?
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