IDENTIFYING AND INVESTING IN A BEAR MARKET

A Bear market as we may know occurs when a market experiences a prolonged persistent decline in prices — It’s simply a period when a stock or any other asset crashes by more than 20% from recent highs.

In recent times as you all know the markets are down, costs of living have gone up. Even in most countries the value of fiats keeps falling.

I believe to effectively tackle the problem of this bear market we need to closely identify the root causes and how to evade or utilize them.

CAUSES OF A BEAR MARKET

1. Overly contractionary monetary or fiscal policy — Contractionary fiscal policy is when the government either cuts spending or raises taxes. The name comes from the way it contracts the economy. It reduces the amount of money available for businesses and consumers to spend.
2. Pandemics — A good example is the previous bear market which began March 2020. This was triggered by Covid-19 Pandemic.
3. Recessions — is a term used to signify a slowdown in the general economic activity.
   Stock market bear usually creates a poor impression towards investments, this will make individuals prefer the option of holding their money in fear of incurring losses. Many investors who are very familiar with the way the stock market works begin to develop bearish mindsets causing further fall in the stock market prices.
   This kind of economic condition is characterized with persistently low demands and drastic drops in price levels by most functioning sectors of a country.
4. Geopolitical crises — Wars have been closely related to bear markets. Four major bear markets were experienced between WWI and WWII (1912–1949), with the markets down below 39%. Wars cause financial panic which can then lead to an economic recession.

RECOGNIZING THE BEAR MARKET

How do we know we are in a bear market?

There are typically four stages to understand that we are in a bear market:

1. The first stage is the Recognition Stage. Here we shall just start to Recognize investor sentiment which is (mostly positive) and high prices. Here everyone tends to ignore the initial onset of a bear market and mistake it for ordinary day-to-day market fluctuations. In this first phase, some investors will recognize that a bear market is impending and start selling their Assets.
2. Afterwards there is a Panic, where prices tend to fall sharply, and investors capitulate. Trading volume will drop, and investor sentiment will drop greatly too.
   This can be referred to as Capitulation.
3. After a while there may be some Stabilization, panic selling reduces and then many investors start making Speculations for the price decline. This is also a very volatile period, tough and usually out last the other stages.
   There may be market rallies that tend to reverse as a lot of market speculators enter.
4. The final stage is the Anticipation stage. There’s a lot of Anticipation, prices begin levelling off and finding a bottom. Low valuations and/or good news start attracting more investors into purchasing assets and bear markets lead to bull markets again.

So, if you are still invested until this moment, now may not be the time to sell off, unless you willingly bear the huge loss and move on.

INVESTING IN A BEAR MARKET

So, you found yourself in a bear market and now you want to know If it is a good time to buy/invest or want to know how to trade and survive the bear market wave.

A persistent fall in the stock market prices (below 20%) should not cause you or investors to panic, as the market is bound to adjust automatically in the long run.

Fact is Bear markets are not entirely that bad. If you are one of the many good investors that recognized the start of the bear market and exited early, investing in the bear market may be a good thing for you. Capitalizing on assets which have hit a critical bottom (20% or worse).
For me I’m more of a holder or long-term investor.

A number of things you want to do is;

• Have a Solid trading strategy in place with clear entries and exits.
• Study and learn Technical Analysis — I know a trading technique like scalping is used by most traders, where you are just profiting off of small price changes and making a fast profit off reselling.
  If you must scalp you should consider having a very solid exit strategy as one large loss during trade would eliminate the many small gains accumulated in many trades.
• Never Over-trade — Imagine placing a lot of trades in a single day without any solid plan or strategy, wouldn’t that be horrible? You’d have a lot of assets to track in a very volatile market and you won’t be able to measure your efforts effectively to know what works and what doesn’t. And then you lose your money.
• Only Invest what you can afford to lose (always apply a good risk management system)
• Have other streams of income, not just trading.
• Always do your own research and Invest in a solid project. A very good example of a solid project is WOO Network’s WOO token. You can learn more about them here at learn.woo.org
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Final Thoughts

Many may wonder, “How long can a bear market last?’’ — It’s impossible to say how long the current downturn will last. This is very hard to predict.
Some experts may try to predict a trend reversal from bearish to bullish by using technical trading indicators. This may be true to a certain extent but when it comes to ascertaining the true length of the bear market it is impossible to be accurate.
Holding your funds invested will allow you escape short term losses and which will also lead to long-run profits when the market adjusts automatically. Many investors will be back to pave the way for robust growth.

“Tough times don’t last, but tough guys do”.
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