During bull runs, cryptocurrency prices go up, and investors feel more confident trading digital assets. Learn the most effective strategies and practices to maximize your gains during a bull market in the crypto sector.
The crypto market has earned the reputation of being one of the most volatile sections of the global financial markets. Still, investors aren’t afraid to approach it and employ diverse strategies to capitalize on its trends. During a bull run in the crypto sector, optimism is widespread, prices are on an upward trajectory, and the market presents traders with profitable opportunities—assuming they use the proper strategies.
What is a Bull Market?
The term bull market is used to describe a phase of a financial market, in this case, the crypto one, characterized by rising prices. It’s easy to notice when the market is on an upward trajectory because crypto pairs like ETH/BTC are traded at higher prices. Usually, a market enters the bull phase when the assets’ prices go up 20% or more and maintain the same trend for a prolonged period. Besides the price increase, the period is also marked by market optimism, low unemployment rates, economic recovery, and strong investor confidence.
The crypto bull market is similar in some aspects with other financial markets, but due to its high-volatility assets, it operates slightly differently. It usually registers price spikes of 20%-50% in weeks or months, and the duration of a bull phase varies greatly from one to another. It can last a couple of months or more than a year, depending on its triggers (tech advancements, regulatory news, adoption rates, market sentiment).
What Crypto Trading Strategies Should You Use During A Bull Run?
If this is your first bull market, you will need to understand market dynamics, be disciplined, and have strategic planning to trade successfully.
Timing the Market: Finding the Right Entry Points
Identifying optimal entry points is paramount when trading cryptocurrencies during a bull market. Beginner traders could get caught up in the excitement and buy digital currencies at their peak, only to witness the prices drop instead of resuming an upward trend. You can avoid this if you use Dollar-Cost Averaging (DCA), a strategy where they invest a fixed amount of money into a cryptocurrency at regular intervals, regardless of the price. This method reduces the impact of short-term volatility and ensures that traders do not commit all their capital at once. If you prefer a more active approach, use technical analysis to identify the best times to enter the moment.
Some of the most useful indicators for entry timing include:
- Support and resistance levels: Buying when an asset bounces off a support level can increase the chances of entering at a good price.
- Moving averages (MA): A shorter-term moving average (e.g., 50-day MA) crossing above a longer-term moving average (e.g., 200-day MA) is a bullish signal, often called a “golden cross.”
- Relative Strength Index (RSI): If RSI falls below 30, the asset may be oversold, presenting a buying opportunity.
Using these indicators, traders can make more informed decisions rather than simply buying based on hype.
Trend Following: Riding the Momentum
As mentioned earlier, the general trend during a crypto bull market is upward. You can capitalize on this by employing trend-following strategies that require identifying the dominant trend and acting accordingly.
Key tools for trend-following include:
- Moving averages: A strong uptrend is confirmed when an asset consistently trades above its 50-day or 200-day moving average.
- MACD (Moving Average Convergence Divergence): When the MACD line crosses above the signal line, it suggests bullish momentum.
- Breakout trading: If an asset breaks above a key resistance level with strong volume, it can indicate the start of a sustained rally.
When using this strategy, be cautious of fake breakouts—times when a crypto asset moves briefly above its resistance level before falling back. Use volume analysis to confirm breakouts and prevent being caught in a bull trap.
Taking Profits: Managing Risk and Locking in Gains
Holding onto your cryptocurrencies during the bull run could lead to significant gains, but failing to take the profit at the ideal time could lead to missed opportunities, especially if the market corrects and heads towards a bear market.
A couple of strategies can help you secure profit without exiting too early:
- Trailing Stop-Loss Orders: A trailing stop automatically moves up as the price rises, locking in profits while allowing traders to stay in the market as long as the uptrend continues.
- Scaling Out: Instead of selling all holdings at once, traders can sell a portion of their position at different profit targets. For example, they could sell 25% of their position after a 30% gain, another 25% at a 50% gain, and so on.
- Profit-Taking at Resistance Levels: If an asset approaches a historical resistance level, traders may consider taking some profits in anticipation of a potential pullback.
Diversification: Spreading Risk Across Multiple Assets
Diversification is a mine of gold for crypto investors because it enables you to mitigate risk during the bull market. While the overall market is on an upward trend, individual crypto assets could behave differently. Here is a way to diversify a crypto portfolio:
- Large-cap coins (e.g., Bitcoin, Ethereum): These tend to be less volatile and provide stability.
- Mid-cap altcoins (e.g., Solana, Avalanche): These can offer higher growth potential while still being relatively established.
- High-risk small-cap altcoins: While these assets carry higher risk, they can generate massive gains in a bull market.
- Projects across different sectors: metaverse projects, DeFi tokens, AI-based digital currencies.
Risk Management: Protecting Your Capital
Risk management is paramount when trading assets in the crypto market. The prices might be on an upward trend during the bull market, but pullbacks and corrections can appear at any time.
Don’t expose yourself to excessive risk; use some risk management strategies instead:
- Setting Stop-Loss Orders: Always have a predefined exit strategy in case the market moves against a trade.
- Position Sizing: Never risk more than 1-2% of total capital on a single trade.
- Avoiding Overleveraging: While leverage can amplify profits, it also increases the risk of liquidation. Keeping leverage low (e.g., 2x or 3x) can help manage risk effectively.
Final words
Trading digital currencies during the bull market provides you with several opportunities, but you must practice strategic planning and discipline to maximize your gains.