Determining the current trend and predicting the future direction of the market is a complex challenge that requires comprehensive analysis.
The definition of a bear market is indeed not as clear-cut as it might seem at first glance. Technical analysis plays a pivotal role, but different traders can interpret the same data in diverse ways. Some rely on trendlines, some on technical indicators, and some on a confluence of various methods.
The choice of time interval for analysis is also of crucial importance. Conflicting trends may be seen on different timeframes. A long-term trend may include several short-term corrections or even local reversals.
Elliott wave analysis makes it possible to look at the market more comprehensively, but it is difficult to apply and interpret. In addition, modern algorithmic trading systems factor additional “noise” into price models, which tends to complicate classical wave analysis.
In terms of preparing for a possible bear market, the following measures can be recommended:
- Portfolio diversification not only within the cryptocurrency market, but also outside it.
- Setting stop losses to limit potential losses.
- Framing a clear action strategy for various market development scenarios.
- While it is very important for investors to track a trend, they need to decide which method to use for this: wave analysis, average lines, trendlines or technical indicators. Write down trading rules for yourself and follow them. You also need to understand that almost all indicators are lagging, so signals come out with a time lag.
It’s impossible to completely protect yourself from risks in the cryptocurrency market. Stop losses (pre-set orders to close positions when a certain price is reached) are a key risk management tool, but they do not provide complete protection, especially amid high volatility environments. Therefore, investors must craft their own strategy based on personal goals, risk level and understanding of the market.