How to Make Money in a Bear Market

By definition, a bear market dawns when there is at least a 20% depreciation from recent heights of an asset’s market price.

The bearish market condition can clearly be perceived on technical analysis charts which demonstrate the new patterns, such as lower lows and lower highs.

This period is signified by widespread pessimism and negative investor sentiment, however, a bear market can infact present a unique opportunity for savvy traders to make serious bank.

To do this, there are a number of options. Below I have listed some of the most popular:

Short Sell via Margin Trading

When used wisely, shorting with margin trading is a powerful tool. Trading on ‘margin’ is using borrowed funds from your broker to sell an asset with the intent of buying it back at a lower price and keeping the difference in price as your profit. The margin is also the minimum amount required to open a position which can be massively increased relative to the amount you deposit depending on how much leverage is utilized. For instance, if you wanted to short sell $10,000 of Bitcoin and the broker offered as much as 100x leverage, like PrimeXBT, you would only be required to invest and risk $100 of your own capital. This also means that if the price decreased by 5% the profit would be increased to $500, as opposed to just $5 if no leverage was used.

Buy a Call Order via Binary Option

A ‘call’ option is a bet that a particular asset will rise in value to a fixed monetary amount in the short term. Why this is relevant to a bear market is that it is very inexpensive to buy while the price is low if you feel the end is near. If the asset’s price was hammered but the company or project is in good shape, betting on a rebound for the company’s stock can be profitable. It’s important to remember that a call option has an expiration date and it can become worthless if you’re not careful. You can speculate and bet on the imminent value of an asset with Binary Options brokers, some of the most popular include eToro and iQ Option.

Buy a Put Option via Binary Options

A ‘put’ option is the opposite of a call option and gives you the right to sell assets in the same way, making it possible to profit from a market’s decline. You can elect to sell an agreed amount of capital on an agreed date (called the strike price) with a put order. The put option gains value as the asset decreases below the strike price. By purchasing a basic binary put option, the trader is simply speculating that the price of the underlying asset will be lower than the current market price when the option expires, typically within next few minutes or several hours.

Diversify your Portfolio

Different investment markets perform well at varying periods of time with the natural fluctuations of the economic business cycle. For instance, the stock market may have taken a dive, meanwhile, cryptocurrency markets are booming. If you don’t care to short sell then why not mix it up and catch onto a different market’s upwards price action.

Research Up and Coming Assets

Go digging for diamonds and spend time doing market research with the goal of investing in an asset or market with a high potential for growth and buy while the price is at its lowest point. Then, as the crypto community would say ‘HODL’ (hold on for dear life).

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As you can see, it's not all doom and gloom. There is much money to be made in a bear market, provided the right strategy is used at the right time.