Once you understand the difference in strategies, the key is how to determine whether the current market is bullish or bearish. In addition to looking at long-term trends, some micro market data can provide you with more timely signals:
Utilize funding rates: Funding rates are the core mechanism of perpetual contracts, used to anchor contract prices to spot prices. They can reflect market bullish and bearish sentiment in real-time. When the rate remains positive and relatively high, it indicates strong bullish sentiment in the market, with costs paid to the bears, which is a typical characteristic of a bull market. When the rate remains negative, it indicates that bears dominate, and the likelihood of a bear market increases.
Observe key price levels: The golden rule in practice is: In an uptrend, look for support; in a downtrend, look for resistance. In a bull market, prices will continuously break through previous highs and, when retracing, will not break previous lows, forming the rhythm of 'higher highs and higher lows.' Your main task is to identify and defend key support levels. In a bear market, the situation is the opposite; rebounds often struggle to break previous highs, and your focus should be on resistance levels.
⚠️ Risk control bottom line applicable to both markets
No matter how the market changes, some principles are the lifeline you must adhere to:
Never go all in, operate in batches: This is the cornerstone of position management. Never invest all your capital at once. Whether opening a position or adding to it, do it in batches to effectively diversify risks and smooth costs.
Leverage is a knife, use it well but do not get hurt: High leverage is a double-edged sword, especially in a bear market where volatility is high, making it prone to liquidation. Always use leverage cautiously and adjust dynamically based on market volatility. When market fluctuations are severe, actively reduce leverage.
Stop-loss is insurance, not a cost: Every trade must set a stop-loss. Think of the stop-loss as insurance you buy for your trades; it may cost you a small 'premium,' but it can prevent a 'total loss' disaster. This is especially important in a bear market.
💎 Summary
In a bull market, your role is like a surfer, aiming to catch wave after wave and ride the momentum. In a bear market, however, you are more like a sniper, requiring immense patience to wait for highly certain opportunities, strike precisely, and withdraw quickly.
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