The Bear Market Yolo Trade
There are many types of yolo trades.
The classic is finding some small market cap crypto, allocating $10k to it and forgetting about it. You either 20x or you lose your money.
Another is the extreme volatility yolo trade. The market nukes 25% in day and chaos is rampant — you push in all your available cash for a once in a lifetime buy.
The yolo trade that is not discussed often, however, is the Bear Market Yolo Trade (BMYT). This trade is the most insidious and the most deadly. It has the lowest risk/reward of any other trade. It is built on greed and uncontrolled FOMO.
It is what many people are experiencing right now and they don’t even know it.
The BMYT is what happens when the first glimpse of the bull market starts to emerge. After watching prices drop 50–80% and potentially selling much of their assets, the market participant starts to see things turning around.
At first this is met with skepticism. “Ok, let’s see how this plays out before we make any moves.”
Then it is met with excitement. “Looks like XYZ coin is playing catchup, going to be an awesome trade.”
Then it is met with a deep, all consuming level of desire. “I am going to make it all back on this one trade.”
You just need a 20% move. That’s it. This time you’re going to bet big, sell the relief bounce, then get the fuck out of the market.
As the price creeps up you sit and watch, trying your best to control the greed. You know you shouldn’t ape in but you’re watching the gains slip away as you sit on the sidelines. Every tiny dip gets bought up, the FOMO intensifies.
As this process unfolds, we spend more and more time staring at the charts. We default to inefficient edges and smaller timeframes. We begin to hope for things to happen instead of observing things happening. Our disciplines slowly devolve into misinformed gut feelings.
In this state of being, the BMYT becomes the only thing that matters to you. You look at your available capital and plan out how you are going to trade the entire stack, even if it’s for 10%. Price continues to creep up but you wait and wait until you can’t wait anymore.
You leg in with 20% of your capital and watch the trade unfold. Price continues to move up. At least you’re making money now, you say to yourself. The momentum grows and you add another 20%. Now you’re getting confident and ready to manage the position.
At this point, you start to realize you’re not in a great situation but there’s nothing to do about it now. You HAVE to make it back. You cannot handle the idea of missing another bull market. It’s better to have a shitty entry than miss out.
This is when Bear Markets show their true colors, slowly consolidating and creeping up, never letting you satisfy the hunger inside.
For whatever reason, sellers step in. Price drops and flies right past your average entry price. That’s ok, you think, because it’s only 40% of my capital. I’ll just add more at the support level and resume the trade that will get you back in the green.
But that’s not what happens.
The price hits your support, then creeps the other way. No more stairs up, elevator down — now it’s stairs up, stairs down. The pain stars creeping the other way. What the fuck.
You remember that we are in a bear market and cut your position at a loss. You’ll wait until we hit support then re-do the entire trade sequence again. This process will continue until you have successfully given 25% of your capital to market makers and disciplined traders, leaving you in a worse position that you had been originally.
The BMYT is so dangerous because it is born from emotions of greed. The best trades of your life will always be born from fear, not greed. If you are excited when you get into a trade, you are in a losing situation. If you are excited when you get into a trade in a bear market, you are going to get destroyed.
There is no moment in trading more dangerous than directly after an emotional experience. Trading is a painkiller for most people — bull markets are one giant orgy of spiritual oxycontin for legalized degeneracy.
After experience a huge drawdown, we are in a lot of pain. The idea of making it back quickly is the juiciest salve there is, a warm bath for our aching portfolio.
We will make short term decisions that have long term consequences. We will have unrealistic expectations without the edge to back it up. The BMYT will convince us that we need to become more aggressive to make real money, that we have been playing too cautious this entire time and that the real path to glory lies in being a terminator with balls the size of grapefruits.
But we all know how this movie ends.
The antidote for the BMYT is boring, age old wisdom that none of us want to hear.
Step away from the computer, phone and markets for 48 hours. Find pain relief in healthy ways like exercise and nature. Sit with the new identity that you associate with your current net worth and apply a non-judgmental attitude. Re-read trading books that help you get back to fundamentals.
If you find yourself looking at the charts this morning and watering at the mouth, trying desperately to find a setup that will allow you to deploy your capital, realize that you are in a danger zone. You are setting yourself up for failure. I say this because I am looking for people like you to trade against — you are my edge.
You will never make it all back in one trade. Life changing riches happen when you least expect it, usually after deep research and during periods when no one else will take the trades with you. They do not happen during relief bounces, even if it leads to a new bull market.
Now is the time to trade levels, take profits and slowly stack wins. You will not make it all back. Leverage is not the answer. Stop convincing yourself any of these things are true.
Inoculate yourself from the Bear Market Yolo Trade. Check your greed at the door. It doesn’t matter if this is the beginning of a new trend or not, it is a DANGER ZONE.
In times like this, no trade is almost always the best trade.