I got into cryptocurrency and am mostly a HODLER but, now, I'm studying trading and am a total newbie at it. The course I'm studying is talking about "bearish entries". I know a bullish entry is when you buy when the price is low so you can sell it later for a higher price. But what is a bearish entry? Previously, I thought the definition of a bearish entry is when you sell a holding of crypto near a strong resistance line, but, if that's the case shouldn't it be called a bearish exit rather than a bearish entry? Thank you for taking the time to read this totally newbie question.
Without seeing the context in which it is used I would think it is simply the reverse of bullish signals. A bearish entry to me would be a bullish exit trigger. There are trades that are considered a bearish trade (expects stock to drop) and bullish (expects stock to go up) Bearish trades use the Shorting of stocks and/or put options to make profit. So a bullish trader gets a chart/study trigger indicating a down trend would be interested in selling out and take profit while at the same time a bearish trader would see the same signal and enter into a short sale or perhaps buy put options.
Thanks for responding. Please look at the message I sent to you. It will offer some context so that you may more accurately give me your thoughts on what a 'bearish entry' is?
Examples of "entering" a bearish trade: short sell the underlying instrument, i.e.,borrow stock from your broker and sell it on the open market hoping to buy it back cheaper and return it to your broker (cover your short sale). buy a put option (gives you the buyer the right to put stock to the put-option seller/writer at the strike price should the price fall) sell (write) a call option (gives the buyer the right to call away stock from you at the strike price if the underlying price rises. However if the underlying price falls the option expires worthless and you as the call seller keep the premium paid by the buyer)
So me, being in cryptocurrency, does "entering" a bearish trade mean, using tether?? Tether is a cryptocurrency that holds it's value at 1:1 to the us dollar.
That's an interesting question. I would say no, because it essentially just removes you from the crypto action. It is going flat. You would stand not to gain or lose on a change of the crypto against the fiat (USD, EURO). Of course there are the rumors that suggest not enough fiat reserves are held to secure tether and the use of tether could drive down crypto prices. But from a personal perspective, even if crypto goes down as the conspiracies suggest, you would still be pegged to the fiat...not the same as having a bearish position.
In stocks, I've occasionally established a position in something I want to own longish term using a collar. This is a typical bearish entry. You buy the stock and simultaneously sell an at-the-money (or slightly out-of-the-money) Call and use the proceeds to purchase an at-the-money (or slightly out-of-the-money) Put. The timeframe for the Call & Put would more or less match how long you expect the stock to be flat-to-bearish. The value of the Put goes up as the price goes down, effectively lowering your cost-basis for entering the stock. This can be an effective and relatively safe way to get in on something paying dividends that you'd like to collect now rather than wait. So, as an example (not a recommendation!), if you are today short-term (6 months, say) bearish on Ford (F) you might consider a collar. Buy 100 F at 10.08, sell the Dec2018 ATM 10 Call for $56 and buy the Dec2018 ATM 10 Put for $53. If you are wrong, and it stays at 10.08 or goes up, you risk getting called away at 10 (an $8 loss) a day or two before the next ex-div in October. If it goes sub-10, you'll likely collect a $15 divy in December AND be able to sell the Put for the difference between F(in December) and 10, thus lowering your basis. Over the years, I ended up owning a lot of decent divy stocks this way: T, JNJ, and HP in the past year are most recent examples. I don't know how one would do this with cryptos: Bitcoin Options perhaps? I haven't a clue.
