How Futures Prop Traders Navigate Bull and Bear Markets Like Pros
7/28/2025, 7:13:02 AM
Discover how futures traders navigate bull and bear markets with precision and strategies. Explore the key tools and strategies.
Traders must understand how bull and bear markets operate to achieve success in futures prop trading. This helps traders stay prepared and responsive ahead of time.
A bull market is characterized by a period when prices are increasing, and traders can see potential for future growth. This is reflected in increased trading activity, accompanied by higher asset values. On the other hand, a bear market is characterized by periods where the prices are declining, and so is the traders' morale. This is marked by a decrease in trading activity and lower asset values. Bear markets are relatively short in comparison to bull markets, which tend to last longer.
Learning about these market cycles helps traders stay active, prepared, and strategic ahead of time. Since these market cycles shift quickly, as a prop trader, it's essential for you to be highly adaptable and resilient to navigate a highly competitive environment like a pro.
Want to trade bull and bear markets like a pro? Join FundingTicks today to trade with confidence and discipline, regardless of market conditions.
Understanding Bull and Bear Markets
Type | Bull Market | Bear Market |
Price movements | Increase: a 20% rise in stock markets. | Decrease: a 20% decrease in stock price from near-term highs. |
Economic conditions | Sound economy. | Receding economy. |
Profit rate | Rising corporate profit. | Decreasing corporate profit. |
Investor sentiment | Driven by optimism and confidence. | Driven by pessimism and fear. |
The 2008 financial crisis
The 2008 financial crisis is marked by a shift from bull to bear markets. Before the market crash, the housing prices in the US were rising rapidly. However, cheap loans were available with lenders issuing subprime mortgages. The investors were eagerly buying them in hopes of gaining high profits. As a result, the Dow Jones Industrial Average reached an all-time high in October 2007.
However, after this unsustainable cycle, problems arose when adjustable-rate mortgages were reset, which led to a spike in defaults. Following this, the top financial institutions began to collapse.
First, Bear Stearns collapsed in March 2008, followed by Lehman Brothers in September 2008. The Dow then reached its most significant point drop (-777) on September 29. This plunge froze the global trading markets.
The 2020 Crisis
On March 11, 2020, Dow entered the bear market for the first time in 11 years due to the COVID-19 crisis. It fell from 30,000 to 19,000, and the Nasdaq also followed suit soon enough.
However, the market quickly rebounded and entered its bullish phase due to rising hopes for economic strengthening and the availability of vaccines. This sudden shift indicates that bear markets can occur even during a healthy economy. This is why traders must remain adaptable and flexible.
Market Indicators Signaling Cycle Changes
The market indicators that signal cycle changes include price trends, volatility, and asset valuation. Additionally, economic indicators such as GDP growth and the employment rate also play a role.
The Prop Trader’s Edge: Access to Firm Capital and Rules
The key difference that gives prop traders the edge over retail traders is that prop traders use firms’ capital, whereas retail traders have to use their own. Prop traders are provided with firm resources, training, and risk management strategies by the firm. On the other hand, retail traders have to manage their resources, risk, and learning process. In comparison to retail traders, prop traders must adapt quickly and remain flexible. To remain competitive, they must continually improve their performance and stay resilient.
Strategy Adjustments in Bull Markets
In a bull market, you can follow these strategies to maintain and improve your position in the market.
Buy early in the bull run.
Don't sit on losses for too long. Additionally, to minimize your losses, plan your exit strategy.
Take profits at regular intervals.
Follow the market momentum. Before making a call, it’s essential to thoroughly analyze the bull trend, as it’s possible to make a profit or incur a loss in a bull market due to changing trends.
Buy call options; it's a contract with a specific due date that gives you the right to buy a stock at a predetermined price.
Strategy Adjustments in Bear Markets
In a bear market, you should:
Diversify your investments across different asset classes.
Investing in high-yielding stocks is also a great way to minimize risk.
For risk management, use hedging tools to limit potential losses on existing investments.
Also, you can hold short positions to profit from a price decline.
In a bear market, adhering to stop-loss discipline is crucial; otherwise, your losses can compound rapidly. Try to keep your position size small to mitigate risk.
Since bear markets are very volatile, avoid revenge trading. Recognize that volatility is very normal, so the best course of action is to stick to your plan and avoid any potential impulsive trading.
Risk Management Principles for Both Cycles
In both bull and bear markets, the following principles can help traders manage risk effectively.
Type | Bull market | Bear market |
Position sizing | Large position sizes due to lower volatility. Also, smoother trends play a role. Key tip: Maintain discipline and avoid overexposure.
| Since volatility is higher, reduce your position sizes to limit risk per trade. |
Daily drawdown limit | After consecutive wins, respect the loss limit.
Key tip: Avoid pushing past your limits and take breaks. | Due to high volatility, you must adhere to the strict drawdown limit.
Key tip: Pause before making impulsive choices. |
Trade journaling | Journal to spot trading under overconfidence or after winning streaks. | Journal to spot revenge trading and emotional exits. |
Data review
| Regular data review will help refine skill and strategy. | Consistent data review will help identify patterns of mistakes, allowing for the refinement of risk management. |
Importance of risk-to-reward ratio maintenance | Maintain a solid risk-to-reward ratio to ensure safety after losing in a trade. | Maintaining a solid risk-to-reward ratio will help minimize losses as compared to wins. |
Trader Psychology and Discipline
Trader psychology and discipline maintenance are two significant factors that influence trading in both bear and bull markets. In a bull market, overconfidence and greed can lead to poor trading decisions. In a bear market, fear doesn't help much either while trading, leading to a negative result.
To improve your discipline management and thrive under pressure, join FundingTicks today for a smart trading experience.
Tools and Technology Prop Traders Use
Prop traders are provided with top trading platforms, such as MetaTrader 5 and TradingView. The prop firms provide risk dashboards to traders, allowing them to receive a comprehensive review of their trading performance. With a real-time data feed, traders can make informed decisions in time.
The backtesting platforms and real-world simulators enable traders to review their performance and strategies, refining them before applying them in a real-world trading setup.
Final thoughts
Trading in bull and bear markets can be particularly tough and frustrating if traders are not well-educated about the market cycles of each market. While the bull markets are characterized by confidence, the bear markets are marked by pessimism and fear. Learning about both markets is crucial for finding a balance in your trading strategy as a futures trader.
Ready to trade like a pro? Join FundingTicks today, where you have access to evaluation programs, real-time data, and advanced risk management tools, all designed to help you build discipline and flexibility.
