Why Investors Lose Money in Bull Markets—Even When the Market’s on Fire
- Silivere Bakomeza
- Mar 29, 2022
- 5 min read
Updated: May 8
It sounds backwards, right?
The market’s booming. Stocks are flying. Everyone’s making money—except you. Or maybe you made a little… but gave it right back the next week.
If that sounds familiar, you’re not alone.
In fact, most retail investors lose money even during bull runs. Not because the market didn’t give them a chance—but because they didn’t have the mindset or the plan to win.
This post explores why investors lose money in bull markets and offers a clear strategy to flip that pattern permanently.
1. Chasing Green Candles
When everything is going up, logic goes out the window. Investors see green charts, breakout tweets, and news headlines—and they jump in blindly.
They buy at or near the top, not because it’s part of a strategy, but because they’re afraid of missing out.
This is the classic FOMO trap.
Real-World Example:
Tesla in late 2021. The stock was skyrocketing, and people were buying in without any clue what it was worth or why it had already run. When the correction came, many were left holding bags at $1,200 while the stock dropped nearly 50%.
Avoid it by:
Setting entry targets before the hype hits.
Studying charts and key resistance levels.
Asking yourself, “Would I still want this stock if it dipped 20% tomorrow?”
2. No Exit Plan
Let’s say you bought at a good price and the stock runs up 40%. Great. But then what?
Most people freeze.
They either hold for “just a little more” or panic when it drops 10%—and end up watching their gains evaporate.
Case Study:
Imagine an investor buys Nvidia at $120. It runs up to $270, and instead of taking partial profits or tightening their stop-loss, they hold. A dip to $210 wipes out most of their unrealized gain, and they sell out emotionally at $190.
They never had an exit plan—just vibes and hope.
How to fix it:
Define your sell zones before you buy.
Consider setting tiered exit points (e.g., 20%, 40%, 90% gain).
Use stop-losses or trailing stops if you can’t watch the market.
3. Overconfidence Kills
This one’s subtle. The market hands you a couple of wins, and suddenly you think you’ve figured it out.
You increase position size, take riskier bets, and stop respecting the rules that helped you win in the first place.
That’s when the market humbles you.
Mini Story:
A trader turns $5K into $8K in a few weeks trading meme stocks. Then he puts the full $8K into weekly options because “he can’t lose.” The option expires worthless. He’s back at zero.
This happens every bull market. Confidence becomes arrogance—and arrogance gets punished.
Guardrails to set:
Stick to a max risk % per trade (e.g., 3–5%).
Journal every trade and reflect on results.
Never confuse luck with skill. Treat every trade like your first.
4. Trading What You Don’t Understand
The hype makes people jump into complex financial products without knowing what they’re doing—especially in a bull market.
They don’t understand what LEAP options are. They don’t know how margin works. They don’t realize leveraged ETFs decay over time. But they buy anyway—because everyone else is.
Example:
People bought $TQQQ and $SPXL thinking they’d 3x their gains… without realizing how fast those ETFs can lose value in a sideways market.
Protect yourself by:
Only trading what you fully understand.
Taking time to learn how different assets behave.
Watching 1–2 YouTube videos isn’t research. Dig deeper.
5. No Strategy. Just Vibes.
Most retail investors never write down a strategy.
They scroll Twitter, follow hot picks, react to headlines, and ride the wave with no plan.
That’s not investing. That’s survival mode.
And in bull markets, you might survive for a while. But eventually, you’ll get caught in a reversal with no clue what to do.
Signs you’re investing with vibes:
You change your mind every week.
You only buy what’s trending on Reddit or X.
You don’t know your average cost or target return.
Shift from vibes to strategy by:
Choosing your style (DCA, swing trading, long-term, options, etc.).
Writing clear rules for entries, exits, and sizing.
Reviewing your trades weekly—not emotionally, but analytically.
6. Lack of Discipline: Buying at the Top, Selling at the Bottom
Here’s the brutal truth:
Most people jump in when it’s already hot—and sell when it cools off.
They chase after the rally, but they panic when the market pulls back.
They buy when influencers are excited, and sell when fear creeps in.
This is the exact opposite of what great investors do.
Real Strategy:
Buy when the market is red. That’s where the discounts live.
Sell into strength. Not all at once, but take partial profits when the crowd is cheering.
What Discipline Looks Like:
Waiting for key levels before buying—even if it takes weeks.
Holding cash when nothing looks good.
Controlling emotion during both euphoria and panic.
Discipline is not about being perfect—it’s about sticking to your rules when it’s hardest to do so.
So How Do You Win in a Hot Market?
Let’s bring it home. If the market’s on fire, here’s how to survive—and thrive:
1. Stick to a System
Pick your lane and stay in it:
Dollar-cost averaging (like I do with $MSTR)
Swing trading
Long-term growth investing
Deep-in-the-money LEAPs
Whichever you choose, make your decisions based on a repeatable framework.
2. Manage Risk Relentlessly
Never go all-in on a single trade.
Know your max risk before you hit “Buy.”
Use stop-losses or defined exits.
3. Learn to Take Profits
Lock in wins along the way. Don’t let greed rob you.
Even trimming 10–30% off your winners can protect capital when things reverse.
4. Be a Contrarian (But Not Reckless)
When everyone’s excited, be cautious.
When everyone’s scared, be curious.
It’s not about timing the market perfectly—it’s about buying value and selling noise.
5. Keep Your Emotions in Check
Market euphoria is a trap.
Panic is expensive.
A clear mind beats a loud market.
Quick Self-Check: Are You Bull Market Ready?
Do you have a defined investing or trading strategy?
Do you know your risk per trade or per week?
Can you explain your top 3 holdings in 2–3 sentences?
Do you journal your trades or investing decisions?
Have you ever let a gain turn into a loss out of greed?
If you answered “no” to any of these, this is your wake-up call.
Related Posts You’ll Like:
Start Your Investing Journey Today:
Bottom line:
Even in a hot market, people lose because they’re chasing heat instead of following a plan.
Discipline is your greatest advantage.
Stay calm, stay clear, and keep building—whether it’s red or green.
Comments