When the markets start running we all get excited. When you see countless stocks make ten, fifteen or even twenty percent gains in a day you cannot help but rubbing your hands together and picking the next stock to make you a bunch. Unfortunately, when the markets go the other way everybody seems to go cold and some even go into shock – fearing the worse.
The simple fact is that both bull and bear markets can be profitable. Some might even prefer to trade in bear markets, but they are usually the more sophisticated traders. When you see share after share falling and you see your net worth being halved in a single day it is only normal to get concerned.
With one of the biggest bear markets in history, the recent financial "disaster" is redefining how we trade and profit in bear markets. Here are some simple tips to help you with trading in markets that are going down.
- Stay Calm
This advice might seem overly simplistic when you have your life saving on the line, but the only people who lose money are those who panic. When you see your shared dropping day after day it is easy to think that you have to "cut your losses" and get out. To a certain extent it may be right, but if it’s a bear market you will lose money. Hold on to your assets. When the market picks up you will regain all the value and you would have lost nothing.
- Opportunities Are Knocking
While all the scared traders are selling off they high quality shares, we can sit back and take our pick at great value stocks. For experienced traders, a bear market is like a Christmas sale. You can pick up all the best stocks for half price. Instead of thinking that you need to sell, you need to buy!
- Short Selling
Short selling is a traders secret weapon in a bear market. With short selling you are actually doing the reverse of what you do in a bull market. In theory you sell high and buy low. With online share trading this is simplified a lot and you can simply execute the trade like any other. Don’t underestimate this trading strategy – it’s very profitable and can be your lifeline in a market that’s running south.
