Stock Advice: How to make money in bear market

Posted: Oct 14, 2009 |Comments: 0 |

As everybody already knows the stock market cannot always be soaring. There are times when the situation can look pretty bad. Well, there's no need to panic or feel down just because of a bearish market. You should realize that you could actually capitalize on the situation. A bear market may, in fact, just be the kind of blessing you need. It is true that a bear market can be terrible for retirees who live off their investments. It is the reason why retirees are advised to keep enough of cash and bonds to ride through market downturns without being affected too much.

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However not all of require our investments for the purpose of bill paying. You may be one of many people who are in the process of accumulating money while earning elsewhere in order to retire happy. You may also have some other objective like sending your kids to college or anything that will require such wealth accumulation. A bear market can work to the advantage of a person like this.

This is how it works - when the market plummets, your money has the ability to buy more shares of stock. The same money invested in a healthier market would buy you fewer shares. This helps you build more equity than would be possible in other times. It is true that trading in bullish conditions is far easier and far more comfortable. It is also true that profits can also be more easily made. But there are ways in which you can trade successfully in a bearish market as well.

First of all you must not panic when the market plummets. Rather than looking for people to blame you need to spend time actively planning for the future and strategizing. This will help you avoid bearing huge losses. If you do bear losses because of a drop in prices you should get ready with the kind of action to bail yourself out and take advantage of the current situation. You can't trade the way you are used to trading in more bullish conditions. For instance you can't just buy some stock because of an initial outbreak and come back later in search of profits.

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Trends are important in bull markets. However due to market freezing in bearish conditions you'll find that trends are much shorter and less stable. The market is likely to go in a sideway direction. Prices will fluctuate between ranges. Therefore you will see that range trading is the better option during a bearish market than trend trading. Your adaptation period needs to be really short and you must catch on quickly.

The margin for errors during a bear market is really small. You need to work with smaller profits at this time but you can trade in a higher volume and at a higher rate as your money can allow you to buy more equity. You can also bump up profit margins by using low cost online trading platforms or negotiating lower brokerages due to conditions. All this should help you do well.

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