| How to Make Money in a Down Stock Market |
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| Written by W. Alan Gay |
| Friday, 12 June 2009 09:15 |
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A key question my students often ask me is: "With the stock market down, can I still make money trading stock?" My reply is that it is really dependent on the kind of investments you hold.
A key question my students often ask me is: "With the stock market down, can I still make money trading stock?" My reply is that it is really dependent on the kind of investments you hold. The answer is no if you are holding your investments in a stock fund, mutual funds, or other standard asset allocation accounts. The reason for this is that these large accounts are regulated and do not allow short stock positions. Therefore, if the market declines in the next 3-5 years, as it most likely will, your account will lose money year after year. If you use short positions as your investment strategy, you will be able to make money no matter if the market goes up or down. However, short position investments are not available unless you trade through individual accounts. Trading through an individual trading account rather than a fund gives you the leverage to control your investments and make profits daily. The reason for this is that you can buy low if you expect an increase in the stock value, or sell short if you expect it to decline. If its that easy, why isnt everyone doing it? For one thing, it requires approximately $25,000 to set up an individual account. Many people dont have that kind of investment or are unwilling to risk it. And, it is true that stock trading for a novice can be very challenging. If you do not know what you are doing, you can lose all your money very quickly. There are tactics to alleviate these two concerns of the novice trader. First, find a trading program that gives you low risk trade picks. The program I use and that I recommend to my coaching clients has a 31 year average experience level for its trade pickers. So a trader can simply follow their trade recommendations and have a very high probability of realizing returns. If you remember to set your stops at a level that suits your comfort zone, you will have a maximum loss that is very small and insignificant over the course of time. You also need to find a program where you will walk through step by step until you feel comfortable trading on your own. To illustrate, I teach a nine day course where my students are taught each and every step needed to successfully trade stocks on their own, no matter if the market is up or down. Regardless of the system you choose, if you make sure that it has experienced advisors and a program that walks you through every step of the way, you can be smiling all the way to the bank while everyone around you is moaning about the poor performing stock market. DISCLAIMER: This article is provided as information only and is not to be taken as financial advice. W. Alan Gay has been a day trader and trainer for 15 years. His free report describes Alan's voyage to becoming successful at trading stocks and gives useful techniques he and his students have used to consistently trade successfully. Click to obtain a free copy of his report and learn more about how you could be trading stocks successfully in as little as two weeks. |