| Stocks And Shares - The Simplest Way To Trade Advantageously In A Bear Market |
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| Written by George Priestley |
| Saturday, 16 October 2010 08:58 |
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Trading in a bull market is simpler than trading in a bear market. Many traders find they can earn money trading in bullish markets, but when there's a major correction in progress or when the market is bearish, they literally freeze and cannot trade successfully or find profits in their trading.
Trading in a bull market is simpler than trading in a bear market. Many traders find they can earn money trading in bullish markets, but when there's a major correction in progress or when the market is bearish, they literally freeze and cannot trade successfully or find profits in their trading. First,when a market has crumpled, it is critical to accept the incontrovertible fact that the market trend has changed from bullish to bearish. It is mankind's nature to find scapegoats or to discover a reason or to rationalise away the proven fact that the market trend has changed. But unless the trader accepts the indisputable fact that he's only responsible to trade his way out of a bearish market, he'll find his position unsustainable and discover losses that add up daily as the market bearish sensibilities continue. It doesn't pay to decline the responsibility of your own trading action and assign the blame on your broker or your pal who has given you the "tips" that led straight to your losses. If you are faced with losses from a sudden collapse in prices, accept that it is your responsibility to now institute action to get out of this situation with profits. Secondly, while in bullish markets it is easy to trade by just buying stocks that are in initial outbreaks and just holding them and coming back again after a few days to reap profits, you cannot do the same during bearish markets. In bullish markets, you trade with the trend, and as long as the trend is up, you stand to make easy profits. On the contrary, in bearish markets, the market goes into consolidation, and trends are "shorter" in duration or the market will go into a sideways direction, with prices oscillating between ranges. During bearish markets, we are more biased towards range trading rather than trend trading. So if you do not know how to change from using trend trading to range trading, you can be caught with short term trend changes and suffer whipsaws and lose money trend trading during bearish markets. Dealing with traders who have gone through a series of major market corrections since 1987 has led me to conclude that there is no room for lackadaisical trading during bearish markets. The margin of error for a trading signal is much lower when trading in a bearish market. I have seen traders who are able to quickly change or adapt from longer trend trading to trading shorter swings in the market or range trading to be able to make money from their trades. In bearish markets, they are contented with smaller profits, but trading more often and in higher volumes. To aid in their margin of profits, they are able to negotiate the lowest brokerage terms possible with their brokers or to use discounted online trading platforms. In bearish markets, the trader who range trade will be the one who is best positioned to take advantage of the shorter and faster rebounds that occur as stocks get oversold and retrace upwards. Accepting personal responsibility and adapting to range trading will improve his chances to make money during bearish markets. DISCLAIMER: This article is provided as information only and is not to be taken as financial advice. Looking to find the best deal on barclays etfs, then visit my website to find the best advice on commodity future trading for you. |