Being able to recognize the change of price action and profiting from the downside (Bear Market), is equally important as making money on the upside (Bull Market).
The current bull market began in March of 2009, and has since been the longest bull market in history. Therefore, many young traders have yet to see a bear market. For the novice investor, this could be worrisome. For the experienced trader, its fairly irrelevant.
As an investor or trader, you should be able to recognize the trends and thus be prepared for said trends to change. While many buy and hold strategists benefit from a bull market, why not continue to capitalize once the direction changes?
How To Make Money In A Bear Market:
There are a few basic tools when profiting from the downward movement in stocks.
1.) Shorting Shares Of Common Stock: This is a conversation for another day. However, if you found yourself on the wrong side of the trade you would lose your initial investment & potentially OWE much more. It’s a good way to lose your savings. Don’t lose your savings.
2.) Buying Put Options: Puts are essentially shorting the stock, without the outrageous risk which comes from shorting shares. If you purchase puts, the maximum value you could lose, is your initial investment.
If this seems obvious, that’s because it is. We will select the less risky route. This is step 1 of risk management.
Remember: Call options make money when the stock goes up (Bullish or Bull Market). Put options make money when the stock goes down (Bearish or Bear Market).
Please refer to my YouTube Video, which provides an excellent example of how we used put options to profit 48%, in 6 minutes, while the general market was tanking.
If learning how to execute these types of trades is interesting to you, please refer to my Beginner Friendly Stock & Options Trading Course. This course is a, video based, online course designed to teach you the tools required to be a trader, while appropriately managing your risk.
See you there!