Trading in a bear market

When it comes to a bear markets everyone is always complaining. They all seem to be asking the same question, is it over yet? But there are many ways in which trading and especially learning to trade during a bears market can help you.

1. Stocks tend to go down at a faster rate then they go up. I realize that the majority of you don’t see that like a good thing but think about this. If a stock is moving in a direction you can make money from it. When stocks go up you can buy stocks and calls. When they go down you can shorting stocks and entering puts.

If a stock heads down 50% in and you shorted you would have made money. It would be like buying a stock and having it go up 50%. It is the same thing only shorting makes money when prices go down. The speed at which stocks can fall is the main reason why many professional traders prefer to trade in a bears market.

2. The second reason is that bears markets and volatile markets occur regularly. If you are just getting into the stock market it can be to your benefit to learn in a bears or volatile market.

The reason for this is that it paints a more realistic picture of how the market can behave. There are too many stories of people who enter the market when it is bullish and make a lot of money only lose it all when the markets crash. Always Remember in a bulls market everyone is a genius.

3.A related point is the importance to always use proper risk management. In a bears market you will never forget that, but in a bulls market you may wonder away from that ideal causing you to pick up a very bad trading habit.

I am sure that not everyone will agree with me but bears markets are not as bad as their reputation would have you think. They are a natural cycle and come to remind people that the market isn’t just a place where you buy a random stock and expect it double.