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How To Trade Profitably In A Bear Market

Posted on September 3, 2023 by Todd Marvel

Trading in a bull market is simpler than trading in a bear market. Many traders find they are able to earn money trading in bullish markets, however when there exists a major correction underway or once the market is bearish, they literally freeze and so are struggling to trade successfully or find profits within their trading.

First,whenever a market has collapsed, it is very important accept the truth that the marketplace trend has changed from bullish to bearish. It really is human nature to get scapegoats or even to look for a "reason" or even to rationalise away the truth that the marketplace trend has changed. But unless the trader accepts the truth that he could be solely responsible to trade his way to avoid it of a bearish market, he'll find his position untenable and find out losses that accumulate daily because the market bearish sentiments continue. It generally does not pay to refuse the duty of your trading action and put the blame on your own broker or your friend who has given you the "tips" that resulted in your losses.

If you're confronted with losses from the sudden collapse in prices, accept that it's your responsibility to now institute action to obtain using this situation with profits.

Secondly, during bullish markets you can easily trade by simply buying stocks which are in initial outbreaks and just holding them and returning again following a couple of days to reap profits, you cannot do exactly the same during bearish markets.

In bullish markets, you trade with the trend, so when long because the trend is up, you stand to create easy profits. On the other hand, in bearish markets, the marketplace switches into consolidation, and trends are "shorter" in duration or the marketplace will get into a sideways direction, with prices oscillating between ranges. During bearish markets, we have been more biased towards range trading instead of trend trading. If you have no idea how to differ from using trend trading to range trading, you may be caught with short-term trend changes and suffer whipsaws and lose cash trend trading during bearish markets.

Dealing with traders who've gone through a number of major market corrections since 1987 has led me to summarize that there surely is no room for lackadaisical trading during bearish markets. The margin of error for a trading signal is a lot lower when trading in a bearish market. I've seen traders who can quickly change or adapt from longer trend trading to trading shorter swings on the market or range trading in order to earn money from their trades. In bearish markets, they're contented with smaller profits, but trading more regularly and in higher volumes. To assist within their margin of profits, they could negotiate the cheapest brokerage terms possible making use of their brokers or even to use discounted online trading platforms.

In bearish markets, the trader who range trade would be the one who is most beneficial positioned to make use 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 create money during bearish markets.