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 find 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.
Second , while in bullish markets it is easy to trade by just purchasing stocks that are in first outbreaks and just holding them and coming back again after a couple of days to harvest profits, you can’t do the same during bearish markets.
In bullish markets, you trade with the trend, and so long as the trend is up, you stand to make simple profits. To the contrary, in bearish markets, the market goes into consolidation, and trends are shorter or the market will go into a sideways direction, with costs oscillating between ranges. During bearish markets, we are far more biased towards range trading instead of trend trading. So if you don’t understand how to change from utilizing trend trading to range trading, you may be caught with short term trend changes and suffer whipsaws and lose money trend trading during bearish markets. Coping with traders who have gone through a sequence of major market corrections since 1987 has led me to conclude that there’s no room for lackadaisical trading during bearish markets.
The margin of boo for a trading signal is lower when trading in a bearish market. I’ve seen traders who may be able to quickly change or evolve from longer trend trading to trading shorter swings in the market or range trading to be in a position to earn cash from their trades.
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.