There are many challenges that must be faced if Smart People want to enter the world of trading. There are many possibilities that can happen and Smart People must be prepared to deal with them. One of them is a bearish market condition that must be faced with a cool head and an accurate strategy. Let’s take a closer look at how the stock trading strategy is in these bearish market conditions!
What is a Bearish Market?
First, let’s find out what a bear market is! This is a condition where the stock price index has decreased. From this definition alone, it can be understood that a bear market is not a very good condition. Especially when traders want to sell their stock assets.
Why is it called bearish? Bearish comes from the word ‘bear’ which means bear. The term is inspired by the way bears fight when they are clawing with a movement pattern from up to down or down. This analogy is considered appropriate to describe the decline in stock prices.
There are various factors that can cause a bear market. This could be due to slower economic growth. In addition, a bear market could also occur due to an increase in the unemployment rate and a trade balance deficit. Under these conditions, Smart People must implement an effective and efficient trading strategy.
What to do when a bear market occurs? Let’s first remember that whatever the conditions, Smart People must remain calm and can think clearly. Don’t rush into action and don’t panic. Here are some stock trading strategies that can be applied during bear market conditions:
1. Don’t Carelessly Buy Stocks
Logically, when prices go down, people will be excited to make purchases. The principle is indeed to buy when the stock price is low, but that does not mean buying without consideration. Avoid buying stocks carelessly just because the market is bearish and stock prices are declining.
If you really want to buy stocks, keep doing careful analysis. Recognize the possibility that a stock whose price has fallen could still fall again and this of course will have a negative impact. Use a variety of indicators, candlesticks and other analytical tools that can help Smart People find the best opportunities.
2. Do Cut Loss
When the market is bearish, it is highly recommended to cut losses in a disciplined manner. This cut loss is a safeguard that will keep Smart People’s position in case the stock price drops further. This cut loss must be done with wise calculations so that it can really provide a satisfactory return for traders.
However, cut loss should not be done carelessly. One wrong step can actually reduce the returns that can be obtained. It is better to do a cut loss when market conditions are really difficult to control. For example, when price declines continue to occur and it is difficult to get a bright spot from the situation.
3. Apply Short Term Trading
The next strategy that can be tried is short term trading. This is also one of the strategies that can save Smart People. It should be noted that even though there is a bear market, it does not mean that all stock prices have decreased. Under these conditions, there could be an increase in stock prices. Usually this occurs in second-tier, third-tier, and fried stocks.
In a situation like this, try to be a short term trader. That is, buy the stocks that were rising earlier and sell at a high price. Smart People can become day traders who hold stocks for a short period of time for resale. This is very effective in helping Smart People get high returns without having to worry about long-term stock price risks. However, you still have to be careful in doing this strategy!
4. Pay Attention to Trading Psychology
Most traders will feel emotional and panic when a bear market occurs. This condition is unstable and easily triggers emotions. In the end, a trader who panics and loses control will not be able to control his attitude. They will then make choices without thinking. Unfortunately, these ill-thought-out choices are likely to lead to negative impacts.
It is also important to note that a trader is usually much more aggressive when in a losing position. They will generally try to take revenge through aggressive, thoughtless steps. Positions that are taken aggressively are unwittingly detrimental and cost a lot of money. So, try to keep an eye on trading psychology and think with a cool head.
5. Stay away from the market
When exploring stock trading, Smart People must know when is the right time to keep going and when to stop. When there is a bearish market and stock prices are difficult to control, try to be calm. It is better to stay away from the market for a while and rather than worrying about the condition of stock prices that continue to decline.
Many traders apply the principle of stay away from the market when a bear market condition occurs. Especially for beginners who still can’t control themselves well when conditions are unstable. Stay away for a while and wait for a bullish market or a reversal in which the stock price rises again. This time off can be used by learning more about trading.
Stock trading does offer many challenges. As a trader, Smart People must be prepared to face various possibilities. Make sure to stay calm in any condition, whether the price is going up or down. Peace of mind and patience will enable Smart People to think clearly and at the same time more carefully read all kinds of possibilities.