What happened to the
stock markets in early March?
Anyone at all involved in
investing or trading no doubt personally
experienced it- the stock markets went
through a major correction! And in these
days of the "World Economy" such a
correction can be triggered by news from
anywhere in the world. As it did this
time. Poor economic news from China
prompted a sharp world decline in stock
prices in just a few days.
And many investors, especially long term
investors made big losses.
And they're probably asking:
"Is there some way I could have avoided
making losses during that period?"
Well, the answer is
Obviously trying to predict such a
correction and get out before it happens is
extremely difficult, and honestly more a
matter of luck than anything else.
But by diversifying your trading strategies
you can definitely avoid losses during such
times - and in fact make healthy profits
The key is to employ a mix of trading
techniques that take advantage of a variety
of trading timeframes.
Avoid putting all your
eggs in the "long term" basket and look at
complementing your trading with styles that
make returns over the shorter term as well:
- Swing trading is an excellent way to
capitalize on market movements over a period
of just a few days or weeks.
- Day trading of course, allows you to make
returns on stock movements within just one
And, mix up how and what
- Include Short Selling in your trading
techniques. By selling a stock or index
short, you are looking to profit from
downward moves. This is just as valid as
trying to buy low and sell high. And offers
an important hedge against a market
- Also, there are now Inverse and even
Double-Inverse indices that can be traded
quite easily. DOG is the symbol for the
Inverse Dow 30 Index and DXD is the Double
Inverse Dow 30. By owning these, you are
essentially short selling the major stock
And, contrary to popular
belief, it is not difficult to begin trading
in this manner.
Over the years online trading has exploded
in popularity and, as a result, the
resources, tools, strategies and
infrastructure available to the ordinary
investor have become enormous.
- Online brokers offer trading accounts with
extremely low commissions that allow
investors to trade all kinds of different
instruments (stocks, options, futures, forex)
over all kinds of different timeframes (day
trading, swing trading, long term trading).
- A large number of trading strategies and
systems are also available online. And many
such systems, like www.intradaytrades.com,
for example, offer a spectrum of short term
and longer term strategies in a single
- And online trading platforms have become
very sophisticated, offering complex
analysis tools and even the ability to
develop and back test trading strategies.
So, what simple steps can you take to profit
during rising markets AND market
- Long Term trading: Allocate a portion of
your trading funds to long term investments
(over many months). Make your profits from
the overall market trends - remember to take
those profits periodically so that you're
not caught by a sudden downturn. And look to
include some of those Inverse Indices in
your portfolio. They can act as a tremendous
hedge against market corrections.
- Medium Term trading: Allocate a portion of
your trading funds to Swing Trading. In this
way you capitalize on the medium term trends
in the markets or individual stocks.
Practically all financial instruments go
through these medium term swings as traders
are constantly trying to determine the right
longer term price by buying and selling at
support and resistance levels. And by taking
both Long and Short trades on these swings
you stand to profit in both directions!
- Short Term trading: Allocate a portion of
your trading funds to Day Trading. This
allows you to completely take the longer
term market factors out of the equation. By
trading within a single day, it really
doesn't matter that there was a long term
correction. You profit anyway. With the
right strategy, you would undoubtedly
recognize the selling opportunity presented
on the day(s) when there is a market
correction. And by selling short you stand
to make enormous gains that day!
- Ask your broker how to set up an account
that allows you do trade in this way. You'll
be surprised at how simple it can be to get
Much is written about
diversifying your investments. But don't
just look at diversifying your holdings.
Diversify your trading strategies too.