With the global markets and indices experiencing corrections, the PSEI is no exception. The market has been tumbling down for quite some time now, after a quick run up early this 2018.
It's in times like these where only the most skilled and experienced traders and investors still make money despite the selling pressure in the market. Here are a few tips on how to handle tough times when the market is red:
1. Stick to Cash
Cash is always a safe bet. It's rough to stay in the market when stocks are being sold off left and right. The key is not to constantly be invested in the market, but to be in it when it counts. Don't be afraid to take profits and sit on cash when there are no good stocks to trade.
2. Wait and Scout for Setups
Opportunities are everywhere, even in a bloody market. It is a trader's duty to observe and screen through the best and most resilient stocks that stay strong despite a corrective season in the stock market. Look for issues that continue to perform, or at least stay above support levels. When the market reverses upward again, these stocks will give you the best opportunities.
3. Average Down for Long Term
For long term traders and investors, this could be the best time to buy and accumulate more stocks. With blue chips stocks correcting down closer to their moving averages and fair values, it would be wise to buy at lower and cheaper levels for the long term strategist.
4. Trade Smaller Amounts
When the market is trending and surging like a bull, stock trades can easily be profitable. But when the market is red, even the best of setups can fail and be sold down. If you choose to stay in the market amidst the selling sentiment, one way to lessen your risk is to trade smaller amounts. Allocate lesser capital and risk to each trade, while saving the rest for better opportunities when the market turns upward again.
5. Study, Study, Study!
Lastly, now is the best time to study. Whether fundamental or technical analysis, there is always a new technique or concept to learn. Choose to be a constant learner and continue to expand your arsenal of patterns, setups, and knowledge about the market. Follow blogs, watch videos, and read books to hone your craft and be the best trader you can be. Preparation is the key to winning in the markets.
These are just a few things you can do when the market is red. The stock market is not always smooth sailing, but keep in mind that even setbacks can be opportunities to propel you further in your path to financial freedom. God bless and Happy Trading!