Trading Justice

It can feel like it’s impossible to not find a winning trade in a bull market. Entire sectors see anywhere from steady to meteoric rises, companies report increased earnings quarter over quarter… even normally mediocre stocks can feel the uplift of such a market (as a rising tide raises all ships). Week after week, the markets generally continue to rise. It even feels like it’ll last forever sometimes, right?

Well, we all know how that goes. A bull (or bear, for that matter) market won’t last forever. Resistance will eventually be found, tested, and remain unbroken, causing the market to at the least go sideways for a time. In such an instance, the markets become almost dull as they ping pong between constrained high and low. Specific strategies, such as straddles, work well enough; as can directionally trading within support and resistance. …but what if support is broken consistently, and in a bigger way? Welcome, friends, to a bear market.

Folks newer to trading may feel the opposite about a bear market as compared to a bull market: winning trades are almost impossible to find. Not the case at all. You just need to change up your strategy. First, there are always some risers even in a bear market. They can be tougher to find, but they do indeed exist (which is what scanners are for). Alternately, shorting is always an option. Or, you could choose to cash flow by selling options at a higher premium should volatility see an increase, as well. Long and short of it: there are ALWAYS trades if you know where to look.

Not sure how to trade in a bear market yourself? Then give this episode a listen as Tim and Matt discuss bear markets, what can cause them, and what you can do to trade them.