Markets can move in either one of two directions: it can hit you like a bull upwards, or claw like a bear downwards. You can make money in either situation if you are able to master share market trading.
If you’re new to trading in the share market, it can be overwhelming. Here are five stock market tips to help you navigate the bull and bear markets.
5 Stock market trading tips for bull markets
1. Assess your goals
To make informed decisions about bullish sharemarket trading, you need to first evaluate and assess your goals. You should consider your investment capital, age, as well as other factors that could impact your investment.
2. Follow the flow
Follow the herd mentality in bull runs. Buy stocks at lower prices, and then sell them when they go up. Do not buy or sell stocks in opposition to the market’s momentum. It is likely that you will face large losses.
3. Diversify your portfolio
You can diversify your portfolio in the bullish market. There are many stock classes you can invest in, including small-cap, medium-cap and large-cap stocks. You can also invest in other industries, such as manufacturing and automobiles, during a bullish market run. Also, you might search for stocks that are undervalued. These stocks are more likely to revert back to the mean, and you will be able to make more from them. This article on mean reversion will explain more about this strategy.
4. Invest in trustworthy companies
Diversifying your portfolio is risky. You should only invest in reliable, proven growth companies. Before making an investment, analyze the company’s products and services demand, sales, revenue, and other factors.
5. You can buy and sell in phases
Instead of waiting too long to sell stock, or getting into and out of stock options too quickly, buy and sell stocks in stages. Although you may not get the best returns from share market trading, you will always receive better prices for each subsequent trade.
5 Stock market trading tips for bear markets
1. Avoid knee-jerk reactions
It is better to be dead than sorry when confronted by a bear. Avoid sudden movements in the share market trading when there is a bear run. Instead, be calm and carefully consider your options.
2. Evaluate your risk tolerance
Assess your risk tolerance to ensure you only invest what you can afford. Do not over-invest in the hope of recovering your losses. You will lose more. You’ll lose more during a bear market.
3. Stocks in short supply
To profit from falling stock prices, you can be aggressive and short stocks. Stocks can be sold at a higher price first and then bought when they fall further.
4. Invest in stocks that are reliable
A good strategy for trading shares during bear runs is to invest in defensive or non-cyclical stocks. These stocks provide stable returns, even during a negative market run. Non-cyclical businesses include those involved in healthcare, consumer goods, and utilities.
5. Balance your portfolio
You should review your portfolio allocations, and adjust to correct any imbalances that may have been caused by the bear market. You can reduce your share market trading capital, liquidate it or invest it in gold and sovereign bonds.
We hope you find the information in this blog helpful and that it will allow you to make informed, sound decisions about trading the share market during bear or bull sessions. No matter which dominant animal you are, you will be victorious and make handsome profits.