How to Invest in a Down Market Colorado

Steps

1. Check a market graph for peaks and low in the market.
2. Select a stock and back test it by checking the performance in a previous down market.
3. Set a trailing stop to preserve your gains as the market can go up in a instant and inverse stocks will drop like a rock.
4. Don't buy stocks that are down because of bad earnings, bad outlook, bad news, etc. Buy stocks that are down because the whole market is down. They are being dragged down with all the other stocks. They will bounce back when the market turns around.
5. Sell covered calls to protect yourself from further downside exposure.
6. Short stocks. If you think a stock is going lower, sell it short.
7. Buy puts. Puts are options you can buy when you think a stock is going lower. When the stock goes lower, your 'put' option goes higher, making you money.
8. Buy cyclical stocks. They decline much less in a down market.

Tips

• Try to avoid using margin. If you use margin and your stocks decline enough, you will be forced to sell at the bottom.
• Never panic. Buying high and selling low is the worst thing you can do. Be patient, the market will most likely come back over the long run.
• When things look their worst, and you really want to sell and get out, that is probably the time to buy!

Warnings

• Do not enter a inverse fund too early. Make sure there is a 14 day down turn indicating the bears have taken over.

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