How To Survive A Bear Market

You’ve doubtlessly already heard about the terms ‘bull market’ and ‘bear market’. What do these really mean? A bear market is simply when you have a drop in a large number of share prices over a relatively long period of time. Traders normally talk about a bear market when prices have dropped at least 20% over a period of no less than two months. As more and more people sell their stocks, market prices are pushed down even further.

A bull market is just the opposite: A prolonged, widespread rise in the price of a large number of stocks. While the pessimism behind a market with declining prices drives it even further down, the optimism underlying a bull market drives the prices to even higher levels.

Do not confuse the terms ‘bear market’ and ‘market correction’. A market correction happens regularly and is simply a small downward movement in prices after a sharp price increase. This happens when traders sell stocks to cash in on the profits they made during the increase in prices.

It’s easy to see how one can make money in a bull market. In fact, it’s hard not to make money in such a market. But how can you make money in a declining market?

One such way is if you could accurately predict the end of the falling market and then buy a selection of top quality stock tips. Although you can use a variety of fundamental and technical indicators to help you with predicting the turning point, it remains very difficult. Even the best of traders often fail to correctly predict the turning point of a slumping market.

Another possibility is to sell stocks short. What you in effect do is to borrow stocks from a brokerage and sell them to a third party at the current high price. Once the price has dropped, you buy them back and refund the brokerage. You should only do this with stocks which are virtually sure to drop in price.

You have one other possible course of action if you want to make money in a bear market: buy put options. This type of option actually rises in value as the price of the underlying share goes down. As with short selling stocks, if you are wrong about the market and it actually goes up, you will lose the money you paid for these put options.

For more on the stock market go to the WallStreetWindow stock trading newsletter.

Financial Stock:

Finance for Managers (Harvard Business Essentials)Harvard Business Essentials

Your Guide and Mentor to Doing Business Effectively

In the faced-paced world of business today, everyone needs a personal resource-a place to go for advice, coaching, background information, or answers. Bosses and colleagues aren't always available when you need them-and they might not always have the most reliable solutions to your business problems right at hand.

The Harvard Business Essentials series fills the gap. Concise and straightforward, these books provide highly practical advice for readers at all levels of experience. Whether you are a new manager interested in expanding your skills or an experienced executive looking to stay on top, these solution-oriented books give you the reliable tips and tools you need to improve your performance and get the job done. Harvard Business Essentials titles will quickly become your constant companions and the trusted guides you'll turn to throughout your business career.

Finance for Managers Calculating and assessing the overall financial health of the business is an important part of any managerial position. From reading and deciphering financial statements, to understanding net present value, to calculating return on investment, this book provides the fundamentals of financial literacy. Easy to use and non-technical, this helpful guide gives managers the smart advice they need to increase their impact on financial planning, budgeting, and forecasting.