Guys, we can’t beat around the bush about this any longer… Trading in a bear market is unpredictable. And since we’re in a new stock market trading regime — with another uptick in COVID-19 cases in China, major geopolitical issues with the Russia-Ukraine war and rising interest rates — knowing how to trade a bear market in 2022 is going to look a bit different than what we’re used to.
The good thing is bear markets are a fact of every trader’s life — we all knew that the longest bull market we’d ever seen had to end at some point…
The longest bull run in history in the S&P 500 started on March 9, 2009, and ended in March 2020. The COVID-19 outbreak was severe enough to end 11 years of mostly uninterrupted gains. The bear market that followed cut investors deep, and many were scrambling to save their portfolios after they were blindsided.
About a month after the stock market hit rock bottom, it returned to another bull run.
But now, Wall Street is hinting at signs of a bear market far more often. And while bear markets are a natural part of economic cycles, it’s still hard to know how hard it’ll hit, how long it’ll last and how bad it’ll impact stocks.
However, there are ways to not only survive a bear market relatively unscathed, you can also position yourself in a way to prosper from them.
Check out my top 3 ways to trade a bear market in 2022 below!
How to Trade a Bear Market in 2022 in 3 Ways
The biggest thing to remember when trading in a bear market is your holding periods are going to be much shorter. That’s because the market will move in big swings up and down — that’s the hallmark of volatility.
So when you design a trade in this type of market, it has to be quick — a couple of hours to a couple of days in many instances.
Trades lasting longer than a month might be too big a time horizon for that market.
The second most important thing to keep in mind when trading a bear market in 2022 is to always keep your powder dry…
What does that mean?
You always have to have cash on hand. You can’t go in with all of your money in one or two stocks — that’s just bad business.
Putting in all your money at the same time during a bear market is the worst thing a trader can ever do. You need to keep cash in the account at all times so you can take advantage of the spectacular setups that happen when stocks crash — giving you the opportunity to buy a stock on the super cheap before it rebounds.
Oftentimes, you can make overnight moves like we do in our Burn Notices strategy — click here to learn more.
But the third tactic in how to trade a bear market in 2022 is one I cannot emphasize enough…
Watch the video below to learn more about tactic No. 3 and how to trade a bear market in 2022.
And as always, send any topics you’d like me to cover to jeff@joyofthetrade.com and stay ahead of the markets, especially these choppy ones, by subscribing to our YouTube channel.
