How to Survive In A Bear Market

There is no doubt that we are in the throes of a vicious bear market. Oh, sure you can argue that stocks are well above the levels they reached during global financial crisis, and yes, you are right when you point out that many stocks have not even lost half of their gains. Yet, current market conditions are so volatile that prices can go sideways or down for a long period of time. This begs the question of how to survive in a bear market. Here’s my advice:

Take a break

It is okay to take a break from trading. I do this frequently, especially after a rough spell in both bull or bear markets. In a bear market, though, you face nothing but counter-moves, fake outs and false hope. Eventually, you are worn out. I’ve seen countless players throw in the towel due to fatigue from waiting endlessly for a trend to be established or just turn.

Give yourself a break before the market breaks you. It’s not easy, and at times you will feel left behind, but I doubt you will be permanently scarred by it. In fact, a break is refreshing, and it allows you to come back into the game re-energized.

Play the market both ways

By playing the bear market both ways, you will not only dampen portfolio volatility but increase your chances of banking wins. The name of the game is stock picking, and those who pick the best will perform the best. Most of us are conditioned to only play the bull side. After all, markets always seem to rise over time. Only playing the bearish side could have dire consequences over the long term, but there are times where it pays off handsomely.

I come to the table each day looking for opportunities on both sides of the trade, regardless of where the trend is. I use a guarded approach, and I can assure you this has saved me more times than you can imagine. Stocks do not rise every single day. Stay agnostic and look for opportunities with an open mind. You’ll be more likely to find ideas on both sides.

Remember that bear market cycles tend to be short

As I said above, this is a bear market. However, we have often seen some of the most spectacular bull rallies occur in bear markets. Conversely, some of the most awful bear runs have occurred during bull markets. Market cycles need to run their course. Fortunately, bear market cycles are rather short historically – about 18-24 months long. If you are waiting to invest in a normal bull market, it’ll be at least another year.

Make no mistake, this is not a normal market. Why not embrace the conditions and pursue both bull and bear trades? With elevated volatility, there could be incredible opportunities on both sides.