Use info at your own discretion!
For stock trading, we live in the best of times, and the worst of times. Essentially, this stock market is going through a huge identity crisis at the moment… is it a bull or a bear? BTW, just in case you do not know, Bulls make money when stock prices go higher, while the opposite is true for bears. Anyway, while I am not going to ring the bell and proclaim that the bull market is over, I certainly think the markets behavior this year shows us that we need to know how to make money IF the Mr. Market morphs into a bear. Here are two ways to make money in both conditions.
1. How Make Money in a Rising Stock Market (BULL/LONG)
The most basic ways to make money in a bull market is to own the following ETF´s; “SPDR S&P 500 ETF (SPY)” and “PowerShares QQQ ETF (QQQ)”. Those ETF´s track the most important stock indexes in the world, i.e. the S&P 500 and Nasdaq 100. SPY is up 60% over the last 5 years, and QQQ is up 104%, both of which are ALLOT better than putting your money in the bank. The reason we are getting a bit worried about the health of the current bull market is that the SPY is down –1,9%, though QQQ is showing more strength by being up 7,6%. While those two are great in a rising stock market, they become your worst enemies when the market enters a bear market.
2. How Make Money in a Declining Stock Market (BEAR/SHORT/INVERSE)
We got to change our strategies when a bear market strikes, since we simply will lose money by trading as if we are in a bull market. While there are many ways to short-sell stocks, i.e. make money when stocks go down, I will focus on the safe ways of doing this. You should be aware that short-selling can involve unlimited risk unless you use ETF´s like the following; “ProShares Short S&P500 (SH)” and “ProShares Short QQQ (PSQ)”.
When do we know if the bear is in town? Well, we will know soon enough, maybe even by the end of this year. The burden of proof is currently on the bulls. They SERIOUSLY need to show some strength ASAP in order to avoid a self-reinforcing rise of the bear army. Write your thoughts and trading plans in the comment section below.