7 Do’s and Dont’s When the Market is Falling

7 Do’s and Dont’s When the Market is Falling

 

What if one day you will notice that the market is dropping? What if one morning you will see your portfolio’s loss is way too much to handle? What will you do then? Here are some sound advice you can do too…

 

1. Do not easily get scared.

 

Greed and fear are the two enemies of traders and investors. True enough few years ago, I saw my stocks went to bottom and I could not do something.  My friends who are in the market were already telling bad things, everything seems to be in total chaos. I turned on the TV and there it was on the headline and on the news. Then, I checked an article with similar title you’re reading now and it got me so scared, it feels like it’s the end of the world. Then immediately I clicked the “sell” button, sold it at a loss. After a week, my stocks went up all time high. I almost wanted to cry.  Later I’ve found out that it was just a pullback/correction.

 

2. Do not listen to the noise around.

 

 

I want to make this very clear, Do not let anybody, bad news, or even your emotions control your portfolio. When everything is in chaos, concentrate on your own investment goals or your trading plan. Do not get easily affected because the market is volatile ever since and this is how the market behaves. It is very important to know what is the current market you’re in right now. If it is just a correction or it is already start of the bear market. From there, you can gauge a proper expectation on what to do next. I’m going to emphasize the use of chart for you to be able to know what is happening. 

 

3. Do nothing.

 

If you are an investor, the best thing you can do is nothing at all. If you are a trader, once your cut loss price is already hit, execute the exit plan and go on vacation. There are lot of things to do other than in the stock market. If it is already on a bearish market (downtrend), it is hard to trade against the current (counter-trend). You can still be productive by doing other things.

 

 

4. Do something.

 

A falling market will teach us a lot of things. It even made me a better trader. Many times, when everything seems going upward, we are not practicing the discipline as much. During downtrend, you have to be always cautious on your trading plan and a proper entry and exit should be followed. Do something for yourself. Evaluate yourself why you’re losing as such. What needs to be done to be better and to be properly warned before the next downtrend occurs.

 

 

5. Do not buy blindly.

 

 

Buying on the falling market thinking it is already cheap is very misleading. During bear market, it is just normal that prices fall one after the other. A famous mantra for traders says ” Do not catch a falling knife!”. A stock on a downtrend could continue to go down further. Technical Analysis offers a lot of tools and ways that everyone could use to know if the stock’s falling state is already diminishing and it is likely to start reversing upward.

 

 

6. Do not think that it will never end.

 

History repeats itself. That’s the famous Dow theory is reminding everyone that there is always a cycle. There are only 3 directions of the market: uptrend, downtrend, and sideways. Downtrend may take sometime but it has to end once there will be strong signs of reversals showing.

 

 

7. Do take profit.

 

Taking profit is essential since our market is highly volatile. We call it trailing stop/stop loss, a very important part of risk-reward management. A part of preserving your capital and protecting your gain. If the market continues to fall and it’s affecting the price movement of your stocks, the best thing to do is to save your gain.

 

 



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