We are seeing wild volatility and a lot of looming bad news for the market. The upside is that it has never been easier to leverage high volatility in a declining market. Although the bear trading strategy guide may have been a bit dusty, the tried and true methods seem to be working.
Inverse Index ETFS
The other day we reminded you of a great set of tools that thrive in a falling market. They are easy to trade, can be traded in your IRA, and offer a variety of ways to use them. In case you are new to using the index ETFs that go up when the market goes down , we have you covered. We put together a guide that lays it out. (check it out here) . They are simple to trade and have been crushing it for the last two months. In just the first month after the start of the COVID crash, SDOW, the ETF that inversely tracks the DOW (SDOW goes up when the DOW goes down) more than doubled. In addition, inverse ETFs have been fertile ground for lucrative options trades.
Using Options To Grab Gains From The Drop
Another way to pull income from a market that is declining is to buy put options. This is a great way to dramatically boost the power of your investment capital and lock in an amount of risk that you are comfortable with. In addition, this allow you to use the higher volatility that is a common characteristic of dropping markets to boost the potential option profit. The VIX, an indicator that tracks volatility, is heading back towards recent highs and isn’t showing any signs of calming down.
With the right time frame, increased volatility can help give options a greater chance of being profitable. Wendy Kirkland has been pointing out some nice put options on the QQQ. You can see her latest here.
Exploiting the Shift To Safe Havens
The tendency of investors and traders is to move their capital to “safer” investments. Historically, when the market is dropping and there is unrest and conflict, many move their money to gold. As with many market “rules of thumb” it can become a self fulfilling prophecy. The fact that this is so widely believed means many will follow this adage and it will move gold prices up. A great way to leverage this is to use GLD, the ETF that tracks gold related stocks. We just shared more on that in an article you can read here.
Trading the Market Outliers
Even in a down market some stocks will go up. When you can find the ones that are being catapulted by a downtrend they can be extremely lucrative. I was surprised to see an outlier that I wouldn't have expected. Our readers got a heads up early on a sector that is showing explosive potential in spite of the chaos in a great article from Keith Harwood’. You can see it here.
Remember when things are volatile, you need to adjust your strategies and be extremely mindful of your position sized. Smaller positions is very targeted trades can be more effective in wild, dropping markets. And don’t get discouraged with smaller gains. When the market has dropped 10%, a 5% gain is really more like 15%.
Keep learning and trade wisely,
John Boyer
Editor
Market Wealth Daily
See Related Articles on TradeWinsDaily.com
Chart of the Day: Advanced Micro Devices (AMD) Moves
Palo Alto Networks Signals a ‘Buy’
Waiting For That Longshot Pays Off
Chart of the Day: Chevron (CVX)
Look At What Signaled A QQQ Potential Winner
© 2023 Tradewins Publishing. All rights reserved. | Privacy Policy | Terms and Conditions | Contact Us
Auto-trading, or any broker or advisor-directed type of trading, is not supported or endorsed by TradeWins. For additional information on auto-trading, you may visit the SEC's website: All About Auto-Trading, https://www.sec.gov/reportspubs/investor-publications/investorpubsautotradinghtm.html
TradeWins does not recommend or refer subscribers to broker-dealers. You should perform your own due diligence with respect to satisfactory broker-dealers and whether to open a brokerage account. You should always consult with your own professional advisers regarding equities and options on equities trading.
1. The information provided by the newsletters, trading, training and educational products related to various markets (collectively referred to as the "Services") is not customized or personalized to any particular risk profile or tolerance. Nor is the information published by TradeWins Publishing ("TradeWins") a customized or personalized recommendation to buy, sell, hold, or invest in particular financial products. The Services are intended to supplement your own research and analysis.
2. TradeWins' Services are not a solicitation or offer to buy or sell any financial products, and the Services are not intended to provide money management advice or services.
3. Past performance is not necessarily indicative of future results. Trading and investing involve substantial risk. Trading on margin carries a high level of risk, and may not be suitable for all investors. Other than the refund policy detailed elsewhere, TradeWins does not make any guarantee or other promise as to any results that may be obtained from using the Services. No person subscribing for the Services ("Subscriber") should make any investment decision without first consulting his or her own personal financial adviser, broker or consultant. TradeWins disclaims any and all liability in the event anything contained in the Services proves to be inaccurate, incomplete or unreliable, or results in any investment or other loss by a Subscriber.
4. You should trade or invest only "risk capital" money you can afford to lose. Trading stocks and stock options involves high risk and you can lose the entire principal amount invested or more.
5. All investments carry risk and all trading decisions made by a person remain the responsibility of that person. There is no guarantee that systems, indicators, or trading signals will result in profits or that they will not produce losses. Subscribers should fully understand all risks associated with any kind of trading or investing before engaging in such activities.
6. Some profit examples are based on hypothetical or simulated trading. This means the trades are not actual trades and instead are hypothetical trades based on real market prices at the time the recommendation is disseminated. No actual money is invested, nor are any trades executed. Hypothetical or simulated performance is not necessarily indicative of future results. Hypothetical performance results have many inherent limitations, some of which are described below. Also, the hypothetical results do not include the costs of subscriptions, commissions, or other fees. Because the trades underlying these examples have not actually been executed, the results may understate or overstate the impact of certain market factors, such as lack of liquidity. Simulated trading services in general are also designed with the benefit of hindsight, which may not be relevant to actual trading. In addition, hypothetical trading does not involve financial risk, and no hypothetical trading record can completely account for the impact of financial risk of actual trading. TradeWins makes no representations or warranties that any account will or is likely to achieve profits similar to those shown.
7. No representation is being made that you will achieve profits or the same results as any person providing testimonial. No representation is being made that any person providing a testimonial is likely to continue to experience profitable trading after the date on which the testimonial was provided, and in fact the person providing the testimonial may have experienced losses.
8. The author experiences are not typical. The author is an experienced investor and your results will vary depending on risk tolerance, amount of risk capital utilized, size of trading position and other factors. Certain Subscribers may modify the author methods, or modify or ignore the rules or risk parameters, and any such actions are taken entirely at the Subscriber's own election and for the Subscriber's own risk.
|
No comments:
Post a Comment