Things You Shouldn’t Do In A Bear Market2 min read
Knowing the right thing to do in a bear market can be a challenge. While there is no standard manual to guide us in these times, we do have a few pointers on what not to do from the common mistakes that we have observed over time and thought we could help you avoid making them.
But first, what is a bear market?
According to Investopedia, a bear market is when a market “experiences prolonged price declines.” The website says the term “typically describes a condition in which securities prices fall 20% or more from recent highs amid widespread pessimism and negative investor sentiment.”
So, not all corrections and slides in indices can be called a bear market.
Strategies that you can follow to avoid common mistakes:
1. Tune out the noise:
When the market crashes, there will no doubt be plenty of people offering advice, and some of it might even be unqualified. You will also find plenty of valuable tips and expert advice online. However, you need to form a strategy that works for you, based on your portfolio.
2. Avoid knee-jerk reactions:
Being impulsive will only hurt your portfolio. It helps to remember that the market will go through ups and downs, and eventually correct itself after a bull run. Spend some time doing research before making trading decisions. We’ve written more about keeping calm when the market is down.
3. Don’t call the lows:
It’s best not to make assumptions about the bottom of an index or stock. So while one can look at the support level in a bear market, it is advisable not to get caught up in making predictions. Make decisions based on what’s best for your portfolio.
4. Place a stop-loss order:
Having an exit strategy when the market is down will definitely help you minimize potential losses. Choose your stop-loss after doing your research about the company and its stock. We’ve written more about how you can use stop-loss orders in F&O trading.
Of course, these strategies will not work without discipline. Having clarity and making informed decisions is crucial in such times.
This list is not exhaustive, and there are many more strategies you can use when the market is down.
Disclaimer: This content is purely for informational purposes and in no way an advice or recommendation.
