3 Simple Ways to Beat A Bear Market

"Walang Kumikita pag Bear Market!"

You hear a lot of people say this. Yung nagsasabi ng mga ganito, hindi lang talaga marunong magtrade. 

Sharing with you one of our student's notes in our MasterClass about Outliers.

Too many times we have heard people advise against trading in a bear market. They say, cash is king and you would be better off liquidating all your positions then take your well-deserved vacation! They say that no one earns a single cent in a bear market, or worse, that no one leaves a bear market unscathed! With all these voices surrounding you in a market of uncertainty, who wouldn’t be afraid to stay? No one wants to be told “I told you so,” so you give in, sell your positions, pack your bags and never look back until the market clears. 

What if I told you that all these are misconceptions and that the people saying that clearly do not know what they are talking about? Even the great Shelby Cullom Davis said, “You make most of your money in a bear market, you just don’t realize it at the time.” 

For you to be better prepared to enter a bear market, here are 3 simple ways to beat the bear market.

1. Keep your head in the game 

There is nothing more crippling than fear itself. If you are so engrossed in ideas of the market crashing and you losing tons of money, surely you wouldn’t be able to function properly. You wouldn’t be able to make the right decisions. Warren Buffet once claimed that he makes no attempt to forecast the market and that his efforts are devoted to finding undervalued securities. If he does not try to forecast or predict the market, then you shouldn’t too! Your only role as a trader is to react to the market. No one can ever predict or control the market. All you have to do is keep calm and keep your head in the game!

2. Time your entry. 

An opportunity arises in the market where everyone is panic selling. In an uptrend, we say prices don’t go up on a straight line. The same thing goes for a downtrend market. Prices don’t go on a straight line! Watch out for market corrections, retracements or bounces and time your entry. In this game, timing is everything!

3. Look for that Outlier 

An outlier is defined as something that is situated away or detached from the main body or system. In the case of a bear market, outliers are those stocks that detach from the general bearish market sentiment and continue to rally despite the bearish market condition. This is the easiest way to beat the bear market because these stocks will simply stick out like a sore thumb. All you have to do is ride these stocks and watch it soar above everything else. Here are examples of certain stocks that defied science and went against the bear markets throughout the years.

In any market condition, there will always be an opportunity to earn and to learn. There is no truth in saying that you cannot earn money in a bear market. You just need to know what to look for and how to play it. You only need to keep your head straight, time your entry, and look for that outlier. You will be surprised with how much the market can offer you!

By Lloyd Yap