How to trade in crash markets

#1
Hey forum,

this is my first post and currently I am mostly learning in the trading space (only traded to try it out).

I set aside money to start trading and now the crash has come and I do not dare to touch the market.

I wonder:
What do you do in such a crash market? I find it hard to assess buying or selling opportunities when I do not really understand the market behaviour and the market is driven by fear and panic as well as triggered stop losses. Also I feel how I get caught in fear of missing out because I see the huge fluctuations that could also be opportunities to make money. It is hard to keep calm.

Do you stay cool and wait? Or do you have a strategy to take advantage of such crash scenarios? How do you know when the market has already calmed down and behaves "normally".
 

newtrader101

Well-Known Member
#3
Hey forum,

this is my first post and currently I am mostly learning in the trading space (only traded to try it out).

I set aside money to start trading and now the crash has come and I do not dare to touch the market.

I wonder:
What do you do in such a crash market? I find it hard to assess buying or selling opportunities when I do not really understand the market behaviour and the market is driven by fear and panic as well as triggered stop losses. Also I feel how I get caught in fear of missing out because I see the huge fluctuations that could also be opportunities to make money. It is hard to keep calm.

Do you stay cool and wait? Or do you have a strategy to take advantage of such crash scenarios? How do you know when the market has already calmed down and behaves "normally".
Read up relevant books completely. Only you know your situation correctly. if you're asking about a particular stock, paste a screenshot and then others here can help you. As Kingsmasher said, a trader waits for and finds opportunities in both bull and bear markets.
 

MSN1979

Well-Known Member
#4
Hey forum,

this is my first post and currently I am mostly learning in the trading space (only traded to try it out).

I set aside money to start trading and now the crash has come and I do not dare to touch the market.

I wonder:
What do you do in such a crash market? I find it hard to assess buying or selling opportunities when I do not really understand the market behaviour and the market is driven by fear and panic as well as triggered stop losses. Also I feel how I get caught in fear of missing out because I see the huge fluctuations that could also be opportunities to make money. It is hard to keep calm.

Do you stay cool and wait? Or do you have a strategy to take advantage of such crash scenarios? How do you know when the market has already calmed down and behaves "normally".
Crash is perfect opportunities to buy in cash. Even if you have a little amount of money consider buying shares in little quantities to experiment. Like 5 or 10. Your company selection criteria is what really matters when a market is down. There are good companies available at discounted prices when a market crashes. To buy in crash consider following points:

1. What business models are trending/What companies will gain most when markets recover from crash.
2. Do you have enough holding power to withstand a crash
3. Bulls may make a comeback. It may take a month 3 months or 6 months or even a year.
4. Good Money is made when you buy low and sell high. (Ensure you do your homework properly to find companies that will make you money)
5. Look for regular dividend paying companies, companies that have solid management and transparent working.
6. Diversify your investments. For example if you are bullish in IT sector its better to buy 10 of tcs 10 of infosys 10 of mindtree and 10 of hcl then buying 50 of same company. Same can be done with sectors.
7. Remember all companies cannot become Zero. Exception like Lehman brothers and Enron and satyam computers will always be there but it think losses are part of game. Have a big heart and learn from your mistakes.
8. Day Trading Swing Trading is Different from Holding. You may take multiple trades for example when the markets crash one may short nifty with a Strict SL and at the same time buy stocks which look attractive.
9. Try to keep things simple. When you are getting a decent profit. Partially book them.
10. If you get too excited when you make money and angry or upset when you loose. STOP trading and relax. You are not ready for markets. Period.
 

js19

New Member
#5
While the signs are pointing towards a market crash it is meaningless to fear a market crash without knowing the warning signs. Instead learn how to read the markets and improve the strategies which are already made and that can help you not only protect your investments but take advantage of drops in the market. During this period you may buy shares of flourished businesses that generate real profits and high returns on equity,low to moderate debt to equity ratios,have a shareholder-friendly management etc because these firms hold better under stress and likely to make recovery even if the share prices decline by 75% or more.
 
#6
If a crash is expected traders must know how to react and whether to react or not . Some tips on how to trade are :
  • Cut losses quickly at a pre determined price. Use a limit order to close the trade.
  • Forget about shorting.
  • Buy on the dip. Rather than selling short it is better to wait and then buy on a dip.
  • Trade like a coward as its not about who can make money quickest but about survival and profits in the long run.
  • Buying put options for stocks is also something a lot of traders do.
  • A better strategy is to stay on the sidelines and wait for lower risk and higher reward opportunities.

 
#7
No crash will last forever, so don’t fear them much. Yes, you can sell the under performing assets to have a bigger cash holding to manage the crash. And when trading, try to average your trades, deal only with reputed companies, that are paying regular dividends and don’t forget to limit your losses with a stop loss.
 

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