In these day of the credit crunch and all the economic slowdown in general, is there still a way we can make any money from the plunging stock markets? Yes there is, it is even possible for us to make more in markets that are heading South, in unbridled free fall, than if they head up.
What we do is short sell, and this is done either through you broker, your bank, or an online account. I prefer the latter by using spread betting. When we open a Sell position, we are in effect borrowing a stock to sell at its current price. The stock we choose is determined by our thorough research criteria. Our prediction is that over a period this stock will go down in value. Assuming the price goes down, then we reverse our position later on and buy it back, at of course, the new lower price. The difference in the value is our profit.
Here are 5 ways you can use this technique:
Using Day Trading, we open a position, which is usually founded on using technical indicators, and it remains open for a duration of anywhere from a few hours to a few days. Trading with a management facilities, our stop loss system will protect us from losing too much if thing the trade goes against us, in this case, up.
Swing Trading is similar to day trading and employs the same indicator types. It is focuses on taking advantage of price swings in trending markets. Positions are usually held for a longer period, up to say three weeks.
Range Trading. If you notice a stock whose price seems to generally fluctuate in a well-defined channel between two parallel lines, then this is called a range. The line underneath is usually called support, and the upper one, resistance. Just like a zig-zag across you chart really. It will be horizontal, or sloping in either down trend, or up trend. The trick is to take advantage of, in our case the price as it bounces off the resistance line, or breaks through the support line.
Scalping is taking advantage of volatile markets. This strategy is fast paced and scalpers don't spend more than minutes or seconds in markets that lend themselves to this method. A big advantage is the minimal exposure of your cash to the market, thanks to the tight spreads.
The Foreign exchange or Forex, is immensely popular, trading currency pairs such as the US Dollar with the UK Pound or the Swiss Franc with the US Dollar. Many traders make a living on trading just one currency pair. Scalping is a good way to trade the Forex because it is usually highly liquid in nature.
So as you can see, there is enormous scope for making the most from falling markets.
How would you like to discover more about the techniques successful traders use to make profitable trades?
Download them free here: Day Trading Course
Ian Jackson is an authority on Day Trading information, learning the hard way - and now he reveals how you can learn the business too, without all the growing pains.
Reuters - Stocks climbed on Thursday as investors snapped up shares trading near their lowest levels in five years on optimism that aggressive rate cuts by global central banks, including the Federal Reserve, will help cushion a worldwide economic downturn.
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