Around the end of July, the stock market and crypto market went from Bull to Bear.
In other words, market prices dropped and have remained low ever since.
Whether you are a new investor/trader or an experienced one, the idea of a Bear market always brings a sense of doom.
That sense of doom can lead to mistakes when trading & investing.
So, before you do anything, consider the following things we DON’T DO to help you avoid the top mistakes most people make when in a Bear market.
1. Timing the market
Some people sell their stock or crypto, wait until the price falls and then buy them back at the lower price.
It sounds like a good idea, but it’s not. That’s because what you are doing is trying to time the market. That’s not easy.
The reality is that you don’t KNOW if the price is going to continue falling when you sell.
The Bull market could start at any time, and we know for a fact that it WILL return (we just don’t know when).
This is the reason our CCA strategy works so well. We’re not trying to time the market.
2. Being in a rush to turn things around
When we are trading we are looking to move in and out of an investment within days to weeks.
However, there might be assets we are investing in that could see nothing happen for months to years.
It might only last a few weeks, but you should be PREPARED to wait years.
In a Bear market, you can expect to be in an investment for many years.
For instance, we have recently come out of a Bull market that lasted over 13 years – the longest bull market ever.
Fundamental analysis shows us Bear markets don’t last that long, but you never know, so be prepared to wait until the markets finally turn around.
They always do and never fail to.
There is a famous saying – “quitters never win, and winners never quit.”
Losses can be painful, but that doesn’t mean you should give up.
You should use that experience and learn from your losses. That can help you become a better investor.
Most people quit before they have mastered trading and/or investing.
The problem is, that most people give themselves a very short time to achieve returns. Naturally, these people are going to give up sooner rather than later.
Instead, keep going and learn from your mistakes. It all helps achieve the financial freedom you have set your heart on.
4. Not having a strategy with clear rules
We can’t stress enough how important it is to have a strategy. Better still one that is PROVEN to work.
For instance, we follow a proven strategy that consists of 5 Rules:
- Know what to invest in
- Know how much money to invest
- Know at what price to invest
- Know how to get out with a small loss
- Know how to get out with a large profit
It is a big mistake not knowing these BEFORE you enter any trade. Sadly, most people don’t, and that’s why they are not successful investors.
5. Not shorting the market
Even if you’re holding onto a stock for the long term, you can still make money by shorting the same stock in the short term.
Take Tesla as an example.
We bought to hold for the long term. But if we got a sign that it was going down in the short term, then we would go short even though we have another position with Tesla that is long.
Going long and short when the opportunity arises is a great strategy to follow because you are doubling your chances of making money by acting in two different POSITIVE ways.
It’s not something people think of doing, because they don’t realise they can get in again when the price drops, and then sell when the price goes back up.
That is the beauty of shorting. Not shorting is a top mistake to avoid.
6. Using leverage
It’s well known that 90% of all new traders lose 90% of their money within 90 days.
This is not a surprise when you consider that most people have never been on an online trading course and learned how to invest properly.
On top of that, they’re looking to make money as fast as possible.
That can be tricky if you don’t have a lot of money to invest with.
That’s when some people decide to borrow money from others, usually brokers.
Brokers are attractive because they allow people to trade with more than they have. For instance, for every $1 you have in your account, the broker might allow you to trade with $100.
That’s very tempting.
And it can work if you know what you are doing. But if you don’t it is THE fastest way to lose money, and even a small move against you means you can lose… 100 times faster! This is called leveraging and it is another top mistake to avoid.
Saving the worst mistake till last… PANIC!
Panicking is a natural reaction, but it is an emotional one.
It is then followed by the rush to sell because people think they are going to lose all their investments.
But wait, take a moment to think about it. Does doing that make sense?
What you could be doing when the price drops is BUY some more, not sell.
It is a good time to accumulate more of the same stock or crypto.
Because the price will always go back up. It always does.
If you are not sure, then don’t do anything. Doing nothing is better than selling.
Emotional selling is simply the worst.
Here at Investment Mastery, we have traders and investors who have spent many years learning from their mistakes and now know exactly what NOT TO DO in a Bear market… as well as everything you SHOULD DO.
Get in touch, and we can help you enjoy the same successes in trading & investing as we have been for the past 20 years!