Tuesday, August 26, 2008

Are You Making Money in this Bear Market?

The Trend is Your Friend, whether you are a trader or investor. So ride the Trend, don't fight against the Trend. The ability to read the Trend correctly gives one the highest probability of success in making money from the stock market. With correct Timing, your probability of success increases.

Individual stock price movements are very much affected by the macro market trend, regardless of the fundamentals of the individual stocks. Macro market trend refers to US indices, Regional indices (ie Nikkei, Hang Seng, Shanghai) and STI. STI is spineless and looks for its direction from US and Regional indices.

So are you adopting the correct strategy? The Trend determines the Strategy to be adopted. Are you short selling at high price and covering back at a lower price? Or are you still buying weakness to average down your cost of holdings?

Experts are recommending that people should short the market as that is the best strategy for Bear Markets. Ray Baros said that at INVESTFAIR '08. The analyst from KELIVE said that during the daily radio programme on Capital 95.8 at lunch time.

A word of caution though. I do not short sell although I know that's the best strategy to make money in this Bear Market. Short selling using CFD is a leverage product and involves higher risks. Unless you know what is a good entry/exit price for the stock and when to exit, you might lose money. To reduce your risk, you might want to consider using your own cash instead of using the margin allowed in the account. So you will not be subject to margin call.

I prefer to wait for indicators that a possible Bear Market Rally is coming!

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