The markets often crash. Yes, this is nothing new. This happens more often than we realize, if only for a day or two.
The question is: were you prepared?
- Ready to sell marginal positions
- Ready to buy
It is one thing to jettison marginal positions. They are the easy ones to spot – barely making any gains or sliding backwards slowly but surely. When the market hits a bump or sell-off, why not throw these out.
On the other hand, the tough one is being ready to take advantage of a downturn in the markets and but when the prices are low.
Here are a few ideas on how to take advantage of sell-offs to grab new positions:
- Look at the equity curve of the ticker symbols in your groups or groups in your investment software to see which ones have had the most upward momentum.
- If you are using a trading strategy, check the rankings of the symbols in your groups to see which ones have been at the top the past few weeks or months.
- Compare your ticker symbols against a benchmark like the S&P 500 in either a combo chart or in a ranking to discover those symbols out-performing the market.
Note of caution, many big market drops last only a few days. This means:
- It may not be necessary to sell any positions.
- The opportunity to buy at a lower price is limited – time is short.
If your investment software has a number of trading strategies then abrupt market changes can be a good time to evaluate your strategies.
- Compare your strategies performances in a combination chart to see if one is out-performing the others
- Examine the equity curve of your strategies to make sure you are using one that is performing well and not in decline.
Keep a positive outlook. The market always rebounds. The only question is how quickly. But apply these ideas with some investment software and you can find safe profitable investments.