Many traders and investors lose money in the past few months during global stock market correction. With STI < 2600 points, there is a strong fear in the market. I have clearly pointed out in the past that greed and fear will continue to influence people to make wrong decisions. We need to position our investment, choosing stocks with different characters, aligning with our personalities.
Here are suggestions of trading/investing strategies for 3 unique personalities (Short / Mid / Long Terms) to profit from the current bearish stock market with 4 decisions of Buy, Hold, Sell/Short, Wait.
1) Short-Term Trader (buy/sell every few weeks)
Strategy: Short / Wait.
Choose stocks with weak fundamental and bearish trend for the past few months (aligning with major stock indices), short with CFD for stocks at high optimism to profit from the falling market. Most people only know how to long the market, therefore either lose money or doing nothing in the past few months of bearish market. Trading could be 2 ways (long / short), as long as the trend is clear, either bullish or bearish markets could be opportunity to make money.
If shorting (requires training) is not a preferred style, those who want to buy low sell high, has to wait for a few more weeks for the global stock market to recover for short term, then long on stocks with positive trend.
As a short term trader, not every day is a trading day, we need to wait patiently for the best opportunity of the weeks to long or short. Short term trading is more speculative, reacting quickly to market news, therefore one has to apply Short-term Optimism + Technical Analysis (both price and volume) to have a high probability trading.
2) Mid-Term Trader (buy/sell every few months)
Strategy: Wait / Long.
The current market correction (20-30% for some stocks) is attractive for mid term traders who have higher risk tolerance level and looking for higher potential return than short term trading. Since the short term trend is still bearish, one could wait patiently for the global stock recovery for the next few months, then buy those stock with strong fundamental stocks.
If your stocks are trapped in the stock market, likely now is at low optimism, too late to sell now. Wait till the next rebound or rally above the support again, target to sell at intermediate high, either to minimize the losses (if bought too high last time) or making some profit. Apply Mid-term Optimism analysis with integration of Technical and Fundamental Analyses as main strategies.
3) Long-Term Investor (buy/sell every few years)
Strategy: Wait / Long.
Usually long term investors need to wait 5-10 years (typical economy cycle) for global financial crisis to buy strong fundamental stocks safely at amazing low price, future potential could be 50-200% higher. Current global market correction is still not severe enough, there is room for further correction. Therefore, long term investors should wait patiently, could be next 6-12 months, partly depending on the political economy, ones could enjoy the best performance as the golden investing opportunity could be coming soon.
Apply long-term optimism with fundamental analysis to start prepare yourself for this gift from heaven in near future. Blue chips will have more than 50% discount in stock prices, most people will get panic but you could profit from fears of others. However, investor has to accumulate bullets (cash) to have chance to buy low and sell high.
