The market moves in two ways—it either hits you like a bull upwards or claws like a bear downwards. If you master the share market trading, you can earn in both situations.
However, if you are new to share market trading, you can get intimidated by these market conditions. So here are five stock market tips for the bull and bear market to help you out.
5 stock market trading tips for the bull market
You need to first assess and evaluate your goals with bullish share market trading to make informed decisions. It would be best if you considered investment capital, age, and other factors that can influence your investment.
In a bull run, follow the herd mentality and buy stocks at lower prices and sell them when the prices go higher. Don’t buy or sell stocks against the market’s momentum. You will likely face huge losses.
The bullish market is the perfect time to diversify your portfolio. You can invest in different stock classes such as small-cap, mid-cap, and large-cap stocks. Similarly, you can invest in different industries such as manufacturing, automobiles, and technology in a bullish market run. You may also search for undervalued stocks. Typically, these stocks will revert to the mean and you are likely to gain more profit from this. Read this piece on mean reversion to understand more about this strategy.
Diversifying your portfolio comes with risks. Therefore, invest in trusted, reliable companies with a history of growth. Analyze the company’s product and services demand, sales, and revenue before making an investment.
Buy and sell stocks in phases rather than waiting for too long to sell a stock or entering and exiting a stock option too soon. Carrying out share market trading in phases may not give you the top returns, but they will always give you better prices at each successive decision.
5 stock market trading tips for the bear market
As in real life, it is best to play dead when faced by a bear. Avoid making any sudden moves in share market trading during a bear run. Rather, stay calm and analyze your investment options or refrain from making any investment at all.
Analyze your risk tolerance and invest only what you can afford to lose. Don’t over-invest with the expectation of recovering your losses. You’ll end up losing more. Remember, during a bear run, even the smallest of corrections can bring huge losses.
You can go on the offensive and short stocks to profit from falling stock prices. You can first sell stocks at a higher price and then buy them when the prices fall further.
One of the best share market trading strategies during a bear run is to invest in non-cyclical or defensive stocks. These stocks provide stable returns, even during a negative market run. Businesses involved in consumer goods, healthcare, and utilities, are examples of non-cyclical companies.
Reconsider your portfolio allocations and make changes to address any imbalance that might have occurred due to the bear market. For instance, you can lower your share market trading capital and liquidate the amount or invest it in gold or sovereign bonds.
We hope that the tips mentioned in the blog will help you make sound, informed decisions related to share market trading during bull and bear sessions. You will surely emerge victorious, earning handsome profits, irrespective of the dominant animal.