How to survive stock market corrections.

How to survive stock market corrections.

According to Warren Bufett “Stock market is a device to transfer money from the impatient to the patient.” Warren Bufett has the authority to say so because patience has helped him to accumulate all his wealth and those who were panicky left the opportunity at their doorstep. Investing during market corrections is an art which needs to be mastered to be successful in stock trading.  This blog post will cover some of the tips and tricks which would be useful for trading market corrections.

  1. eqsis-panicDo not panic.

The first and foremost rule to make money during market corrections is not to panic. People often take incorrect decisions in a state of panic and this will cost you money. During the bearish phrase take a look at your portfolio and analyze the performance of you stock holding, decide which stocks to hold and which stocks to sell.

  1. Stock market corrections would affect only the short term traders.

If you are a long term investor and you tend to book your profits quarterly or yearly then you need not worry about stock market corrections. Corrections are generally temporary downfall in the market after a bullish rally. Such corrections would not affect your portfolio. On the other side if you are a short term trader then you need to trade market corrections smartly and most importantly do not panic. Taking decisions early can be beneficial for the short term traders, this would help them save some money smartly.

  1. Don’t believe the media hype.

There is no doubt that financial channels provide the best source of information related to share market but it better to ignore these channels during market corrections. These channels would hype the situation rather than showcasing the real scenario. This would only worsen your sense of fear and this would make you panicky. It would be absolutely fine if you ignore these financial news channels and apps for five days.

  1. Do little or nothing.

If you completely ignore the market correction then also you will be safe because these corrections hardly last for a long time, these are just the temporary downfall in the market. If you choose to sell off and play safe then you should check your portfolio and choose smartly after analysis which stocks to sell and which stocks to hold.  If you are a beginner then it is good to not react during the market corrections.

  1. Short selling.

When a trader borrows the stocks with an intention to resell them when the price falls then it can be called as short selling. Trading short positions would be a wise decision to make during market corrections. When you predict the market correction after analyzing the market then trading short positions can be very helpful in making money. An experienced person in share market would be comfortable in making money by short selling as it has higher amount of risk involved.

  1. Call option and Put optionBuying put option.

A put option is a contract giving the owner the right, but not the obligation to sell a specified amount of a particular security at a particular price within a specified span of time. This would be another good option to make money during market corrections.

  1. Stock market correctionsLook for deals.

Here deals are not the usual discounts which you get but deals are the opportunity to buy valuable stocks at a very cheap price. Many such deals would be made available during the market correction and one must not miss the opportunity to buy such stocks as this would fetch huge returns in the future. Here is a twist, before buying the share at reduced price always analyze the situation and see whether it is due to correction or due to troubles in the company.

  1. Review your investment portfolio.

Market corrections would be indeed the best situation to assess and review your existing portfolio. Take out the stocks which seem to be risky and minimize your risk. If you find some great stock deals then never miss an opportunity to buy those shares. As far as stock investment is concerned it is very beneficial to follow you intuition or gut feeling, if you feel that a particular company would further fall down in value then selling off is a better option than regretting it later.

To summarize.

Stock market corrections are startling and alarming to numerous financial specialists. In today’s surroundings, things move rapidly and the media is on needless excess mode as far as giving an account of the occasions. At times of market corrections stock traders are all around the globe are advised to stay quiet and return to their money related arrangement for a guide on what to do, if anything.

Have you survived a stock market correction? Please share your experience in the comments section. If you could contribute more tips and tricks to survive market correction please comment below.

Article Info

Published Date: July 4, 2016
Author: Valarmurugan

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