Do you know how to bet on the stock market going down? Strategies such as naked put buying is very profitable if you choose direction properly. If you’re looking for more risk management strategies then call credit spreads and put debit spreads are also really good ways to profit when the market is falling. No one can predict the downturn of the market. However, patterns and trend lines can go a long way in helping to predict a fall in the stock market.
How to Bet on the Stock Market Going Down
- Here’s how to bet on the stock market going down:
- Shorting stocks or $SPY.
- Puts on stocks or $SPY.
- Call credit spreads on stocks or the market.
- Trading /ES or /MES short.
Sometimes there are corrections that can cause people to think the market is going into a recession. That isn’t the case. So if you’re going to bet on the stock market going down, make sure you have proper risk management.
The market trades in cycles. There will be bull markets and bear markets. The key to protecting current profits and adding more is knowing how to bet on the stock market going down.
There isn’t a magic formula to knowing how to bet on the stock market going down. If there were, we’d all be rich. However, there are tools we can use to know when to place the bet.
20% or More
A bear market is considered as such when it’s down 20% or more. Many times people can mistake a market correction for a bear market and panic. A correction is between a 10-15% move down.
This allows for investors to get better entries into a trade. However, at the time, it can seem like a bad thing. The good news is that you can still make money when the stock market is going down.
The key is to knowing when to bet on the fall. There isn’t a perfect science to that however, using patterns and technical analysis basics are tools at your fingertips.
Make sure you know where to invest in a bear market and have the strategies needed to protect yourself.
Candlesticks are the name of the game. They not only form support and resistance but also tell us how other traders are feeling. Support and resistance is so important.
They’re levels that traders pay close attention to. You can find them using the real bodies and wicks of the candlesticks. However, candlesticks can tell you so much more.
Candlesticks serve a great purpose. Not only to they tell a story by themselves, when you group them together they form patterns. You should know what candlesticks mean to know what story they tell.
Everyone knows what bullish candlesticks and bearish candlesticks are. How about doji candlesticks? Did you know there are different doji candles? Doji candles are indecision candlesticks.
Some show more indecision than others. While some have a more bullish or bearish bias in their indecision. That’s why it’s so important to know what candlesticks look like and mean.
They tell you when other traders aren’t sure of a direction. Then you can look to see where they’re placed in patterns. Take our candlesticks reversals course to learn to differentiate between them so you know how to bet on the stock market going down.
Patterns are going to be a huge help in knowing how to bet on the stock market going down. It takes looking at thousands of charts to be able to see the patterns pop out at you.
There are large ones like triangles. Descending triangle patterns on the S&P futures are going to be a huge clue into the direction of the market.
Then you need to look closer. Bearish and bullish patterns form within each other. This can cause the break down of patterns. You see the descending triangle and think it’s going down.
However, inside of that is a cup and handle pattern. Cup and handle patterns are bullish. That can have an impact on the market’s direction. Although you may see head and shoulders patterns.
That allows you to place a good bet on the stock market going down. You can look even closer for the 2 and 3 candlestick patterns for further confirmation.
Look for dark cloud cover patterns or bearish harami patterns. Get as much confirmation as possible if you know how to bet on the stock market going down.
What Goes Up When the Stock Market Goes Down?
- Here are some stocks that go up when the stock market goes down:
- Gold: $GOLD or related stocks. Silver: $PAAS or related stocks.
- Defense stocks during times of war such as $LMT and $GD.
- Consumer Staples: $WMT, $TGT, $JNJ.
Technicals on How to Bet on the Stock Market Going Down
Technical analysis is another tool you can use to confirm a bear market coming. Moving average lines, RSI and MACD can be used to confirm moves as well
Moving averages like simple moving averages and exponential moving averages have many uses. They are support and resistance as well as equilibrium. When a stock moves away from the moving average lines, it’s going to come back to them.
The moving average crossovers are good buy and sell signals; especially the 9 and 20 exponential moving averages. When they cross get in or out.
The RSI lets you know when a stock is overbought and oversold. Sometimes stocks can stay in those areas confirming the strength of a trend. Other times, it’s a signal that a reversal is coming.
The MACD tells you when a stock is crossing into bullish or bearish territory. Look for the MACD crossover to confirm a move so you know how to bet on the stock market going down.
Bottom Line on How to Bet on the Stock Market Going Down
If you want to know how to bet on the stock market going down all you need to do is read the charts. However that’s easier said than done. You have to put in the time and effort to study.