Its been more than a decade since the stock market underwent as difficult a period as is now unfolding, which leaves newer investors extra vulnerable, according to Real Money Columnist James ‘Rev Shark’ Deporre.
“Anyone that started trading since the 2008-2009 recession and bear market is likely dealing with the most difficult market environment they have ever seen,” Deporre wrote recently on Real Money. “A stealth bear market has been operating in many stocks since February 2021, and now it’s spreading to the broader market and creating elevated volatility.”
According to Rev Shark, there are many different styles and approaches in dealing with challenging markets, but if you aren’t clear about what you plan to do, that leads to emotional and suboptimal decisions.
“My style is a combination of stock-picking, momentum and technical trading, and it doesn’t work very well in a current market environment that’s driven primarily by macro flows, rotational action and computer algorithms,” he said.
To help out, here’s a look at Rev Shark’s current seven-point strategy for investing in a toxic market
1. Stay highly reactive and do not spend much time trying to predict what might happen next.
Many people spend time and energy complaining about the horrible market, which may provide some emotional relief, but it is not productive. The market always has and always will go through cycles. Miserable market action is just the nature of the market beast at times. The future will take care of itself. Focus on managing what is happening today, which is the only thing that you can control.
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2. Maintain a high level of cash.
There is no benefit to building big positions in a poor market. When there is a clear turn and some sustained upside, there will be plenty of time to put money to work. Traders often fear that if they don’t put money to work into the teeth of a decline, they will miss out. That just isn’t the case. When a bull market environment develops, it will last weeks…
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