How To Take Advantage Of Stock Market Decline

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By Funso OKe

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The market has a good bad stage that tend to excite professional traders so they can take advantage of the market when it rises again; this stage comes around often, when it is around you see a lot of panics, anger, bad headlines disturbing sell off in the market.  Well guess what not all bad news are bad news, I will show you why below. The stage that we are talking about is called “market decline”.  That is the type of situation we are experiencing today, the market is currently taking a big hit and it poses as sad news to amateur investors because the message they get from this is to go ahead and sell to stop the loss, while most big guys are happy because they now have the chance to make big move on the market. Days that the market decline are days that are good to buy more, the reasons are, stocks are cheaper, you can maximize on gains, and you have enough time to exercise short term and long term trades.

Cheap stock prize

Cheap stock prizes comes on days that the market have a huge sell off, for instance today march 10 2011 the DOW is short -154.88 points, NASDAQ short -41.27 points while S&P 500 is short -17.65 point. Whenever there is a decline in the market like this, what professional investors do is buy more, but keep in mind they don’t just buy any stock, they only buy into companies they have done several researches on,  companies that they are sure will rebound. So instead of panicking and calling your broker to yell at him to selling off your holding as most amateur investors will do; those that have a strong positive market experience will buy more, they will add 100 shares here and there, here is why;  let’s say stock XXXY is $75 at opening, and the stock go down to $70, what an experienced traders will do is buy more at $70 so they can catch more gain when the stock go back up to about $80 so instead of gain the profit of 5 point difference only, when it goes up from $75 to $80 you get a 10 points gain because you bought more at $70.

How to Maximizing on Gains

As mentioned above, when the market underperforms you want to give yourself the room to be able to buy more, how you can do this is buy keeping cash in your investment account daily this means you keep at least 20% cash, because as you are hoping to buy more in some company you like, you need money to be ready for action. Some days you will see the stock of the company you like decline and that will be your opportunity to strike, and if you don’t have cash available it is okay to cash in on one stock that has made you money in other to raise funds for another in case you are short on cash, but if you do have cash in your account just use the cash to buy more and this increase you gain when the stock finally hit the target prize in the near feature.

Learn to use the above methods to do you short term or long term trades and you will see the huge difference in your investment portfolio because it give you a great room to run, and maximize your gain to the best potential while taking advantage of the market decline.

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