# Can money be made in bear markets if you aren't shorting?



## darkhorse70 (16 October 2014)

Long story short, my brokerage account does not allow to me to short. I don't fancy going against the trend and if a bear market was to come into action, is there any companies who still continue to go up.

I don't really want to go into very short term trades, like hours. Just to much stress for me personally and I dont have live feed.

So the question is, does that mean you have to wait on the sidelines till the markets turn again? I find it hard to believe that a stock would continue to climb while the rest of the world is collapsing.


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## darkhorse70 (16 October 2014)

I'm just frustrated a bit that as soon as I get a chance to trade, all the signlas are point to sit on the side lines or potentially short.


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## tech/a (16 October 2014)

Like all investments there are times that are better than other times.

Long term long only trading methods struggle.
Those that do churn out some profit are those that are in and out quickly.
Generally in churning markets.
Markets like these now are best to be out of if long---in my view.

If you cant trade short Id seriously look at CFD's if you want to short stock.
You really need to have that capability.

Can be very profitable just ask Sam who pulled $29k last night!


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## darkhorse70 (16 October 2014)

Ok thanks tech. I will research CFD's tonight. I believe I can still make money short term trading. I actually did whipe sim trading but the fact that broker fees were $25 per trade really chewed at my profits. Since IB is a margin of that cost I could do it if it came to that.

29k. Now that would be a good day haha


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## darkhorse70 (16 October 2014)

Do cfd's work in the exact same way apart from margin. Or is there another element to it like experation etc or different prices compared to the real stock?


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## tech/a (16 October 2014)

darkhorse70 said:


> Do cfd's work in the exact same way apart from margin. Or is there another element to it like experation etc or different prices compared to the real stock?




No just the spread you need to worry about.

I don't use them but there is a type that you should be using 
Someone who does I'm sure will help.

Learn how to position size correctly with margin so you are at no greater risk than without margin.


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## darkhorse70 (16 October 2014)

Thanks. Unfortunately Ib doesn't even provide CFD's to Aussie residents. Basically ruled out half the markets potential. I guess I'll sit on the sidelines for a few days for some more clarity.

On the other hand Twitter just bounced off the $46 mark ( good support level) up to 50$. I can maybe make a quick buck above 50. Aim for 52-55$ but im worried it could be very volatile.


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## VSntchr (16 October 2014)

tech/a said:


> No just the spread you need to worry about.
> 
> I don't use them but there is a type that you should be using
> Someone who does I'm sure will help.
> ...




"DMA" (direct market acess) cfd's is likely what your referring to.

I second Tech/a's comments on learning to position size correctly. I almost would recommend not looking into CFD's purely because if you haven't traded before the emotional factors could take over and you could end up doing some very silly things that you may not have done if you didnt have access to such leverage.


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## Weatsop (16 October 2014)

The easiest "short" is to exit and don't buy. Not-losing-money is a damn important part of trading. Recognising when to stay the hell out is a damn important part of trading. The markets won't give you a profit just because you want it to. The market doesn't care about you.

The market is not your mum.

Twitter spiked above $50 yesterday, but got hit back down. 


Where will you enter for confirmation? Why there? 

Do you need to see something in the volume or on the book? 

How are you going to exit? A take-profit? If so, why are you setting it where you're setting it? 

What are the fundamentals looking like? What do you know about upcoming news? Is there any? 

How much of a retrace do you expect if it does fly past $50? Why? 

Where would your stops be? How would you know you're wrong about the up-move?

Without knowing squat about Twitter - I don't even trade equities, and I've looked at the chart for about 60 seconds - I would have thought that, having spent September bumping along above $50, with $50 as support, and having recently broken down below $50, AND now having rejected an attempt to get back above... that the likely short term move is down, and that $50 is now fairly strong psychological resistance.

If I was stupid enough to trade something I'd only just seen, going just off the chart, I'd jump in with a short, and a nice tight stop just above $50.

*DON'T TAKE THAT AS ADVICE.* Even if you could short shares with your account, you'd do better just writing a cheque and sending it to the charity of your choice.

...but why do you think it's going up? What's your plan?

Trading without a plan is a terrible idea.



I ****STRONGLY**** recommend that you take bad trading conditions (or a lack of a plan) as a great opportunity to fire up a paper trading account, download some books on trading to your iphone, and spend a few days (preferably months) practicing and getting to know your plan perfectly.


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## darkhorse70 (16 October 2014)

Value snatcher, I know about correct position sizing. Id still only risk 2% regardless of leverage or not. Im currently reading trading in the zone. I'm implementing the idea that I cant have any emotion when regarding trading. I cant become fearful and I cant trade on over confidence.

I'm still trying to accept that trading has a risk. Like the author says once you truly accept that fact, then you have no fears. You have no bias as your emotions don't have any impact on what you are receiving (external data such as charts etc). Even though I have never traded, I believe after 1 year of emotional loss of control, I understand the importance of patience and discipline. The best thing ive learned for a while. Each individual trade has no certainty. But over the bigger picture if you do have an edge then you should come on top in the LONG run. So on that basis im not really excited or fazed if I win or lose a trade (well that's what I believe, I still have to trade lol).

Weatsop, as far as Twitter goes, I have been following it since it made its bottom. If I had money I would have been in since $36. I know it like the back of my hand. Its actually one of the only stocks ive been following for the past few months. The only reason in my mind support at 50$ didn't hold was because the markets are tumbling. And I wouldn't go long on it, now now. But what I wqas trying to say was since Tech suggested short trading, that at 50$ I could put on a 30c stop loss below and aim for $52/55 in the hope that the market would bounce for a day or two. Just because it didn't go past 50$ yesterday doesn't mean it cant. We actually have no idea what it could possibly do. Its all probability. The only reason I would be scared is because the markets might just gap and you get wiped out 5/10% and that's the last thing I want at the beginning of my trading career.

Plus 46$ is a much more important level than 50$. When it gapped up after earnings and previously 46$ was an important spot. Even yesterday it hit 46$ and shot back up to 50$. Most likely short lived but Id be on it in a heart beat if the markets stop their retracement.

I don't really care about fundamentals or recent news. As long as im not in front of the earnings day, I just assume that most of the news has been factored in.

My plan was to aim at 66$ but as I said the mentioned thing about TWITTER about entering in at 50$ in this current trade was a quick short term trade.


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## Weatsop (16 October 2014)

Hey, if you've got a plan, then you're on!

There are always risers, in any market. Some are risers *because* the market is going down. You can trade long in something, every day.

Sorry if the first answer was a bit condescending - I'm more of a *warning* feller than someone with actual advice. Until I've got a good idea people know what they're doing, I tend to worry about their accounts going down in flames.


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## Trembling Hand (16 October 2014)

darkhorse70 said:


> Im currently reading trading in the zone. I'm implementing the idea that I cant have any emotion when regarding trading. I cant become fearful and I cant trade on over confidence.
> 
> I'm still trying to accept that trading has a risk. Like the author says once you truly accept that fact, then you have no fears. You have no bias as your emotions don't have any impact on what you are receiving (external data such as charts etc).



Hasn't just about 30 years of recent psychology study and science debunked everything in that stupid book?



darkhorse70 said:


> But what I wqas trying to say was since Tech suggested short trading, that at 50$ I could put on a 30c stop loss below and aim for $52/55 in the hope that the market would bounce for a day or two. Just because it didn't go past 50$ yesterday doesn't mean it cant. We actually have no idea what it could possibly do. Its all probability. The only reason I would be scared is because the markets might just gap and you get wiped out 5/10% and that's the last thing I want at the beginning of my trading career.
> 
> Plus 46$ is a much more important level than 50$. When it gapped up after earnings and previously 46$ was an important spot. Even yesterday it hit 46$ and shot back up to 50$. Most likely short lived but Id be on it in a heart beat if the markets stop their retracement.




From what you have here it is clear that you actually have position sizing drastically wrong. A stop and therefore position size has to reflect the likely move not your hope.


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## qldfrog (16 October 2014)

you can be long on BEAR (on the ASX)


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## Weatsop (16 October 2014)

See, I'm being all subtle, "oooh, I'm worried you don't know what you're doing and you'll lose your money, myeh myeh myeh".

...and TH is all: *punches dude in face.*


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## tech/a (16 October 2014)

Weatsop said:


> See, I'm being all subtle, "oooh, I'm worried you don't know what you're doing and you'll lose your money, myeh myeh myeh".
> 
> ...and TH is all: *punches dude in face.*




He's a pussy compared to the market !


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## burglar (16 October 2014)

Weatsop said:


> See, I'm being all subtle, "oooh, I'm worried you don't know what you're doing and you'll lose your money, myeh myeh myeh".
> 
> ...and TH is all: *punches dude in face.*




If he is in the ring, he'll be lucky if only his face gets punched.


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## darkhorse70 (16 October 2014)

TH, I took the recommendation of the book from Nick Radge. And to be honest it does make sense to me. Maybe you can outline the 'stupid' stuff.

Position sizing - $50 is support level. Id prefer it at $46. Get it at close to that level as possible. Set the stop below that just because the range might push through. Divide amount your risking for example 30c. Divide it by your 2% to get x amount of shares allowed to be bought. Position sizing. 


Dont you know. Know one beats the markets.

By the way weatsop I appreciate the advice. Im not attacking you, just responding to your concerns.


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## Trembling Hand (16 October 2014)

darkhorse70 said:


> Position sizing - $50 is support level. Id prefer it at $46. Get it at close to that level as possible. Set the stop below that just because the range might push through. Divide amount your risking for example 30c. Divide it by your 2% to get x amount of shares allowed to be bought. Position sizing.




My point exactly! 

Average overnight gap down is *$1.80*. How is that coming into your calculations?

30 cents!

And we are in the highest volatility in about 5 years.

Position sizing.


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## Smurf1976 (16 October 2014)

There's also the opportunity that a bear market creates for long term investment once it's over.

For example, CBA bottomed at $24.03 early 2009. Let's say that someone bought it at $30 somewhere around that time. 

CBA at $30, that's a 7.6% dividend yield (fully franked) at the time, rising to 13.4% yield on that original investment today and with about 150% capital growth since then based on today's closing price. So not a bad investment and no need to pick the exact bottom to make it worthwhile. 

That doesn't make you money during the bear, but it's an example of a market decline providing an opportunity to make a profitable "buy and hold" investment. CBA is just one example, there's plenty more like that.


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## darkhorse70 (16 October 2014)

Mate, I was just giving a random example loll. To be honest my thought was, it would most likely go down by atleast a dollar and go up by most $2 ( MOST likely). That R/R isnt something id go for. The only way it would work was to be very tight on the risk for example 30c. For that to occur id have to watch the tape like a hawk and as I said I dont have life feed to see what going on woth the market plus the stock.


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## galumay (16 October 2014)

Smurf1976 said:


> There's also the opportunity that a bear market creates for long term investment once it's over.




Absolutely, its a fantastic opportunity for long term investors, I hestitated to mention it because the discussion seemed so focussed on trading from the OP onwards.


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## darkhorse70 (16 October 2014)

Smurf thats what I was thinking. I was looking at how long bear markets on average last for so I could hop on after. I think the 08 GFC was only 1 year till the bottom. Im sure an oppurtubity or two would be present over a bear market.


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## >Apocalypto< (16 October 2014)

darkhorse70 said:


> Long story short, my brokerage account does not allow to me to short. I don't fancy going against the trend and if a bear market was to come into action, is there any companies who still continue to go up.
> 
> I don't really want to go into very short term trades, like hours. Just to much stress for me personally and I dont have live feed.
> 
> So the question is, does that mean you have to wait on the sidelines till the markets turn again? I find it hard to believe that a stock would continue to climb while the rest of the world is collapsing.




writing Call Options.
Buying Put Options

Options are a whole new thing tread carefully.


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## skc (16 October 2014)

Some potential approaches from an old thread on the same question.



skc said:


> - Buy put options
> - Sell call options
> - Buy inverse ETF
> - Buy VIX index/ETF
> ...


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## darkhorse70 (16 October 2014)

Thanks apocolypto/skc. Maybe a good time to start understanding those other tools.


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## Julia (16 October 2014)

darkhorse70 said:


> I was looking at how long bear markets on average last for so I could hop on after. I think the 08 GFC was only 1 year till the bottom. Im sure an oppurtubity or two would be present over a bear market.



OK, so how would you determine an entry point, having ensured that a bottom had been reached?

And on this:


> could put on a 30c stop loss below and aim for $52/55 in the *hope* that the market would bounce for a day or two.




When you exclude the word "hope" from your trading/investing vocabulary, you will be getting somewhere.


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## darkhorse70 (16 October 2014)

Julia, id wait for a confirmation after the trend had clearly changed/reversed. Then id wait for clear changes in the trend of stocks and hop on once some clear level had been indicated. Obviously you would have a heap of resistance on the way up etc.

I say hope in the sense that nuthing in this endevour is certain. Not on any one particular trade anyway. It can go both ways no matter how much you analyse the trade. I didnt mean close your eyes and take a shot in the dark or cut corners etc and hope for the best.


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## Julia (17 October 2014)

Thanks for clarifying, dh.  Good luck.


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## Trembling Hand (17 October 2014)

darkhorse70 said:


> Mate, I was just giving a random example loll. To be honest my thought was, it would most likely go down by atleast a dollar and go up by most $2 ( MOST likely). That R/R isnt something id go for. The only way it would work was to be very tight on the risk for example 30c. For that to occur id have to watch the tape like a hawk and as I said I dont have life feed to see what going on woth the market plus the stock.




My point was that with a $7000 account and a volatile $50 stock you will not be able to position size _any _amount that will make it work on an EOD trade.


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## darkhorse70 (17 October 2014)

No problem Julia.

I think I get what you're saying TH. I understand I dont have the capital to buy a large enough position if thats what you mean? I dont think ill plan on trading short term. With my anxiety and all I dont want to be an emotional wreck while I trade. 

And If I did want to trade EOD it would have to be in the aussie markets. I need my sleep lol.


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## darkhorse70 (17 October 2014)

Care to expand with an example so it has some educational value?


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## tech/a (17 October 2014)

darkhorse70 said:


> Care to expand with an example so it has some educational value?




Risk 30c
2% 7000 = $140
That's 467 shares. @ $50 = $23,350 (Using your margin)
Say price rises 30c by close (EOD)  That's $140
less brokerage 
tax 35% say You made $91 approx.

*This is the correct way to us margin*
You don't have $23,350 but you are not taking on a greater Risk than the trade below.

Now take a $5 stock 
same risk 2% 
467 stocks @ $5 = $2335
Stock rises 30c ---etc blah blah

Same figures as above.
*Better bang for buck* but *UNDERCAPITALISED.*


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## DJG (17 October 2014)

Dont mean to burst your bubble but before you worry about shorting and Twitter - figure out your plan!

This was less than a day apart.



darkhorse70 said:


> I don't really care about fundamentals or recent news. As long as im not in front of the earnings day, I just assume that most of the news has been factored in.
> 
> My plan was to aim at 66$ but as I said the mentioned thing about TWITTER about entering in at 50$ in this *current trade was a quick short term trade.*






darkhorse70 said:


> I think I get what you're saying TH. I understand I dont have the capital to buy a large enough position if thats what you mean? *I dont think ill plan on trading short term. *With my anxiety and all I dont want to be an emotional wreck while I trade.
> 
> And If I did want to trade EOD it would have to be in the aussie markets. I need my sleep lol.


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## skyQuake (17 October 2014)

tech/a said:


> Risk 30c
> 2% 7000 = $140
> That's 467 shares. @ $50 = $23,350 (Using your margin)
> Say price rises 30c by close (EOD)  That's $140
> ...




Would work better with a CFD provider, since IB is screwed for stocks atm.

Also part of your edge darkhorse is your ability to trade stocks without making waves - you can get in and get set while whales are still scrambling around for liquidity (and likely to do so for the nxt hr)
This is especially true for mid tier US stocks, where there is no opening auc and stocks don't gap around as much. They tend trade (thinly) to get to 'fair value', whereas bigger caps have pre-market trading and open at 'fair value'


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## tech/a (17 October 2014)

skyQuake said:


> Would work better with a CFD provider, since IB is screwed for stocks atm.
> 
> Also part of your edge darkhorse is your ability to trade stocks without making waves - you can get in and get set while whales are still scrambling around for liquidity (and likely to do so for the nxt hr)
> This is especially true for mid tier US stocks, where there is no opening auc and stocks don't gap around as much. They tend trade (thinly) to get to 'fair value', whereas bigger caps have pre-market trading and open at 'fair value'




For shorting yes.
figures were more the point.


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## darkhorse70 (17 October 2014)

Ok, I see tech.

I agree that im undercapitilzed for EOD trading TH, I wouldnt even consider EOD unless there is no other alternative. My account is at $8000 now haha.

Dangaff I was giving hypothetical situations. Ofcourse im going to always contradict myself. Im always learning and evolving. I do have a plan. Its not intra day but if it came to that then I would change my strategy. But do I curre tly want to engage in it? No.

Skyquake, I agree about the getting in and out quickly. Ill have to get some more confirmation I guess before I start to formulate a new plan. 

Thanks


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