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How to make money when the stock market drops

Your capital may be at risk. This material is not investment advice.

Many of you have surely looked at online investments for a way to invest money and get a good profit.

But, this is not arriving, investing without any knowledge and winning.

Perhaps luck will accompany you but it is unlikely.

With this you will only get to lose your money and also you will not have the opportunity to learn or look for how to invest and you will assume that investments do not give positive results.

Today we are going to talk about how to take advantage of possible falls in the stock market to increase our money while investing wisely.

Why invest in the stock market?

Investing in the Stock Market can be a good opportunity to obtain profitability, since it offers a wide range of assets with which we can negotiate.

When we invest in the stock market we must know that profits can be obtained both when the stock market is in full swing rising and when the markets fall.

This is thanks to the fact that when investing we can bet because our assets will go down or up the stipulated price so that the benefits can be obtained from both results according to our investment bet.

Bullish positions (long positions) bet on the value to rise.
Bearish positions (short positions bet on the value to go down.
In the Stock Market, as we said, you can generate profits in both bullish and bearish directions, you just have to know how to proceed in each situation.

Everything is a matter of following the evolution of the markets and the securities that operate in it, paying close attention to those factors that can influence prices, and above all not losing detail of the behavior of other investors.

Without going any further, supply and demand will already give us a lot of information on how we can get more out of our money.

 

How to trade down

Usually it is usually agreed that in upward trends it is easier to obtain profitable results in investments in the stock market.

But what if the market is down?

One option is to wait for a new situation of rises and continue trading, but why not try to take advantage of the falls?

Trust me, in downward situations you can also get good opportunities to close a good deal.

As we have already advanced, the most common way to make money on the Stock Market is to buy shares as cheap as possible, wait for their price to rise and then sell them at a higher price, to get a return on the invested capital.

But in addition to that we have the alternative option, less used but very interesting too. It’s about selling first and buying later.

But is that possible? Yes and no. I will explain you.

In the Stock Market as such you cannot sell shares if you do not have them, but if you register with a broker, it can “lend” them to you so that you can open short positions.

On the Internet you will find multiple international brokers, where you can make this type of investment to benefit from downtrends.

On the other hand, in addition to investments in the Stock Market as such, you can also enjoy other types of products that will allow you to trade with stocks. Let’s see them!

If you are thinking of investing when the stock market falls, you have a selection of very interesting investment products.

Some of the most used products for these operations and that we are going to detail below are CFDs, Futures, Credit Operations and Options.

We must be clear that these methods are very beneficial but in some such as CFDs they also have a great risk of losses due to leverage.

You can invest and obtain benefits of amounts greater than those you have available but, on the contrary, the losses would also be at the rate of the amount greater than what you have in your account.

In the world of investments you have to be careful when betting on an investment but with a clear investment plan and experience in these operations the risk is considerably minimized.

We will start with binary options. In Europe they are prohibited but binary options in Latin America are very popular.

These are based on a contract by which the buyer can buy or sell (CALL OR PUT) the assets at a certain price at a time that is set in advance, the expiration date.

Through binary options you can trade multiple underlying assets, such as stocks. In this case, you will only have to choose a security and bet that its price will go down and, if it fell at maturity, you will make a profit.

It is undoubtedly one of the most sought-after alternatives to take advantage of this type of situation, when the stock market falls.

In addition, in binary options trading you will only make decisions about the evolution of the asset price, if they go up or if they go down.

At no point will you have to actually buy or sell the shares, just speculate on their price fluctuations.

Trading with futures

It is a product similar to binary options, since in futures trading benefits are also obtained by making predictions about the value that assets will have, in this case stocks, in the future.

As with binary options, the investor can sell without having bought previously, since through this contract only a forecast is made about the trend that the price will have.

The main advantage of futures is that profits are obtained on a daily basis, so they are a good alternative to operate in the short term. However, in the Spanish market even these types of operations are not very popular and offer less liquidity.

CFDs on shares

Contracts for difference are another option used by traders. One of the main advantages is that these contracts, unlike options and futures, do not have an expiration date.

On the other hand, they enjoy a very interesting feature: leverage.

With leveraged trading you can qualify for much more significant profits. But be careful, you will also be exposing yourself to the risk of suffering greater losses.

By not having an end date set in advance, CFDs serve us both for long and short positions. In the same way, these operations will also allow us to take advantage when the stock market is down.

How cons, to say that these investments have a certain cost of hiring and that in addition, commissions are applied to each day that the contract is active.

Also, comment that in Europe binary options are prohibited and CFDs have limited their leverage.

Finally we are going to talk to you about the well-known, and with more tradition, Credit operations. This method can only be used for securities that are included in the Spanish IBEX35 index.

Credit operations can be due in a specified time or without. There are other so-called intraday operations that allow you to invest money that you do not have but have one day to expire.

The operation is identical to intraday operations except that it can have an expiration date of 3 months. For this type of operations you can only count 20% or 25% of the total investment.

When the stock market is down, credit operations are an excellent alternative to benefit. The Ibex-35 is the Spanish index that brings together the shares of the most relevant and strongest companies in the markets.

If the values ​​fall, you can take advantage of credit operations to invest downwards and obtain higher returns when the situation begins to normalize and prices begin to rise again.

As you can see, there are many options available to invest in the Stock Market with the markets down, in this case, and explore your possibilities when investing.

Recommendations before investing down

Although it is usually easier to invest higher, we all know that at some point the stock market has to fall. Financial markets run on volatility so it is possible to make money both up and down.

Bearish strategies are more complex and some aspects should be taken into account. If the shares fall and you want to take advantage of it, it is important that you are convinced that the drop in prices is due to widespread fear, because if this is the case, you will know that at some point the prices should rise again.

If you are going to trade down it is important that you trade intraday, as it makes no sense to trade in the medium or long term. In the long term the company could go bankrupt and if you invested in its shares you will only accumulate losses.

To take full advantage of the potential of short operations, CFDs are the best alternative, since they allow you to sell without having bought and you will enjoy leverage in your operations.

Now that you know the possibilities that a bear market offers, would you dare to be a bear? There are only two market trends, so it’s up to you.

Be that as it may, I hope you enjoy the stock market and that you can get the most out of your money.

If you want to know more about trading with binary options, I recommend that you take a look at other articles, where we reveal everything you need to know and where you will learn to trade assets both up and down.

NOTE: This article is not an investment advice. Any references to historical price movements or levels is informational and based on external analysis and we do not warranty that any such movements or levels are likely to reoccur in the future. In accordance with European Securities and Markets Authority’s (ESMA) requirements, binary and digital options trading is only available to clients categorized as professional clients.
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