3 Clutch Tips for Surviving the Bear Market

by | May 9, 2022

Have you ever traded a real bear market before? 

Well, if you’re currently trading this market, then you have. You can cross that one off your bucket list…

But I’ve said it before and I’ll say it again — I think the overall market’s headed lower this year.

I went into great detail on all of the reasons why I believe this in a recent letter that you can read right here

Let’s quickly recap a few of my concerns about the current state of the stock market:

  • Some of the world’s biggest tech companies are dumping market cap value like penny stocks…

EXAMPLE #1: In early February, Meta Platforms Inc. (NASDAQ: META) lost $250 billion in market value — the biggest single-day wipeout in the history of the stock market. 

EXAMPLE #2: At the end of April, Netflix Inc. (NASDAQ: NFLX) reported its first-ever quarter-over-quarter subscriber loss. The stock dumped as much as 35% intraday — the biggest single-day loss in the stock’s history. 

  • Nearly every current news headline is negative for stocks — 40-year high inflation, the war in Eastern Europe, the Fed hiking interest rates, etc…

Speaking of headlines, I get my news from the StocksToTrade Breaking News Chat, and so should you. See for yourself! Try StocksToTrade today! 

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Now that your news and charts are in order, look at the big picture. It doesn’t look great, either…

  • The bear markets we’ve seen in recent history (e.g. 2000 and 2008) dropped stocks much further than their current levels from peak to trough…

EXAMPLE #1: In 2000, following the blow-off top of the dot-com bubble, the Invesco QQQ Trust (NASDAQ: QQQ) dropped more than 80%

EXAMPLE #2: In 2008, amid the financial crisis that led to the Great Recession, QQQ dropped more than 50%

If we’re in for a similar bear market this time around, history tells us that QQQ is probably headed lower than the current drawdown (which stands at 25% at the time of writing).

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So…why should you care? Because sleeping on the obvious signals you could cause you to trade in a way that blows your entire account up!

Or, you could ignore the history and miss a massive short opportunity on the overall market. It all depends on how you play it…

With that in mind, let me give you three clutch tips for surviving this ugly bear market…

Tip #1: Buy Puts on Bounces (or Green Days)

Let’s say you’re in a put trade and it’s going well. You’ve hopefully booked profits on the way down as the stock sliced towards your price targets.

This is where a lot of traders pack up and call it a day, but that’s a mistake. 

If you simply move on to another chart at this point, you’re potentially leaving money on the table. 

This is all especially true in this bear market, where the selling is seemingly unstoppable.

Bottom line: I want you to start seeing bounces and green days as re-entry opportunities for put trades.

Looking back on some of my trades from 2021, a few of my biggest wins came from playing bounces on downtrends (after I’d already locked in some gains). 

I could’ve been happy with the initial profits and moved on. But I’m never satisfied. 

Example: Last summer, I traded Moderna Inc. (NASDAQ: MRNA) puts four times in a row for nearly $80,000 in profits.

Don’t assume the bear trade is over because one wave has ended. Another is likely coming. 

See the bounces for what they are: slam-dunk opportunities to re-load your puts

By doing so, you could potentially pocket money that other traders are foolishly leaving on the table.

Tip #2: Don’t Go Long Before the First Green Day

Quite frankly, I wouldn’t recommend going long on anything in this bear market…

That said, I understand the mindset around buying calls on some of these days…

After all, the ‘relief rallies’ we see in a downtrend can bring MASSIVE bounce play opportunities.

But you’ve gotta remember that timing is everything

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Buying calls in this market is a dangerous game. If you don’t perfectly nail the timing, you’ll likely get smoked.

In individual stocks, wait for the first green day and adjust your long strategy from there.

For the overall market, I wanna see a first green week before considering any call plays.

My advice? Don’t go long on anything right now. But if you must, do it on (or near) the first green day.

Bottom line: Be patient. Don’t try to be a hero and call the bottom before it forms. 

Tip #3: Get In and Out of Your Trades Quickly

With the market whipsawing as it has been, it’s no time to be holding swing trades.

Many dip-buyers fell for the bull trap last Wednesday, only to be annihilated on Thursday in the biggest single-day index drop since early 2020.

My advice? Get in and out of your trades quickly. 

This is even more true for options traders. Think about it…

Anyone who bought index calls last Wednesday — and didn’t sell them before the end of the day — got utterly destroyed on Thursday.

Don’t fall for the bull traps. I think there’s a ton of rollercoaster price action left in this wild bear market — be prepared for anything.

If you aren’t nimble and prepared to adjust your mindset based on whatever the market throws at you — you’re setting yourself up for disaster.

Keep your trades short and sweet until the overall volatility subsides. 

Bottom line: If you happen to bag a big win in a bear market, the best strategy is to take the money and run. 

Final Thoughts

I know that many of you have probably never traded a bear market before. And you’re probably wondering how exactly you should adjust your strategy.

I hope these clutch tips help you navigate the bear market. They’ve helped me enormously throughout the years, and now I’m a millionaire because of it.

Be nimble, watch for bounces, and don’t try to be a hero. 

Meet Mark:

Mark Croock is a former accountant who after studying under Millionaire Trader Tim Sykes turned his small account into $3.19 Million in trading profits by applying Tim’s strategies to options trading.

He started Evolved Trader to pay it forward and help other traders learn how to leverage options

 

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