I recently developed this strategy for investing and trading the stock market after the recent market crash that saw portfolios and asset classes lose over 50% in value. For any investor to experience such a traumatic experience, it would be hard for any person to commit money in the market without fear of another plunge downward. The buy and hold strategy no longer applies in this environment, especially since we are officially in a bear market. Diversification in stocks didn't help much as virtually every sector dropped over 35%-50% in value. Jumping in and trying to catch a potential falling knife is not the answer either. To make money in this market, short term investing or swing trading is the only way to go. You also have to have a sound plan of attack to survive in these markets. Another thing is forget worry about having to pay short term capital gains, if your paying taxes it means your making money. Many people want to hold their stocks at least a year to avoid short term capital gains. Holding stocks to avoid paying capital gains is essentially "penny wise and dollar foolish" in todays market. Those winning positions could very well be losing ones in a years time.

 

The fact that most people lost over half their values on their stock portfolios and retirement accounts shows that the majority did not have any protection for their accounts in the form of short postions. I feel that people do not use short positions because they are not familiar with it nor comfortable doing so. Shorting is a very important strategy and if used correctly can be a valuable tool that will help you profit in the stock market. It is a key part of my strategy towards successful trading.

 

What are the factors that determind how well you do in the markets. The 3 factors that many people fail to see are the following. The stock market is based on human psychology that affects the probability of market directions. Markets go up because of greed and go down because of fear. Understanding this psychology is one of the most important factors to success and we can do accomplish this by using technical analysis and reading charts. The second factor we have to take into account is the risk reward. How much are you willing to risk to make a certain amount (reward). The last factor is your trading plan. The trading plan is determined by the first 2 factors. When you go to place a trade to buy a stock, you have a plan. What price will you pay for it, 2) if the stock goes against you do you hold and pray, 3)take your losses and if so how much loss 4)average down

by buying more.