04 June 2019

How to PROFIT from a BEAR Market?

HSI opened high only to fall back to the previous closing range. This shows that sentiments are still bearish, with no clear conclusive end to the current trade war.

At this rate, there might be a chance for the market to move lower than the day before.

If investing, watch for strategic entry prices. Likewise, for invested clients, you may do a sell first and buy back at a later time. This is something like a covered short where invested clients can trade for some profits while holding on to shares.

For example:

Mr Tan has 1k shares of DBS bought at S$27.00. It is sure loss now if he were to sell now at S$25. To do a covered short, Mr Tan sells DBS at S$25. And after a week, DBS falls to S$24.00. Mr Tan bought back after a week at S$24.00. 

He has profited S$1.00, and back to holding DBS shares to wait for the shares to come back at S$27.00.

Profit is made when one is buying low, selling high, or vice versa, regardless of the sequence.

The risk for Mr Tan is if he were to sell at S$25, and the price starts to move up and up, then Mr Tan would have missed 'the boat'.

Be sure to tabulate and account for the prices bought and sold. The online portfolio only tracks what is first bought and sold, not the other way around.