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How To Make Money When The Stock Market Goes Down or Crashes

Updated on July 9, 2012

Something many new investors do not realize is that it is possible to make money when the stock market goes down as well. Most people think that in order to grow your net worth you need to bet on stock growth. This guide will go over the basics of the different ways that you can make a profit trading online markets in a bearish or declining marketplace.

Becoming an Online Currency Trader

Becoming an online currency trader is really the biggest opportunity you have when you are trying to make money when the stock market goes down or crashes. In a financial decline, even in a global one, some countries are affected more than others and some will even come out ahead. It's not always practical to buy overseas stocks but buying currency from a country achieves the same result - it buys you a part of their growth (or slower decline). If the currency performs better than yours then you have made a profit and you can cash out for more money then you paid. Diversifying your investments when you are in an economic decline is a wise move and diversifying globally is by far the best way to do this.

Shot Sale Market Trading On-line

Short selling is the riskiest way of trading in a falling market but it can also be the most profitable. Short selling involves selling shares that you have loaned the right to, essentially shares that you don't actually own. When you make the sale you are obligated to buy them at the previous market price and this can either be a very good or a very bad thing. If when you sell the price has fallen you are going to make the difference in profit. However, the risk comes in when the stocks take an upswing. Since there is no risk on what price stocks can increase up to your risked losses are practically infinite. This is a good option in steadily declining markets where you have done your research.

Day Online Stock Trading in a Bearish Market

While long term stock trading might not be very favorable short term, or day trading still has a lot of potential. Day trading should focus on very small buy and sell orders multiple times over the course of a day. With such small trades you can minimize risk while profiting from the small up and down shifts that occur on most high-volume stocks over the course of each day. This can be hard, however, if you don't have the best stock trader online available - you need one that has all of the tools that you need at the cheapest possible comission.

Choosing the Best On-line Stock Trader

Whether you are doing a lot of online stock day trading or if you are simply trying to keep your investments secure through a market fall then you are going to need the best online stock trader you can get. For day traders the best best online stock trader is going to be the cheapest. You are often even better off getting your metrics tools separately to save on the high volumes of commissions you are going to be doing. In a market fall, especially, you want to be making as many lower risk trades as possible. The best on-line stock trader for a long term investors is going to be the one who does the most research for you so that you can receive sound buy and sell advice.

Spread Betting

Your final option when it comes to making money during a recession is spread betting. When you make a spread bed you make a 'bet' against how much downwards movement a particular stock or financial commodity will have. Then if the spread is met you make the difference in profit. Just the same as with short selling there is the risk that you will lose money if the price instead goes up. However, unlike short selling your risk is limited by the amount of spread you bet on. In this way you are ble to make more conservative trades and it is a much safer way to make money when the stock market goes down.


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