The markets often crash. Yes, this is nothing new. This happens more often than we realize, if only for a day or two.
The question is: were you prepared?
Ready to sell marginal positions
Ready to buy
It is one thing to jettison marginal positions. They are the easy ones to spot – barely making any gains or sliding backwards slowly but surely. When the market hits a bump or sell-off, why not throw these out.
On the other hand, the tough one is being ready to take advantage of a downturn in the markets and but when the prices are low.
Here are a few ideas on how to take advantage of sell-offs to grab new positions:
Look at the equity curve of the ticker symbols in your groups or groups in your investment software to see which ones have had the most upward momentum.
If you are using a trading strategy, check the rankings of the symbols in your groups to see which ones have been at the top the past few weeks or months.
Compare your ticker symbols against a benchmark like the S&P 500 in either a combo chart or in a ranking to discover those symbols out-performing the market.
Note of caution, many big market drops last only a few days. This means:
It may not be necessary to sell any positions.
The opportunity to buy at a lower price is limited – time is short.
If your investment software has a number of trading strategies then abrupt market changes can be a good time to evaluate your strategies.
Compare your strategies performances in a combination chart to see if one is out-performing the others
Examine the equity curve of your strategies to make sure you are using one that is performing well and not in decline.
Keep a positive outlook. The market always rebounds. The only question is how quickly. But apply these ideas with some investment software and you can find safe profitable investments.
Author Raymond Dominick is the designer of Dynamic Investor Pro investment software for stocks, ETFs and mutual funds. He is the author of the book, “Invest Safely and Profitably.” He began investing in the markets in his teenage years. An experienced business manager and journalist, he has been a registered investment advisor representative, also a professional photographer who loves escaping to the wonders of Glacier National Park in Montana.