Tips on Navigating and Surviving the Current Market Conditions

Here are several tips that I have compiled on surviving market downturns.

1. Cash is your friend. Make sure that most of your portfolio is in cash. 3 out 4 stocks decrease in value during bear markets. Instead of trying to fight the tide, keep cash on hand. Place cash in money market fund or CD for a short period of time (up to a year at most).

2. Think short term. Focus on short term trades. Also make sure that you use a shorter time frame for determining your exit strategy (utilize the 10, 20 and 50 day MA).

3. Hedge your portfolio with some well timed short sale trades. Try and short stocks that have recently fell below the 50 day Ma (for short term trade) and the 200 day Ma (for an intermediate to longer term trade). Although shorting does not produce the same gains as going long, it is still better than nothing.

4. Refrain from using margin. The only use for your margin should be the occasional short sale.

5. Patience. This is probably the biggest problem that most traders have. Traders by nature are usually very inpatient, emotional, and constantly seek self gratification. All of these traits are harmful and are one of the main reasons why so many traders fail. The few that are actually able to remain patient, disciplined and unemotional are the ones that succeed.