Playing a Stock Market Crash

Stock market crashes aren’t always bad. In fact sometimes they can be unbelievable profitable. During a big crash there is the opportunity to make a large amount of money in a short period of time, if you play it right.

So what do you need to do to play a market crash successfully? Well there are 3 things that you should always consider when you play the downside.

1. Keeping Small Losses

When you short a stock you max loss is unlimited. There is no limit to how far up a stock can go. Of course you do not want to risk an unlimited amount of money. So it is wise to have some sort of stop to get you out of a position should it start to turn against you.

This is also important when you are bullish but affects you much more when you are bearish.

2. Prepare For the short term

It’s been said over and over again, in the long term stocks go up. So if you are
playing the downside you had better make sure that you are only going to be in that trade for a short amount of time. You might want to have a target that tells you where to exit your stock at, or you might want to follow it down with a stop.
Either way you had better be prepared to exit out of it very fast if you have to.

3. Don’t Pick Top

Picking the top isn’t the way to make money. All stocks that I short I want to make sure they are either already in a solid downtrend, or they are showing weakness by breaking through support.

For more on the stock market visit http://www.stocks-simplified.com

To read about the causes of the great depression visit http://www.stocks-simplified.com/What-caused-the-great-depression.html