Lesson: Spread Betting to Make Money in a Bear Market
Luckily for the successful spread trader, you’re able to make money even if the market decreases which, when you think about it, offers massive potential and is a pretty exciting prospect. Rather than having to fear a bear market you can look at it as an interesting opportunity – now you will be betting that stocks will decrease in value. It switches up the mindset in a new and exciting way.
Bull Turns To Bear
In market movements, the tendency is for a bull market to peak and then turn into a bear market as the cycles of investor sentiment changes from optimism to pessimism. This can happen for many reasons that are often contested but in our opinion this constant up and downward motion is a combination of real market outlook and investor psychology.
When a firm is doing well financially (take a look at Apple, for instance) investors will jump on board in droves – and rightfully so. The company keeps doing well, so why not buy stock in it? The problem is that this increases both demand and speculation of how well the stock will do in the future. More people want it, so it keeps being sold for more and more.
Eventually Apple stock starts to look over priced – despite the great numbers and the bullish trend things are looking just a little too good. They’re a great company, sure, but investors are starting to think, are they really worth that much? Throw in a financial quarter that isn’t as good and there is a good chance the company has reached the peak and will start a bearish decline. “It’s too good” plus “Maybe they’re not doing so great” will startle investors and kind of wake them up. The end result is a decline while the market corrects itself.
Spread Betting Basics: No Fear of Bear Markets
Traders using financial spread betting as an investment vehicle now find themselves in an enviable position as they are in a prime position to profit from these declines rather than simply cashing in, or worse still, losing money by holding on to positions and hoping the market will recover. Spread bets to sell any available market can be entered as easily as one to buy.
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