Stock Market Corrections And How To Trade Them

Stock market corrections occur every once and a while. they are not to be feared. In fact many traders can make money when these corrections happen. A correction is simply when stocks after a long time of going up head down. They are called corrections because they are said to bring over priced stocks downward. This corrects the price of the stock, or brings it back down to a reasonable level.

They occur once every few years. The average correction last about 18 months, in that time the market the average loss in the overall market is about 30%. Stock market corrections do not need to be feared however. There are ways to make money in the market. Shorting is normally one of the easiest ways to make money when stocks fall. It involves borrowing stock from your broker and selling it.

When the stock is at a lower price you would want to buy it back and return it to your broker. You keep the difference between the price you sold it and the price you bought it. This strategy can be very rewarding during a market crash. In fact many professional traders will actually prefer to trade during a downward moving period then trading during an upward moving time period.

It does make sense. The markets tend to go down faster then they tend to go up. Shorting stocks can lead to greater returns in shorter time periods then buying stocks. Many stocks may go from $80 to $40 in only a couple months when they fall.

Traders who short should treat that trade like they would treat any other trade. They should have certain entry and exit rules. They must also use proper risk management. Other traders will prefer to still look for bullish opportunities. There are always going to be stocks that go up. The only problem with this is the markets are not agreeing with them. This could cause certain surprises during corrections.

Everyone prefers to trade the markets differently during a correction. But there still is money to be made during this market. If you learn it well you could bring home money by the barrel-full.

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