A Trade A Day

With the market giving back weeks of gains and the talk of recession beginning to crescendo It’s time to talk about “recession proofing your portfolio” Now, you can go to your favorite mainstream media’s business section and read about buying “defense stocks” or gold etf’s, but they’re subject to supply and demand like everything else.

No matter what sector you did buy, a drag on the economy will drag them all down eventually, and as the US economy falls deeper into a recession, foreign economies will follow. So investing oversees isn’t a silver bullet.

So what’s the best course of action during a recession for people with money in the market? Here’s my top 5:

1.Take a more active role in your portfolio’s management.
Having a clearly defined plan will give you the power to move in and out of positions with confidence. When I hear the word recession, I think about the people who are going to lose their jobs, not my portfolio. That comes from knowing that I can trade my plan and make money in any type of market.

2. Learn to trade technicals
Trading on fundamentals will cost you during a recession. There are a lot of good companies that are going to see their stock price plummet. Learning to trade stocks using technical analysis allows you to target the best time to buy a good stock. This will minimize your downside risk and allow you to get a position at the best price.

3. Learn to short
If markets aren’t moving up, then learn to make money when they’re moving down. Learning to short may sound intimidating, but I am willing to bet that being afraid to short comes from not knowing how. Shorting gives you the flexibility to profit when the market goes down. Why do I like shorts so much? Look at two weeks ago. It took three weeks to go up 5% and that was wiped out in 3 days. Down moves don’t last as long, but the gains come quickly.

4. Stay in cash
A great trader once told me, cash is a position. If you’re not finding setups, don’t trade .This may sound cliche, but don’t let market swings keep you up at night. Get into cash and let the recession work itself out. Then when the market bottoms, you’ll have your cash ready to go.

5.Wait it out.
You’re a glutten for punishment. Shorting isn’t for you and neither is cash. Buy what you want, but you’re going to take a beating.

Good Luck!

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