How To Survive a Bear Market (In 3 Easy Steps)

how to survive a bear market

Learning how to survive a bear market doesn’t have to be complicated…

Learning How To Survive a Bear Market can help you protect your trading and investing accounts in times of market strife. But learning how to survive a bear market isn’t always easy.┬áSo in this short blog post we’ll explore how you can survive a bear market in 3 simple steps.

And keep in mind…

Even though we’ve previously looked at how to calculate the downside when stocks are dropping, and how to trade stock market pullbacks – a bear market is an entirely different beast all together. So…

If you keep these practices in mind you will be well on your way to surviving the next bear market – whether cyclical or secular. So, let’s explore what you can do to survive a bear market…

How To Survive a Bear Market – Step 1

The first step to surviving a bear market is simple stage analysis. If you aren’t objective about the stock market price action you are unlikely to spot a bear market pullback until it’s too late. And the easiest way to be objective is to keep an eye on what stage the market is in and adjust your risk exposure accordingly.

Over the years I’ve read myriad investment books, and it’s amazing how many of the time-tested traders and investors focus on stage analysis. Technical-analysis-oriented books like Secrets for Profiting in Bull and Bear Markets and How to Trade in Stocks both share techniques for identifying the stage of the market. Both books also emphasize the importance of remaining disciplined in the face of stage analysis.

Speaking of which…

How To Survive a Bear Market – Step 2

The second step to successfully surviving a bear market is to remain objective and unattached to your stock picks and ideas. It’s very easy to get emotionally involved with your investment ideas – especially when you invest a lot of money in them. But the truth is…

If you’re too complacent or (worse yet) enamored with your stock ideas then you won’t be able to see when the facts are changing. You need to keep your eyes open to cracks in your investment thesis and be ready to admit when you’re wrong. While this step is simple, it’s not exactly easy.

On the other hand…

One key to mastering step 2 in surviving a bear market is always having a steady source of stock ideas and investment picks. There are lots of different ways to find new trading ideas and stock picks. And having a steady stream of stock ideas to analyze and look at keeps you critical of your current portfolio holding – which is essential to surviving a bear market.

How To Survive a Bear Market – Step 3

The final step to surviving a bear market is to zoom out! Once you see a bear market starting to grab hold you should take a step back. Use weekly stock charts to get a bigger picture.

So instead of freaking out about the day to day action…

Take a wider view and re-calibrate your perspective on support and resistance trend lines. Realize that in a bear market it’s not time to press your bets on the long side. Instead, you need to be patient. And before you dive back in…

Repeat step 1 of how to survive a bear market! Wait for the market to confirm it is basing out and starting to move higher before putting your capital at risk. If a new bull market is truly under-way there will be lots of profits to be had: So don’t force the buy and wait for the market to prove itself on the bigger picture (weekly or monthly) time frames.

Hopefully by now you can see the overall key to surviving a bear market is about protecting your capital and making sure you live to see another day. And I hope these three easy steps help you understand how to survive a bear market in practice.

And By The Way: If you’re looking for more information and resources to help you profit in any stock market condition, I encourage you to download the free ebook below. You’ll also get free weekly updates sharing my favorite stock market tip, tools and resources.

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