How To Be A Bear

The above chart is from one hour ago, showing the market dropping towards a floor that is commonly reserved for correction. What this means, is that there are automated trades that will drop their holdings if the market drops a certain amount. When we reach that threshhold things will get hairy.

But if you're a bear, then you're already covered in a thick, protective coat of bear fur. How to get there, is pretty simple. Remember two basic things. First, your potential for losing money is nearly unlimited. Unlike someone who buys a stock, hoping it will rise - your potential to lose money is more than the amount you put in. A person who plays long on a stock, can buy 10 shares at 10.00 a share. The stock could go to zero, losing them 100.00 . But a Bear, who decides to buy options for stocks at 10.00 a share, could see the price of the stock spike upware to 100.00 a share. They will have to cover their purchase of the stock - and use their options to sell it at 10.00 a share , by putting down 1,000.00 - after which the net proceeds of the sale, subtracted from the total - gives them a net loss of 900.00 . That's 800 percent more than the face value of the stock. Remember this, because this is the most important thing you can keep in mind while shorting a stock.

The second thing to remember is that , as a Bear, you love to see chaos - economies crashing. But once everything dangerous has occcurred to your stock - you're alot better off in a stock that has good fundamentals - if you're not a profressional. You will get very familiar with the stock as it crashes, and you may be able to understand when and where it will rebound.

A third way to be a fuzzy bear, is to just withhold your long stock purchases until you feel the stock itself has tanked. You want the market to crash, not because you're interested in selling or covering - but rather, buying. This is a fun way to play the market because there's no exposure. Just track the market, and when you feel it has hit bottom. Pull the trigger. But instead of covering, you can buy.

The key thing here in both cases, is to realize that markets are subject to two forces. First, the market makers - have alot of power over short range fluctuations of the price of a stock. They can simulate events that trigger computerized trading. Second, the market itself is generally controlled by the ebb and flow of corporate interests and achievements. The markets are almost always better seen in this context rather than in the broader view of a global economic indicator - because they are so volatile. In America, the economy began a good recovery - which quickened throughout the end of 2010. The Bush Republicans, seeing that they were elected on the pretense of job creation in a non-recovery, spent much of their time passing legislation that ended up returning us to the state we were in, when they were in office in 2008. But the numbers posted at the end of the day, can be walked down in the final hour or so. Most of the indices were at or around 300, before the big walk-down to 500 point loss.

In order to be a good bear, you have to know when the market is really going to hit bottom of a big sell off. Predicting this to somewhere around 9:30, tracking to around 11 am tomorrow morning, is a somewhat safe bet - but when the markets test this limit the key is to discover whether automated trading and micro trading (the trades that occur in split second intervals, according to new computer programs ) is going to crash the market further.

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Anonymous said…
I did, I made a nice fortune yesterday on that one day trade. Thank you, that was good advice.

So was this morning a dead cat?