Advice for what to do when a market crashes

[u0362565]

Hi all, do you have any advice about what to do when a market crashes? I would assume a major crash was like what we saw last year when coronavirus broke. I only started looking into trading just after that happened so have not experienced one yet. Although was involved in the recovery which was a baptism of fire..I guess the question is, do you know when you're in a crash scenario? Of course the news might give clues but you don't know how far the market will fall so are you inevitably going to lose money at least in the short term? This especially if you're a long trader. I assume you don't just carry on trading as you normally would.

Thanks for the advice.

[Midas_Touch]

The answer depends a lot on your personal circumstances, time horizons, whether you're trading for fun / extra cash or to make a living etc.

If you're a long-term investor and have confidence in the quality of your holdings, then a bear market (defined as a 20% drop from the highs) is usually a great opportunity to top-up (personally I would do this by drip-feeding into the market slowly as it's impossible to be sure when a bottom has been reached).

If you're a trader then market crashes and the associated volatility usually throw up lots of good trading opportunities but easy to get burnt if you don't know what you're doing. I always think of crashes / bear markets in this way...as scary as they can be, they're actually (eventually!) the beginning of the next bull market, as the Covid crash of March 20 proved to be most recently - best buying opportunity in many years.

As you're relatively new to trading I would highly recommend reading 'The Disciplined Trader' by Mark Douglas. Expensive to buy usually, but well worth every penny. Hope this is all of some help to you.

[u0362565]

Yeah i'm talking about trading.  I think what i'm trying to figure out is how i'd fair in a crash given you don't really know its happened until its happened.  I suspect i would lose money initially but then should be able to turn it around, assuming the market recovers of course.  There are also whole years where markets go into reverse trends and again i guess i could trade those but its easier to see that's what's happening once it been and gone, at the time you might always be looking for the market to turn upwards and it keeps trending downwards.

[Playford]

Hopefully you've got stops in place and get stopped out without taking too large a hit....

Then everything is on sale from an investment POV.... 

[u0362565]

It's times like in the attached image, Oct 18-dec 18. The FTSE saw declines over an extended period of time. If your view even over the short term eg days is that the market will recover the falls, in this case that isn't true. Basically I think I need to learn how to short, as long trading isn't always the right thing to do.