G’day Traders,
Today will be a little different. I am going to be a little tough on you because I want you to make money. Then I am going to show you the amazing possibilities of a falling market.

• You are not going to make money by switching products that look like they are doing better.
• You are not going to make money by copying another trader’s strategy.
• You are not going to make money if you add more products just because what you have done has made you a profit.
• You are not going to make money if you take huge leaps up in size because in the last two weeks you have done well.
• You are not going to make money if you are not trading (especially in times like this).
• You are going to lose money if you just leave your money invested in equities in a bear market (this may seem pretty obvious, but do you have a net long position in equities when you think of all of your investments?).

One thing I am trying VERY hard to do is show clients that Lifestyle can help you make money across a range of different instruments and that something like ETFs has amazing advantages over more traditional products – that you can actually make money in a falling market.
For example, for Options traders owning some of SDS (which goes up significantly when stocks fall) is a really good hedge. Other investors can buy this to protect other assets that they own.
For ETF investors you have training in the LIS website on products that you should make money out of in a bear market. You can (and should) also be short some equity ETFs.
I always say if you want to make money in a falling market you should be trading Forex and commodities. There is extra volatility, no doubt, but if you stick to the products you trade and follow your rules you should be doing well right now and if the market really takes off you should do even better.
If you wonder why I am saying this, if you saw my Tweet on the state of US housing you would understand. US existing home sales are down over 25% year on year to the lowest level since 95! Yes – that is worse than the housing collapse that caused the last crisis.
US Government stimulus is no longer holding up economic data and the outlook looks bleaker than even I predicted. I can’t believe the market wasn’t down much more last night, but there is more housing data to come.
What does this mean?? Opportunities – if you are trading live and following your strategy!
The US S&P500 -1.45% European top 500 -1.68, UK -1.51% and early today both Nikkei and ASX are down.

ETF – I have said it – are you making money on the downside?

Options – I like to buy some SDS or some put options on the S&P500 if I am risking a lot on bullish strategies. It would be smart to sit back this month until later before expiry.

Today’s Top Tip

Check out what other like-minded traders are saying in our feedback section on the Lifestyle Trader website.
Information for Beginners - I said it – follow your rules!

Information for Intermediate - Read my Tweets!
Information for Advanced - Keep it simple and focus on risk – if so and the market tanks you will make money – I think the risk of the market tanking is well over 50% – lets say 60%.Hey… a market crash means great profits on Forex and Commodities - so it’s not that bad unless you let all your other investments halve in value.

Scott Goold
Head of Lifestyle R&D

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Trader Term of the Day – Relative Strength

In the stock market, a measure of a given stock’s price strength relative to a broad index of stocks.