Bear market swing trading is among the more difficult for natural buy-and-sell trades. In a downtrend environment, equity market prices are decreasing in the long term. Therefore, it is not advantageous to buy a security and hold it with expectations of price appreciation. There are several strategies to circumnavigate this:
- Shorten your trade period. Instead of holding for weeks, be prepared to have a quicker turnaround on the securities you are holding.
- Hold more cash. Plan on holding back some capital you may otherwise be trading in the event that securities you are holding do suffer material price declines.
- Convert to options (by buying puts). Instead of buying now and selling later, the ideal position to hold if you believe prices are declining is to sell a security first, then buy it back later.