August 28th, 2015
by Sam Seiden, Online Trading Academy
Are you an average investor that got hurt during this decline and, more importantly, do you feel financial pain when the market declines like the past few days? Not only can you apply some simple rules to protect yourself but you can also profit when the market declines, let me explain.
How do you predict a major market decline and Profit from it?
Identifying where the markets real demand and supply is on a price chart is the key to predicting market turns and market moves, in advance, with a very high degree of accuracy. In other words, learning to identify where banks and institutions are buying (Demand) and selling (Supply) in markets so we can buy and sell there also. Let's walk through this with the JPM trade mentioned in the trade charts and timeline below.
Above is the bearish options position at an objective supply level, the entry is in the circled area. This opportunity started out by locating on the chart exactly where institutions were selling the shares of JPM, the supply level you see in yellow. We know supply exceeds demand at that level because price could not stay at that level and declined away in strong fashion. Once price rallied back to that level (circled area), I entered my bearish position and profited from a downside move. At the time of entry, retail traders/investors were buying and Wall Street pros were selling. We know this because only a novice trader or investor would buy after a rally in price and at a price level where banks are selling. This is an example of executing our simple rule based strategy, but the key is to focus on real supply and demand and keep things simple. I then profited from the downside move.
Can you protect yourself from a market crash?
There are a few simple ways to protect your hard earned capital from a market crash. One is to utilize options. What you can do is buy a "put option" on the stock market. This is essentially portfolio insurance. You are paying what is likely a small premium on an instrument that will increase in value as the market declines. So, while your stock holdings will lose value in a market decline, the increase in value on your "put option" can offset that loss. Astute investors do this all the time. Another idea is the use of Futures. The Futures market was created for hedging. In the early days, farmers and companies would use the Futures market to hedge against price declining. Today, astute investors also use the Futures market to protect against market declines. Wall Street pros take this approach with their money, not yours.
Can you participate in stock market gains without stock market risk?
At Online Trading Academy, we've spent a couple years developing a very low risk wealth building/passive income strategy. This strategy utilizes a multi-prong methodology that leverages predictable monthly income payments which are then utilized to enter directional positions in the stock market. In other words, you're able to take advantage of stock market moves without stock market risk to your principal and, no, this is not an annuity. Instead of your investment capital sitting in the stock market with all the risk and fees, why not use interest payments from very safe, short maturity, and high yielding corporate bonds to buy options on stock market moves. This is one of the many simple strategies Wall Street firms use for their capital, are you? In our Financial Matters program, I teach students this simple strategy which enables them to think and invest similar to a Wall Street insider. As a result, students participate in stock market gains without exposing their hard earned savings to stock market risk.
The Most Important Information You Need To Know
The major problem for retail traders and investors is that they think like average investors and not like Wall Street Professionals. Have you ever wondered why the gap between Wall Street's returns and the average investor's returns is so wide and getting wider? The key is to stop thinking like a retail investor and start thinking like Wall Street. In the global financial system, those who know what they are doing get paid from those who don't. Money always ends up in the hands of its rightful owners when it comes to trading and investing. Whether the markets go up, down, or sideways should have little impact on your financial well-being. Major Wall Street firms profit nicely every year, why can't you? Learn to think and execute like a Wall Street professional and start living life on your terms.
Hope this was helpful, have a great day.