Do You Familiar With the 7 Kind Tips to Cope With Pullback?

U.S. stocks pulled back on Wednesday, and $S&P 500(.SPX)$ pulled back 1.38%, the largest one-day correction since April 25th. Many short-selling targets rose sharply that night.

The decline on Wednesday may be related to Fitch’s downgrade of the U.S. rating. Investors are worried about the U.S. credit crisis, financial deficit crisis, economic recession and other panic emotions. Also people are seeing the U.S. stock market has been rising for a while, and a healthy correction may be needed.

Somehow the movement of the stock market is cyclical in nature. It is just not possible for the market to continue trending only in one direction.

As of Wednesday's close, the $S&P 500(.SPX)$ closed slightly lower at 4517.46 points on the 20th DMA, closing at 4513.39 points.

So, how was your trading performance on Wednesday? Did you get a good return in July’s market? What's your plan for the August trading target?

Source from Techcrunch

Before you share with Tigers. I'd like to share with you a few strategy tips that will help you manage the market decline with less fear.

1.Pay attention to the signs.

Whenever you get wind of black swans like burgeoning geopolitical tensions or disease outbreaks or feel that the markets are tense, you should exit the market early.

2. Sell to take profits.

If you feel the market is going to pull back in the short term, you can reduce some profitable positions and hold small positions in stocks or assets that are still bullish.

3. Set stop loss targets: set a certain percentage of retracement expectations and sell to the stop loss.

This is probably one of the easiest tips to avoid a stock market crash. The stop loss is an effective tool that can help you limit your losses when your investment decisions don’t go according to plan. While there is no perfect stop loss, it would be a good idea to set your investment target below 10% to 15% of your purchase price.

4. Keep cash to hedge your bets: to participate in some reverse "short" targets" or to use option strategies.

If you foresee a major downturn, don’t hesitate to prepare to profit directly from it. If you own stocks that you think are going to fall, then you could short the stock.

Another alternative is to buy put options on stocks you own and for which there are options, or on one or more financial indices. These derivatives will increase enormously in value if the price of the underlying security or benchmark falls.

5. Increase positions in stages to lower your original costs.

When the pullback wears off,If you've been bullish on a stock for a long time and the stock falls, you can buy it back at a safe price when the stock falls. Buy it back when the chart patterns show that it is probably near the bottom. This can pull down the average price of your positions.

6. Diversifying is a simple but good strategy.

Diversifying your portfolio is probably the single most important action you can take to protect your investments from a broad market decline.

Investors should diversify into different sectors and countries, invest in different assets, and keep each asset position balanced, and don't buy too many positions in a single stock.

7. Apply Auto Invest based on market cycle.

If you assume that the bull market is starting now, you can invest firmly in promising stocks for a certain period of time (weekly or monthly), even if it declines again. If you don't trade frequently and are optimistic that you can buy some quality stocks in the long run, Auto Invest is a good choice

Conclusion

The above tips may not be able to help you fully avoid the effect of the crash, it can, to a large extent, prevent your investment portfolio from significantly degrading in value. This way, you can safely ride out the storm without any lasting impact.

If you do get stuck, remember that the stock markets are cyclical in nature and don’t worry, because a recovery is likely. You can also make use of the opportunity that a market crash brings in and buy low, so you can earn decent returns when the markets recover. With these pointers in mind, it becomes relatively easier for you to cushion yourself from the adverse impact of a market crash.

Questions for Tigers:

What strategies you are using?

Any other good tips you want to share with Tigers?