It's no secret that growth in the financial market cannot continue indefinitely. Sooner or later, there are bound to be periods of recession. Professional participants in exchange trading, traders and investors, call such periods a professional term - correction. You can easily predict the behavior of a long-term investor during the correction period, he will buy good assets at reduced prices. For the investor, the correction is only for the benefit. But what to do at such moments for a trader who earns on changes in the exchange rate value of securities and derivative financial instruments?
What strategy should a trader choose?
Fortunately for stock speculators, market corrections are rarely protracted. Most often, the market correction occurs within a week, more often - within a few days. In these difficult days for the market, you can choose two strategies of behavior as the main ones: either do not trade at all, wait a few days, or trade what was not affected by the correction (most often, this is illiquid). It is extremely rare during the correction period that the entire stock market goes into the "red zone" and steadily falls. As a rule, there are always a few issuers who stubbornly do not want to lose in price and even show a slight increase. If not trading for a few days is not a strategy for you, then the best option is to try to speculate on assets with weak liquidity, but always keep in mind that there is a risk of losing part of your capital.
Trading during a protracted correction.
The fall in asset prices can continue for quite a long time, several weeks or even months, but then such a process is no longer called a correction, but a full-fledged global financial crisis, when it is quite realistic to lose the lion's share of your capital if you do not set stop losses in a timely manner. Such large-scale crises occur rarely, but at the same time regularly. On average, once every 10-12 years. And when this happens, it is certainly better to refrain from trading, because during periods of global financial crises, the economy is in a very difficult position, and all financial assets lose in value. It is terrible to even think about how much you can lose at such moments, usually hapless investors who wrote off the global financial crisis for the next correction lose about 70-85% of their capital as a result. They manage to sell their assets too late and at very low prices. Naturally, few of them are satisfied with the sale price of their assets, but in difficult times for financial markets, they simply do not have a choice.