Anytime a global crisis happens, investors tend to panic and start selling. Although it might seem like a bad idea to invest when things are so crazy, the market actually sees growth after the dips that are caused by the actions of fear-stricken investors. Pandemics and global disasters can actually present trading opportunities, as long as one reacts properly. Below, we will provide a few tips that can help traders make it through this pandemic on top.
Tip #1: Don’t Panic!
Pandemics are generally known for causing hysteria. The COVID-19 pandemic itself has been known to cause shortages of food and other essential items due to hording. Many people might have seen the ways that this type of panic has carried over to the stock market. For example, you might see a drop in your investments and quickly sell out your assets out of fear. Remember that selling everything and being terrified of the stock market is caused by your emotions, and that making financial decisions out of fear will cause you to make mistakes. Instead, try to focus on long-term goals and watch for bearish opportunities as the market recovers.
Tip #2: Take Advantage of the Market
During times like these, the value of stocks will go down. This makes it a good time to invest in stock for good companies while the price is down before the price goes back up. You won’t see many opportunities like these, and prices will eventually go back to normal. Just be careful, as shares in bad companies might stay down, so you’ll need to be mindful of the companies you’re investing in. Think about the fact that others are thinking from fear and anxiety and anticipate the way the market will move.
Tip #3: Consider Diversifying your Portfolio
You should be mindful of what you invest in during times of global pandemic, but it might be a worthwhile idea to invest in different resources. If you typically invest in currency pairs, consider adding commodities to the list. Having your money in different places can help to cushion the blow if one of those investments goes bad, so it’s better to have different options.
Tip #4: Be Mindful of Risks
Traders should always take precautions to limit their losses, especially during times of pandemic and hysteria. Of course, you will need to be even more careful right now. Make sure you’re using a stop loss and consider setting take profit levels or other measures to ensure that you don’t blow your account. Take another look at your trading strategy as well and look for any needed changes. You don’t need to change everything out of fear, just simply look at the way the pandemic has affected your profits thus far and see if there is anything that needs to be changed. If you don’t already keep a trading journal, consider keeping a special one until the pandemic passes so that you can keep a close eye on the ways that it is affecting your outcomes.
Tip #5: Look Towards the Future
There are a lot of reasons why COVID-19 has inspired panic, not only in traders but in all of us because of how dangerous it is and how it can affect our lives. If you haven’t found yourself doing much trading because you have too much on your mind, or if you’re feeling too anxious to trade, remember that this will pass. All of the previous pandemics have ended at some point. Try to profit from it by anticipating what the market will do but understand that it is ok to take a break from trading if your head isn’t in the game. Things will eventually go back to normal.
The COVID-19 has caused many investors to sell and take profits out of fear and anxiety. Good investors need to understand how times of crisis affect the market and make smart trading moves while practicing risk-management techniques to limit their losses. To make effective trading decisions during any times of market uncertainty, one needs to be able to handle their emotions, otherwise, they are bound to make bad trading decisions. Don’t panic and remember that this pandemic will pass, and the market will go back to normal before we know it.