How to trade stocks during coronavirus?
How to trade stocks during the fall of the stock market? What to buy stocks in the crisis of 2020? What is the best stock trading strategy? Where to trade stocks?
Welcome you friends! Although the stock market crash due to coronavirus resembles the 1929 crisis and the Great Depression, it does the ability to buy cheap stocks. When a recession hits the market, most stocks will suffer no matter how strong they are. However, this is good news for you. When the stock market collapses, the value of stocks drops, and this is the best time to buy stocks cheaper.
In this article, you'll learn how to trade stocks during a downturn with three simple investment tips. In this stock trading guide, we will teach you where to invest during a recession. If you want to survive the stock market crash and profitably buy stocks during the coronavirus, follow our best stock trading strategy in a recession.
If you are just starting your acquaintance with the stock and foreign exchange markets, then see our Forex brokers rating with a detailed description of trading conditions and feedback from traders.
What is a stock market recession?
Technically, a recession is a period of significant slowdown in GDP growth. In macroeconomics, a technical downturn occurs when GDP growth rates are negative for at least two consecutive quarters. We can also define recession as a reduction in output, investment and trust.
What causes the recession? Several factors can trigger a recession, including:
- Internal factors (monetary and fiscal policies, taxation growth, a significant drop in different asset classes);
- External factors.
Our team of experts selected several groups of stocks protected from recession for purchase. These are recession-resistant stocks that can outperform the market during a crisis.
What stocks to buy in a crisis?
The basis for successful stock trading in the event of a stock market crash is to study the past. Here is a simple tip on stock trading in a crisis. Compare which stocks performed well during previous downturns. In this guide, we look at stocks that rose during the 2008 financial crisis.
During the last crisis of 2008, the US stock market lost almost 40% of its value. But even in those difficult times when most stocks fell, there were some stocks that crashed.
Given the stock market crash due to coronavirus, we will look at recession-protected stocks that can survive in this bear market.
1. Sustainable Stocks in Crisis - Retail Industry
The first way to make money during a recession is to invest in stocks of retail discount stores.
This type of business succeeds during the recession. The retail industry, as a rule, makes big profits during any crisis, and subsequently these shares can surpass all other S&P 500 shares.
Here is a list of stocks of companies that need to be monitored during the 2020 crisis:
- Dollar General (NYSE: DG) - during the crisis of 2008, DG grew by more than 60%, and since mid-March 2020 its shares have grown by more than 38%;
- Walmart (NYSE: WMT) - since the outbreak of COVID-19, Walmart shares have risen more than 19% compared with the March low;
- Dollar Tree (NYSE: DLTR) - With a yield of over 60% in 2008, Dollar Tree is another downturn-resistant stock that can withstand today's bear coronavirus market.
2. Coronavirus Protected Equities - Healthcare Industry
Other stocks that will survive the coronavirus crisis are biotechnology and pharmaceutical industries. Health care companies performed well during the 2008 recession.
Amgen Biotechnology Company (NYSE: AMGN) was among the most successful stocks in 2008, adding 24.3% by the end of the year. During the stock market crash, COVID-19 Amgen added about 24% from the low of March.
3. Sustainable stocks in 2020 crisis - delivery services industry
Given that more than 3 billion people in the world are isolated due to the spread of coronavirus, the home delivery service industry has become an important component of our society.
The largest courier companies in the USA are UPS Inc. and FedEx Corp.
Stock traders who want to choose healthy stocks can start by including the above items in their portfolios.
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How to trade stocks during the coronavirus crisis of 2020?
A study was conducted to evaluate the last six recessions, and it turned out that if you invested in Dow shares during the 1980 crisis, the value of the portfolio would have brought profit at the end of the recession.
How can you profit from a recession? A simple way to trade stocks in a recession is to make short deals. When stock prices fall, you can make money by making sell deals. In fact, traders can make money in both directions when the price of shares falls and when the price of shares rises. See the end of our article for more details.
Finding good stocks to hold and profit during a recession is quite difficult. In addition, the purchase of dividends may be another profitable way to invest during a recession. Dividend stocks can be a good source of passive income in times of crisis.
However, the best stock trading strategy during the recession is day trading. During the fall of the stock market, charts experience great volatility, which is ideal for day traders. Stock market traders will continue to see volatility as uncertainty remains around the coronavirus.
One of the main characteristics of a bear market is its high volatility compared to bull markets. And the 2020 bear market holds the record as the fastest bear market in history. Volatility in the bull and bear markets looks very different. So, as you can imagine, stock volatility reached its limit during the 2020 recession.
In light of this new crisis, we will teach day traders to trade stocks in a recession.
Best Coronavirus Stock Trading Strategy
The stock market did not see such a level of volatility after the crisis of 1929. Due to this volatility caused by the coronavirus, at the intraday level, the price will experience large ups and downs in stock prices. Thus, in the current situation in the stock market, you can learn how to make a profit when stock prices fall, as well as when they rise.
We will teach you how to make money during the coronavirus using the stock trading strategy from trading guru Larry Williams.
Day trading during a falling market may be the fastest way to increase your account. With day trading you can trade both ways. You can take advantage of both the bearish trend and sharp bullish rallies.
Our stock trading method is based on the same method that Larry Williams used to make more than $ 1 million in profit at the Robbins World Cup Futures Championship.
However, our team of experts slightly changed the rules of the strategy in order to meet the current market situation.
Our stock trading strategy uses the Smash Bar daily reversal pattern. According to Larry Williams, Smash Bar is a high volatility bar with long shadows. The Smash Bar trading model indicates a potential reversal of the previous impulse movement.
If at the intraday level the stock price suddenly begins to experience a high level of volatility, then bars with long shadows appear on the chart.
Take a look at the chart below:
Now it’s important to learn how to distinguish the Smash Bar candlestick model from the Pin Bar pattern. While the two models may look the same, the Pin Bar has a small candle body, while the Smash Bar has a typical larger body.
You should enter a buy transaction when the price breaks the maximum of the Smash Bar pattern, while stop loss must be placed under the minimum of this candle.
This pattern works because increased volatility attracts more traders. The coronavirus crisis triggered an unprecedented level of stock volatility. This is good news for traders because it means that the Smash Bar pattern will tend to repeat more often. You can buy and sell stocks in a recession due to increased stock volatility.
So, you learned how to buy stocks, but how to sell stocks during a recession? We use the same principles, but in reverse order.
There is also a small change to the Smash Bar reversal pattern that you can use. Larry Williams calls him the Hidden Smash Bar (Hidden Bar).
When a volatile bar appears out of nowhere, this could be a reversal signal. This bar should have a closing price in the lower third of the range. The body of the candle should be larger than other bars. Please note that in this case we do not look at the shadows of candles, moreover, they may not be at all.
There is no better way than to show you on the chart how to trade stocks in a recession using the Hidden Smash Bar pattern.
Please also note that this pattern works best when we trade in the continuation of the established intraday trend.
Where to trade stocks during a crisis?
If you are a beginner trader and are not familiar with the stock exchange, we recommend that you start trading stocks with a Forex broker. In addition to currency pairs, it provides CFD contracts for stocks, bonds, futures and other market instruments. You get access to more than 10,000 shares on various stock exchanges. In this case, you do not need to have huge capital to start trading. You can start with a minimum amount, but we recommend that you start trading in stocks starting at $ 1,000, then you can now earn good money without much risk.
When trading CFDs with a Forex broker, you get the following benefits:
- simple registration without leaving your home;
- minimum starting capital;
- low fees;
- large selection of stocks;
- availability of leverage;
- receiving dividends;
- the ability to enter into transactions for both purchase and sale.
See also what CFD Contract Brokers are.
Use our best stock trading strategy during a crisis if you want your deposit to increase even by case of market collapse. Learning how to trade stocks during a recession can help you not only save your money, but also significantly increase it. The crisis lasts 18 months on average, so it’s important to find different ways to secure your capital.
Investors can invest in shares of pharmaceutical companies, retail stores and delivery services, as well as invest in dividend shares.
If you like active trading more, the best way to make money during the coronavirus is to use the Larry Williams Smash Bar daily stock market trading. This is a simple but very effective way to trade stocks in times of crisis.
Read also the article "Forex or stocks - what should a novice trader choose?".