What to Do in a Stock Market Crash

stock market crash

As per usual during a 2% market pullback in recent years, everyone starts to panic and think about a recession. A stock market crash is actually one of the best opportunities for traders who have the right strategies, and make decisions under pressure. 

Some of the biggest fortunes in the world have come from stock market crashes. In my latest video lesson, I talk about how to trade in downtrending macro market conditions, and my favorite strategies and tips to use to capitalize:

Have a Plan During a Stock Market Crash

Stock market crashes aren’t anything new. You were around in 2008, and probably during the early 2000’s during the dot-com bubble. Ever since the stock market was founded in the 20th century, the market has crashed every 5-10 years. 

Regardless of whether you are 10-year trading veteran, a complete newbie, or just someone with 401k, you need to have a plan for what you will do during a market crash. It should be pre-determined, otherwise, when the crash happens, you will panic and sell the bottom just like everyone else who loses a ton of money during a crash. 

Understand the Big Picture Trend of the Stock Market

The advice I would give to the average Joe with money in the market is to just do nothing! Sure you could hedge, but for most people that gets too complicated, and they end up messing it up because they time it incorrectly. 

If you are a momentum trader like myself, and are looking for some more higher-risk, high-reward strategies, I would look into various instruments to short-sell the market, which is essentially capitalizing on the stock market going down (learn the strategies I use in bear markets here) .

Take a look at the monthly chart of the Dow Jones industrial average:

stock market crashing

What is the trend? Clearly up. What happens every time there is dip? It gets bought up. So what does that mean you should when the stock market dips? NOT SELL. This is, of course, is easier said than done.

At the moment when you are watching your portfolio get crushed, the primitive part of your brain is panicking, and you convince yourself that everything is going to 0. Don’t let fear dictate your decision making during a crash!

  • Stay Calm, Don’t Make Impulse Decisions With Your Money
  • Don’t Watch Every Tick: Watching the Markets 24/7 Will Just Make You More Emotional
  • Don’t Think Like The Crowd
  • Hedge Your Long Term Positions
  • Don’t Catch A Failing Knife, Let the Bottom Pick Itself

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