5 ways to make money in a difficult market
TRANSCRIPT
“I want to show you how you can either bank or keep a profit despite the
tough market conditions.”
Trade/Think differently
Don’t sweat the small stuff!
Over your investment lifetime (approx. 45 years), you will experience:
• +150 Dips, • 45 corrections and • almost 13 Bear markets!
#1. Diversification - Still the only free lunch
#2. Buy defensive - “The best defence is a Good Offence”
#3. Alternative lifestyles - Look to asset classes/strategies
Gold/Oil ratio = Gold price / oil price
This will give us the number of barrels of oil will buy one ounce of gold
Gold falls -$99 to $1,000Oil modest advance +$11 to $65
Gold maintains the current $1,100Oil soars +$17 to $71
Gold modest advance +$155 to $1155Oil also soars +$21 to $75
Here are six ways you can take advantage of the projected direction:
1. Sell short either the BBET40 ETF, or sell short the ALSI (the Top40 derivative);2. Buy the EURO against the US Dollar (EURUSD)3. Sell shares in the Industrial sector that have valuations that are too high (for example retail and consumer stocks)4. Buy the JSE listed Oil ETF (SBAOIL)5. Short the Gold ETF (Newgold)6. Trade the pair by short selling Gold and simultaneously buying Oil
Gold/Oil ratio = Gold price / oil price
#4. Letting volatility work for you - How to time the market using the VIX
The VIX (Volatility Index) is one of the investment industry's most widely accepted methods to measure stock market risk.
It’s widely regarded as the “investors fear gauge”.
VIX does not measure the volatility of a single issue or option instrument, but uses a wide range of strike prices of various calls and puts that are all based on the S&P 500.
We want you to understand how to read the VIX, be able to identify the levels where fear is heightened and when it abates and also look at the levels where you as a trader should enter/exit or hedge your portfolio.
During this time the VIX you could have used the VIX as an indication to either:
Close your long positions
Hedge your long only portfolio (more about this at another webinar)
Short the market until the market moves to normalised levels Speculate by purchasing low vols for a possible spike.
#5. Pairs trading - Trade like a hedge fund manager
Trading the pair
A pair trade involves the simultaneous buying of one share and the short selling of another share to create one pair trade.
Used by Hedge Funds and Investment Banks around the world since the mid 1980s Indirectly increases your trading universe with hundreds of different share combinations going
Head 2 Head against each other Market neutral strategies allow traders to make money in most markets, it doesn’t matter
whether we are in a bull, bear or flat market Does not require forecasting or guessing which direction the market is going because the only
thing you need to worry about is one share outperforming another Geared trading – Utilizing leverage allows even small moves in the underlying shares to amplify
the returns, allows traders to implement their strategies with low capital investments while making better use of their risk capital
Diversify your portfolio through exposure to alternative investment strategies and utilize these strategies to improve their returns across their portfolios
low correlations to the rest of the market, and at the same time those return come with less volatility than the rest of the equity market
Trading universe:The trading universe is made up of the top 80 shares listed on the JSE, however on the rare occasion we do step out of this.
Pair Name: +SHP/-SPP Pair Direction: Long Possible Profit: 31.78%
BUY 200 SHP_CFDs @ 132.48R Trade value = 26 496.00R Entry: 1.180 Time Period: 1 -2 Weeks
SELL 236 SPP_CFD @ 112.50R Trade value = -26 550.00R Target: 1.225
Stoploss: 1.160
To achive a ratio of: (BUY/ SELL) 1.1776 Margin required: 3 182.76R
Profit: 3.81% Nominal exposure (ABS): 53 046.00R
Margin: ZAR 3 182.76 Loss: -1.69%
Gearing: 16.67 Ratio: 2.25
Source: MarketMap
Possible ProfitTrade DetailsTrade Details
The SHP/SPP pair has retraced to previous lows . Over the last fortnight SPP has out-performed SHP breaking out of a S/T upward channel and reaching support at 1.18.
We expect the support level to hold and suggest a long SHP relative to SPP for the next few weeks with a target at the medium regression
Your Survival Checklist During a difficult market, consider the following:
1. Don’t Try to Outrun a BearStock market declines are normal and frequent, don’t try to time the market – This not a time to sell quality investments.
2. Bear markets are shorter than bull marketsOn average, bear markets last about 15 months with an average loss of about 32% (-28% SA). Bull markets last nearly five years (54 months) with an average gain of about 130% (214% SA)
3. Bear markets have historically been followed by bull markets. Bear markets can present opportunities for investors to equities at lower prices. Severe bear markets tend to be followed by sharp rebounds. In each case when stocks dropped40% or more, they rebounded by more than 33% during the first year of the upswing.
