Trade like a Business - Six Strategies to Survive Stock Trading in a Recession

One of the key ways to be a profitable trader is to look at your trading and personal finances as its own business.

In this video, I pull lessons from some widely used recession resistant business practices that we can apply to trading.

This video isn't intended to be financial advice, the information contained in this video is to inspire you for your own due diligence when it comes to trading.

During recessions, businesses will often scale back on their goods and services that don't sell as well to focus more on the ones that sell better.

The first lesson we can pull from this strategy is to focus more on the stocks that actually make money, and less on the stocks that don't.

Think in terms of what you would have to buy if you were strapped for cash. Would you shop for bargains? Would you change your spending habits?

A lot of times, losing money in a bear market is inevitable. Sometimes instead of focusing so much on how you can make money in a bear market, you also need to think in terms of where you can put money that will also lose the least amount if things get worse.

A bonus on this thought is that bear markets and times of extreme volatility is not the best time to experiment. If you feel you are a good stock trader, then focus on stock trading. Don't try to jump into something new like forex or futures trading. Focus on what you know, and paper trade new ideas until markets stabilize.

Another lesson we can take from business owners during recessions is they take steps to protect their cash flow, usually before it becomes a necessity.

Smart businesses will position themselves long before their competitors do. What we can take from this as a trader is to cut back on discretionary spending and scale down our position sizing. I like to take profits and protect gains faster than I normally would in a less volatile market.

Businesses will also avoid opening new lines of credit during a recession. In line with this practice, it is probably best to avoid trading on margin and taking out new lines of credit during a recession. However, I still think it's best to do research early on how you would borrow money if you had to so that you are less likely to panic and reach for the fastest, often most costly way of borrowing money.

My final tip for this video is to diversity. It can be a double-edged sword when it comes to focusing on what you know, but that doesn't mean putting all of your eggs in one basket. Diversify your investments across different financial products that are the safest and always keep cash on head so that you can take advantage of opportunities that arise from recessions.

As always, thank you for the support.

Trade Gingerly,

Savvy