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Sizing Up The Market From The Perspective Of A Bearish Trader

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Sizing Up The Market from the perspective of a Bearish minded trader.

Massive opportunities are everywhere in the markets. Today we take the perspective of a Bearish minded trader. A bear welcomes rallies, as the bear knows rallies set up bigger drops to capitalize on. The key word is capitalize.

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We live in a country based on capitalism, this is about as ethical as it gets to a capitalist society. How can a bear capitalize now.

  • The first step is finding a target. There are plenty out there to include the indexes. For this example we will use stock OKTA.
  • Study the chart to find resistance areas in the trend. Currently OKTA 50 day line is acting as strong resistance. Chart below.

  • Create a setup with favorable reward/risk.

A favorite way to do this in volatile markets is using a 2 to 1 put/call ratio for low aggression and 3 to 1 put/call ratio for more aggression. The thinking behind this is 1 call is the hedge versus 2 puts. In the case the trend reverses. 1 call is enough to cover the loss behind the 2 puts and even profit from that move.

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