The golden rule says, "Buy when the streets are in blood" in reference to the falling market. Considering the current situation in the world, we should say, "Buy when COVID-19 is on its way". But do you actually have enough courage to earn during the crisis? Can you leave popular clichés and superstitions behind to make substantial wealth?
While experts say that to catch a falling trend is harder than to seize a bullet with your teeth, specific traders find the way to take advantage of the crisis and make a good profit when investing in stocks, bonds, and other trading instruments. We have conducted an ultimate guide on how to trade in a fallen market and join the community of Forex jet sets.
Would you like to become another Warren Buffet or John Paulson? Then don't stop reading.
Are Traders Affected by the Crisis?
They certainly are but in a different way. The financial theory says a trader needs to behave rationally to maximize revenue and utility. However, a few people actually follow that concept. It is all about the fear that makes them behave irrationally. When the crisis is on, the majority of traders are mainly driven by their emotions, especially when the global economy faces uncontrolled chaos.
This is what we seem to have right now with the development of corona. The field of behavioral finance defines reasons for people to act differently from what is said in financial theory. They may include:
- Mental Accounting – the concept suggests allocating or saving money for future purposes when the situation goes out of hand.
- Emotional Gap – it is the process of decision-making that is mainly driven by emotions as a result of extreme conditions. What would you do when you feel angry, anxious, or excited? Those are hardly the best emotions to make a rational choice or analyze the market.
- Anchoring – the behavioral model that makes people rationalize their spending. They start to invest less, even when the profit is obvious.
- Self-Attribution – a concept when people stick to the niche they are mainly specialized in. Some traders start ranking their competence higher than others do.
All the above-mentioned prevent traders from making decent revenues. A few understand that a crisis can be the right time to make significant profits. All you need is a trusted broker and a bunch of trading instruments to choose from.