A major advantage of modern trading is that you can make money even when prices are falling! Because you can earn money regardless of how the market is moving, it is always possible to make a profit! But how do you actually take advantage of falling (and rising) prices?
How do you earn money when prices are falling?
Making money when prices are falling is fairly simple. To do this you need to have an account with a CFD broker. With a CFD broker you can trade in stocks, commodities, index funds and currencies. By opening a free demo account with a broker, you can make a profit by trading.
Buying and selling
Normally when you are trading, for example in stocks, you would choose the option to buy. When you buy, you earn money when the price rises. This can be very profitable, but lately, it sometimes happens that the share price significantly collapses.
If you expect that a certain price will collapse, it is wise to choose the option to sell. Then you actually earn money when the price of the security falls. That way you will benefit from a situation where most people lose a lot of money!
Profiting from large declines
Increases are often quite gradual, while sharp declines often occur at once. This is where you can earn a lot of money! Negative news about a share or economic zone may be an indication that the price will drop significantly. For example, this happened with SNS Reaal stocks when negative information regarding the company's earnings was made public.
When you expect a certain price will fall, you can further improve the result of your trade by using leverage. By using leverage every euro counts more. With a leverage of one to twenty, for example, a decrease of one euro is worth a profit of twenty euros.
Movement is all you need!
Nowadays when you are trading all you really need is movement. It does not matter if prices fall or rise; you can always make money. It is important, however, to buy or sell at the right time. You can learn this timing by practicing a lot with a demo account at a broker. By practicing, you learn to recognize certain patterns and you can better predict when prices will fall.
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