On this occasion we are referring to one of the systems that carries the most risks for its operations. Among other reasons because it is more complex to know what is the level at which the falls in the equity markets are going to stop. And therefore you can make mistakes more often. This fact can affect that you can leave by the way when following the value with the same tendency that until now. For this reason, it is very convenient that you analyze the convenience of this operation and what can happen to you if the operations do not develop as you expected at the beginning.
You can not forget that the figure of free descent is the worst that can shape your interests as a small and medium investor. Among other reasons because no longer has supports below. With a potential for depreciation that is more than manifest and that is not expressed in other stock market figures. Where you can put yourself in the worst case scenario since you can leave many euros on the way if you do not know how to undo positions in time. Do not forget that the free descent has nothing to do with what a downtrend is, although both figures have some similarities.
In any case, in free download scenarios it is very complex to operate because you have much more to lose than to gain. It is much better that you wait for the end to be in a position to take positions in the selected stocks. While on the other hand, it can help you to see the movements from the sidelines and with full liquidity in your savings account balance. But anyway, we are going to explain some other investment strategy that you can develop from now on. In any case, it is not without risk as you will understand now.
Free descent: soil formation
One of the keys to opening positions in this very special figure lies in detecting the formation of a ground that serves to undertake subsequent ascents. However, this level usually costs a bit to identify since requires a little learning in operations with these characteristics. Where you can easily get confused and therefore lose more money than initially planned in your investment strategies. But in all cases the floor is usually a very important level as entry into positions in equity markets. Risk, on the other hand, is one of the greatest risks associated with this class of securities on the stock market.
Another aspect that you should pay attention to in the free descent is that although can last a long time, at least it is not eternal. At some point the much-desired change in trend will have to occur. And that it will be the right time to return to operations in the equity markets. Through an investment strategy that will have no choice but to be very aggressive due to its special characteristics. On the other hand, do not forget either that this class of securities have lost a very important part of their valuation on the stock market. And this is an aspect that you should evaluate positively from now on.
Volatility in their prices
Another of the most important facets of what a free fall is is the great difference between its maximum and minimum prices. Because its volatility can become extreme in most cases due to few titles that are exchanged in equity markets. To the point that they can be easily manipulated by the strong hands of the markets and that makes them very complex to carry out operations on the stock market. To the point that you can even get hooked on open positions in stocks.
While on the other hand, volatility is not the best ally you have to make the capital for investments in the stock market profitable. Because there are many the risks involved in this kind of operations and that in any case they are not suitable for small and medium investors who provide less experience in their movements in the equity markets. Where they must contribute many and varied knowledge from the point of view of technical analysis and also from the fundamental one. So that in this way, it is not a highly recommended operation from any kind of investment strategy.
Not investing a lot of money
Another thing that you should not do from now on is to make large outlays in this type of operation. Not surprisingly, it is an additional risk that you should avoid in everything from now on. Among other reasons because you can leave a lot of euros in a very short space of time. To the point that this kind of operations should only be developed with a minimum amount that cannot affect the capital that you have accumulated until then. In what is an operation that is considered by financial analysts as high risk.
While on the other hand, it should also be noted that in the stock market operations of greater monetary value, much more money is lost than in the rest. To the point that these movements can endanger your personal or family assets. It is convenient that from now on you do not forget this factor because it can generate a situation very little desired for your interests as a small and medium investor. And this is something that cannot be traded in any kind of investment strategy.
Take advantage of losses for tax purposes
Depending on the capital generated during this year, but especially on the stock market losses that are obtained, partial or total sales of the securities that are undervalued can be made, certain benefits can be obtained from the tax point of view. And that can be seen materialized with great efficiency in the next income statement. At the end of the day what it is about is to make numbers, calculating what benefits you can bring to make these sales. Although in case of any doubts raised in the draft, the most reasonable thing is to go to a tax advisor who will be in charge of deciding whether or not this operation should be carried out in the equity markets. At the moment it is one of the most profitable options for the interests of small and medium investors if they see that they are losing money in the stock market.
It is an investment strategy that can be unknown by a good part of small and medium investors. But in any case, it can be used with total security in the effects it can have on the interests of retail investors. At the end, part of the negative effects of this operation can be amortized, which on the other hand can put their securities portfolio in serious trouble. Not surprisingly, both for better and for worse you always have to count on tax treatment, in one sense or another from now on. In all cases, they are very complex securities to carry out any kind of exchange operations with them.
Not take positions
In summary, when you are facing a stock market in a situation of free fall, you should not take positions under any aspect. Because in the short and medium term, the only thing you will achieve is to lose money in the movements. Whereas if on the contrary, you already have the positions hired, you will have a double path of action. On the one hand, the most decisive of all and that is none other than undo positions especially quickly. With the primary objective of increasing losses to the point that a very important part of your capital may disappear. This operation would be interpreted as a clear preventive measure so as not to go any further in the valuation of your investments.
While on the other hand, you can also let the positions run until this figure ends. Although in this case, it is a more conservative investment strategy that is only intended for to periods of permanence that go to the medium and long term. Where you will have time to return to the original situation. That is, at the price levels where you made the purchases. Because in these periods of time, in many cases the prices of their shares recover, although you will not be able to have liquidity for a period of time that is more than lasting.
In all cases, you will have verified that it has a solution but that it is not the best of the stock market figures with which you can find from these precise moments. Of course, there is a lot you can lose and very little to gain. Unless you opt for trading operations or carried out in the same stock market session.