Before we dive in, let’s start by breaking down the definition of a stock market crash is so we are all on the same page:

Technical Definition of a Stock Market Crash

A stock market crash is a sudden dramatic drop of stock prices across a major market mechanic, indicie, or industry. It results in major, widespread losses, and usually is driven by panic selling and underlying economic or political factors. Oftentimes, crashes occur after a time of large-scale speculation and economical bubbles in one or multiple industries. 

The South Sea Bubble (1720)

One of the earliest recorded stock market crashes occurred in the early 18th century in Great Britain. The South Sea Company, which was granted a monopoly on trade with South America, saw its stock price rise dramatically in the early 1720s. Speculators rushed to buy shares in the company, driving the price even higher. However, the company had few actual assets and was essentially a Ponzi scheme. When the bubble finally burst in 1720, the stock price collapsed and many investors were left with significant losses. The crash was a significant event in British history and is often cited as an early example of financial speculation gone awry.

The Wall Street Crash of 1929

Perhaps the most famous stock market crash in history is the Wall Street Crash of 1929, also known as the Great Crash or the Stock Market Crash of 1929. The crash, which occurred on October 29, 1929, is often seen as the beginning of the Great Depression.

The crash was caused by a number of factors, including overproduction, low wages, and an oversupply of goods. As a result, consumer demand began to decline and businesses began to struggle. In addition, the stock market was fueled by speculation, with many people buying shares on margin (using borrowed money). This added to the instability of the market.

On the day of the crash, the Dow Jones Industrial Average (DJIA) fell by more than 11% and continued to decline in the weeks and months that followed. The crash led to widespread panic and a significant loss of wealth for many investors. The effects of the crash were felt around the world and contributed to the global economic downturn of the 1930s.

The Black Monday Crash of 1987

The Black Monday Crash of 1987 occurred on October 19, 1987, when the DJIA fell by more than 22%. The crash was caused by a number of factors, including a slowing economy, rising interest rates, and trade tensions between the United States and other countries.

The crash was exacerbated by the use of computerized trading systems, which allowed for rapid selling of stocks. Many investors panicked and sold their stocks, leading to a further decline in the market. The crash had a significant impact on the global economy and led to a recession in many countries.

The Dot-Com Bubble (2000)

The Dot-Com Bubble, also known as the Tech Bubble or the Internet Bubble, was a period of rapid growth in the stock prices of internet-based companies in the late 1990s and early 2000s. The bubble was fueled by speculation and hype surrounding the potential of the internet and the belief that internet companies were immune to traditional business cycles.

However, many of these companies had little in the way of actual assets or revenues and were overvalued. When the bubble finally burst in 2000, the stock prices of many internet companies collapsed, leading to significant losses for investors. The Dot-Com Bubble is often cited as an example of the dangers of speculation and the importance of proper due diligence when investing.

The Global Financial Crisis (2008)

The Global Financial Crisis, also known as the Great Recession, was a significant economic downturn that began in 2007 and continued into the early 2010s. The crisis was caused by a number of factors, including the collapse of the housing market, and risky financial practices.

2020 COV-19 Crash

In March of 2020, we saw a roughly 40% decline in the S&P in just a month after worldwide lockdowns due to fear of COVID spread. Markets tumbled pricing in the potential of indefinite lockdown of economies across the world.

What’s Coming in 2023?

When you zoom out and really look at the market as a whole in 2023, we will likely see a continuation of the main themes from 2022: High-Interest Rates, Rising Unemployment, Falling Housing Prices, and Uncertainty. All of this describes what could be coming in 2023. We have already seen drastically high inflation numbers and rising rates trying to combat that inflation, which has resulted in a slowing of the economy and market instability. Now, there is no way to truly predict 100% what will happen in 2023, but by looking at the current conditions, one can reasonably believe that these negativities won’t turn around in the early part of 2023. 

Will we see some easing on rate hikes by the FED towards the middle to end of the year? Maybe, or maybe not. But just looking at how things are from a high-level at the moment, one can reasonably believe that 2023 may continue to be a shaky year. As traders, we focus on REACTING to events, not predicting.     

How to Prepare For The Coming Market

The most important thing you can do to make sure you are trading and investing safe in times of uncertainty and downturns is to focus on obtaining quality education, and getting involved in an experienced, transparent community. It may sound cliche, but proper education will be the number one thing separating you from dominating this type of market in 2023, or getting dominated by it. 

You have to learn from others who have been through major market downturns and from those who have not just traded through bull markets. At Bulls on Wall Street, we have tons of professional traders, including Kunal of course, who have seen every market condition possible, traded through them successfully, and can teach you how to navigate them. If you don’t learn how to successfully trade these types of markets from someone else who is actually experienced, you can miss out on huge opportunities, or even worse, take some massive financial hits. Invest in education, and surround yourself with a supportive, knowledgeable, credible, and active community this year to reinforce your education and learn more in real-time.

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The post Complete History of Stock Market Crashes: Is One Coming in 2023? appeared first on Bulls on Wall Street.

This downturn has prompted some questions from our community surrounding the topics of how do I stay safe during a bear market or a market crash?

Yes, during a crash you can make a TON of money by taking advantage of the day-to-day volatility as well as getting yourself into some very nice long-term positions. But, you can also lose money even faster if you are not properly prepared.

That is why today we wanted to break down some of the top things you should NOT do whatsoever during a market crash:

Master Your Emotions

It is impossible to remove emotions from trading or investing. That is the reality of the game we play. But, in times of panic and downturn in the market, people’s emotions get heightened tenfold. When the market is crashing, you have to remain diligent and in control.

With a lot of red in the markets, especially if you are positioned heavily to the long side, you have to resist the instinct to panic, especially if you have long-term investment horizons or goals. Consider historical market statistics. Volatility is a natural part of the game, and crashes can happen. If you’re in the market for the long haul, bear markets are unavoidable. You have to accept periods of losses on your account and in the overall market. Downturns are temporary. Over every 15-year period, starting on any single day in its history, returns for the S&P 500 have been positive. Money moves in and out of the market, but economic growth ultimately spurs the value of companies higher year over year.

We will dive into more strategies on how to master emotions in this week’s live webinar:

Don’t Panic Sell 

Just because the market is crashing or is down, you don’t want to panic sell at random levels. Yes, if a stock breaks a key level or support or hits your stop during a crash, sell by all means. But, if you are just selling out of pure fear and anxiety at a random point, that is not the right decision. Most of the time, you’ll be selling into support or the ‘bottom’, which brings upon pure frustration and painful losses. 

Selling your positions in the middle of a crash can be the worst thing you can do. It’s the exact opposite of the buy-low and sell-high moto. Be calculated with your entries AND your exits always, especially during volatile times in the market. These reasons are why 95%+ of traders lose money in the markets. This video lesson dives into more detail how to be the 5% that thrive in these market conditions: 

Don’t Randomly Average Down or Buy Stocks

Yes, following a market crash can bring some of the best long opportunities you can see in decades, but, you have to time them right. Market crashes can bring devastating moves to the downside, so you have to be careful of where you are buying stocks and what your plan is for each position. 

Make sure that you look to buy at key levels of support where strong demand is coming in at. Look for large zones at key whole dollar levels with multiple bottoms on longer term time frames. Those will be levels that have the highest probability of attracting buyers at, giving you the best chance of entering a successful long position at. 

Focus Even More On Your Risk-Reward

Always make sure to follow the risk-reward chart below, regardless if you are day trading, swing trading, or position trading stock within a bear market or a market crash. Be careful and pick your spots right when entering positions during times of volatility.

Focus on a 1:2 or BETTER risk-reward ratio on all trades and positions. It doesn’t matter if it is a scalp or a swing trade. When the volatility is through the roof in the market, you have to skew the odds in your favor even more than when the market is more ‘stable’. If your target isn’t 2x what you’re risking, walk away from that potential trade. There will be plenty of opportunities in this market environment, always avoid forcing set ups with poor risk vs reward:

Hard Stop Losses

The last thing we have to mention is hard stop losses. We’ve heard too many horror stories of new traders getting annihilated because they didn’t use a stop loss. Don’t believe gurus on the internet that tell you market makers will move a stock to take out your stops. No market maker cares about your tiny $10,000 position in Netflix. Mental stop losses can go south quick if you’re not an experienced or disciplined trader. Put on a hard stop loss right after you enter a position.

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The post What NOT to Do in a Market Crash appeared first on Bulls on Wall Street.

Some of the biggest fortunes in the world have come from stock market crashes. In my latest video lesson, I talk about how to trade in downtrending macro market conditions, and my favorite strategies and tips to use to capitalize:

Have a Plan During a Stock Market Crash

Stock market crashes aren’t anything new. You were around in 2008, and probably during the early 2000’s during the dot-com bubble. Ever since the stock market was founded in the 20th century, the market has crashed every 5-10 years. 

Regardless of whether you are 10-year trading veteran, a complete newbie, or just someone with 401k, you need to have a plan for what you will do during a market crash. It should be pre-determined, otherwise, when the crash happens, you will panic and sell the bottom just like everyone else who loses a ton of money during a crash. 

Understand the Big Picture Trend of the Stock Market

The advice I would give to the average Joe with money in the market is to just do nothing! Sure you could hedge, but for most people that gets too complicated, and they end up messing it up because they time it incorrectly. 

If you are a momentum trader like myself, and are looking for some more higher-risk, high-reward strategies, I would look into various instruments to short-sell the market, which is essentially capitalizing on the stock market going down (learn the strategies I use in bear markets here) .

Take a look at the monthly chart of the Dow Jones industrial average:

What is the trend? Clearly up. What happens every time there is dip? It gets bought up. So what does that mean you should when the stock market dips? NOT SELL. This is, of course, is easier said than done.

At the moment when you are watching your portfolio get crushed, the primitive part of your brain is panicking, and you convince yourself that everything is going to 0. Don’t let fear dictate your decision making during a crash!

• Stay Calm, Don’t Make Impulse Decisions With Your Money
• Don’t Watch Every Tick: Watching the Markets 24/7 Will Just Make You More Emotional
• Don’t Think Like The Crowd
• Hedge Your Long Term Positions
• Don’t Catch A Failing Knife, Let the Bottom Pick Itself

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