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Watch Out! Bear Markets are Extremely Volatile and Bear Traps For Unsophisticated Investors

Watch Out! Bear Markets are Extremely Volatile and Bear Traps For Unsophisticated Investors.  The charts below of bear markets going back to 1929 show they are marked by extreme volatility with sudden surges amid longer term downward moves. If we have now entered another bear market, this kind of volatility can result in major losses for unsophisticated investors who have been conditioned to believe over the last few years that the only direction is up. For the more sophisticated traders, there is a trading  technique known as “buy on the dips and sell on the rips.” In other words, buy on weakness and sell on strength. So, pullbacks as we’ve recently experienced may provide chances to buy extremely oversold stock. However, investors also need the discipline to forsake greed and sell as the markets surge higher, but before the rips convert to bigger dips. For the less disciplined, which historically means most investors, defensive action is the watchword.

Watch Out! Bear Markets are Extremely Volatile and Bear Traps For Unsophisticated Investors

Watch Out! Bear Markets are Extremely Volatile and Bear Traps For Unsophisticated Investors

Watch Out! Bear Markets are Extremely Volatile and Bear Traps For Unsophisticated Investors
Watch Out! Bear Markets are Extremely Volatile and Bear Traps For Unsophisticated Investors

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Brad Lamensdorf

Brad Lamensdorf, the founder and portfolio manager of Active Alts, is a principal and co-manager of the AdvisorShares Ranger Equity Bear ETF. He previously managed a long-short investment partnership from 1998-2005 under the name Tarpon Capital Management. Earlier in his career Mr. Lamensdorf was an equity trader/market strategist for the Bass Brothers’ trading arm. He managed a short only portfolio in addition to co-managing a $1bil hedging program. He also served as in-house market strategist for the entire internal and external network of Bass Brothers money managers.

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