A bull market may make your stock's price increase, from which you can benefit in one way or another.
However, the possibility of your stock becoming too costly always exists since after the up, a down in the price may follow, which may be of an extreme speed.
So, under bull market conditions you can do one of the following in order to counteract the potentially negative effects.
- First of all, you can sell a part of the shares and use the money to repurchase the stock when its price falls again.
- Secondly, you can leave the market work its way through the imbalance with no action from your side.
- Thirdly, you can take advantage of the high prices and sell the stocks for a profit.
Never forget that a market correction will follow that may push the price of your stock below its initial level.
A useful strategy to counteract the negative effects of a bull market is to sell a portion of your stocks at the current bull market price, which will be greatly higher than the one at which you have purchased the stock.
- After the market correction is at place you can use the money you have acquired from the bull market sale to purchase shares at the current lower price. As a result you will have more stocks than you used to have before the bull market.
- You have not only avoided losses but also have reduced your average cost per share.