Profit from falling prices?
The coronavirus held the world and the stock market in 2020. Experts predicted it years ago at the time, and now it has happened: A previously unknown virus has spread from Wuhan, China, across the globe. Containment of the virus in the near future initially seemed unrealistic - a global pandemic ensued.
The consequences of COVID-19 were already felt on the financial markets in the first few days after the outbreak. Many prices plummeted; for the DAX, the week after the outbreak was the worst week since 2011.
For most people it was clear: At the moment you can't get much out of stocks. But was that really the case? Or can you also make a profit from falling prices?
If one had claimed before the pandemic that a virus would soon occupy the whole world, one would probably only have gotten a few laughs.
But it happened: From a ?wet market? in China, the virus spread first only in Wuhan, then in China and then all over the world. The coronavirus causes many sick people and deaths.
The first political priority was to contain the virus. That this will succeed, however, was already doubted at the beginning. There was hoarding, many people were less on the move (consuming less) at the beginning of the pandemic, and large events were banned.
Again and again, quarantine zones were established in several European countries, e.g. who still remembers the first bad incidents in the German district of Heinsberg, where an entire village is quarantinede stood?
Examples of the Corona episodes
All this, of course, had consequences for the economy & financial markets.
Many companies trembled; the DAX had not seen such a large drop since 2011.
Let's look at two examples: The Tesla share peaked on February 19, 2020. From that day on, it went steadily downhill until March 1.
The same applies to the share of Alphabet, the subsidiary of Google. From February 19, the share price fell steadily.
When prices fall, there are different types of investors: Some panic and sell their shares, some see it as a correction and wait.
It is also a good idea to buy new shares during such phases. They are cheap now and it is likely that prices will rise again at some point.
From falling prices profit
In classic stock trading, you can profit during black phases by buying new shares now.
Securities are cheaper and the crisis (including the next one and the one after that) will certainly not haunt us forever. So sooner or later, there should be an upward movement again. However, it is never possible to estimate when that will be.
Getting started with stock trading is not difficult: providers, such as flatex.at - Online Broker (our recommendation) offer uncomplicated online trading. After registration and personal verification you can start trading.
CFDs are contracts for difference. One bets on rising or falling prices.
CFDs make it possible for profits to be made even with falling prices.
Long" and "short" positions can be opened. Those who open a "long" position profit when the price rises. Who opens a "short" position, profits when the price falls.
Registration with a CFD broker works more straightforward and faster than with stock brokers.
There are demo accounts to try out trading.
This is how CFD trading works:
When the Markets recover after the crisis?
At the time of the crisis, it is impossible to predict when the markets will recover. But experience teaches that recovery is usually when it is least suspected and the outlook is darkest.
The coronavirus threw a huge spanner in the works of the entire global economy: in China, production was halted in many factories, which is causing and will cause supply bottlenecks in Europe and the world.
However, the shares already returned to normal towards the end of 2020 and - fueled by an unimaginable Quantitative Easing program (?money printing?) of the central banks - to one of the strongest rebounds of all times.
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