Tip No1
The first tip is to be prepared. Before you make any investment, be just as cautious as you would be if you knew for certain that there would be a Stock Market Crash next week. It is better to be safe than sorry, especially when your hard earned cash is involved.
Tip No 2
Most brokers allow you to place stops for all your open positions. You are strongly advised to take advantage of this facility. Stock prices are known to fall as much as 20% during a Wall Street crash. To make matters worse, very few of them recover to their previous levels in a hurry. While a stop will not guarantee your exit price during a crash, in many cases it will help you exit at a more favourable price than if you did not have one in place.
Tip No 3
The amount of money you lose during a crash is directly proportional to your position size. The smaller your position size - the less money you will lose. Limit your position size to less than 2% of your capital, and you are likely to survive even the worst Stock Market Crash.
Tip No 4
Hedging is a strategy used liberally by Stock Market professionals, and for good reason. Whilst hedging can be an expensive exercise, it will save your skin when things go horribly wrong such as during a Stock Market Crash. These days, there are many instruments like options that make hedging possible even for small retail investors.
One of the worst things that can happen to any investor is to be caught on the wrong side of a crash. Fortunately, the tips I have presented will go a long way towards cushioning the blow.
