Making Money in a Down Market

The markets have been selling off recently and money has been sitting on the sidelines. It's going to start coming back into the market at some point in time, but many investors are extremely nervous right now. I think there is going to be more pain in the upcoming weeks, but money can still be made even in the financials. There are certain stocks that will do relatively better than others. Let's say you have two companies in a very similar businesses, but one is clearly better (clearly worse) than the other. A common strategy is to go long the stock you think will do relatively better and short the stock you think will do worse. This strategy allows you to make money in a down market/sector. For the financials, you could go long JP Morgan (JPM) and then short C (Citi) for example. JPM is seen as the most stable bank on the street while C is more tied to the general trend in financials. You can do this with a number of companies because the financial sector is so diverse. I would try to stay clear of names prominent in the news because those large percentage fluctuations could really damage your trade. Employing this strategy can make you money no matter the direction the market turns.