A bear market is a protracted period, generally short-term, in which the prices of securities are falling. There has been a significant amount of bear markets in Singapore throughout the years. Therefore, investors need to know how to trade a bear market properly. A bear market, the opposite of a bull market, can be difficult for investors as stock prices decline and volatility increases.

How to trade a bear market?

The primary strategy for trading a bear market is investing in low-risk assets with a slow rate of return but relatively lower volatility and less risk. This means that investors should avoid stocks during this time because they tend to carry a greater risk than other types of investments such as mutual funds or bonds. Another good idea would be to invest in gold or precious metals because they tend to hold their value when other assets crash and can even gain value during a bear market.

However, if investors have a lot of capital to spare and wish to trade a bear market themselves, the best thing to do would be to short sell stocks that are performing well or hold an extremely high value in hopes that this will drive down their price.

Another idea is buying out-of-the-money options because they become much more valuable when the price of an underlying asset drops. For example, if investors buy put options when the stock has fallen by 10%, it could gain value up to 15%-20%.

Strategies to trade a bear market in Singapore

However, traders and investors can use specific strategies to trade a bear market in Singapore.

Know your risk tolerance

Bear markets can be volatile and risky, so know your risk tolerance before investing. If you are not comfortable taking on additional risk, it may be best to wait until the market has stabilised before investing.

Diversify your portfolio

When markets are volatile, it is crucial not to have all your eggs in one basket. Diversifying your portfolio with low volatility, blue-chip stocks can help reduce the risk of loss when markets are volatile.

Keep an eye on the fundamentals

It may be challenging to watch stock prices fall, but it is important not to change investment strategies based on market fluctuations. If stocks perform well operationally and their valuations are reasonable, it might be a good time to buy while prices are down. However, if there’s no reason for the drop other than market sentiment, then it might be best to wait out the bear market and buy when prices recover.

Avoid penny stocks and focus on mid-caps and large caps

Penny stocks tend to be less liquid and more volatile than blue-chip stocks. While larger companies can better absorb market shocks, small companies might not have the cash flow to sustain significant losses.

Stay informed

It is vital to stay up-to-date on current events in Singapore so that you are aware of factors that could affect stock prices. Reading business or financial news can help give you an edge when investing during a bear market.

Keep your emotions in check

Investing without emotion can be difficult, but it is essential to stay level headed through all market conditions – bull markets and bear markets alike. As long as company fundamentals remain strong, there’s no reason to sell just because stocks are down at the moment. Furthermore, overreacting to short-term market fluctuations can lead to suboptimal investment decisions.

Have a long-term outlook

Bear markets can be unsettling, and it may be easy to get caught up in the panic. However, it is essential to remember that markets always rebound, and stock prices will eventually recover. A long-term perspective can help you stay invested during difficult times.


The key to successfully trading a bear market is remaining calm and sticking to your investment plan. By following these tips, you can reduce your risk of losses and maximise your potential for gains. If you are a new investor, we recommend contacting a reputable online broker from Saxo markets and trading on a demo account before investing your own money.