1. Good news in a bear market is like smoke in the breeze (i.e., soon dispersed). Don’t buy into upgrades or analyst recommendations. Analyst “upgrades” or recommendations can kill you.Every person reading this has access to some kind of trading platform, trading tools or systems that afford instant access to the financial markets. Good news like upgrades in bear markets typically has about five minutes of fame.

2. Bear markets are not a time to learn how to “day trade” in an effort to recoup losses (no matter how many times you hear that “this is a traders’ market”).

3. Accumulation days (there may be three or more in a row) are shorting opportunities, but resist being aggressive until the S&P 500 shows a 3- and 5-day moving average bearish cross. (Remember that it’s 50% market, 25% sector and 25% stock as far as direction, but some could argue in markets it’s 75% index, 15% sector and 10% stock.)

4. Chart patterns (unlike ice cream) come in just two flavors: continuations and reversals. Reversal patterns mostly form in weak trends. If the trend that the market or stock you are watching has been strong, then chances are that any pause is just a consolidation before the next leg down.

5. There is no such thing as “safe sectors.” Sure, each bear market brings sector rotation. But make sure if you are playing this game that you don’t have the flexibility of wood. And when the music stops, quickly find a chair!

That is, you must keep a flexible mindset so that you are able to change with the markets. The best traders are those who are nimble and approach the markets without bias.

6. Your stop-losses are YOUR stop-losses. The pain of being down 8% in a bull market is no different than being 8% wrong in a bear. If your risk tolerance requires you stopping out at 8%, then be consistent in any market you trade, but trade “with the primary trend.”

It takes greater emotional balance to trade a bear than a bull. So, always manage your risk — just remember that, in the markets, your money is always at risk.

Great traders manage emotions and risk. This makes them great. YOU know your risk tolerance and YOU control what happens between the “keyboard and chair.”

7. Bear markets are generally slow-moving affairs. However, stocks in bear markets can move much faster than you think (hence the reason that volatility rises drastically). But the “time” we spend in a bear is what everyone needs to keep in perspective. Bear markets last much longer than most are willing to wait.

8. Market Capitulation — more a state of mind than a specific set of market conditions — is very difficult to measure; hence the market maxim, “Bear markets end when the last bull throws in the towel, not when bears turn bullish.”

9. Bear markets drain emotional capital much faster than bull markets. Bear-market volatility will suck your energy at twice the rate of a bull. Rule: Take twice as many breaks from trading the bear as from trading the bull.

10. Have sufficient, liquid funds. Over-leveraged and under-capitalized traders are also called “bear food.” Make sure you’re not edible.

11. The market going up on bad news, is not a sign of the bottom, in bear markets it’s always bad news and due to the fact the stock market isn’t at zero it is bound to eventually go up on bad news before the primary trend continues. (Learn to manage your expectations. The higher your expectations, the more you are setting yourself up for a fall. Trading is a marathon, not a sprint.)

12. Know what you own in a bear market, We are always advised to “know what we own in a bear market” but that doesn’t mean it will go in the direction we expected when we bought it. Losing 40% in a stock that “you know” is the same as losing 40% in a stock that you bought by accident. In fact it likely feels worse because you actually had to spend time researching the darn thing. (When you are wrong, admit you are wrong and get out quickly. Do not hold and hope, as this is a sure recipe for disaster.)

13. Diversify—>For what? To insure that each stock get’s equally hit and your portfolio goes down orderly? In bear markets bull market rules are tossed out the window, when you get sell signals on everything (index, sector, stock) then sell. Many investors will justify this method by saying to themselves “well if I sell and it goes up, I’m going to be upset”. Well another way to look at it is, if you sell and it goes down you will have more money. Are you in the market to make money or be right? No place in bear markets for “Ego’s” (Let go of your ego and your need to be right. Ego has absolutely no place in trading.)

14. I often hear news letter writer “so and so” is great in a bull market………”Who isn’t?” In bull markets everyone is brilliant; it’s only in bear markets that this “unusual and impressive intellectual acuteness” turns into financial ruin. (Study the habits of winning traders, because there are certain common denominators that winners have.) Remember the only reason we are in the markets is to make profits. So is everyone else, and someone has to win and someone has to lose. However bear markets have the unique ability to create more losers than winners. That would have to do with the inability to hide bad habits that are often disguised in bull markets.

15. Former leaders are not where traders should look for safety, remember in a bear market all is fair game for the woodshed.

16. If you don’t understand it, Don’t Do It!

17. There is always one more imbecile than you counted on calling a bottom.

18. Don’t fall into buying stocks because of “perceived value” especially with over touted value plays which pay high dividends. Stocks that drop 40% in a matter of months that pay a high dividend are still stocks getting “splits” without the burden of extra shares. Lastly can anyone guarantee the dividend won’t get cut?

19. No one get’s rich in bear markets, it is often said we typically just have degrees of losers. Bottom line, try to lose less than the guy next to you.

20. Short into accumulation days typically 3 or more but never aggressive until you have a bearish cross of the 3 and 5 day moving averages in the SP500 (Remember the it’s 50% market, 25% sector and 25% stock as far as direction but some could argue in markets it’s 75% index, 15% sector and 10% stock.)