The concept of making a profit in a falling market is foreign to most people. We constantly hear on the news about how negative it is when the stock market goes down. While a falling market definitely has an adverse impact on less sophisticated investors and traders, savvy investors and traders profit from a falling market. Here is how they do it.
Creating an effective trading plan for a falling market essentially involves reversing your strategy for a rising market. Take a look at your criteria for entering into a buying position in a rising market. That is essentially your exit criteria in a falling market.
Start there and work backwards. When would you want to sell a stock that had previously been rising? The answer to that question is when you would want to buy a stock that meets your criteria in a falling market. Once you understand how to make money in a rising market, you are also prepared to make money as an investor or a trader in a falling market.
Investors and traders who are prepared to profit when the market is falling increase their opportunity to manage risk. Without the ability to profit in a falling market, investors and traders are effectively removing themselves from the market for periods of time. And when you're not in the market, you can't make money from the market.
Profiting from a falling market is fairly straightforward once you understand the concepts. However, there is risk involved. You should fully educate yourself before attempting to profit from a falling market. The strategies required are advanced. | 
