How do day traders trade in recessions?
During price declines in a recession, we GO SHORT. Typically one of 3 ways — we typically either buy put options, sell call options (collect option premium) or short a stock. Each one has it’s own inherent risk/reward but all 3 techniques assume the price will go down which means our gains will increase. In the event prices go up and move against our position (such as M&A news in stocks), our pre-defined risk management rules trigger and the position is closed for a small loss.