On a very basic level, trading is a zero sum game.  There will always be a winner and there will always be a loser.  Even in a stock market crash, there's always opportunity to make money.  In terms of investing in an economic downturn, you have to understand the tools that are available to you.

There are plenty of tools available that investors can use to protect their portfolios.  If you're already a seasoned investor, then you know that there are mechanisms you can use in your trading accounts or with your broker that can help mitigate your risk and can also help you make money on the way down.

Gary Ng, Canadian investor and entrepreneur, says the number one rule to follow when investing in a market downturn is to mitigate your downside risk.  

Stop Losses

"Setting stop losses is very important.  In my practice, there are two types of stop losses that we use: a visual stop loss and an actual stop loss," Ng says.

In a visual stop loss, there is a metaphorical line drawn in the sand where if the price of the stock that you invested in drops to that level, you do a full re-evaluation as to why you invested in that stock and whether or not you want to continue to invest or get out.  

In an actual stop loss scenario, an investor invests in a company and immediately after, they set a stop loss mechanism that will sell the stock at a certain amount of loss.  "You can set the stop loss at anything you want.  It can be 5, 10, 15 percent.  It doesn't matter.  It's whatever your thesis for investment is," adds Ng. 

Use derivatives

A more aggressive strategy, explains Gary Ng, is using derivatives to make money during a downward trending market.  Some products that are available for equity stocks are called put options.  Put options are a derivative that gives you the right to sell a stock at a certain price at the cost of a premium.

"You as the buyer would have to pay a premium to the seller for the put option, but then that gives you the right to sell the stock at a strike price.  Let's say a stock is at $100 and you are thinking that it is going to drop significantly.  You could buy a put option at a strike price of $95 and if it trades anywhere below $95 then you get to make money."

In order to get this downside advantage, you have to pay a premium and that is something you have to study and investigate to see if it's worth your while. 

Sell Call Options

More complicated strategies to use during an economic downturn are selling Call Options, which means you have the obligation to sell a stock at a certain price if it starts to trend up.  If the stock trends down and trades below the strike price, the Call option will expire worthless and you get to keep 100% of the premium. 

Sell futures

Another way to make money on a downward trending stock market is to sell futures, also called a futures contract.  Futures contracts are derivatives trading on the futures exchange, so broad based indexes such as the S&P 500 or Nasdaq 100 track large baskets of equity stocks.  

Gary Ng: "If you feel that the stock market is going to trend downward, then using futures to short the market is a very effective tool. It is highly leveraged, so it could be potentially very costly if you're wrong.  But if you're right, it can be extremely rewarding."  He adds, "The liquidity in futures markets on equity indices are excellent.  They are used by professional traders, institutions and individuals alike to speculate and to hedge and they also have their respective options markets attached to them as well."

At the end of the day, there are a lot of tools to help investors mitigate risk and also speculate on a downward trending market.  

Gary Ng suggests investors educate themselves and use professionally licensed advisors and brokers who can help them navigate these tools.  

"Be wary, for an amateur who is dabbling, it is a very dangerous space to navigate.  You need a lot of education, mentoring and coaching before engaging in the markets in general but once you're in it and comfortable, it can be extremely rewarding."