How To Trade Stocks In This Market Turmoil
Every day multiple governments around the globe take seemingly bold steps to bail out one or the other aspect of this failing economy, but every day the markets deflate their enthusiasm in no time. Under normal circumstances, no government in the world would even dare take such steps. Today, these are the norm of the day and easily forgotten.
This economy seems to be like a black hole which can suck in unimaginable amounts of cash, businesses and home owners, never seeming to give up. The US government has literally pumped in trillions of dollars. The European banks have slashed their interest rates by huge margins. On November 10, the US again moved in to help the sinking insurance company AIG to keep it afloat, the Chinese government announced more than half a trillion dollar investments in its infrastructure to create jobs; but the stock markets' response around the world was poor and mixed.
I remember, just a few months ago, a swing of 100 points in the stock market was considered huge. Now days, the US Dow Jones swings more than three hundred points several times like every other day.
When is this all going to end?
There is again good news and bad news.
The good news is that, we might be already half way through this mess and most troughs might be bottoming out soon if not already. The stock prices are so low, that they are not going any lower. They just rise up thousand points and fall back by the same margin. The stocks are just so much oversold that they cannot go any lower further. Most of the bad news has already got priced in stocks.
The housing market seems to be bottoming out too. The latest reports showed that the buyers who had been sitting on the fence with pocketfuls of cash are slowing trying to move in.
The bad news is we do not really know if there is any other major bad news that is still unknown to the world - Something that can bring down the whole world - as if anything remains now!
Well, what are the savvy investors [http://www.learninvestment.com] doing at this time?
Well again, they are making money! What? In this economy? The answer is yes.
What does an investor need to make money? Simply - buy low and sell high [http://www.learninvestment.com] - the mantra almost everyone who is not even investing knows. In normal times, one would need to wait for months for a price to bottom out so that one can buy and similarly wait for long times before a stock price would start coming back down to start selling. Today, one might get this opportunity almost every second day, if not sometimes multiple times in one day! If you keep some money to use it for day trading, you might be in for a surprise. The markets are definitely going to go up and definitely going to come down - huge swings will just be a part of life for some time to come. Then why not should one take advantage of this? If you happen to buy high and the markets fall the very next day, one need not despair as it is going to come back up very soon and you can rectify your mistake. Or when it is low, buy more to average out.
The caution one has to take is that daily trading can sometimes lock all the funds and if a wrong decision is taken in a panic, one might lose everything and not have anything remaining to help recover. Therefore, a good strategy would be to always keep half of the amount that you set aside to trade daily available to you for a corrective action [http://www.learninvestment.com]. When you sell, you do not get the funds in your account immediately, and if you need to take action during the next opportunity before the money from the previous sale becomes available, you can use a part of the buffer you had. Then you should really wait before making the next move till you get the money back in your account from your last sale. This way you would insure that you would not lose and always have means to recover.
One last caution, and that might in a way be just stressing the above point a little more, is: Use only the money you have in hand that you can afford to lose. Never use margin money especially for day trading; else you might very soon be standing on the streets with nothing to cover your back! Literally! Let greed and emotion not overtake your investment strategy and you should do great.
One can get ideas from others on how to invest, but one should always use one's own instincts to make decisions and this holds true for what I wrote above too. No one in this stock market is an expert - but one who can still make money is smart!
This economy seems to be like a black hole which can suck in unimaginable amounts of cash, businesses and home owners, never seeming to give up. The US government has literally pumped in trillions of dollars. The European banks have slashed their interest rates by huge margins. On November 10, the US again moved in to help the sinking insurance company AIG to keep it afloat, the Chinese government announced more than half a trillion dollar investments in its infrastructure to create jobs; but the stock markets' response around the world was poor and mixed.
I remember, just a few months ago, a swing of 100 points in the stock market was considered huge. Now days, the US Dow Jones swings more than three hundred points several times like every other day.
When is this all going to end?
There is again good news and bad news.
The good news is that, we might be already half way through this mess and most troughs might be bottoming out soon if not already. The stock prices are so low, that they are not going any lower. They just rise up thousand points and fall back by the same margin. The stocks are just so much oversold that they cannot go any lower further. Most of the bad news has already got priced in stocks.
The housing market seems to be bottoming out too. The latest reports showed that the buyers who had been sitting on the fence with pocketfuls of cash are slowing trying to move in.
The bad news is we do not really know if there is any other major bad news that is still unknown to the world - Something that can bring down the whole world - as if anything remains now!
Well, what are the savvy investors [http://www.learninvestment.com] doing at this time?
Well again, they are making money! What? In this economy? The answer is yes.
What does an investor need to make money? Simply - buy low and sell high [http://www.learninvestment.com] - the mantra almost everyone who is not even investing knows. In normal times, one would need to wait for months for a price to bottom out so that one can buy and similarly wait for long times before a stock price would start coming back down to start selling. Today, one might get this opportunity almost every second day, if not sometimes multiple times in one day! If you keep some money to use it for day trading, you might be in for a surprise. The markets are definitely going to go up and definitely going to come down - huge swings will just be a part of life for some time to come. Then why not should one take advantage of this? If you happen to buy high and the markets fall the very next day, one need not despair as it is going to come back up very soon and you can rectify your mistake. Or when it is low, buy more to average out.
The caution one has to take is that daily trading can sometimes lock all the funds and if a wrong decision is taken in a panic, one might lose everything and not have anything remaining to help recover. Therefore, a good strategy would be to always keep half of the amount that you set aside to trade daily available to you for a corrective action [http://www.learninvestment.com]. When you sell, you do not get the funds in your account immediately, and if you need to take action during the next opportunity before the money from the previous sale becomes available, you can use a part of the buffer you had. Then you should really wait before making the next move till you get the money back in your account from your last sale. This way you would insure that you would not lose and always have means to recover.
One last caution, and that might in a way be just stressing the above point a little more, is: Use only the money you have in hand that you can afford to lose. Never use margin money especially for day trading; else you might very soon be standing on the streets with nothing to cover your back! Literally! Let greed and emotion not overtake your investment strategy and you should do great.
One can get ideas from others on how to invest, but one should always use one's own instincts to make decisions and this holds true for what I wrote above too. No one in this stock market is an expert - but one who can still make money is smart!
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