Volatile Market Strategies:
Explanation of what to do in different circumstances in stock market:
Market tends to crackdown when there is a sudden panic due to some incident. Sometimes such panic situation is created without any major reason. Markets can witness huge volatility due to rumors. At certain stage a major trend reversal can happen in market. In most cases untrained investors and traders just watch things in a shock and fail to take timely action. We need to understand what we need to do in such circumstances, so we can take action with ease in such circumstances. Whatever we do, either it is trading, or investing in stock market, the bottom line should be that it must be done in such way.
Effects of Rumors and Announcements:
Lot of rumors makes rounds in market from time to time. Based on it a quick jump in a stock price can be witnessed. One must avoid getting trapped in such rises, as when a rumor doesn’t materialize into facts, such rises equally sharply turn into sharp declines. Same way just after a good result is declared, people scared after that stock to buy it. But mostly the stock has risen already on expectations of good results, and could prove to be a trap for short-term traders. When some unexpected big positive development takes place in a company, the effects of it can be witnessed immediately after the announcement is made. In such cases the stock price can rise sharply after the announcement is made, and such gain can remain intact in it. Same way if an unexpected bad development takes place in a company, prices can decline sharply and stay there for longtime.
Sudden bad incidents that spread panic in markets:
We have seen in past that during market hours or after-market hours, a huge negative incident can occur which can trigger panic selling in the market immediately if it happens during market hours, and next day if it happens after market hours. Under normal circumstances we prefer to first spot the trend and then follow the trend, trader doesn’t enter to buy against the trend. But in such circumstances, one needs to understand that a sudden dip is just a blip in the overall trend that is in place.