Volatile markets are a problem, but only if you don’t know how to trade them.
Unless you have a plan that you’ll actually execute when volatility kicks into high gear, you’re going to struggle – and you may do something you’ll regret.
While there are lots of ways to trade volatility itself, some of which I told you about a few weeks ago, there are only a few ways to play volatile markets.
Many investors are stricken with panic when it comes to the thought of losing stocks they love; I get it, it can be scary. But you don’t need to panic, you can own great stocks at much lower prices, and you can buy more of them.
Here are the three key things to remember when trading volatile markets.
There has been a lot of blame flying around. Investors have been looking for something to pin the market’s selloff on, and they’re getting desperate.
First, investors blamed the 10-year Treasury yield nearing 3% and the Fed hinting there are more rate hikes coming.
Now, the prospect of tariffs and trade wars are being blamed for the latest frightening drop off a cliff.
And, to be fair, we’re seeing crazy volatility. Markets have dropped hundreds, sometimes thousands of points at a time, then bouncing back only to drop a few hundred more points in the last hour or half an hour of trading, then gapping up or down the next morning…
But it isn’t being caused by the prospect of inflation, the 10-year yield rising, the Fed’s expected hikes, or the warning shots of steel and aluminum tariffs that were shot across the bows of some trading partners.
The market volatility that’s scaring the heck out of investors is about mechanics, not fundamentals.
Here’s how to turn your worries into profits…