With uncertainty comes volatility, especially in the stock markets. When news of the pandemic first started surfacing we saw how quickly the markets reacted. This reaction can create opportunities for big gains, but that also comes with the risk of big losses. Before you start trading make sure you understand the risks involved. Lay out a plan that can help you focus on your goals and the strategy to reach them. We have selected two methods to help you start goal achievement in this volatile market.
The first method is called “Buying in the Breakout”. This strategy requires you to review a stock with an identifiable support and resistance range. This range is the expected downturn and upturn during the changing of supply and demand of that stock. When this stock “breaks out” of its range in the upturn, that is the time to buy. In volatile markets, these “breakouts” could lead to big gains in the long run. However, a stock that goes up, can come down. It is important to remember that a steep decrease is also possible so set up a stop-loss order to limit the potential loss.
The second method that an investor can use in volatile markets is a shorter-term strategy. This means taking profits when they arise, instead of waiting on a longer-term investment. In a volatile market, a short-term trader should look for a stock that has been trending downward but has not completely collapsed. These stocks have a chance at rebounding and jumping in value very quickly. The important part is getting in before that spike happens, and not waiting till it’s too late. Again, be wary of the risks that are associated with this kind of trading.