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Stock Trading in a Volatile Market
Stock trading in a volatile market relies heavily on technical analysis with tools such as Japanese Candlestick charts . Traders know that the fundamentals of stocks , indexes, and market sectors are discounted by the stock market as soon as they are known. The individual stock trading in a volatile market such as today’s often has to guess along with the rest as to where the fundamentals will go next. Two major issues, for example, are whether the US congress and president will come to a consensus about dealing with the US debt and if the EU will be able to wrest itself from the so called PIIGS debt dilemma. Both of these are unknowns that currently defy reasonable fundamental analysis and both situations could have drastic effects on the world economy if they do not work out well. Thus traders look to read market sentiment when stock trading in a volatile market. When the market is falling, or rising, traders look for indications of the kind of market indecision that typically precedes a market reversal .
A useful tool in this regard is the Doji Candlestick . The Doji is represented by a short to virtually non-existent candle with shadows of varying lengths. This Candlestick analysis signal indicates that a stock opened and closed at very nearly the same price but that it fluctuated greatly above and below the baseline price. This Japanese Candlestick is considered an indication of market indecision and a good indicator that current market trends will reverse. It is not especially useful in a flat market as it does not tell stock traders which way a flat market is likely to go.
With technical analysis tools like the Doji Candlestick both a day trader and one interested in long term buy and hold investing can take advantage of stock trading in a volatile market. A trader will buy stock , sell stock , sell short , buy calls or buy puts in order to gain short term profits . An individual more interested in long term investing can use Candlestick stock charts in bargain hunting and buying at the bottom of a market trough in order to gain a long term investment at a bargain basement price. In this regard it is notable that Berkshire Hathaway is said to have made its largest number of stock purchases of the year recently on an especially bad market day.
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Two major issues, for
example, are whether the US
congress and president will
come to a consensus about
dealing with the US debt and if
the EU will be able to wrest
itself from the so called PIIGS
debt dilemma.
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Both of these are unknowns
that currently defy reasonable
fundamental analysis and both
situations could have drastic
effects on the world economy
if they do not work out well.
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When the market is falling, or
rising, traders look for
indications of the kind of
market indecision that
typically precedes a market
reversal.
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It is not especially useful in a
flat market as it does not tell
stock traders which way a flat
market is likely to go.
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With technical analysis tools
like the Doji Candlestick both
a day trader and one
interested in long term buy
and hold investing can take
advantage of stock trading in
a volatile market.
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An individual more interested
in long term investing can use
Candlestick stock charts in
bargain hunting and buying at
the bottom of a market trough
in order to gain a long term
investment at a bargain
basement price.
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In this regard it is notable that
Berkshire Hathaway is said to
have made its largest number
of stock purchases of the year
recently on an especially bad
market day.
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Although big picture
fundamentals such as the
evolving state of the world
economy or the politics of
Capitol Hill may baffle all
investors, there are stock
fundamentals that are useful
even in a chaotic market.
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When the markets are chaotic
traders can use these sorts of
stocks for short term profits
and long term investors can
pick up bargains at the bottom
of the price curve.
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In both cases the use of
Candlestick patterns can help
to spot opportunity based
upon evolving market
sentiment when stock trading
in a volatile market.
