How To Profit From High Volatility
Go to: Previous Article Next Article
Investors who have had money in the markets over the past two years will not be surprised to learn that since June 2007, the volatility index has risen from 16 to a little more than 79, the highest levels recorded in history.
In fact, after the attacks of September 11, 2001, volatility jumped to just 33. They closed the markets as a result of the uncertainty! Today, the markets feel subdued, yet are registering volatility in the range of 30. This presents plenty of opportunity for investors to profit.
The first thing investors need to do when it comes to taking a run at profit is to distance themselves emotionally from their investments. Trading software that provides signals on when to buy and sell can help in this regard, but this is something most individual investors are unable to accomplish. Think about it: we all work hard for our money and we hate to see it wasted. This is a benefit that money managers have -- they haven't worked hard for the money you invest, so if they lose, they lose your money, not theirs.
The second thing the investor needs to do is understand volatility. This can be done primarily by studing graphs on sites like Yahoo! Finance (type "^VIX" in the quote section) but also by realizing and appreciating the dictionary definition. Volatility is the rate of change in a price's deviation from its mean. This means that the higher the volatility, the more quickly a price will deviate from it's mean price.
Lastly, investors need is to hold back from being consumed by greed. This poses an immense challenge for most people as short-term gains often hint at larger longer-term returns. Trading system can help in this regard as well since they so effectively strip the emotion factor from any trade by focusing solely on statistical figures like volatility, momentum, relative strength and so on. Individual investors, on the other hand, focus on the potential of profit or loss.
In summary, by eliminating emotion and relying on technical trends investors can use volatility advantageously. Such volatility can allow for strong gains and returns when used properly. A trading system can assist to a large degree, but is not at all required for investors who can control their emotions and greed.
Article Source: Articlelogy.com
- Credit Cards A big selection of Cards in all flavors: Bad Credit Cards, Secured Cards, Prepaid Cards, Canada Cards, Low Interest Cards -
Word Count: 386
Reduce Your Debts Without Bankruptcy. See How Much You Can Save. Free Debt Analysis
