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Stock Market Volatility
Stock market volatility is what makes trading work. Market inefficiency occurs when traders and investors do not have time to do fundamental analysis or complete technical analysis with tools such as Candlestick charting. This can lead to wide swings in stock prices before technical analysis catches up and the sort of stock pricing predicted by stock fundamental analysis reasserts itself. During the time of volatility and market inefficiency traders can often effectively scalp on the upswings and downswings of stock price.
Long term investing hates volatility and day trading likes it. Having a stock trading strategy in place before unexpected news of a takeover bid or product recall sends a stock into a tailspin will help the day trader take advantage of swings in stock price. Stocks that usually trade within support and resistance zones can break out to the upside or downside. If the day trader is in a profitable trade as the breakout occurs he or she can ride it to a nice profit. If he or she is caught in losing trade in these situations, stop loss strategies are necessary to reduce investment risk.
Even over the longer term, taking advantage of stock market volatility and stock volatility are what can enrich the savvy investor. An investor can place a limit order which is to buy at or below a given price or sell at or above a given price. If he or she expects market movement but does have to time to watch the stock price all day long, a limit order good for the day or forever can be placed to buy stock or sell stock taking advantage of stock market volatility.
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This can lead to wide swings in stock
prices before technical analysis
catches up and the sort of stock
pricing predicted by stock
fundamental analysis reasserts itself.
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Having a stock trading strategy in
place before unexpected news of a
takeover bid or product recall sends a
stock into a tailspin will help the day
trader take advantage of swings in
stock price.
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If he or she is caught in losing trade in
these situations, stop loss strategies
are necessary to reduce investment
risk.
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Even over the longer term, taking
advantage of stock market volatility
and stock volatility are what can
enrich the savvy investor.
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If he or she expects market movement
but does have to time to watch the
stock price all day long, a limit order
good for the day or forever can be
placed to buy stock or sell stock taking
advantage of stock market volatility.
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Long term investing takes advantage
of even longer term swings in stock
value, watching the price to earnings
ratio of a stock and analyzing
fundamentals.
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In value stock investing an investor
will see a discrepancy between a
stock’s fundamental value and the
stock’s predicted worth going
forward.
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Often times a wise investor will pick
up on a stock before stock market
volatility hits, have stock picks and
purchases in place with limit orders,
before prices start to fluctuate.
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Technical analysis software,
programmed with data from past
market experience will pick up
patterns imbedded in market
volatility and help the trader use
technical analysis indicators to profit
from swings in the market with large
trading volume.
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Knowing and using Candlestick
charting techniques to be able to see
Candlestick pattern formations is a
time honored and effective means of
letting the market’s movements in
periods of volatility predict its future
actions.
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As with all stock market trading tools
the trader needs to learn Candlestick
basics in order to most effectively use
these tools when the opportunity
presented by stock market volatility
presents itself.