Profiting From High Volatility
For investors who survived the past two years, it will not be much of a surprise to learn that market volatility, as measured by the Chicago Board Options Exchange, has risen from a modest 16 to a little over 79, the highest level ever reached.
To give perspective to just how high the volatility index climbed, think back to the chaos that followed September 11, 2001. That point, volatility "spiked" to 33. These days, as the index reports a number in the 30 range, the markets seems subdued. This is definitely not the case, which means investors can continue to profit from volatility.
For the individual investor, the first thing that needs to happen is to strip away the emotion from the investment. This is challenging, however, and for good reason. Most investors have worked extremely hard to build a nest egg, and watching a volatile market eat it up without providing any tangible benefits is extremely difficult to stomach. One solution is trading software, which is a lot like a money manager in that it does not know or care how many hours or sacrifices one had to make in order to save such a nest egg.
Secondly, the investor should have a good understanding of volatility. Reviewing the charts at Yahoo! Finance by typing "^VIX" in the quote box is a good start. Another essential is to understand the definition of volatility, which is simply "rate of change of the deviation from the mean." The higher the volatility, the more quickly will stray from its mean.
The last thing an investor needs to do is tame the beast known as greed. This is a difficult thing to do since short term returns give us a taste of just how much we might make if we stay invested just a little longer for just a little more money. By using trading software, investors are better able to remove the emotion since the software will study concrete factors like volatility, moving averages, momentum, and so on whereas investors study the profit and potential for more.
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. - 23221
To give perspective to just how high the volatility index climbed, think back to the chaos that followed September 11, 2001. That point, volatility "spiked" to 33. These days, as the index reports a number in the 30 range, the markets seems subdued. This is definitely not the case, which means investors can continue to profit from volatility.
For the individual investor, the first thing that needs to happen is to strip away the emotion from the investment. This is challenging, however, and for good reason. Most investors have worked extremely hard to build a nest egg, and watching a volatile market eat it up without providing any tangible benefits is extremely difficult to stomach. One solution is trading software, which is a lot like a money manager in that it does not know or care how many hours or sacrifices one had to make in order to save such a nest egg.
Secondly, the investor should have a good understanding of volatility. Reviewing the charts at Yahoo! Finance by typing "^VIX" in the quote box is a good start. Another essential is to understand the definition of volatility, which is simply "rate of change of the deviation from the mean." The higher the volatility, the more quickly will stray from its mean.
The last thing an investor needs to do is tame the beast known as greed. This is a difficult thing to do since short term returns give us a taste of just how much we might make if we stay invested just a little longer for just a little more money. By using trading software, investors are better able to remove the emotion since the software will study concrete factors like volatility, moving averages, momentum, and so on whereas investors study the profit and potential for more.
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. - 23221
About the Author:
Chris has more than 15 years of experience in the financial services industry as a Financial Advisor. For recommendations on trading systems and analysis, visit Online Trader Today.com where Chris is a Technical Advisor. As well, you can visit his debt-free blog at How To Repay Debt.com
posted by X - Men @ 6:04 AM
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