It Is Not Too Late To Profit 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.
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.
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 final thing the investor should do is control his or her greed. Again, this is difficult to achieve as short-term returns suggest longer-term returns. Again, removing the emotion of greed can be achieved by using trading software that measures concrete factors like volatility, moving averages, momentum, etc..
While trading systems allow investors to remove the emotional side of investing, they are not absolutely required provided that the investors can control their greed. By eliminating emotion, investors can take advantage of the profit opportunities that volatility offers. - 23229
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.
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 final thing the investor should do is control his or her greed. Again, this is difficult to achieve as short-term returns suggest longer-term returns. Again, removing the emotion of greed can be achieved by using trading software that measures concrete factors like volatility, moving averages, momentum, etc..
While trading systems allow investors to remove the emotional side of investing, they are not absolutely required provided that the investors can control their greed. By eliminating emotion, investors can take advantage of the profit opportunities that volatility offers. - 23229
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 @ 1:40 AM
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