If you subscribe to our premium newsletter Simplifying Wall Street in Plain English, you’ll remember our January issue where we talked about volatility in 2018.
We said, “2018 will redefine how you look at volatility.
Most people tend to limit their understanding of volatility as something that happens ONLY when markets are falling. So, how’s that worked out for you so far this year?
Last Wednesday was a prime example of volatility on the upside. In case you missed it, the DOW index opened down 497 points (downside volatility). By the end of the day it finished up over 210 points from Tuesday’s closing (Up Volatility). A total swing of over 700 points in one day.
However, if all you did was look at the closing price, you would think, “Wow, the Dow was up over 200 points today.”
This is the kind of volatility that Wall Street loves for several reasons:
It generates HUGE commissions.
It allows them to dump a lot of unwanted inventory.
It makes the normal investor nervous.
It sets the small investor up for the “Kill shot”
The boyz in the “Club” use this volatility formula over and over again. It’s like the instructions on the back of a shampoo bottle: “Wash, Rinse, Repeat.”
So, the question should be; How do you avoid getting killed?
First, you must understand that the deck is stacked against you. Second, you must learn how to embrace volatility instead of fearing it.
As usual, it’s easier said than done because your emotions will always work against you.
However, having ears to hear what the market is telling you, is the secret to embracing volatility.
Make volatility your friend…and profit from it (HERE).