Trade The Journey

Trade The Journey

Trading with Volatility!

Peace, Greetings, and Safety to all.

 

I’m sure everyone has received the safety messages regarding the Coronavirus. The Coronavirus is a threat to the quality and length of your life. Every economy is experiencing a slowdown in production and an increase in the number of Coronavirus cases. Deaths resulting from the Virus are steadily increasing.

Many countries are ill-prepared for this sort of calamity. Not only is this Virus costly to a countries healthcare system, but it also produces a halting effect on the economies’ exports and imports. Trillions of dollars are needed to prop up an economy while its residents remain on lockdown.

Companies are enforcing safe distances by allowing employees to work from home. Some employees have been terminated as a result of the lack of work available. The Virus will touch many lives even if you are blessed to avoid contracting the Virus.

Industries are drawing upon their credit lines as well as individuals hoping to survive these times. The President is eager to get the economy pumping again because he assumes that things remain the same. For us to resume the Economies’ historic Bull Run, the same variables mixing at the same time would be needed.

 

Sentiment has changed along with the hope of exiting this National Emergency unscathed.

Times like these are touted as the best time to invest in a company. Most companies are heavily discounted from their real value.

So yes, bargains are indeed available. Earlier this week, Boeing was selling for $90 a share. A few months ago, Boeing sold for close to three-hundred dollars. A fair value, I suppose, since Boeing is responsible for a person of the Nations’s GDP.

No, I didn’t buy their stock due to the shady operations that resulted in deaths earlier in the year.

This is a time in history best remembered as the culmination of incompetence, greed, and fear. The masses swayed to believe that the seriousness of the Virus may affect others but not them.

The financial crisis which looms on the horizon will undoubtedly make everyone believe that the missed opportunities to remedy the Coronavirus spread will affect us all. There are many angles to this crisis; there is a commodities crisis, a credit crisis, an economic crisis, and a health crisis.

These will be challenging times for everyone, but within every crisis is an opportunity.

 


 

So the question is, How do you trade in this market?

 Last weekend, I tripled the value of my portfolio, and the following week I returned to the original amount.

These volatile markets require skill in assessing stock movement quickly and acting quickly. Traders/investors inexperienced in chart reading or technical analysis should not participate. Fundamental analysis is the primary tool of the long-term investor now since prices are selling at a discount.

Great Companies can weather this storm if it possesses a strong balance sheet and management vision.

I believe that money can be made in any market.

A volatile market requires a flexible mindset due to the news and general sentiment of people during a time of fear. The stock may move downward based entirely on fear. In these times, everyone wants out of their stock position.

 

┬áThe four most dangerous words, as told by Howard Marks, “This time it’s different.”

Last weekend eager to participate in the stock market, I brought a stock during the After-market hours. I didn’t research the company, but I had a feeling that a food delivery service stock would rise during the lockdown. The stock purchase was not a head decision but a gut purchase.

The stock tripled in value over the weekend and opened the following Monday at a new high. The stock’s new high was the highest high it had made to date.

Feeling lucky, I brought a medical stock due to the companies’ insistence that it produced a new ten-minute Coronavirus test. The test would be shipped to countries as a trial, and the FDA had not approved the test.

I brought this stock during the after-hours on a Friday. With no stop, I watched the stock retreat from its high. Within a couple of days, my portfolio was back at its original value.

Finally, I decided to cut my losses and remain on the sidelines until I shored up my faulty enthusiasm.

The next trade I made, I waited until the trading hours to place the trade. This companies stock I purchased had an established history producing quick diagnostic tests for diseases around the world. With a quick check, I was able to verify the validity of a test and whether or not the company had a real chance to produce the advertised test.

I also learned to place a stop to avoid unforeseen losses. Patience is needed not because the value is absent, but because sentiment is fluctuating. A level of predictability is required before the markets can begin to stabilize.

For investors, this is the perfect time to enter the market as long as you can withstand the volatility in the market. Most of your neighbors, colleagues, and friends will be exiting the market in large numbers eager to maintain a significant cash position.

 

“Be greedy when others are fearful and fearful when others are greedy.”- Warren Buffett

Unfortunately, trading/investing is inherently risky, and no one can give surety to an excellent return. In risk-on (risky) times like these, prudence and foresight will be your safety net and producer of returns.

Let the Financial Statements be your ultimate guide. Without access to capital, the best idea can fail. The hallmark of efficient management is effective management of capital. Debt, productively used is an asset.

 

Week in Reflection:

Since my state is on lockdown, a budget was indirectly enforced by the government. Most of the shops are closed, and most residents have stayed inside. Although it’s been a slow week, I was able to complete a lot of research and find some great investments.

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