Nobody can say for certain why markets move.
Just because a financial news outlet assigns a headline to a particular day of trading doesn’t mean they are in any way, shape, or form accurate. Don’t forget, these are “reporters,” not market technicians.
It’s a continuous process.
Deal with it.
Or watch the talking heads on television say an up-market is attributable to “the Fed” and a down-market is due to “oil.”
Or is it vice versa?
Regardless, what we do know is that the current market drama looks like a replay of late August and early September 2015.
Pulling up a 1-year chart of Chinese equities, anyone can see that after a steep sell-off in late summer, Chinese stocks recaptured a portion of their losses through year-end.
Those same stocks in the Far East now look poised to revisit lows from last year. And the rest of the world seems determined to hammer the “sell” button right along with them.
But does negative movement in the global equities spell certain disaster? Unlikely.
Markets have been moving up and down since the first share ever traded.
Even when market speed increases and price action is faster than “usual,” there’s plenty of opportunity for traders to take advantage of mispricing - in fact, it’s arguable these markets offer the lowest-hanging fruit.
Sure, you may have positions that are suffering - long equities, short puts, and other similar structures - but that doesn’t mean you need to freeze up like a deer in headlights, or sit on the sidelines.
Beaten up securities that were already attractive for your portfolio may now present even better buying opportunities. Or, if you’re worried about the market sitting at these levels or going lower, you can explore selling covered calls to increase returns and effectively lower your cost basis.
The market will always go up and down. Traders that expect this type of activity will be far more successful than traders who simply sit and hope the market will go up.
That’s why we prefer active management over passive management.
Sound portfolio management is based on level-headed analysis, effective risk management, and some other core competencies that are consistently reinforced on the tastytrade network.
So while fast-moving downward markets may snap the puppeteer-strings tied to the mainstream financial media’s back, such volatility shouldn’t be a reason for panic.
In fact, a measured, rational approach to chaotic market conditions will always yield superior results.
In the coming days and weeks, it will of course be important to follow *real* developments in the world’s economy and markets - monitoring the flow of information has always been a critical part of trading.
However, those storylines will fade and be replaced by new ones.
As has always been the case. And always will be.
Here at tastytrade we’ll continue to try and produce the most timely and market relevant programming possible.
We hope you’ll chime in with your thoughts and questions as well. Tweet it, chirp it, or be a mega-hipster and send us a telegram.
Either way, we look forward to hearing from you...whether you leave a comment below or reach out to our support team at firstname.lastname@example.org.