Hello everyone. I'm sorry I haven't written for a while and I'll try to keep you posted at least weekly. The hot news last week was the Dow breaking 9,000. This was some great news for both new investors and for everyone who dreaded checking their 401k since last winter. The test, of course, comes this week. Will the Dow continue its bullish activity towards more gains, or will the recession's grip on the economy drag the market back down?
To be honest, I really don't know, but later I'll explain what to watch for in this volatile state. Telling you that I don't know doesn't really help, but here's why I can't make up my mind. For the majority of this year, the market has been on the rise. I've enjoyed the bullish surge as my investments did better than expected. However, the rising market almost seems manipulated.
We've watched as unemployment has risen intensely, the dollar has lost value around the world and the economy has been hit with one of the biggest recessions in history. All of this is occurring right now. It doesn't make sense that a market based on our economy should be rising. In fact, I believe that the Stimulus, and other programs pumping money into Wall Street have artificially kept it as high as it is, rather than allowing it to follow the economy. Therefore I do not know how high it will surge, but I do believe that another crash is on its way. If another crash is coming, how can you be ready to avoid it?
Know how much profit/loss you're willing to take from each investment without involving emotion. Decide how far the stock must rise before you're willing to sell it, and how far it can fall before you're willing to sell it. I usually choose about 10% each way so I'll use those for examples. This means, if my stock goes up 10%, I am willing to sell it and take my profits out without wondering how well I could have done had I stayed in long term. Also, if it drops below 10%, then it probably didn't do what I had expected, and I cut my losses rather than fall with a sinking ship. Cutting losses and selling when the stock dropped is no easy task, so bite your lip, hold your pride and do it. You may lose 5-10% here and there, but you'll never lose big in a crash like last winter and what may return this winter.
Now, if you choose that you're willing to make 10% profit, this does not mean that you have to sell immediately when it reaches that number. Watch the stock and stay in it as long as its rising. When it turns and starts to move down, then sell it. My figures of 10% may seem low to you, but most of my trades last between 1-4 weeks. I'm no day trader, but I don't believe long term is the safest bet either. So 10% profit in a month may not be incredible gains like you hear about in infomercials, but its adequate and realistic. I hope you enjoyed the article, and if I hope that my advice will save some of you if the market does crash again soon. Thanks for reading.
