Trading 101: How to Trade Absolute Market Chaos

01:40 10/23/2018

Major index futures plunged. The Dow Jones fell another 400 points on Tuesday. The NASDAQ fell 75. The S&P 500 was down as much as 35 points on the day. Investors panicked and sold. “Indeed, a wall of worry has morphed into [a] towering wall of pain as extremely fragile circumstance across the capital markets continues to undermine investor confidence,” said Stephen Innes, head of trading at Oanda Corporation, as quoted by MarketWatch. “Markets continue to tremble but with traders suffering a severe case of the cold sweats as geopolitical risk runneth over, the unambiguous bias toward safe havens suggest the street is expecting this rout to deepen. In the absence of any tier one US economic to tether market sentiment, the bears are uncaged, and a bull is on the menu!” All thanks to a mountain of worry. Some believe the Federal Reserve made a mistake raising rates, which could make borrowing much more expensive. Mid-term election jitters can be blamed. The looming end of quantitative easing is ending in Europe. Earnings growth may be slowing. And then of course, the trade war between China and the U.S. hasn’t been well received. Interesting to note, this is all happening in the worst month of the year, mind you. As bad as things may seem in the markets, there is good news. “The tax reduction helped produce an unprecedented 25% first half surge in earnings, underpinning stock prices in what is normally a difficult environment for investors. Notwithstanding the stock market’s recent correction, equities typically generate outsized returns in the midterm quarter and the one immediately thereafter. This suggests that stocks will ultimately rebound,” wrote Joseph LaVorgna, chief economist Americas at Natixis, as quoted by MarketWatch. We must also remember that markets are resilient. The last thing you ever want to do – especially now – is panic. Any time the market goes haywire, remember these key rules from Warren Buffett. Rule No. 1 -- Have Cash on Hand

This article has been provided by a Chasing Markets contributor. All content submitted by this author represent their personal opinions, and should be considered as such for entertainment purpose only. All opinions expressed are those of the writer, and may not necessarily represent fact, opinions, or bias of Chasing Markets.
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