Since the calendar switched over to 2015, we’ve seen an immense amount of volatility on Wall Street. There was even a 28-trading day stretch during which there were no back-to-back days of gains for the overall market.
And that volatility looks poised to continue.
So while the average trader and investor struggles to make consistent gains, here are 3 secrets to easily beating this volatility…
Daily swings can absolutely destroy the casual trader. Heck, they even destroy the portfolios of the so-called professionals.
That’s because everyone begins trying to play the day-to-day ups and downs of the market without ever taking a step back and realizing that the top stocks are basically being gifted to them.
Here are the 3 secrets to winning in a volatile market:
1. Look at performance on down days
When the market’s being volatile, pay more attention to the performance of stocks on the days when the market is falling significantly than to days when it climbs.
The stocks that can break even or even climb on those days are the ones you want to focus on.
Additionally, a good rule of thumb is to wait for the market to dip near its long-term moving average (the average price of a stock or index over 150 days) to buy. That will give your new trades room to climb.
2. Identify the steady stocks
While the market is jumping up and down, finding the calmest stocks becomes vital. Sure, buying a stock that soon leaps up 10% is fun, but will you still like it when the volatile market pulls it back down to a loss in days?
I’m talking about the steady climbers. Look for stocks that seem to move by their own accord rather than in perfect congruence with the market.
3. Find stocks that respect support
I spoke about the long-term moving average moments ago. This is important for individual stocks as well as the overall market.
During periods of volatility, it becomes even more important for a stock to respect its long-term moving average. That shows you that even the major downswings of Wall Street won’t destroy that stock.
Even on the worst of days, the strongest stocks will bounce off of that support over and over instead of falling below it.
