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It’s a big world out there – choosing a market to trade


CharlotteIG

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Investors and traders would do well to remember that there are plenty of markets to choose from – it’s not always necessary to follow the crowd.

 

The recent volatility in certain stocks has sparked renewed interest in the market across all sections of the media. The names of these stocks, and others that might be viewed as possible candidates, have been emblazoned across news reports and headlines.

Such an increase in their visibility will undoubtedly lead many to think that these are the stocks to buy right now, to the detriment of all others. It is understandable – humans will see others getting involved in all the excitement, with talk of huge wins, and will want to get involved themselves. Previous market manias like bitcoin, or tech stocks, seem dull by comparison.

Market history teaches us that following the crowd rarely ends well. Usually, by the time something has hit the headlines the ‘obvious trade’ is over, or at least the most significant chunk of it anyway. Nobody talked about bitcoin at $1000, but at $19,000 it was everywhere. No one wanted to talk about buying stocks at the lows in 2008, or in late 2018 or March 2020 when they had endured heavy falls. But when stocks hit new records after these sell-offs there was plenty of focus on them.

The spotlight of media attention will make it seem like the only stocks in the market worth trading are the ones making the headlines. But this isn’t true. ‘It’s not a stock market, it’s a market of stocks’, goes the old adage. Just because a company isn’t seeing its share price gyrate by tens or even hundreds of percents a day doesn’t mean it isn’t worth considering for a potential trade.

Everyone has their own risk tolerance. Some people, for example, experienced traders, are used to big swings in prices and can stomach the changes in profit and loss that go with them. Others shy away from such extremes in volatility, which is a perfectly acceptable way to trade or invest.

It is important to remember the time element too. Fortunes can be made and lost in the stock market, and in a variety of time frames. It isn’t necessary just to look to the end of the day. Longer-term trades, with smaller position sizes, can help promote a calmer approach, and with a greater length of time comes a different view of how much a trade might make. A day trader might look for ten or twenty points, but those looking to hold a trade for weeks or even longer will be expecting the move to cover hundreds or even thousands of points.

In any trading strategy, the most important element is to make sure that your mistakes are survivable. Being stopped out and losing 2% of your account is no problem – being stopped out and losing 50% (or even more) is. There’s no rule that says you have to be in the hottest stocks, or that you have to look to make big money in one day.

In trading, as in life, it is important to find what works for you. Chasing the big volatility might seem like fun, but it’s not the only way to trade.

 
 Chris Beauchamp | Chief Market Analyst, London | Publication date: Friday 29 January 2021 15:08
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That's our choice if we choose to rush in with the herd. No different from the big boys with their clone narratives. Free trade should be protected. We don't need your paternalism. You've never cared about punters. Don't pretend to start now because you might be getting burnt.

Stop taking down the website. Stop the market manipulation!

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Guest Diamond Hands

Posted

What a coincedence that you have decided to run this article at a time when people only want to buy one stock and you won't let them.

GET OUT OF TEH WAY!

💍🙌

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jlz

Posted (edited)

While this article gives good advise, in my opinion, it is a huge mistake to remove one stock of the market like you guys have done. 

Specially when it has been so openly discussed. 

It is true that going with the crowd sets you in a position where we are 'late' to the party. We are likely to receive all the hits if we follow the crowd. We know that.

But the way to manage risk is personal and shouldn't be influenced by the broker. Because I never received financial advise when I saw that 80% of customer loose money trading with a broker, I shouldn't be patronised and blocked from one stock that is impacting a much bigger player. 

This article would have been well received if IG took the action to allow only limit orders on the stocks that are blocked. Like executing-only brokers have done. If the risk is too high and want to protect your customer, the normal action is to remove market orders so they know always at what price they are buying. That way traders can manage their own risk.

It is obvious that after blocking those stocks and allowing the big players to short them to get back to a price, you are taking a side that worries many.

So writing this article now is obviously an attempt to divert our interest into other markets that are not part of the problem. 

 

Edited by jlz
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