Market volatility

This is an off-day for me but i wanted to talk about the volatility of the markets as of recently. If you read my post yesterday you would know that I advised against buying GameStop and rightfully so. Not to pull the, ‘told ya so’ card but it is important not to get caught in bubbles

Market Bubbles

It doesn’t matter the decade, since the inception of online trading there has been market bubbles. Market bubbles are any time the market has a hot sector. The reason it is called a bubble is because the prices increase up and up and eventually it pops and the prices fall. The dot com bubble, the housing bubble, the marijuana bubble, COVID-19 bubble and now the retail reddit bubble.

Marijuana bubble of 2018 and 2019. Also pictured is a dead cat bounce along with a double bounce

Bubbles are not a bad thing, it is a natural cycle in the market now. In fact if you get in early enough they can make you rich, but that is the problem isn’t it? Getting in before it gets big. All it takes is creativity and forethought to know when this happens. However, the general rule is, if your neighbor suggests you stocks, it is probably too late.

Hot Sector

Hot sectors are similiar to market bubbles. The only difference is they may not ‘pop’ and they may not be so volatile. Hot sectors happen more often than bubbles. They can be influenced by pretty much anything but mostly politics, business moves and product improvements or developments fuel these.

Covid Hot Sector Play along with vaccine

Momentum Plays

Momentum plays are usually extremely volatile and daily. These moves happen everyday and there is tools used by institutions and day traders that track these because they move so much daily, over 50% daily. It’s very competitive and hard to find but well worth it in most cases if you can learn it. I have used it a couple times but it is high stakes.

This is a swing/multi-month momentum/pschology play. Market sentiment is key for bigger plays.

The Point

The point of me mentioning these different stock market events is to show that these moves happen in the market all the time and they are predictable. Short squeezes, bubbles, market manipulations and even corrupt hedge funds happen all the time. The only reason the recent events have changed things is because reddit had enough followers to blow it up. The market is ruthless and you should proceed with caution if you want to become a trader. Education, exposure and practice will get you far on the street but you have to be ready to constantly evolve.

That’s enough of me riffing today, i took a break from the ‘Stock Markets For Begginers’ today because I wanted to address what is happening in the market. I hope you enjoy your night tonight! See ya soon!


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