𝙉𝙤𝙫𝙚𝙢𝙗𝙚𝙧 𝙎𝙪𝙢𝙢𝙖𝙧𝙮 & 𝙈𝙖𝙧𝙠𝙚𝙩 𝙐𝙥𝙙𝙖𝙩𝙚
Another month comes to a close and in keeping with much of 2021, the volatility experienced across the markets has been high. We closed the month with a small loss of 1.10%, and around a 35% cash balance. As we move into December, I have already started planning the portfolio for 2022, by the end of the month I will carry out a full rebalance and get ready to move into the new year!
We finally had an admission from Fed Chair Jerome Powell that maybe we should retire the word "transitory" when talking about inflation, as always, the markets reacted with extreme fear and dropped accordingly. The funny thing is that it wasn't anything we didn't all already know, and it just shows the impact of psychology on the markets.
The difficult thing for many newer traders is to not lose your nerve and get shaken out by the volatility. Assuming today closes green ($NSDQ100 already showing a 0.93% gain on the futures market at the time of writing) , the last four days have just been alternating large red/green days, leading us to almost the same position we started in. Unfortunately, many people will have closed their positions because of this volatility.
Going back to my previous post, this is normally the best time to be buying, rather than selling, but panic tends to take over rational thought, especially if you start to see sensationalist headlines that the markets are doomed and everything is going to zero! Honestly, nobody can predict the markets, all we can do as traders and investors is control our risks, place our bets, and let the market do its thing. If you haven't realised it by now, psychology is the most important element of both trading and investing.
For example, greed is common in newer traders. They see the stories of people 100x their accounts in 24 hours and decide to never take profits in case they miss the next big move (particularly in fast moving spaces like crypto). More often than not, this leads to unrealised gains and regret. Another common emotion is fear, people become fearful of corrections and close their positions at a loss. Generally, this will mean you miss out on any future gains and the opportunity to reduce your cost basis.
I always find it fascinating that a stock can drop 2% or more in a day as people rush for the exits on the latest market move, only to be up the same amount or more a day later.
Having conviction in your investment decisions, playing with capital you can afford to lose, regularly taking profits, making regular investments into your account, dollar cost averaging into positions, and having a long term mindset will put you ahead of many new entrants to the markets!
Anyway, expect more volatility today as the Jerome Powell and Janet Yellen once again open their mouths to speak about economic policy.
As always, if you have any questions then please just let me know!
Thanks for your support,
Andy... Show More