Another stunning week on the market. Fortune favored the bold once again. However, the snap correction we had on Wednesday - after a sharp rise - showed how quickly things could turn.
Stop losses. When the market is this volatile- you really need to have good stop loss management. Even for investors.
The professional traders set it at 1 to 2%. For the average investor- 5% - is a figure to consider, esp when your shares have gone up 20% - 50%+
You just have to try and remove as much emotion from trading. The buy and hold strategy whilst sounding good on paper- can cause you to miss out on cashing in your profits - which is what the whole business is about. You're here to make money. Remember that! Never fall in love with the stock. If the shares start coming hard down - better cash in your chips - and wait and see.
But anyhow the market rebounded sharply on Thursday and Friday. But it certainly would have hurt if you had bought in on Wednesday.
Here's a author to read - Daryl Guppy - has written several good books on share trading - His style is not share investing but active trading. The difference is that traders follow technical analysis and less on fundamentals.
But in this sort of crazy bull market- fundamentals aren't exactly in play- more like rumor and hype. And its the sort of market that is prone to serious and fast corrections.
Something to watch out for is this that double top formation in China- if it breaks past 3800 - 3700 mark strongly- it could go down further.