Lessons Learned from Trading

Lessons learned from trading were shared by zacks.com

“After all these years, my experience has taught me to accept that the market is a living breathing organism. It is not against you; it is not out to get you; it just exists as a marketplace where prices go up and down based on a wide variety of factors. Given that, the most important aspect for survival in trading and investing is discipline and risk management. This can be a difficult skill for both rookies and experienced traders to grasp.

Sometimes, up and down price movement is irrational. One of the major causes is what I mentioned in my fourth lesson above: computers run the show. These High-Frequency Traders can short millions of shares in tiny fractions of a second, driving stock prices lower and profiting on the way down. Then they buy the stocks at the bottom and profit even more as price rebounds to its fair market value. ” Read more…

Lessons learned from the 1987 stock market crash

“Along with those safeguards, the 1987 crash also left behind a legacy of lessons learned, and applying some of them to the market today isn’t hard to do, given certain similarities. One of the biggest similarities between 1987 and now is how both markets are richly valued. When the stock market is strong, much like it is today, current events can be a breaking point, Sukits says, and considering how quickly news travels now and gets embedded in share prices, investors should keep that in mind as a potential trigger for plummeting stock prices.

Although portfolio insurance as a strategy was discarded, some critics of exchange-traded funds say that because these passive investing vehicles contributed to rising stock-market valuations, ETFs could exacerbate a market crash if everyone sells. Not necessarily, Longo says. A market correction could cause ETF holders to panic-sell, but unlike portfolio insurance, there is no automated rule that forces ETF selling, which is a big difference, he says.” Read more