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Volatile market provides the best opportunity for short-term investments

2017 was a glorious year for most companies and investors. This year got a somewhat slow start, and experts are too hopeful that the share prices will pick up in the coming months. In fact, the long standing bull market might just be facing the bear soon. However, that day is not today. So, there are millions of investors out there, who are willing to bet big bucks on their fortune and make some good money out of the investment run. The market is volatile, but it is not experiencing a steady downward movement of share prices. The market is currently experiencing a fluctuation of prices rather than a sharp decline. This is keeping the investors as well as the market analysts busy.

How does the volatility affect the investment terms?

Veteran traders know that the market can be rather volatile. Day-to-day stock prices are never linear, and the stock price graphs never assume straight lines. The fluctuations during a span of two or three days are more pronounced as compared to the fluctuations in prices for over two or three months. The moment you plan to hold a stock for a long time, the volatility of the market instantly decreases. Ideally, a long term investor chooses to hold the stocks for a couple of years before taking action on it.

For active traders, short-term volatility can mean more profit, even when the P/E (price to earnings) ratio is rather low. The relationship between volatility and short term movement profit are direct. Short term investors and active traders usually work the market for quicker gains and the recent Asx 200 index is a standing proof of that. This usually involves keeping a keen eye on the regular movement of stock prices multiple times during the day.

How can you make the most of the current volatile market?

With the correct guidance, even the beginners can engage in short-term investment plans for their trading portfolio in the current market. The current volatile market can be the best opportunity for you to try out active investing. It comes with certain benefits.

Better risk management: The risks of a volatile market can become a lot lesser during short-term investments. Active traders can proactively adjust their portfolios to suit the current market trends.

Short term trading: More number of investors are opting for active trading every day due to the increasing number of short term trading chances. Swing trading strategies are the best in today’s market momentum. Ideally, swing trades involve a period of 2 and six days. However, sometimes, the holding period can extend to 2 weeks as well, depending on the market prices. The frequent ups and downs of the stock prices create quite a few trading opportunities for these traders.

Lucrative rewards: Most active traders choose short term investments due to the scopes of diversification and high rates of return. Several money managers use this technique to meet highly specific needs of their clients. This is a very common investment strategy for hedge funds.

Does volatility precede recession?

Many investors and traders are afraid since they believe that volatility of the market can represent the beginning of a recession. In reality, the relationship equity markets and inflation shares is a complex one. Till date, there has been no indication of a pending recession. There is no stir under the surface, and most investors are not pulling out of the market either. This is contributing to the stability of the global share market and keeping the prices even. Some company shares are still growing. As of the first quarter of 2018, the market has only slowed down a bit. There is no reason to believe that the increasing volatility signifies an immediate recession shortly.

Is this volatility going to last long?

As per investment analysts and experts from CFRA, this volatility is going to be transient. February started off with one of the most volatile indexes in the last one decade that wiped off almost $5 trillion from the face of the global equity markets in less than nine days. This corresponded to a sharp decline from the recent peak of the global share market indexes. However, experts assure the investors that this yo-yo effect is not going to last long enough to create a market collapse and a recession.

The share markets around the world share a direct connection. What happens on Wall Street will affect the Australian Securities Exchange. The entire stocks quotes, share prices and market trends depend on one another in the global market. At the moment, the yo-yo effect is predominant among the US market. Therefore, most analysts are suggesting the investors turn to the Australian market, EU company shares and Japanese shares for better security and better returns.

About RJ Frometa

Head Honcho, Editor in Chief and writer here on VENTS. I don't like walking on the beach, but I love playing the guitar and geeking out about music. I am also a movie maniac and 6 hours sleeper.

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