When you learn to trade you need the right tools, in terms of advanced trading software, to help you make the right decisions. While the software can give you objective data to fiddle around with, stock traders could be swayed emotionally by general investor opinion to make decisions which might seem right at the time but wouldn't seem so smart in hindsight. Various market factors could contribute to panic and anxiety which, when objectively analyzed, tend to be unnecessary reactions.
There could be such a situation currently facing the markets. Though the market is said to be growing overall and there has been positivism as we move further in 2018, there is fear that threatens to show its ugly face again.
Why the Anxiety and Panic in the Market?
Some investors feel like hitting the panic button. And there's a reason for it. The S&P 500 closed last Tuesday, January 30, down by 0.67%. Wednesday reported another decline. The Dow Jones Industrial Average (DJIA) dropped 2.5%, or 665 points, amounting to the greatest percentage decline witnessed since June 2016. Then came Monday, February 5, when the Dow went through a really wild ride after which it reported the largest point drop in a single day in history, closing down 1,175.
So how great should the fear factor be, and is the fear justified? Well, StreetAuthority's seasoned analyst Brad Briggs certainly doesn't think so. He feels this fear and anxiety is the result of bull markets causing “irrational exuberance” among investors. As markets keep progressing on their upward trajectory for months and even years, a usual break in this growth is considered the end of the world. It creates that impression among investors.
A Pullback from the Continuous Growth Appears Catastrophic
Bespoke Investment Group notes that a pullback in the market would appear extremely painful for investors just because there hasn't been any significant pullback for a long time. And since investors are often swayed by emotions, they hastily decide to sell the stocks in their arsenal. This further causes the market declines to increase.
Briggs reckons that the increased volatility witnessed in the market and the down market days are the result of interest rate concerns and inflation, rather than the bull market ending altogether. It isn't unusual to have situations like this. But with the continuous market growth, this usual situation ends up looking catastrophic. But it doesn't mean the bull market is over.
Keeping Emotions in Check
The important thing is not to panic when the market goes through such off days. That's how you can enjoy the bull run. But always remember to ensure you have a plan to exit with your profits in as effortless a manner as possible when, and only when, the right time comes. And that's not to be decided through emotional considerations during such usual off periods, but objective data which you get with advanced trading software.
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