The relative strength index (RSI) is an indicator used in technical analysis to measure the momentum of recent price changes.
No fear: how to stop worrying and love the market
2020-03-26 • Updated
We can repeat on and on until it becomes clear to everyone. The current situation in the market does not mean the end of the world. On contrary, you should take a deep breath and calm down. Yes, the recent plunge looks dramatic, but the market managed to recover from even bigger falls. And let’s not forget that we do trading here. That is, we can both go short and long on the assets. In other words, we can both sell as well as buy.
Even when the market goes down, traders can get profit.
S&P 500 corrected to the downside. It’s a natural move: the market can’t go up all the time. When corrections happen, it’s necessary to do technical analysis and follow the news. Trading counter trend is also a strategy.
For now, let’s distract ourselves from the technical part of the question, and look at the problem at a personal level. Below, we bring you some pieces of advice which you should follow instead of retweeting fake news and panicking.
Avoid 24/7 news flow
To keep your nerves stable during these shaky times, we recommend you to follow the advice of the World Health Organization. In its report, it advises people to stay away from watching/listening to upsetting media coverage and gather the information about the COVID-19 only from reliable sources (such as the WHO itself). Financial advisers are sure that the same rule may be applied when dealing with markets. That is, media coverage should not go from multiple sources at the same time. Try to avoid clickbait headlines and follow only trusted sites or newspapers. Most of the news sources try to present the information in the most intense manner as they care about viewers and subscribers. Simply put, they care only about their money. Carry about your money as well: filter the endless flow out.
Don’t fear the signs of recession
The outbreak of coronavirus has already affected economic sectors, including industrial and touristic ones. That’s not a surprise: due to the quarantine measures people stay home and go out less. But we can say for sure that it won’t last forever. Sooner or later, the top researchers will invent a vaccine and the world will get better. For now, the market is only pricing in the further spread of the disease. It’s worth mentioning that China has already reported some of its cities returning to normal conditions soon.
Wait and see while making investment decisions
Don’t even think about making investment decisions that you are going to regret soon. Have a plan. Analyze the risks. Don't buy without seeing a confirmation that the market conditions are oversold. Don't let your emotions ruin your capital. Apart from basic rules, the current situation provides you with a wonderful opportunity to buy many assets at a solid discount.
Make use of the volatility
Clever traders use the times of high volatility to benefit from the big swings of the price. The most important thing is to stay calm and rational, analyze charts and adhere to the rules of risk management. Remember that safe-haven assets like the JPY, the CHF, and XAU (gold) tend to strengthen when people have doubts about the future.
After all, wash your hands
The uncertainty attracts no one, and both analysts and governments may only contemplate what will happen in the future. For now, the best thing to do, apart from diversification of your money, is to make investments into your health. The basic rules you need to follow are washing your hands, not touching your face and taking care of yourself.
123 reversal setup is a basic on-chart formation, that warns about upcoming trend reversal…
“And if they insist on trying to time their participation in equities, they should try to be fearful when others are greedy and greedy only when others are fearful…
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