Traders are scrambling the last several days to get an accurate pulse on what is happening in markets all over the world. Because of so many kneejerk reactions, it is hard to tell what’s real, and what is going to be reversed in the next couple weeks. Even the experts are a bit confused about what the proper course of action is, simply because so many of the events that are currently going on are tightly interwoven. For example, oil’s drop in price, China’s declining stock market, central banks cutting rates into negative territory, sovereign bonds spiraling downward out of control, and many other things are all interlinked, showing that the market pull theory is alive in well in the minds of the highest level traders in the world. For the home-based trader, the correct course of action doesn’t have to be so complicated, though.
Smaller, independent traders do not have the same amount of money that a huge bank or hedge fund does, and this can make profit making a bit tougher, but it also gives us the freedom to pinpoint our trades, time them well, and exit at the perfect moment without the hindrances that large banks face. It also gives us the ability to exit a position without the public backlash that an institution would face when they need to disclose actions to their investors. True, there is a ton of confusion and volatility in the market, but there are ways around this.
Going back to the basics of trading can help. We hear a lot about diversification when it comes to planning for our futures, but traders can get away without a huge, well balanced portfolio. They still need safety nets, which is what the main purpose of diversification is, but they can be established in a number of different ways. First, you should look to your specialties. These are the assets that you know the best and have the best track record with. You can use your higher level of knowledge with these to help you gain a foothold in the markets. Next, think of different ways to use that specialty. Maybe you’ve been a swing trader with stocks, but never thought about day trading because of the margin requirements and fees. Maybe it’s time to make that move. If you can’t justify traditional stock trading, try binary options to help alleviate costs. Things like this kind of thinking can help get you out of your trading rut and start making money even when everyone around you is having difficulty. Other methods of reducing costs exist, too, but binaries do provide you with a large number of assets. Forex trading is another choice, if you don’t mind solely using currencies.
Finally, pay attention to trends on a global scale. It seems that most central banks are beginning to run out of ammunition when it comes to rates and quantitative easing. These banks are reaching the end of their ropes, and that means that some sort of stability is coming up in the near future. Some experts think this could happen early next week, others think it might take a few more months. The general agreement is that it will happen soon, and that means global economies should start the recovery process shortly afterward. Some assets will begin that process sooner than others, so use your specialized knowledge to predict how you and your focus will be most heavily affected. There’s no way to do this with a high degree of accuracy, but you can give yourself an educated guess at what’s going on, hence reinforcing the value of specializing in a specific asset or two.