9 Tips To Tame A Whiplash Market

On Friday April 17 the markets plunged and today Monday April 20 markets rallied harder than 50%. Normally when a market plunges and there is more downside ahead, a rally back is about 50%. Instead the rally today is almost an 80% recovery by 11:00 AM. With my email box filling up daily with investors wondering what to expect next, you can tell that this market is continuing to whiplash investors which is increasing nervousness among investors.

If we look at the morning intraday market chart such as the Dow Jones below, you can see the dilemma investors face. The market is flip-flopping back and forth between declines and advances weekly. At some point it will end, but as you can see from the chart below, Friday’s sell-off is being recaptured this morning. How much higher the rally has is questionable as once again volume is poor. The current strategy has been for traders to buy the drops and then sell into the rallies. This continues to be the case and can generate decent returns.

DOW JONES Morning Apr 20 2015

Dips Buying And Rally Selling Is Not For Everyone

This type of trading where investors buy dips and sell rallies is not for everyone. It is difficult to know when the next drop is not the start of something bigger. In the same way when a rally jumps the market many investors are afraid to buy, fearful that they are buying at the top and a new downturn will follow. For most investors then, trading a whiplashing market is not easy and can keep nervous investors out of the market. That though means no earnings and no growth for portfolios.

The present market is not unusual and has happened many times in the past. During such periods I developed various tips which I draw upon to remind myself how to stay invested but protective of my capital in a market filled with whiplashes and higher than normal volatility. Here are 9 of my tips that I use to tame a whiplashing market and continue to grow my portfolio.

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Disclaimer: There are risks involved in all investment strategies and investors can and do lose capital. Trade at your own risk. Stocks, options and investing are risky and can result in considerable losses. None of the strategies, stocks or information discussed and presented are financial or trading advice or recommendations. Everything presented and discussed are the author’s own trade ideas and opinions which the author may or may not enter into. The author assumes no liability for topics, ideas, errors, omissions, content and external links and trades done or not done. The author may or may not enter the trades mentioned. Some positions in mentioned stocks may already be held or are being adjusted.