Blockchain enthusiast developer and writer. My telegram: ksshilov
The most exciting part of trading is the thrill of mitigating your risks in favor of your rewards. For those who are just starting, it’s a game of knowing when to buy and knowing when to sell. Or, as most traders would say, "Buy low, sell high"! But, how do you know if the prices of stocks and securities are low or high?
Usually, an investor would have to take an unbiased look at the market, study the price chart of each asset through technical analysis, make sure the price is aligned with the asset’s fundamentals, check if there are any news or rumors that could possibly influence the price, and, finally, use his instinct to make the decision of buying.
Sounds hard? Because it is. Unless… the market is driven unanimously by a global event.
Unfortunately, 2020 brought upon us the coronavirus pandemic which led to a once-in-a-decade economic fallout, especially in Europe. There’s no point in saying how badly this affects our individual lives and how many people lost their jobs in the process.
But, if you have some money aside, you can consider yourself lucky enough to live one of the best times to invest. Forget all the hard work a trader needs to do in order to find a market in its ‘lows’. The entire market is hitting new lows and creating thousands of opportunities.
If you are ready to join what’s going to be part of history in the economy books and do your own investments, the only restriction you have is imposed by your local regulation. Thankfully, if you are European most of the modern platforms are taking care of the legal part for you. A quick search on a list of the best trading apps in Europe will get you started right away!
These kinds of events take place only a few times in a decade, and external sources always provoke it. Each time the market enters in an emotional cycle it follows a consistent pattern, moving from greed to fear and back to greed.
In the past, the stock market faced similar conditions, and every time there was a ‘crush’ on the prices. Also, every time they went back up. These drops are now seen as natural movements and healthy for the market, known as ‘corrections.’
I won’t bore you with history lessons, but I want to give you perspective. If you’d dig into the older investment books, you’ll find out how terrified the investors were in the 60s when the market was dropping amounts that are considered insignificant today. In another 60 years, they are going to read about this crush and think the same.
Anyway, some events are more significant than others. Let’s have a quick look at the ‘worst’ ones and how did they affect the economic environment in Europe:
The Covid-19 outbreak put a pause in the world trade which caused supply disruptions. The restrictions had to be imposed rapidly, and the US stock market was the first to respond with a sudden drop. Shortly after, the stock markets around the world followed and the prices fell simultaneously. The Dow fell more than 23% and experienced its worst first quarter in history this year, and this quarter has been the S&P 500's worst since 2008, dropping 20%.
How far low can it go? Nobody can tell with certainty. It’s true that the Dow Jones dropped more than 10% in a single week. But it’s also true that the market was a record high when the selloff happened. A 10% drop in a ‘stretched’ market is less impactful than a 10% drop in a stable-healthy market.
Plus, recently, when the things looked like they were going back to normal a ‘dead cat bounce’ was seen. In finance, a dead cat bounce is known as a false recovery in the price of a declining stock, when the price changes course and goes up for a short period of time, just to fall furthermore. As a long-term investor, you shouldn’t care so much about it.
But it reveals one important thing: investors are ready to buy back and any rumor or positive sign can trigger them.
Last month you were reading about a 3,000 points drop for the Dow Jones. Today the stock market headlines are not even making the first page. The movement is less than 6 points in a day. Do you want to be part of those ‘terrified investors’ they are going to read about in the future? 50 years ago the investors considered a major collapse when a 200 points drop was happening.
As Warren Buffett said: “The market started the century at 66. It ended it at 11,400. How did people lose money in such a period?” That’s exactly the perspective that you need to have as an investor. When you’ll understand that in the long-term the market always goes up dramatically, then you’ll see these crushes as opportunities, not catastrophes.
We already established that you don’t have to spend more time determining whether it's time to buy or not. Where can you invest?
If you don't already have a trading account, whether you want to start trading stocks actively or just want to invest in the long-term the starting point is the same. I prepared for you a handpicked list of the best (in my perspective) trading apps available in the European region. Here they are:
All these apps are having the option of making a demo account where you can practice without investing a penny. You are placing trades using virtual (fake) money, getting familiar with the various order types available, and feel the thrill when your account is starting to generate money.
Anyway, this money is fake as well. So, don’t stall too much playing around. When you are confident enough, make your first deposit and join the real market for possible profits – real profits! Success!
The author is not associated with any of the projects mentioned.