The bears have clearly taken over this year’s trading so far, and although the bulls may rear their heads from time to time, the bears will quickly chase them out again. This is exactly what is happening right now. Last week saw oil plummet and a stock rout that prompted many to think that it was 2008 all over again. When the markets rallied on Thursday and Friday, the blissfully blind might have taken it as an indication that markets will come to their senses. However reality seems a little grimmer.
The markets are known to over react to economic data. The slowdown in China and the domino effect it has had so far in emerging economies, have prompted the IMF to lower their global growth expectations for 2016. It doesn’t matter how many jobs the US creates and how much of the windfall from lower energy prices the consumer has to spend, the situation is just too unstable for the markets to sustain the rally.
There are always winners and losers in the financial markets. People can make money in bear markets by adopting the right strategy. When the trends point to additional adjustments before the markets recover, it means that the strategies that investors should be following are shorting strategies. These are much simpler to play apply in the world of binary options, because it is easy to see what is going up and what is coming down.
Investors have to be aware of the fact that just like there was a rally over the last couple of days last week, any given asset can suddenly rise. This is why rule of thumb strategies do not work when you invest. Not everything is going down all the time. Investors should make sure they short the right assets at the right time. For example gold may not be a good asset to short at the moment, since investors are widely seeking a safe haven to escape the stock rout and may find it in gold. That means demand for gold will likely keep the overall price trending up.
Bear markets are a great time to learn about investment and focus on detailed technical study. Many say that anyone can make money in a bull market, but bear markets really require deeper analysis and highly tuned senses. Binary options traders should be looking into trends more closely and using all the educational tools that brokers have at their disposal to avoid losing to the bears. In any case, the downward trend that stop momentarily on Thursday and turned around completely on Friday, is likely only a mirage.
There is no fundamental reason for the markets to over react the way they do, but they still do so. There is also no fundamental reason for the markets to return to positive trends on a more permanent basis with the world economy slowing down and threatening to take countries that are just now recovering from the 2008-09 debacle, down again. The bears are here to stay for some time, so learn to live with them and profit!
Disclaimer: The author is not responsible for any trading done based on his analysis. Make sure you do your own analysis and are sure of what you are doing before you make a trade. There are always risks involved in investing.