Do you like stock market volatility?

Question

Doesn't it provide some nice buying opportunities?

Answer 1

Not really. It isn't the volatility per se that provides opportunities as much as market failures. Volatility is neutral. Higher volatility implies the market maker has removed support from the market and it is being filled by retail and professional customers. It implies that the traditional role of the market maker is now being filled by customers. When prices reach a high enough point, collapse is likely, with the customers and not the market maker holding the bag. A volatile stock is a stock where the available supply and available demand shift sharply due to the lack of smoothing by the market maker. The market maker has realized it doesn't pay to maintain a large inventory and just keeps the spread, albiet a reduced spread to encourage customers to step in, without providing risk support. The maker will no longer insure the market against liquidity failure.

I buy when the liquidity failure occurs, I guess from the volatility traders who made spare change here and there. When it collapses, I step in, once the market maker has stabilized the market. I prefer the maker to take risk, not myself. Volatility trading is a good system, until a large shock occurs and it collapses.

Answer 2

1

Answer 3

Hi Yardbird,

Market volatility does provide some nice buying opportunities. Investors become successful by taking advantage of temporary weakness in the stock market. This type of approach as known as value investing. There is a research report on the http://www.tweedybrown.com website called "What has worked in Investing" that shows the historical performance of value strategies versus other investment strategies. Just go to the research & reports tab and then click on the report.

I hope this helps.

Michael Weiss
The Editor
The Mutual Fund Investor
http://www.mutualfundinvestor.net

Answer 4

Part of the current problem is that so very many people are arriving at the same decisions for the same reasons at essentially the same times. We hear good news, then we hear bad. We see things far too cheap, then we wonder if there is more it should really fall before it really needs to go back up. For a long time now, there are great numbers of traders using the same technical features of markets to decide to buy or sell. The amount of trading volume in the markets is enormous compared to a few decades ago. It used to be that most were investors and traders were the odd ducks that took advantage of short trends as people digested financial reports and decided to buy or sell at leisure. Today, however, the traffic in the various company stocks is tremendously more volatile because there are so many people using these trading signals to buy and dump in terms of days and weeks instead of years and decades.

Answer 5

It's hard to look at the total value of your portfolio drop in such big increments...even if it comes back after a few sessions.
But I will admit to making more " trades" than I normally would...and profitted nicely in TBSI ( twice with 10 and 13 % gains over two/three days....and also FTO...a four week run adding 17% ...sold 9/6 )
Another " shipper" NM just lays there..( won't move) and a couple of " techs", INTL and EMC were starting to go up, but right back at square one after Friday's mess.
Over all I'd say the volatility makes life just a little too " edgy".

Answer 6

Volatility is good for the stock markets. It allows those who missed out on IPO's and lower cost value stocks, to get in on a correction.

Anything that goes up must come down. And when it does, those on the ground floor can get in, and the lift moves up again. An analogy like that keeps me motivated / insulated against stock market volatility.

http://urltea.com/1fus

Answer 7

You ain't seen nothing yet. Wait until 9-21-07 to 10-8-07. The volatility should be at its worst.

Answer 8

No, I am almost fully invested, I like it up all the way, but it aren't gonna happen. Yes, volatility provide buying opportunity.