It has been only a short week since my presentation algo trading, and already, the markets seem to be taking a nosedive! However, before you begin to panic, you should realize that algo trading is exactly what caused this volatility in the market in the first place. In an article featured in CNN Money , Chris Isidore succinctly describes the effect of algorithms taking charge during regular trading hours in the financial markets, and how human projections based on the Federal Reserve’s decisions created a situation in which preprogrammed trades cascaded into one another to create a three-day event in which the Dow, S&P, and NASDAQ took a nosedive.
Although this may seem like a catastrophe, there is actually little to worry about. As the programs run their cycle, and buying opportunities present themselves during the selloffs, those same programs (or others written for buying purposes) immediately execute buy orders. These orders, when executed by countless programs, can then buoy the price of shares to create the rebound we have seen during today’s trading day. Obviously, we, as people, are less rational and more emotional. It may be difficult to think about investing when you see news headlines that declare the “loss of all 2018 gains in days.” But if the facts line up with indications of a profit opportunity, then there is no reason not to seize the opportunity to dive in.
Side note: In bearish environments, it’s best to invest in inverse funds and ETFs that appreciate in value when the underlying asset depreciates. These includes ETFs such as SPXS, FAZ, and DWTI. Such funds can be found in every corner of the market inverse-tracking almost every possible kind of asset.
Lastly, I mentioned in my presentation that there were low-cost methods of investing that allowed greater accessibility for new investors. These platforms include Robinhood and Ustocktrade. These trading platforms offer either free or low-cost trading, minimizing the effect of high trading costs for those with starting capital.