Title: Tips for Investors in Volatile Markets
Headings: Tips for Investors in Volatile Markets
Tips for Investors in Volatile Markets
Key Takeaways
What Is Volatility?
Investing in a Volatile Market
How Trading Is Affected During Times of Volatility
Choosing an Order Type in a Volatile Market
The Bottom Line

Content: Volatile markets are usually characterized by wide price fluctuations and heavy trading. They often result from an imbalance of trade orders in one direction (for example, all buys and no sells). Some say volatile markets are caused by things like economic releases, company news, a recommendation from a well-known analyst, a popular initial public offering (IPO) or unexpected earnings results. Others blame volatility on day traders, short sellers and institutional investors. One explanation is that investor reactions are caused by psychological forces. This theory flies in the face of efficient market hypothesis (EMH), which states that market prices are correct and adjust to reflect all information. This behavioral approach says that substantial price changes (volatility) result from a collective change of mind by the investing public. It's clear there is no consensus on what causes volatility, however, because volatility exists, and investors must develop ways to deal with it. Investing in a Volatile Market
One way to deal with volatility is to avoid it altogether. This means staying invested and not paying attention to short-term fluctuations.