COVID-19 Stock Market Investing Rules To Follow

COVID-19 Stock Market Investing Rules To Follow

The situation we find ourselves in needs no preamble. The pandemic caused by the COVID-19 virus has disrupted our lives for the past four months and it continues to do so, despite the gradual recovery of the medical sector as well as the business sector. Until researchers are able to develop a vaccine for the Coronavirus, it will always pose a danger to the public. Since these are difficult times, it’s wise to have many sources of income. One of those sources comes in the form of stock market shares. With the economy on a steady recovery, it would only make sense to begin or resume investing in stocks again. However, we must do so without making these dangerous errors:

Not Monitoring The Market

 Given the current state of things and most recent market drops, we can assume that the market is significantly more volatile, especially when we factor in the decrease in productivity caused by job and business suspensions. As such, news will tend to brew quite rapidly, and the information contained within this news will lend a clue as to when major fluctuations are imminent.

Use this information to place a stop-loss on all short-term trades to minimize your losses if you’re unable to monitor the market constantly.

Succumbing To Availability Bias

An availability bias refers to a mental shortcut that involves the use of information and examples that are readily available in order to come up with a decision. A prime example of this is how a certain event can influence the purchasing decisions of people, as is the case with panic buyers and pandemics. While it is a natural reaction to imminent danger, it should not rule over a trader’s foresight and experience. If you have a rational plan, make sure to stick to it as best as you can.

Of course, if you want to make informed decisions, you need reliable information. The internet holds a wealth of information, but only a handful of sites, like WallStreetZen’s list of analyst predictions for 2020-2023, hold reliable information. Again, use this information to come up with a rational plan and stick with that plan. Never decide on a whim and never let your emotions get the best of you.

Trading Whenever There’s A Breakout

 Because of the increased market volatility, there’s bound to be an increase in market breakouts. It’s going to be tempting to bite at every breakout, especially when most people are going to be desperate to get any profit they can. That simply won’t be sustainable given the heightened market volatility. You might gain a little, but lose double on the next trade. So, again, it boils down to discipline. Set strict and realistic take-profits and keep yourself from taking major losses with a maximum stop.

As previously mentioned, the world we live in these days is one without certainty. There are far too many unknowns. But rather than stagnate, we need to do what we can with the resources that are available to us in order to endure these times as best we can. For those who trade for a living, remember the rules or trading, and do your best to avoid committing these trading mistakes.