Volatility in the market is something that you need to understand when trading. High volatility means that the price action is moving between two wide prices. Low volatility means that the price action is moving between two very narrow prices. Now, knowing that the market is volatile is very important. How do you measure volatility. Statistically we measure volatility with standard deviation. But there is a highly popular technical indicator that does it for you graphically by plotting the standard deviations. This is the Bollinger Bands. Two bands are plotted. One above the moving average with a period of 20 and one below the moving average. Period of 20 is used because it is a good representation of an intermediate trend.
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Gold prices reached an amazing high of $1200 per ounce in the last few months. Although after that there was a retracement but it is expected that this bull run in the gold market will continue. But there is a metal that has even better prospects as an investment right now as compared to gold.
Options trading is one of the best ways to profit from the volatility in the underlying stocks. The more the stock price swings, the more profitable an options contract can be. With options, you can build a much larger stock portfolio as compared to the direct investing in those stocks.
The importance of technical analysis in trading cannot be denied. Technical analysis depends on the price action in the market. Price action is purely driven by the mass psychology. But depending too much on technical analysis without going into the fundamentals that are driving the price action in the market can be short sighted. Good traders always understand the importance of fundamental analysis and how it drives the long term trends in the market. You need to combine technical analysis with fundamental analysis!
Indexes are important financial barometers that tell you the about the market just like an altimeter tells about the height of an aeroplane. There are many types of market indexes. The most important are the ones on the stock market that tell about the state of health of these markets. However, there are many indexes on commodity market. Commodity market is experiencing an unprecedented boom for the last many years. This is the best time to invest in commodities!
