Stock Forex

Here is a micro point on these movements. I think good news plays out in days. However, it can take months for company’s stock prices to recover from bad news.

Now, if you’re playing the stock, either long or short, the length of time is crucial to your profitability. However, if you’re playing stock options, a high point and then small percentage down in the stock, or a bottom and small recovery in the stock ($1 to $5) could produce drastic profits.

Define A Joke

Watching “Data” on Star Trek is a lesson in human behavior. Laughing (getting a joke) is difficult—at least the timing is difficult. Data doesn’t get jokes. He can’t tell one, or understand the punchline. I saw a bad movie (Solo) and the humanoid (machine) questioned why everyone was laughing. “A joke,” he was told. Obviously, he wants to know what a joke is. No good explanation was given. Let me try my hand at it. I’ll then get back to booms and busts. A joke is a story, and at the end a complete surprise occurs, either in the actions of the participants, or a twist in words, with unexpected meaning, hidden meaning, or a nuance to something else. Based on your point of reference, the company you’re in, or the mood you’re in, determines your response—a chuckle, a scoff or a belly laugh, et cetera.

It is the twist, or reversal that interests me. Never has a movie brought tears to my eyes as the end of Steel Magno­lias—then in a half second, everyone is busting a gut laugh­ing. The writer played our emotions like a maestro. The markets also thrive on fear and greed, and unexpected rever­sals.

Change Is Inevitable

When stocks move up or down—either unexpectedly or in reaction to news, especially if they move quickly, there is a high incidence of a major divergence. A favorite play is to buy a call on the low-side turnaround, and buy a put on the top­side turnaround.

A perception of the facts (right or wrong), starts the move­ment. Activity breeds activity and more investors rush in. They listen to current events and future predictions and that subse­quently affects the price. Their purchasing/selling is integral to the process. New information—either right or wrong tests the strength or weakness of the previous assumption/activity, and the price is sustained or divergence occurs. A short term profit can be made. It’s quick and semi-predictable. Get in and out before anyone ever sees (or reacts to) the trend.

Now, use your profits to increase your holdings in great companies. It is the very boom and bust cycle (volatility) which gets me excited. Most investors run from the boom and bust scenario, however, some of us profit big time from this technique.