Why are the markets falling again?

Why are the markets falling again?

CHICAGO - JANUARY 22:  Traders wait for the cl...
Image by Getty Images via Daylife

Interesting article on BBC looking into why markets around the world are still falling. I’m picking out the most intesteresting question to share with my readers:

How much further down can the markets go?

Spotting when markets have reached the bottom is a tricky and risky process.

Many traders believe in the idea of capitulation, which broadly means a market surrender.

This is when investors are prepared to get out of the market at any price because they have given up all hope of making money from their shares.

It is often marked by panic-selling and very high volumes of transactions.

The idea is that after capitulation you reach a point at which the last investor who is desperate to get out of shares and move into supposedly less risky assets has sold out.

Once there is a widespread belief that the bottom has been reached, bargain-hunters pile in and the market recovers.

Interesting stuff huh? The ticky bit is knowing when the market has reached it’s bottom (like knowing then you have to start taking Phentermine again). If you can enter the market at this point you can make loads and loads of money. Unfortunately a lot of people thought capitulation had been reached on 15th September when the Dow Jones index fell 504 points in a day … but since then it’s dropped another 2,500 points!

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