A healthy jump is happening in the market- Will it last?

The stock trading markets are very volatile. Various factors can quickly cause price fluctuations. The price of shares can either pop or drop. Market pops mean that the stock has suddenly traded higher after a short period leading to investors making profits. On the other hand, market drops happen when the stock market crashes leading to a drop in the price of shares. Therefore, investors make losses during market drops.

Due to the volatility of the trading markets, it is important to have strategies to help avoid common pitfalls and to gain more confidence in trading. There is no specific guaranteed strategy for success in trading. Therefore, it is important to look into and compare different strategies, their key features, advantages and disadvantages for you to choose the  most suitable one.

What are Stock Jumps?

Stock jumps mean an increase in the share price. This is caused by an increase in the number of people looking to buy that particular stock.  The difference in supply and demand for the stock cause the share price to rise until an equilibrium is achieved. At the moment, there is a healthy jump happening in the market. This means that the stocks are back up. However, how do you know if it will last?

Recently, shares of Evolent Health (EVH 1.82%) rose more than 22%. The healthcare services stock closed at $22.21 on Wednesday, 23^rd February and opened at $24.37 on Thursday, 24^th February 2022.  The stock went ahead to rise to a high of $27.03 within the first hour of trading. Gold in the national capital on Monday, 21^st March 2022 gained marginally by Rs 26 to Rs 51,400 per 10 grams. This is in line with firm international precious metal prices according to HDFC Securities. Previously, gold traded at Rs 51,374 per 10 grams. Additionally, silver has also gained Rs173 to Rs 67,956 per kg from Rs 67,783 per kg in the previous trade. Nifty50 bulls are also back and have seen strong buying at its support level of 17,000. It is expected that the stocks will continue to form a bullish curve. Therefore, investors are looking forward to having good returns.

The recent jump in the market can be attributed to rising rates. This is because stocks tend to perform well in rising rate environments. However, this only lasts for a while.  When the rates get too high, the markets eventually crash and everyone starts to sell-off. But before that happens, rising rates tend to reflect a strong economy. This translates into solid earnings which in turn translate to healthy stock prices. Therefore, the early quarters of a rising rate cycle are usually bullish meaning that there will be market pops.

How Strategies can help Traders?

During this healthy jump in the market, strategies will come handy in ensuring that you make the most profits before a bear market kicks in. For instance, day trading as a strategy ensures that day trades are opened and closed within the same trading day. This strategy cushions investors from committing to long term strategies that may cause them losses should the rates start falling and a bear market kicks in.

On the other hand, swing trading also allows traders to take their time in the decision-making process despite it being a short-term strategy. This strategy allows investors to follow trends that usually last from a couple of days to several weeks. This is an excellent strategy to use since swing traders are able to take advantage of more prompt asset price fluctuations.

Conclusion

It is crucial to be well equipped with strategies that will ensure you as an investor, make the most out of the healthy jump that is happening in the market at the time. Since the stock market is very volatile, it is important that investors make the most out of market pops before the market drops kick in.