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This video was recorded on the morning of March 2, 2020. The DOW ended up closing the day at 26,703, up 1293 points for the day.
Last week the market sold off due to Coronavirus fears, but today the market rebounded. Tesla Stock (TSLA) ended the day at $743.
When trying to predict what’s the market going to do with news like the Corona virus, often times it’s quite complex. Most of the time people tend to think in black or white, either/or. However, there are many possible scenarios with varying degrees of probabilities.
When betting on this kind of news, there are two main factors:
1. Coronavirus impact
2. How market reacts and when
You could be right on the Coronavirus, but could be wrong on how the market reacts and when.
Determining the how the market reacts and when can be very difficult doe to many factors, such as:
How much market goes down
When it goes down
When it starts going up
Quickly goes up or slowly?
Government actions?
Big money actions
It’s also difficult to predict where Coronavirus will end up in 2-3 month and it’s impact on the global economy.
To bet successfully you need to have odds in your favor for both Coronavirus prediction but also how and when the market reacts.
Often times emotions might make you think you have the advantage because you have strong feelings that bias your judgement.
There are various approaches in dealing with volatility.
1. Dips as buying opportunity
Warren Buffett holds stock long-term and views dips as buying opportunities. But his situation may be unique since he has $100+ billion in cash to deploy and his business generate billions in cash every year. So he can be a net buyer of stock every year.
2. Trade volatility
Oftentimes with short-term trading, you’ll need to do smaller bets to mitigate risk but you’ll need to do bets in volume.
Check out the Kelly Criterion on a mathematical approach on how to size bets.
3. Get in to generational 10x company at right valuation, ride out volatility
This is my preferred approach. Check out my video on how to time stock purchases for 10x gains.
The real-time stock ticker tends to program on minds to focus on the short-term due the instant liquidity without any closing costs it provides. It’s a powerful force, but can provide an edge if you have a long-term perspective and look at the core fundamentals of what makes a company/product successful over time.
Disclaimer: All content on this channel is for informational and educational purposes only and should not be construed as professional financial advice. Should you need such advice, consult a licensed financial or tax advisor. No guarantee is given regarding the accuracy of information on this channel. Author is long TSLA at time of original video publish date.
Tags: Tesla, Elon Musk, Model 3, Model Y, Cybertruck, Investing, China, TSLA Shorts
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