a question for the investing experts here
 

What I dont get, the markets know if they panic. Everyone starts selling and the market drops, knowing this why do they do it? Like there is a very good chance from what Im reading tomorrow will be taking the really big dump. Now if they didnt all go ape shit, then in theory Im assuming that wouldnt happen.

If you don't sell, the guy next to you will. It's impossible to control everyone. In a perfect world and perfect case scenario as you described above, capitalism would not be possible, therefore not even exist.

You're right. But no one is in the market for the greater good, they're in it for themselves.

The sold shares don't just magically disappear, when people are selling someone else is buying them... then when the panic ends, good chance the buyer will make some nice chunk of $$$....

you also have the factor in the options traders. they are taking leveraged positions either long or short..

the average investor is betting long, hoping the stock goes up..

with option trading you can go long, short, or both ways...

time to practice Hedging.

Hedging is a strategy designed to minimize exposure to an unwanted business risk, particularly in inflationary economies, while still allowing the business to profit from an investment activity.

Banks and other financial institutions use hedging to control their asset-liability mismatches, bla .. bla ...bla

yes, hedging can be very valuable in an uncertain market.

i rarely hedge when trading currencies, but tonight i am getting ready to take equal positions (long & short) on the USD/JPY pair.

the reason for this is that there is some big data coming out in the next 8 hours.

my gut tells me that the CPI numbers are going to be lower than expected, however japan has made it very clear that they will prop up the currency pair if need be.

adding to the CPI numbers is also the uncertainty of how the US and European markets are going to react to todays decline in the US and Asian markets as well as the AIG situation.

so, i will take positions both directions and as soon as a short term trend is established, i will close out the losing position and try to ride the winning position for as long as i can..

may the force be with us who hedge starting now .......


good luck to all :thumbsup