InvestorQ : What do we understand by volatile markets and by lacklustre markets?
Moii Chavate made post

What do we understand by volatile markets and by lacklustre markets?

Answer
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Sam Eswaran answered.
2 years ago


There are two approaches to understanding directionless markets. The first is a volatile market. Volatile markets can be volatile in either direction i.e. on the upside or on the downside. The only key takeaway in volatile market is that the volatility as measured by the VIX is increasing. The markets are at the cusp of a major breakout but you are not sure which direction this breakout will happen. That is the dilemma. This expectation of higher volatility is one example of directionless markets.

The second approach to directionless markets is a tepid or lacklustre market. Here the volatility is falling sharply and that means the market is going to be range-bound in a very narrow range. The question is what do you do? When markets are bullish or bearish, you are quite clear what to do. But the big question is what to do when markets are directionless. The answer is you can either adopt volatile strategies or range-bound strategies based on your expectations. Here is how you go about it.