The Latest Stock Market Plunge: August 2015 down 10%

Did the stock market plunge again? Are your positions wiped out or are you relishing the opportunity to find new entry points?


The 200 DMA crosses the 50 DMA: is that the death cross on 8/11? Updated

When I was a student in college many moons ago, I remember on Sunday outside chapel, and on selected weekdays, a seemingly old lady would parade up and down the street, offering pamphlets, protesting and trying to gain exposure for her world view that encompassed the imminent ending of the world…

A Brief Moment in 1987

And for one brief moment in 1987, the stock market plunge of October wiped out billions of dollars in a couple of sessions.

Just recently, if you’d been reading recent headlines on the Street, like this one, you’d be tempted to believe the same stock market plunge had just taken place again!


But is it? Is the end nigh? Or shall we all live again to trade and make money? Well, if you haven’t already guessed, I tend to the latter point of view. We will always prevail, perhaps a little wiser, certainly a lot poorer.

But we will all be investing again one day in the not too distant future, once we’ve licked our wounds after the current stock market plunge. At that moment, it might be hard to imagine as you and I are likely sitting on huge losses on our portfolios (I was down over 50% in 2008!)

Long way to go up – or down?

We should never use the past to judge the future, but previous statistics can be informative. The two most serious downturns in the 20th century were quite severe. The second crisis was in 1970’s when the Dow Jones dropped and the stock market plunge wiped out nearly 50% of the market value but what is worth noting: the greatest point loss (by points) was in fact only #17 in the total percentage losses.

In 2008 we were approaching a 45% downturn, and things have recovered well since then in the markets. There were only a few buyers out in the markets at the time, but many sellers so sell-orders swamped buy orders as companies, institutions, and individuals tried to unwind their risky positions, and save their skin. An awful lot of ‘unwinding’ was done before a more orderly market returned and there was more of a balance between buyers and sellers.

800px-DJIA historical graph

But in each of the downturns that occurred, people got back to business (eventually) and those downturn periods can hardly be seen in the chart above. But with markets still prone and intervention seeming not to work, we just have to figure out how to get from here and now to then.

Are we at the bottom, in the middle or at the top?

Many pundits are suggesting that the bottom of the market is not yet near, but that it is coming. While no one is sure of the exact time frame, several writers talk extensively about ‘capitulation’ – the notion that the selling is exhausted, and buyers’ orders match sellers’.

Jeff Cox of CNBC, writes “…But while hedge funds and industrial investors have been bailed out of positions, individual retail investors have still not reached the severe panic point.”

It’s quite likely most of us willl be steamrollered by the market as we jostle our buy/sell orders. I know I have: I now know the meaning of trying to catch a falling knife! He goes onto say that heavy volume will indicate that the capitulation phase has started, unfortunately we’re just not seeing that yet.

Cramer’s opinion always tells you what he thinks, EXACTLY. But you should take those opinions with a large pinch of salt!

So what is an successful trader/investor to do?

This is what I’m doing these days as I try to make sense of what’s going on, how I’m being affected by the latest stock market plunge, and where I’ll be in 12 months time:…

1. Keep eyes on your cash! It’s YOUR CASH!

Really, it’s just survival out there, that’s the name of the game now. Making sure that your cash is as safe as you can – verify that you have cash in the bank, that your bank deposits are sufficiently insured or guaranteed.

I’m planning to separate my funds into two bank accounts in separate institutions. While my own government authority has guaranteed deposits until 2010, having no access to these funds even temporarily could cause some cashflow problems, so I’d rather not take the chance.

2. Be better informed! Read, read, read…

I’m sure this is one that should affect us all! Here we are fretting about problems and issues that we all know little about: WTF is a Credit Default Swap? Well, since people are taking such risks with their money (and ours!), it seems that we have to all become better informed about the systemic risks these people are taking without so much as consulting us. I, for one, will endeavor to be much better informed about these matters.

3. Pie in the sky: that’s all it can ever be!

Skepticism has always been one of my strong suits, but now I’m becoming skeptical of the truisms, investing group-think wisdom, and aphorisms passed from advisor to client all over the world. I just don’t see why we should all be told that we have to invest in the stock market, expect 9% returns, and take SO MUCH risk without any chance of reward. No businessperson worth their salt would invest in a business like that.

Yet that is what most ‘retail investors’ face everyday. Yet every day, that investor is told to live with the risk of a stock market plunge wiping out not just some of the portfolio, but a lot of it! There will always be the risk of a stock market plunge! …

I’ll be adding to this discussion shortly, but I wonder: how were you affected by the crash? What are you doing to protect your investments? How do you see things now in view of the possible double dip that a lot of people are talking about?

3 Top Reasons to Use Online Stock Brokers

Online trading has exploded over the past couple of decades, since the beginning of companies like Datek Online (remember them?). Its popularity was made by the ease of use, cost of trades, and increasing number of platforms on which you could trade.

There are many other reasons why so many people are doing it, but let’s check out what I think are the top 3 reasons.

Better level of control for commissions, trade executions and transparent pricing


Image of TDAmeritrade’s Online Platform

One of the key things that caused many people to go the online route was that the commissions for brokers were already through the roof. The lower level of commission also made smaller trades, micro-accounts and more frequent trading possible, meaning that ordinary people could access the market directly for purchasing stocks, bonds, contracts & much more.

Instead of calling your broker, you could open your browser or start up your trading apps to get the best current pricing; decide on whether you want to go long or short; and set the market, limit or stop limit orders for the stock you wanted to purchase, allowing you to dictate your execution pricing and your total purchase/sell cost.

A better level of control effectively means that you will have more control over your profits or losses. This new trading phenomenon wound up working for many people, and encouraging dozens of online trading companies to spring up seemingly overnight.

Accessibility to your trading accounts 24/7/365

I’m not a frequent or avid trader by any means, but even I enjoy those advantages of being able to access the account pretty much where, when and how I want. If I had to rely on a standard broker, who may be unavailable when I decide to call, to buy and sell everything for me, there would be a limit to how quickly I can make an investment. In the financial world, time is money and every second counts.

So, if you trade online, you will make all of the trades yourself. You can do everything at the exact second you want to. Even the smallest delay in buying or selling can cost you a very large amount of money. But you will need to learn about online trading from someplace like Online Trading Academy, you will never lose money because your broker was unreachable at the time you wanted to make a trade.

Most modern brokers offer a variety of platforms to access your accounts: web-based sites, apps on your phone or pads, even proper software for your PC or Mac. And you will still be able to dial-in on the old phone, and make trades for an extra fee.

Look for a good online stock broker

Really, check out the offerings and decide what you want or need. You will need to decide what products you want to trade: stocks, bonds, forex, contracts, commodities, etc.; then consider what kind of tools you actually need: will you be trading via web or app or via a full software application.

Lastly, don’t forget to look at the additional research brokers these days offer. Many offer lots of research tools, reports, stock scanners, and much more for no additional fee; while others charge bare-bones fees for stock trades, then have an a-la-carte attitude to the many services available, so trading costs will be low until you need to pay for additional services. However, most fees are minimal compared to what you would pay to an actual traditional broker.

Check out this video for more information. And search through this site for more ideas on use online stock brokers for trading. Or perhaps you have a favorite you’d like to share.