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Stock Market Volatility

Stock market volatility fluctuates all the time, some days more than others. Volatility in the markets grow as the gains increase along with those times when uncertainty rises.

Since the markets have risen as high as they did and the condition of the economy is still on shaky ground, I’m not surprised to see that the VIX (volatility index) jumped 20% in just one day. What does surprise me is the fact that it took so long for it to happen.

In the last fourteen months, the Dow Industrial Average (DJIA) has increased by nearly 80% and over 10% in the last three months. I’ve been saying for quite some time now about the fact that the DOW sitting at over 10,000 points has no real reason to be there. Of course many investors are still riding the wave as long as they can. Unfortunately many of them won’t see it coming when the markets take the next plunge.

Unemployment is at 12% (officially), but it is estimated to be at 17% since most people who were receiving unemployment benefits last year are no longer eligible. Many companies are holding off on hiring until they get a good look at the new tax laws that the present Administration has passed. Add on the fact that the foreclosures in the United States are not shrinking, instead they are holding steady in most areas.

The VIX is one of the indicators that should be watched on a regular basis as part of your stock market strategies. As the uncertainty in the markets rises, the VIX will climb. Many average investors lose money in the stock market as this happens because the price per share of most companies will rise and fall with large swings. If you are a veteran in trading stocks, most likely you’ve learned to read the VIX and play it accordingly.

For those who are not familiar with VIX, there are a few stock market books that will help you understand much better. In many of Jim Cramer books, you will find information about the volatility in the stock market and how to play it.

What happened to the stock market today?

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What Exactly are Penny Stocks?

Before even thinking of buying penny stocks it’s probably a good idea to understand what they are and how they’re viewed by the investing world. Three basic categories of penny stocks are used to define the actual words. Each one has a separate meaning with entirely different investment potential, risk ratios, and trading strategies. You might already know one of these meanings, however if you are doing research or talking about trading with another trader, you need to be careful because the information could be referring to an entirely separate meaning. Therefore, you must understand each meaning in order to make sure everyone is talking about the same one.

True Share Value – When people who do not know much about investing hear “penny stock” this is what they assume is the meaning. This is when a penny stock is valued under a dollar. Usually people believe that the stock is only valued at one cent. This meaning is not used very often in publications, probably due to the fact that it makes perfect sense. If a trader is speaking of a stock that is traded on a major market, such as the NYSE, then it is typically worth no more than $5.00 for each share.

The Stock Market Exchange – On occasion, and in particular with penny stock brokers, the meaning of penny stocks is derived from the market on which the stock is traded. The most prevalent penny stock exchange is Over the Counter, or the pink sheets. Basically, this means that the stock is not qualified to be on one of the more conventional markets. Pink sheets have started to examine penny stocks to make sure they meet their requirements for their exclusive penny stock market.

Market Capitalization – This is the final category of a penny stock and it is based on the company’s value. Usually, the companies have to be worth under $100 million dollars. The essential aspect is the company’s size, rather than the actual value and the price of each penny stock share.

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