As a trader, you are always on the lookout for the next big market movement. You monitor the markets continuously, looking for the best investment possibilities. Sometimes you hit the jackpot, and sometimes you don't. But that's the nature of the market. Below, we will take a closer look at some of the biggest rises and falls of the continuous market. You'll learn what caused them and what you can learn from them.
What is the continuous market?
The continuous market refers to a financial market where trading takes place continuously throughout the trading day. It is characterised by a constant flow of buying and selling activities, allowing market participants to execute trades at any time during market hours. Unlike auction-based markets where trades occur at specific intervals, the continuous market provides liquidity and price discovery in real-time. This type of market structure is commonly seen in stock exchanges, where buyers and sellers can transact at prevailing market prices throughout the trading session.
Examples of biggest rises and falls of continuous market
- Bitcoin: One of the most significant market movements in recent years has been the rise of Bitcoin. In January 2013, Bitcoin was valued at just $13. By December of the same year, it had risen to $800. In 2017, Bitcoin reached an all-time high of almost $20,000 before experiencing a sharp drop in value. For traders who invested early, this rise might have resulted in significant gains.
- Tesla: Another massive market movement was the rise of Tesla's stock price. In early 2020, Tesla's stock was around $90, but by the end of the year, it had risen to over $700. This surge was due to a combination of factors, including Elon Musk's forward-thinking vision and strong investor confidence. Many traders who invested in Tesla early on might have seen tremendous gains, but it is essential to note that the stock's value has not been without its ups and downs.
- Gamestop: In early 2021, Gamestop made headlines worldwide when its stock price skyrocketed. The rise was due to a group of amateur traders on Reddit who bought large volumes of Gamestop's stock, driving up its value. At one point, the stock was up almost 1,500% in just a matter of days. However, as the hype died down, the stock has since fallen back to its original value.
- Covid-19 and the oil market: The Covid-19 pandemic had a profound impact on the oil market and resulted in dramatic price drops. With people confined to their homes, demand for oil plummeted, and prices fell to historic lows. In April 2020, oil futures contracts actually dropped into negative territory for the first time in history. This volatility in the market resulted in significant losses for many traders who were unable to sell their contracts before expiration.
- The Black Monday crash: The Black Monday crash on October 19, 1987, was one of the most significant market drops in history. The US30 Industrial Average fell by over 22% in one day, causing many traders to experience significant losses. The crash was due to a combination of factors, including high debt levels, increasing interest rates, and computerised stock trading. However, despite the significant drop, the market rebounded relatively quickly and is now considered a significant event in market history.
Why are they important for traders?
The biggest rises and falls in the continuous market are crucial for traders due to several reasons:
- Opportunities for gains: Significant price movements could offer traders the chance to capitalise on short-term fluctuations and potentially benefit through strategic buying or selling.
- Volatility trading: Traders who specialise in volatility trading could take advantage of market swings to execute strategies that benefit from price fluctuations, such as options trading or scalping.
- Risk management: Understanding the biggest rises and falls may help traders manage risk effectively. By analysing historical patterns and market trends, they could implement risk mitigation strategies like stop-loss orders and diversification.
- Market sentiment: Monitoring the largest price movements could provide valuable insights into investor sentiment, which could influence trading strategies. Traders could gauge market psychology, sentiment shifts, and potential reversals.
- Timing of trades: Knowledge of significant rises and falls could enable traders to time their trades strategically. They could enter or exit positions at opportune moments, aiming to maximise gains or minimise losses.
FAQs
What causes the biggest rises and falls in the continuous market?
The biggest rises and falls in the continuous market can be influenced by a variety of factors, including economic reports, corporate earnings announcements, geopolitical events, government policies, interest rate changes, and investor sentiment.
How do traders identify potential big rises or falls in the continuous market?
Traders use various techniques to identify potential big rises or falls in the continuous market. These include technical analysis, fundamental analysis, studying market trends and patterns, monitoring news and market indicators, and utilising trading tools such as price charts, volume analysis, and volatility measures.
Are big rises and falls in the continuous market predictable?
While it is not possible to predict market movements with certainty, traders analyse historical data, market conditions, and other relevant factors to make informed predictions about potential big rises or falls. However, it's important to remember that the market can be influenced by unexpected events and can sometimes deviate from predicted trends.
How can traders take advantage of big rises and falls in the continuous market?
Traders could take advantage of big rises and falls in the continuous market by employing various trading strategies such as trend following, momentum trading, contrarian trading, and arbitrage. They can also utilise different financial instruments like options and futures to gain from anticipated market movements.
Past performance does not guarantee or predict future performance. This article is offered for general information and does not constitute investment advice. Please be informed that currently, Skilling is only offering CFDs.
