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• THREE TRADERS, three lattes. One latte
to satisfy the fat cravings, one to satisfy
the sweet tooth, and one for that celebratory treat after making a great trade. All
three lattes are the same size, but each
has a different aroma, appearance, and
sensory effect. It’s sort of the same with
price moves. We strive to find big moves
to trade. They can make us euphoric, but
in reality, not all big moves are created
equal. Sure, a $10 move in a $100 stock
isn’t going to be the same as a $10 move
in a $20 stock. That’s nothing new. But
there’s more to price moves than what’s
on a trading platform.
So, what other ingredients go into a
price move? Prepare to be surprised.
Just as lattes are made up of different
ingredients, so too are price moves. Each
trader has different needs, different
goals, different desires. A price move in
one stock may not mean the same thing
to a momentum trader as it does to a contrarian trader. Which is why it’s a good
idea to throw in a mix of volatility and
some simple math calculations just to
know how big a move really is. Curious
to find out more? A good place to start
is to read the feature article “Not All Big
Moves Are Created Equal” on page 16.
The same can be said of indices;
moves aren’t created equal. That has
more to do with how the indices are
created—they’re weighted differently.
Most are either price weighted or market cap weighted. So, when you see a big
move in an index, what does it mean for
a trader? Turn to page 32, “What Drives
the Dow?” and turn your index savviness
up a notch.
No two traders are alike. Each has a
unique set of goals to be met. So, when
you see big moves in the market, there’s
no need to get turned on by them all.
Only go after the ones that deserve your