The Dow is reaching decade long lows as we dropped below 6,600 in the past week. So the question is, how low can it go? Well there is no clear answer to this question. Michael Bloomberg believes we still have a far way to go and that markets could still decline up to 25%. Jim Cramer believes similar thoughts and that you need to focus on individual stock analysis rather than a market summary. So how should you act in these current volatile markets? First step is buy damaged stocks not damaged companies. Avoid the Auto Industry, Government controlled Banks, and any high priced consumer product. Know your limit and expectations for a company. For instance, if you are a Long-Term investor don't check your stocks everyday as you'll drive yourself crazy with the ups and downs we are experiencing in these markets. Once a week is all you should be doing and make sure you check on Mondays not Fridays so money isn't on your mind all weekend. On the other hand, if you are trying to Day Trade these volatile markets or be a short-term investor, good luck. Just kidding, actually there is lots of money to be made as of right now with smart, strategic day trading. With such volatile levels the risk to reward ratio is at unquestioned levels. Make sure that you don't get ahead of yourself and let the losses accumulate. Set a tight, strategic amount of money that you are willing to lose and play with it in the markets. In current market conditions, I believe the real gains will come from Day Trading and Short-Term Investments. Long-Term your money will be safe buying solid companies, however some of these results will not be realized until three to five years down the road.
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