Keep INVESTING Simple and Safe (KISS)
****Investment Philosophy, Strategy and various Valuation Methods****
The same forces that bring risk into investing in the stock market also make possible the large gains many investors enjoy. It’s true that the fluctuations in the market make for losses as well as gains but if you have a proven strategy and stick with it over the long term you will be a winner!****Warren Buffett: Rule No. 1 - Never lose money. Rule No. 2 - Never forget Rule No. 1.
So what happened? Details were still fuzzy last night as of this writing, but it looks like the event will become known as the fat finger event. A trader at Citi entered an order to sell 15 million shares of a security (not an outrageous amount), but accidental typed billion. Traders all over the globe saw the huge sell order and followed suit assuming Citi knew something. A massive selloff ensued. Part of the issue is because a lot of sophisticated traders use stop-loss order to limit themselves from losing too much in a massive selloff. Say I owned stock in Google and wanted to protect myself from losing too much money if the stock lost value. Earlier this week Google was trading around $530. So maybe I decided if the price dropped to $500 I’d sell my position. When the massive selloff occurred Google dropped to $500 so my stop loss order was triggered. All over the world millions of stop-loss orders like this were triggered so the market was flooded with sell orders and the price of everything tanked. Though it was fantasy trading, I had quite a few stop loss orders triggered as well.
In the high paced world of trading, with lightning fast computers, and herd mentalities, in a matter of minutes almost 10% of the value of the US stock market was wiped out. This 2.5 minute video shows how quickly it happened, and makes Jim Cramer look like the savior of the market. He literally calls the selloff ridiculous, and then people just started buying.
