Indobusiness - Ever heard of the term 'Bubble'? What is a bubble or a bubble economy? As I discussed briefly on twitter, bubble or the bubble economy is the economic cycle characterized by rapid expansion followed by contraction.
What does that mean? Bubble or bubble economy is often characterized by rising property prices, stock prices, and rapid economic growth. Aka Bubble economy bubble appears when the stock price surge even beyond corporate fundamentals. Bubble economy will continue, stock prices continue to rise, until at some point ends with 'eruption' bubble.
Eruption of bubbles or bubble economy indicated by the decline in stock prices suddenly, as in 2008. Bubbles. They expand. They pop!
These bubbles not only in stock prices, but also the price of the property as the case of the subprime mortgage crisis of 2008. Bubble also occur in developing countries like Indonesia. What exactly are pushing stock prices continue to rise?
Indonesia as a developing country are getting richer, the income per capita increases, the middle class became more powerful that increased purchasing power. The middle class is that they are able to meet basic needs, secondary, capable of vacation each year, from buying a car, buying a house with a mortgage, thus encouraging the growth of the property sector, the consumer goods sector and the infrastructure sector.
In addition, the development is also growing rapidly in developing countries, both the construction of roads or other infrastructure as well as buildings or bridges. Encourage infrastructure development in infrastructure, construction, and property as well keep going.
Banks lend money to them, and their assets are used as collateral. Equity in the property, and so forth are used as collateral or leverage to get more capital. Money makes money.
Bubble is also driven by the capital that goes into the stock market and mutual fund asset fund managers are increasing, as well as from foreign investors' funds. As a trader, what should we do in addressing the bubble or the bubble is going on?
Most of the euphoria of the stock price continues to rise. Some are afraid to participate. Better how? Buying stocks when the bubble starts will be very profitable for traders as prices continue to rise. However, the risk of investing is always proportional to the potential benefits to be achieved. That?
The potential returns from investing in the stock bubble was large, but the risk is also great if you're not careful. The best way to reap profits from the stock market and avoid the risk is to follow the trend.
Determine the stock price trend using technical analysis, trend ends and hold it up to sell. By using technical analysis, you can determine whether an uptrend still has the potential to go up or is already saturated.
Thus, you will easily recognize the signs of a turnaround, and avoid crashes. No need to fear the crash in the stock market. Simply read reversal signals, and subtract the position if the signal appears.
By using technical analysis, you can anticipate as early as possible. Technical analysis does not guarantee you to be profitable, but it can help minimize losses and maximize profits.
Ed Seykota quoted, "Follow the trend until its end when it bends." Time, patience, and discipline is the best friend for traders and stock investors.
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