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 I’m using this recent crisis to illustrate how political events, just like in Ukraine,
could be analyzed and utilized for investment thesis.
Let me start from this reminder:
Never allow your emotional, ethical or moral opinions to influence or interfere
with an objective assessment of financial implications that an unfolding event will
or may cause.
Every larger conflict (catalyst) introduces market participants to new set of trading opportunities. There are losers and winners to pick, and abilities to separate
tradable information from emotions is one of the cornerstones of successful investing. The other one is timing.
Markets hate confusion and uncertainty. That makes it highly predictable that
initial market reaction in face of a global event, such as tanks on the streets in the center of Europe, will most likely lead to equities sell off. Sell off that will continue until investors reevaluate new risks and adjust their positions. Shorting the
market or at least reducing exposure to affected by the event equities is prudent
and proven to benefit investors. Markets have a tendency to overreact, and that often creates great buying opportunities. Before committing a capital to any crisis play, make sure that you have a re sons to believe that risks that triggered the sell
off, are contained and will diminishes with time.
How political events could be analyzed and utilized for investment thesis.
Five strategies that I see being most
commonly applied by traders.