What is yoyo?
"Yo-yo" is a slang term for a very volatile market. The name comes from the movements of a yo-yo toy; In a yo-yo market, security prices continually rise and fall.
A yo-yo market has no distinguishing characteristics of a bull or bear market; rather, it exhibits characteristics of both. Security prices in a yo-yo market can range from very high to a low point over a given period of time, making it difficult to buy and hold investors to make profits.
Key takeaways
- "Yo-yo" is a slang term for a very volatile market; In this type of market, security prices rise and fall continually.
- Security prices in a yo-yo market can swing from very high levels to a low point over a given period of time, making it difficult for buy-and-hold investors to make profits.
- Yo-yo markets can be profitable environments for astute traders who are able to recognize buy and sell points and place trades before the market reverses.
- Yo-yo markets are characterized by strong up and down movements in stock prices that can occur over a short period of time, such as weeks, days, or even hours.
Understanding a Yo-Yo Market
While it is difficult for buy-and-hold investors to make profits in a yo-yo market, they can be profitable environments for astute traders who are able to recognize buy and sell points and place trades before the market reverses. These markets are characterized by strong up and down movements in stock prices that can occur over a short period of time, such as weeks, days, or even hours. The movements are usually sharp and usually mean that most stocks move in unison.
Merchants in financial world They also refer to this type of stock price activity as "all or nothing," implying that everything in the market is good or bad.
2015 as an example of a Yo-Yo market
The emergence of yo-yo markets is rare, especially those that last several days or longer. They are more likely to occur when market volatility recovers after a prolonged rise in share prices, which can tend to make investors nervous.
For example, during the first six months of 2015, the Dow Jones Industrial Average (DJIA) It never fluctuated up or down more than 3.5% as it reached record levels. Then, in August, a convergence of issues โ China's slowing economy, falling oil prices and the prospect of higher interest rates โ caused the stock market to plunge sharply.
From August 20, 2015 to September 1, 2015, the market experienced eight trading days in which the advance/decline reading of the Standard & Poor's 500 index was above 400 or below 400: 400 of All 500 stocks in the index were advancing or declining at the same time. In just two days, the DJIA experienced its worst and best days of the year. Before August 20, only 13 days had passed in which this occurred. The previous time the market had experienced an extended number of yo-yo days was during the stock market crash of 2008. During a 15-day period from August 20, 2008 to September 9, 2008, there were 11 events.
