How to trade in this kind of market???

Hi guys, lets start with our stock market again. Now you all know that from many days (or I can say months) market is fully volatile, unexpected rallies, directionless, different sentiments and influence of international affairs.

Now in this kind of market how to trade? And that too, how to trade profitably? It’s not easy to trade in Bear market or range bound market!!! And there is no one strategy is which will help you trade profitably; you have to adopt various strategies depending upon the different situation.

And one point I want to make it clear to you guys, whoever writes or tells something about some company, he has is own calculation, analysis, time frame, exit point and etc. So same price may looks high for me and low for you guys, that is why transaction happens. So you have decide what is your point of view on that particular stock??? So don’t just blindly follow anybody’s opinion including me. So below opinions are purely subjective and perceptive.

Timing

Even though Rakesh Jhunjhunwala says that don’t time market, I believe that timing is the most important thing in the trading or investing (long term players). Whatever may be company’s status and its share price just time the stock!!! I mean check out from past week or month (depending upon your investment style short/long term) how the stock is doing whether bearish, bullish, range bound, erratic movement! What might be its support and resistance levels? What might affect its price like interest rate hike, rupee appreciation/ depreciation and etc.

Strong

Here I am not mentioning anything about fundamentals or technicals. Depending on what you follow (may be fundamentals or technicals or contrarian), you must trade with strong stock. Trade means either taking long or short position.

Price & Volume
Whatever may be your position long or short your decision must be followed strong correlation between price and volume. There should not be divergence in the price and volume movement.

Trading in Futures

For short term it may be better to trade in Futures instead of normal trading. This is because one has to wait for T+2 so as to sell those stocks.

For example, if I boy shares of Reliance Industries on 23rd of this month, then I have to wait till 26th of this month to sell them back to the market, otherwise there exists a risk of auction.

Options

It is better to trade in Options in order to minimise risk. Buy calls if you are bullish on some particular shares. And conversely buy puts if you are bearish. Profit can be earned by incurring limited cost with no risk in this strategy.

Calls and Puts

If the markets are volatile a useful strategy is to buy both calls as well as puts. Whichever direction the markets take in the short run, you are quite likely to make good returns in the short run.

Buy puts and sell calls

This strategy helps when there is uncertainty about the future direction. This strategy can also generate profits if stock price falls rapidly and there is panic in the markets as we saw in January, March and then in July. Selling calls would help you in financing the cost of the puts.

Book profits

This is a bear market. Buy and hold strategy is not likely to work. It is better to book your profits as and when you earn.

Don’t overtrade

Do not overtrade. Remember cash is king in times. You are likely to continue getting panic situations going ahead, where cash can be very gainfully deployed.





Reference

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