A trader enters into a buy trade after confirming with the help of price action that an up-move is in place. A scrip qualifies for buy after it trades above a particular price, prompting the trader to initiate a buy trade. Then suddenly the market reverses gear owing to its volatile characteristics and buy trades turn into losses. Similarly a scrip is considered to have become very weak below a particular price, and so the trader initiates a sell trade. No sooner that is done, there is a strong bullish surge and the sell trades are virtually pulverized.
So what is the solution to the present condition. I am listing a few suggestions for the benefit of traders and investors alike :-
- Investment decisions should be deferred for the time being, specially long term investing. That is because equity markets have yet to touch their intermediate bottom. For Nifty, intermediate bottom could be as low as 4000 while in Dow Jones we can again witness 6400 level soon. If you are a long term investor then wait for levels just discussed above, before jumping into immediate investment.
- Traders should trade strictly along an established short term trend only. And then one should take small profits off the table.
- Wait patiently for correct buy and sell levels for initiating trade, and do not enter into trade in haste.
Year 2010 will be a challenging year for traders as well as investors. So become mentally tough to take the challenges in your stride. My good wishes to all !!