Thursday, January 15, 2009

>Bear market and Stoploss

Bear market,Things are quite bad brokers are tensed they are not able to reach their respective brokerage targets,Traders are feeling the heat no easy money by trading in out.

Is there any way to survive Bear market!!!!

Of course easiest would be not to trade:).

Well that's not possible.
Trader will trade

Many Traders or investors have one thing in common in thinking.
Bear market good for investment...
buying in falls would fetch good return...

Now here few valid points to discuss
how long you ready to wait..
A trader who sits in front of live charts would he be able to see his holding getting ripped off 50-80%.
Secondly,How to analyze which fall is good to buy,and which is not.

Answer would be not an easy task.
With the kind off falls we are witnessing in individual stocks Its a daunting task.

Atleast we can figure out how much we are ready to loose if the trade goes against us.
In more technical terms we need to define risk appetite.
There's a very catchy saying "A trader with out risk is like a nude girl in a boy's hostel"

You just cannot risk more than you ready to loose
Also cannot hold on to it as it keeps your money stuck in a bad trade discouraging to to get into a new trade and of course Capital gets eaten up its a cascading effect .
Lets take an example say a trader gets into a trade he makes 2k loss a amateur trader would
risk double capital to recover 2k loss+ 2k profit and may end up losing 4k.
Some one so rightly pointed out
Trading is serious Business.Accept it or forget it:)

Stop loss is best tool to define ones risk,Without stop loss its kind off gambling or wishful thinking
I came across many traders who say every time we put stop loss it gets hit.
Take this with a pinch of salt if your sl hits in more than 50% of your trades think about something else trading is not your cup of of tea.



krishna said...

nice one sirrrrrrrrrr

Anonymous said...

Precisely but more importantly, buying in a bear market is not trading its suicide. Because you are trying to buck the trend.

More importantly, for traders, its bear or bull, that doesnt matter [as they have non directional instruments at their disposal] but what matters is the volatility. It becomes even more challenging when you are trading in a bear market, as bear market is accompanied by a higher volatilty[as new market participants come in due to lower prices].

Hence pro traders dont trade. They don't fight the market, they just take a vacation when the measure of volatility is beyond their stop levels.

Rish said...

Yes what soham said is true to a certain extent example the movement in Satyam ,Polaris ,rolta etc but then we know the kind off rallies BEAR market produces the one we saw in dec to early jan so i guess taking a vacation would not serve the purpose opportunities keep coming its just how we spot them :)

Anonymous said...

Daily, Weekly, Monthly charts makes the difference. Daily : day traders, Weekly : Positional traders , Monthly : Investors .
After that some personal analysis comes into play like, I would without doubt would wait for a double bottom atleast to invest alongwith other things.

Anonymous said...

In my opinion in bear markets we should take only short positions when price rallys to resistances...but if u try to pick bottoms thats where you fail and lose more than you have dont try to do bottom fishing in bear market or in a strong falling stock...people who tried to pick bottom in Satyam when it fell from 188.70 to 30.80 must understand what I am trying to say...

So net to net is...always trade in the direction of the trend...and be happy & safe...
Happy Trading !!!


Anonymous said...

pl let me know is there any formula or strategy for putting stop loss or is it depends upon the stock or the voltility of the market movement. pl advise.

Rish said...

Anonymous ,Stoploss calculation depends on your trading style If you use Elliott wave principles to decide your trades,It gives good flexibility in choosing your stop loss.

Anonymous said...

Anonymous, A very useful rule goes like this :
You must know the daily range of the stock, it can be 4/- 5/- or anything else, that range means stock is behaving normally, and when it breaks that range say today it ranged at 8/- instead of its daily range of 4-5/-, that means force is against you and you should exit next day. This rule should be used on closing basis.

Anonymous said...

you can trade in this market just watch how much money u have in your pocket.

Anonymous said...

no money is good enough, bigger the stake bigger the loss.
trader's abuiltin gambler's instinct drives his action.
while trading must watch the volumes,must also know the pedigree,& last but not the least the jobbers'game plan specially in smallcaps.avoid using others peaples money & intelligence.

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