Monday, January 26, 2009

>Bear market Trading

Bear market gives birth to enough obstacles to demoralize a trader.
What would you do when you see every other trade you execute
runs towards stoploss or you execute a trade and even after few hours
of trade you see the script price is hovering near the same level you
executed.

No doubt its a daunting task its like a Alaskan guy trying to stay in Sahara
desert for a month,Ofcourse it would be quite difficult but with a set of rules
and habits the hostile condition of desert can be made bearable.

Same way in a bear market the conditions turn hostile for a trader.
Which we can try to repair by set of rules and habits which should be followed
strictly.
First and foremost thing to be followed in a Bear market is to avoid averaging
Of course its not a complete no no if you know whats your trading strategy.
The biggest drawback of averaging is it holds much of capital which in turn
stops trader from getting into new trades.

Second and I follow this rule religiously never chase a breakout in Bear market
either it may be too early or too late.
Always buy stocks near supports in a bear market ,Breakouts are usually a great
shorting opportunities in Bear market (Ofcourse lot of calculation is required to
reach to this conclusion)Don't be surprised if you see a stock falling from breakout
many times a good example of this was the movement in Reliance stock in nov
and dec 2008 and it tested patience(Patience is integral part of trading) Stock
kept falling from 1180 levels again and again untill finally it rose Reliance analysis .

These are two very basic rules which should be followed strictly ,If you think more
rules should add up in this list do drop an Comment.

Regards
Rish

RESEARCH REPORTS

3 comments:

pokrate said...

I follow one simple rule, ie; to short rallies.

padiyara said...

"never chase a breakout in Bear market
either it may be too early or too late.
Always buy stocks near supports in a bear market ,Breakouts are usually a great
shorting opportunities in Bear market"
I fully agree with your above quote.
jacob padiyara

Rish said...

Pokrate i dont agree strictly to your rule as at times bear rallies stretch beyond particular time frame which catches short sellers badly.

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