Measures announced by the Finance Minister yesterday caused record highs in the Sensex and the market was rejoicing. But the fact is that most of the traders do get hurt as they don’t have patience and the trading strategies with inbuilt check system to control their EMOTIONS, GREED & FEAR factors. Result is the panic reactions and the pain.
If you wish to be a successful trader, then besides having a good trading strategy, you must remember the two basic rules, which we all learnt in our school. These are known as Newton’s 1st and 3rd laws of motion.
1st law says, everything which goes up will come down and it applies to stock prices also.
3rd law says for every action, there is equal and opposite reaction. When the stock prices are pushed up or down not fundamentally but by forces created out of an event or news, they come back to their original levels once the momentum of the event fizzles out.
Now if you look at the most trusted and used FIBBONACI RETRACEMENT levels, it is also based on the premise that the prices will retrace the levels and the levels depend on the force with which 1st action took place.
The fireworks happen on account of an unexpected event or news. The large operators or so called market makers with huge resources at their disposal push the prices up or down depending upon the impact of the event on the economy. But as soon as the momentum fizzles out, prices come closer to their original levels. So, if you enter the market in haste, you are likely to get hurt.
Please note the day of any such event is not a good opportunity for small traders to enter the market. Actually, when the prices are shooting up sharply, it’s an opportunity to book profits out of the existing holding and accumulate cash for fresh buying at lower levels.
Similarly, when the prices are being pushed down, you should not sell your holding in a panic reaction. You can work out the levels, from which the price is likely to bounce back for taking fresh positions, so that you get maximum profit in every trade you take.
Your strategy must have the capability to guide about you the levels for exiting & entry so that you make maximum profits.
We have developed trading strategies based on some very powerful technical indicators, which can help you in identifying the lowest possible entry and highest possible exit levels.
Ten important traits to be a Successful Trader in Stock Markets
To know more about our strategies please visit www.tradingstation.in.
The author is the Founder CEO of tradingstation.in (Stock market trading coaching institute) and a SEBI registered investment advisor with more than 15 years of trading experience.