Is it wise to trade all the time with the same mindset? No Right.
When we start trading, we do the same things again & again thinking that what we did yesterday, last week, or last month, with the same strategy we try to make a profit out of it & that's the reason most of our capital is either at breakeven or in a negative. I believe we need to be smart enough to change the strategy according to the type of market we are facing.
Type of Market:- a. Base:- Where the market is in a consolidation stage, and not appreciated in the market by the trader & investors. b. Growth:- Market in an uptrend stage, where the market is appreciating the fundamentals such as good earnings, growth & its intrinsic value & realise that it is undervalued. c. Top:- It is a stage where smart investors know that the market cannot continue forever as the market became highly overvalued & they square off their position & leave the market with a profit. d. Decline:- It is a stage where the market is in a downtrend. There can be various reason for the downfall, such as a decline in the fundamentals of the companies, War, panic, fear, etc.
Type of Strategy:- a. Base:- Short term trading, where need to identify the demand (Buy) & Supply (Sell). b. Growth:- long term positions which last maximum to 3 months, (use a call option) c. Top:- from a traders point of view, again find out the demand & supply with the mindset that small is good. d. Decline:- It is a stage where I make a lot of profit by using margin, Put options, short selling, etc.
So, as a trader, we need to change our trading mindset according to the market phase. Thank You
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