My last six posts have been on market psychology (to use a generic term). They have not discussed the current market conditions.
This is so because each trader must find his/her own method of trading in the market. Adapting to the market is an art, so this column tries to help you become a master in the art.
I assume that many readers are keen to read my views on the market. So here it is.
Last week the Nifty started a down trend. The five week up move failed to cross the previous intermediate high. Therefore, the intermediate down trend remains intact. If and when the Nifty goes above 3115 - 3165, an uptrend will be confirmed. The immediate target for such an up move will be 3500, while the trend could go on to 3800.
Will this happen ? I do not know. Frankly, I do not need to know. The trend is down until the resistance levels are crossed.
Will the Nifty make new lows ? Maybe.
Remember, markets can do many moves that can puzzle us. For example, it is possible that the Nifty may go above 3165, signal an up move then fall to reach 2100. Again, I am just saying that the market can do whatever it wants.
We trade by defining our responses to the market. As an example: I will go long above 3165 with a stop below 2950. I will move this stop up by 25 points after every day. If the Nifty touches 3450 or close by, I will take profits on at least 50% of my position.
We Never say: I have bought today and I will sell at 3800. Why did I buy today ? How can I say that the Nifty will reach 3800? What happens if the Nifty starts falling after I buy ?