Tuesday, October 20, 2009

Markets go up, then they come down

Regular readers will recall my previous post  in which I put up an hourly chart for the Nifty, suggesting that the markets may see a small dip or choppy conditions. Today, the Nifty did remain choppy finally closing half a percent lower.

It is possible that this trend may continue over the next few days.

Earlier, a month ago, traders were sceptical of the rally and suggested that a correcion was coming. But, the market does not oblige so easily. It went up while people waited for the inevitable dip. The dip never came about.

Now, slowly most people have come down to the view that 'this time it is different', and there will be no correction, just a steady advance.So what can happen? Well, the markets can correct suddenly. While we cannot be sure, it is possible that the process of the correction may well have started today.

Brett Steenbarger says:

In a range market, and, especially in slow market conditions, it is neccessary to temper one's expectations. The amount that intraday traders can take out of any given market move, will be limited.

My Notes:

Traders will have to determine their own triggers at which the existing trend will change from up to sideways or down. Of course, this need not happen at all, but you must know your personal trigger at which you will say "the trend has changed".

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