While Indians celebrate Vijay Dashmi / Dushehra, world markets are going dramatically up. Suddenly, in two days, Risk is back again. So far, it appears that the Nifty could open almost a 100 points higher tomorrow. That would certainly be a gain for traders who went long with a stop under 4750 – which is a significant support for the Nifty (see my previous posts).
But, what about trading tactics? The Nifty closed at the lows of the day (almost) on Wednesday. When an instrument is closing near its lows, remains in a protracted down trend, it is reasonable to expect traders to be and remain short in it. Therefore, if you are following any trading method, it is likely that you were short over the holiday.
Well, the answer is: follow your rules. If you are short, and your rules require you to exit at a loss on Friday morning, so be it. There will be many days when the same discipline will fetch profits.