Tuesday, December 6, 2011

Trading with the Bulls

I can undertsand the difficulty for most traders when trying to take a bullish position. We have been in a bear market for the past 13 months. There have been significant rallies yet, the main trend has been down with the Nifty falling from 6320 to 4640.

Now, the market is going up. The key question is: Is this  bear market rally or is this the beginning of a new bull market?

Experienced traders will immediately realize that the question posed above does not have a reply as of now. The Index will confirm a new bull market when it closes above 5400 beginning a new pattern of higher highs. Since this event has not yet happened, there is no way to suggest that we are in a bull market.

Traders should attempt an answer to this question with another question. They should ask themselves: What is the time frame of their trading? If  you are a day trader,then the current upmove is actually a roaring bull market. If you are a swing trader (few hours to few days) then the trend is clearly up since intraday charts have visible up trend and bullish signals. If you are a position trader with time horizon running from months to years, then the trend has not changed to up. So, there is no rush to buy.

One way of trading with the bulls is to understand our time frames. If we are into short term trading, then the longish bear market is not relevant, which the current up move is relevant. A second point in trading with the bulls is to accept what the market wants to do. If your trading strategy is to buy dips in an uptrend, then you should buy the dips that are coming in now. Accept the wisdom of your trading signals.

3 comments:

rohit said...

Sir why are you not coming in the middle and end of the day for the past 3-4 days on cnbc? Sir but you felt that the bottom of this bear should be around 4000? how often have you been wrong, and how do you handle when your call goes wrong, Sir with your experince, if one follows the rules of technicals, with strict descipline how high are the chances of making money? also what are your views on contrarian investing? If one went contrarian at 5350 and also at 4650, hw would have made a hell lot of money?

Prashant said...

Sir,

You are absolutely spot on. Traders should not trade their opnions, but the prices on the screen. We are clearly in a short-term uptrend which will convert into intermediate bull run on crossing and staying above 5400. Rather than the 13-year downtrend, staying with the emerging trends is the only thing which a trader should remember.

daytrader said...

Dear Sir

The Minifty is in process of making bullish 1-2-3 pattern , if today previous high of 5094 is taken out naturally will find a target of 5247 also 5246 is monthly R1 both level will act major resistance .

request ur view

thanks and regards
ur follower