So as there is no positional/longterm short selling allowed in the NSE, how do we trade during a bear market. I know we can short with futures, but the risk is obviously high. So my question is in a trending downward market where say 50-60% of stocks are declining how do traders trade? So should we just stick to those few stocks that are bullish? Regards.
In equity, the only way to benefit from a downward market is to perform an intraday trade where you sell first and buy back at a lower price.
In futures, you can carry forward a sell position. This only risk involved here which equity dees not impose is you have to trade in lot sizes and one lot is the minimum trade quantity you can execute.
In options, you can buy a put or sell a call. This will have to be traded in lot sizes as well. Buying a put will only require the option premium amount while selling a call will require additional margin which is more or less equivalent to the futures margin due to the higher risk involved.
there are three trends and they are:
uptrend, sideways trend and downtrend.
the downtrend can be traded for bottom fishing but you should know where exactly to bottom fish.
the downtrending stock will fall down no doubt and we have to wait for that exact moment to enter the market at the bottom for buying lowest and then holding and then selling at our desired point.
so, in downtrend , try bottom fishing.
@smartinvestor would you prefer to Buy and sell in a falling market?
good question, the falling market gives us the opportunity to buy at the lowest point provided we know where to buy based on pivot points. the selling can be done at the next market up move. this is not for longterm investors but the traders looking for the momentum buying can take advantage of this.
happy trading to you.
@smartinvestor Have a look at ONGC in the last four months. How do you trade with your analysis of finding bottom?
the stock when it doesnot fell from the last support is the level at which we can buy