We have witnessed nifty closing with negative numbers for 5 continuous days, accompanied by an escalated fall of 300 points today. This definitely creates fear in my market and disrupts the performance of the portfolio.
The reasons for such a downtrend could be COVID19 and global slowdown. It has had a great impact of the demand and supply-chain in virus affected areas. In such situations, it is a tendency for traders to square off their positions at huge losses, as they anticipate the markets to fall even further.
The wiser option in such high volatile days would be to
Work with strict stop loss
Back test strategies to see how the same stock have performed during similar events.
Before taking any fresh positions to averaging existing positions, Do NOT trade aggressively, but instead buy on every Dip.
I just have strategy on both long and short sides with strong stop-loss and sensible targets, so I don’t worry about the direction of movement.
As long as the movement is strong and single directional for decently long time, I am happy, because I eventually catch and ride it.
The best way to trade on such volatile days to trade on quality stocks that provide a good momentum for the day.
It is also advisable to avoid carrying any positions for the next day.