Basic Finance

Stock Market- How to trade effectively in the falling powerful Stock Market? -2022

Are you panicking as the stock market is falling? From those people who trade regularly in the stock market, we can understand from their faces that something is wrong.

If you talk to a friend who actively trades in the stock market, then from his/her voice only we can understand that something is wrong. Yes! The stock market is too volatile now and it’s being under selling pressure.

The main reason for this sell-off is the geopolitical tension i.e. the conflict going between Ukraine and Russia and usually, the market reacts before. So, remember this is a reaction of the market for this news. 

And also, one should remember that at every reaction by the stock market, there is an opportunity. For example, in March-April 2020 the market went down due to Covid, so this was an opportunity for us to invest in the stock market.

But then the question comes if the opportunity at every level is right? Should we look for the opportunity whenever the stock market fall? If the market has fallen then what caused the fall down. We must understand and analyse these factors.

So, in today’s blog we will discuss What to do after this Stock Market fall?

What to do after this Stock Market fall ?

From the weekly data, we can see that Nifty 50 has fallen around 1.5% and the worst affected were the Nifty Midcap and Smallcap indices that had fallen around 4% and 6% respectively

Now if we look at the yearly data, then we can see that the Nifty 50 rose around 16.5%  and e the Nifty Midcap and Smallcap indices that had given us return around 24%-25% respectively.

Firstly, you need to decide whether you are a momentum trader or value/growth investors

1. For Momentum Traders:

If you are a momentum trader, then in this situation the stop-losses must have got hit and suffered a loss. But it doesn’t mean that you will keep suffering losses as again the momentum in the market will come.

So, we need to find those stocks in which the momentum can come again and trade in them. But how to find those momentum stocks.

First, let us see how the charts of the indices are looking:

We can see that from the above daily charts, Nifty 50 has taken support at 200 SMA, however Nifty Smallcap and Midcap have fallen below 200 SMA.

Nifty Midcap and Smallcap stocks are high beta stocks and it means that it will take time to recover. It is in consolidation and dangerous zone, so it is better to avoid trading in these stocks.

So, we can look for the sectors for trading in the large-cap indices. We can make a watchlist of the strong stock of the sectors like Real Estate, PSU Banks, Auto etc.

We can see from the chart below that Nifty Bank is getting stronger as compared to Nifty 50, so we can trade in strong banking stocks such as Kotak Mahindra, ICICI Bank etc.

Since our cash is idle now as we have booked profits and taken a loss, we can use that cash to trade in strong momentum stocks.

So, the banking sector overall is looking positive. So, we can conclude that we should pick up strong stocks which are showing momentum for trading in the falling market. There is no problem in building small positions if you are a momentum trader.

You can also watch our webinar on MOMENTUM TRADING STRATEGY

2. For Growth/Value Investors:

If you are a growth/value investor then you should start making small investments or start doing SIPs as when the Ukraine- Russia conflict solves the stock will move up.

For this, you can take help of the Investment Idea section in StockEdge as discussed below:

From the above list, one should trade in those stocks which is above the score of 22 and is near its support zone, for example, Havells India Ltd.

So, growth or value investors should start investing in those stocks whose business they understand and are fundamentally strong.

You can watch the entire video from here-

Bottomline

One should not panic when the market falls but start trading in momentum strong stocks if you are a momentum trader and fundamentally strong stocks if you are a growth or value investor. We hope you found this blog informative and use it to its maximum potential in the practical world. Also, show some love by sharing this blog with your family and friends and helping us in our mission of spreading financial literacy

Happy Investing!

Source
Stock Market- How to trade effectively in the falling powerful Stock Market? -2022 is written by Elearnmarkets for www.elearnmarkets.com

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