Congestion in trading
Namaskar dosto and welcome back to another insightful podcast by Angel One.
Is podcast ka topic hai congestion in trading and we will discuss this topic such that you walk away from here having learnt something useful, lekin without the feeling of sitting in on a boring lecture.
What is congestion in trading?
Very much like a traffic jam or traffic congestion, trading congestion mein bhi, there is no room for movement. Traffic jam mein zyaada tal saare cars aur rickshaw aur bus atak jate hai kyunki they are unable to move ahead because there is something standing in their way.
Trading congestion mein stock prices upar nahi ja sakta (aur neeche bhi nahi ja sakta) kyunki there has to be a demand supply imbalance for that to happen. When the number of buyers and number of sellers are equal; jab demand supply bilkul equal ya almost equal hai toh stock price will neither increase nor decrease because of demand supply economics. Yeh situation kuch din tak reh sakta hain toh isse trading congestion bola jata hai.
Congestion kab hota hai
Jab kisi company mein koi new developments nahi ho rahe - na koi dividend announcement, no acquisition or merger, no recent quarterly or annual report.
Jab traders koi upcoming announcement ke liye ruke hai.
Budget ke pehle when people are waiting to see what will happen.
When something drastic hits the market and people are not sure what to do
Stable prices achi baat hoti hai right?
Day traders aur short term traders stock price volatility pe hi depend karte hai in order to access potential earnings. Agar price upar neeche nahi hoga, day traders kis hisab se apna buy low - sell high strategy use karenge? They might have to work with much higher volumes to get the same earnings.
Dusre investors ko bhi price dips aur discount mein stocks lene ka mauka nahi milega. For example, value investors look for stocks trading at a discount. Value investors stock price aur company earnings ko compare karte hai. Agar stock price low hai as compared to earnings, toh value investors woh stock ko kharidne ke liye tayaar rehte hai. Lekin congestion ke time pe, ho sakta hai ki yeh low price ka opportunity jaldi nahi aa jayega kyunki low price aane ke liye, pehle supply must exceed demand.
Agar aapke paas stock already hai aur aapka plan tha to hold the stock for the long term toh ho sakta hai ki congestion se aapke investment pe zyaada asar nahi padega so long as long term projections progress as predicted.
Stock market ka basic funds hai price volatility - this is what attracts investors to the market. Continuous congestion is not conducive to growth in the long term.
Congestion situation kaise recognise kara jaaye?
Trading volume bahut kam rahega especially as compared to historical volume
Price move hoga lekin bahut kam movement rahega aur ek hi band mein move hoga. Nah previous high price par ho jayega aur na previous low price bhi.
There will either be a general lack of news around the company or something so dire must have happened ke log chauk gaye hai - they are shocked and clueless
Congestion ko opportunity ke jaise kaise use kare?
Exit opportunity - agar aapne apna target price achieve karliya hai toh aap is safe aur stable samey mein exit kar sakte ho.
Entry opportunity - agar aap value investor ho aur aap sure ho ki the congestion band stock price is lower as compared to the company’s actual earnings, aap stock khareedh sakte ho.
Learning opportunity - agar aap stock trading pehli baar try kar rahe ho toh stable pricing is a good time to be learning and making mistakes. Zyaada volatility nahi hone se aapko kam earnings mil jayega lekin in case you make mistakes, aapka loss bhi kam rahega.
High volume day trading - agar aapke paas sufficient capital hai aur sufficient experience, high volume day trading iss time pe kar sakte ho. Chote chote price increase aur price decrease mil hi jayega even during congestion periods and if you are using large volumes toh actuals mein, you can potentially walk away with a good amount of earnings if things work in your favour.
Congestion kaise eliminate hota hai?
Jab volumes rise hoga aur demand supply mein gap aa jayega toh congestion bandh ho sakta hai. For this either the buyers need to prevail over the sellers nahi toh vice versa.
Iska ye matlab hai ya toh ki sellers thak jayenge aur low price mein stocks bechenge nahi toh buyers thak jayenge aur apna entry price bada denge.
How to tell when the congestion period is over
Jab stock price apna previous high nahi toh previous low breach … maane cross...kar dete hai toh you can observe thoda closely… agar 2-3 days ke liye breach karte rahe get toh aap assume kar sakte ho ki things have returned to normal.
Congestion period mein kya nahi karna chahiye
Panic kar ke apne stocks ko loss mein mat becho. Agar company ka earnings acha hai toh aage potential ho sakta hai. The congestion period could be followed by an uptrend, toh adopt a wait and watch attitude.
Avoid buying at a higher price than you want to
Aap kisi stock ke price drop ke liye ruke ho aur past few days se price achi tarah rationalise ho raha tha. Aapke PE ratio calculations se you need to wait for the price to fall lower. Lekin Abhi yeh congestion period aa gaya hai. Ghai math karo. Wait it out or else pursue another stock.
Dost ab aapko congestion in trading samaj mein aa gaya hoga aur iss situation mein action lene (ya nah lene) ke kai options bhi hai. Congestion ho ya nah ho, trading is risky business dost. This podcast has been made for educational purposes only and as an investor aapko thoroughly dusre sources se bhi research karna chahiye.
Hum aise podcasts se aapko aise hi interesting investment topics ke baare mein insights dete rahenge, so subscribe to our YouTube channel and follow us on other social media platforms. Until then, happy investing and goodbye!
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