Aaj hum iss podcast me ek aise question ka answer dhundhenge jo aapke stock market trading ke misconceptions aur doubts ko dispel karega.
Here’s the thing: usually, most traders believe that if the stock market is bearish, it is not a good idea to indulge in trading. Toh kya jab stock market freefall me hoti hai, tab trading karna sahi hai? Let us find out!
To understand what action you should take, let us first make sense of the situation itself.
Stock market me price movements kaayi fundamental features aur technical indicators ke through determine hoti hain. The market is extremely volatile at all times, so there are always ups and downs. But sometimes, the market goes through a period of freefall. Iska matlab hai ke kuch economic changes hone ki wajah se - jaise economic recession ya financially hostile environmental conditions hone ki wajah se - stock market me prices girte rehte hain.
You must be wondering - how does this exactly happen? Remember that whenever a freefall happens it is because we end up with way more sellers than buyers in the market. As a result, the prices of the stocks are driven downward.
Toh Jab stock prices gir rahe ho, toh stock trading rok deni chahiye. On the face of it, it sounds sensible when someone says that. Generally, this advice is correct. Lekin kuch aise bhi scenarios hote hain jahan freefall ke bawajood trading karke returns earn karna possible hota hai!
Are you mind-blown? We thought so. Let us explain how and why in detail now.
Usually, investor sentiment says that in a bullish market - that is in a market where the prices of the stocks and securities are rising is a good time to buy stocks. Aaaj khareedoge, kal uska price badh jayega, so it will be a clear case of reaping good returns on the investment.
However, although this is true, it still does not mean that you absolutely have to stay away from a market on a downward spiral
Yes you heard it right. Even if the market is bearish and in freefall, you can still continue to trade during such freefall!
This is because you might still find opportunities for short-term returns. Lekin ye sab itna simple nahi hai - you have to be extremely careful about everything. A single misstep and you could lose a lot of your capital!
So here’s what you action plan should look like. Sabse pehle ye figure out karna zaroori hai ke market ke freefall ka reason kya hai. As they say, knowledge is power.
Now the question is : what do we do with the knowledge of the reason behind the freefall. Here is what you do: if the downward spiral in stock market prices is because of fear rather than economic factors then it could be safe to trade in such a market.
Lekin agar market me prices ka freefall economic factors ki wajah se hua hai - agar economy me recession ya slow growth ka issue hai, toh stock market me trade karne ke liye aapko economy ke stabilise hone ka wait karna hoga.
But even in the first situation where the freefall in the market is due to only fear, you have to be careful - it is easy to be tempted by to trade in weak stocks because of their low valuations. But there’s a catch.
You are anticipating that the stock prices will go up when the fear subsides. The reality is that some stocks might recover and others will not.
Agar kisi stock ka performance record iss downfall se pehle bhi zyada strong nahi tha, then chances are this stock might not recover when the market is back on track.
On the other hand, we have blue-chip companies. The stocks of such companies have strong financials. Aisi companies ke stocks ke recover hone ki possibility zyada hoti hai.
Agar aap freefalling market me trade karna chahte hain, make sure you are dealing with the good stocks.
Keeping this in mind, agar market freefall me jaa rahi hai aur aapke paas kuch shares hain, consider averaging out rather than selling the shares outright. Jab market me prices girne lagte hain, toh iss darr se ke woh aur na gire, humara first instinct hota hai: let’s sell the shares right away.
Lekin agar aapke analysis se aapko lag raha hai ke conditions future me better ho sakti hain, toh aapko thoda aur capital invest karke, kuch aur shares khareedne chahiye. Isse aapke total investment ki overall cost kam ho jaegi - uske baad jab market me prices upward move karenge toh aapke returns bhi behtar ho jaenge. In that scenario, the larger number of shares and lowered cost of investment will work to your advantage.
Market freefall ke samay trade karne se bhi aapko profits ho sakte hain. Ab main jo tips batane ja rahi hun, bas unka dhyaan rakhein.
One, adopt a staggered buying approach. What does this mean? This means that you should buy stocks of relatively strong companies in a staggered manner. Bajaay iske ke aap apna pura investment capital ek hi trade me laga dein, try and doing the transaction of that amount in parts. In other words, spread your share purchases over a number of trading days instead of doing it all at once.
Aisa karne se you will be in a position of benefit: you will get more shares of the same company and for a much cheaper price. Overall investment ka cost will be lower.
Doosri strategy hai yaani ki Systematic Investment Plan (SIP) ki. Yahan bhi averaging out ka principle use hoga - that you invest in the long run over various transactions, and as a result the cost of your investment averages out. Ye option khaas taur se unke liye beneficial hai jo direct manual investment route nahi prefer karte. And for those who like a little discipline in their savings and investments.
Finally, ek trading hack hai ke aap derivatives me trade karein. Basically, derivatives ke under jab aap call aur put options me trade karte hain, you are profiting off the changes in the value of the stock or index.
Ultimately, the idea is this: you do not need to stop investing in the market if it is free-falling. You just need to be more careful about where you are making investments. Choose wisely and happy trading!