Kya Bolta Hai Market?

Apurva Sheth
Kya Lagta Hai market?

Aaj Kuch Hai Kya?

Kya Karneka Market Mein?

What's the market looking like today?

This is how market men in Mumbai greet each other. Immediately following 'hi' or 'hello' will come any of these questions. You could be a fund manager, stock broker, research analyst, or a retail investor, but if you are talking to someone who's fully occupied in the stock markets, the conversation is bound to go in this direction sooner rather than later.

A professional trader or a fund manager may be asking just to know the views of the other person. But a retail trader asks these questions with a different intention. He wants to find out 'the next big trade'. And he doesn't stop there. He is always looking for that next big trade. He enters and exits positions frequently. He's always looking for some action because he believes he will only make money if he is actively trading the markets.

On the other hand, some traders trade based on their mood...or because they haven't traded for a long time and want to satisfy an urge. A couple of my friends trade only because they have received a payment from one of their clients and will not need this money for the next month.

Traders can be classified in to three groups based on their motivation for trading. First are those who trade without any reason. These are normally the hyperactive traders who frequently enter and exit trades.

Second are those who trade for all the wrong reasons. They trade just because there is idle cash in their account or a popular HNI recently bought stake in a company.

And finally is the third group of traders who trade for the right reasons. Such traders are less common but normally more profitable. The biggest difference with them is that they know their trading system very well. They trade only when the systems they follow signal a trade.

Trading systems do not make money all the time. There will be times when some systems make money in a trending market. Some systems might make money in a choppy market while others might make money in a range bound market.

They key to successful trading is to identify the type of environment the market is currently in - trending, choppy, range bound, etc. Then design and apply trading systems that are suitable for a specific environment, and finally execute the trades with discipline when the system signals a trade.

You can expect profitability in trading only when you follow all three steps correctly. But let me warn you: Following these steps correctly does not guarantee success. It does, however, greatly improve your chances. At Swing Trader, I follow these three steps, and it's a reason for our success.

Most retail investors falter at the first step itself. They do not even try to identify the market environment. Even when they do, their trades are not based on objective assessment but on subjective elements such as their mood or the opinions of others.

You need not worry, though. Next time, I will share with you a tool you can use to identify market environments objectively and correctly.

Meanwhile, what are the tools you use to identify market environment? Share your views in the Club or share your comments here.

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3 Responses to "Kya Bolta Hai Market?"
05 Oct, 2016
I intraday. trader Like 
29 Sep, 2016
i could not understandLike 
28 Sep, 2016
Dear Apoorva, Your opinion above is 100% correct. That is how I started.But thanks to EquityMaster and its various services and news letters I have changed but still have got to go some distance. Though I do not trade in futures etc, but your advice above holds true for all investors . Thanks for showing the right way.Like 
We request your view! Post a comment on "Kya Bolta Hai Market?". Click here!