What we are witnessing right now: Unprecedented Chaos especially in the Indian market and now you can see some signs even in Global markets. Today S&P500 effortlessly broke down below 50 dma and seems to be heading towards 2410 and possibly lower.
Now nobody knows the future. Every Buy on dips one day becomes a trap one day but you never know.
Sometimes buying the dip takes you on a bad trip. pic.twitter.com/bHBQ6gtJWU
— Stephen Burns (@SJosephBurns) August 10, 2017
Hence dealing with Chaos is difficult. There is a very simple trading rule when it comes to chaos: When in Doubt, Stay Out.
It simply means an admission that you have no idea what can happen next and instead of being brave or dismissive, it's time to hide and wait. It means not adding fresh positions, getting rid of recent positions and careful evaluation of old positions in terms of how much pain you want to bear. It also means taking some partial profits in positions where you have big gains.
Let's say you are driving on the road and the weather becomes horribly bad. What do you do - Keep driving or take shelter.
The most tempting thing is to do Shorting or doing some Value buy which can be super risky considering this market can turn on a dime. At the point of time: Doing nothing exciting, and reducing risk can be the most rewarding and safe thing to do. The market will always give you chance to get back in. Right now, I can only say this much:
It's time to be Neutral and Out of this market. It's not behaving well
— Deepak Singh (@smarket) August 10, 2017
No matter what you do, sometimes in future - it might look stupid but remember navigating market is like driving and you have to take decision based on what you see right now. It's not about hope or feelings. It's about being safe
Disclaimer – The state of the market notes is Deepak’s perspective on the market. The column is purely for educational purpose. Nothing contained herein is a solicitation to trade or a recommendation of a specific trade. By reading this publication you agree to make no trade relying in whole or in part on the comments of the writers