InvestorQ : As a trader, how do I actually play the market trend?
Archita Jajjoo made post

As a trader, how do I actually play the market trend?

swati Bakhda answered.
3 years ago

Once the trend is identified, the next challenge is how to play the trend. There some basic rules here. Firstly, when the underlying trend in the market or the sector is positive, never try to short the story. You may be occasionally right but then the risk-return trade-off in your strategy will not be favorable. Secondly, before arriving at a sector-specific trend or stock-specific trend, you need to back it up with data points. What are the analysts saying about the sector or the stock? What is the ratio of upgrades to downgrades? Are the rating agencies downgrading or upgrading the sector? Are we seeing bouts of institutional buying or selling, especially from long-only funds? What is the volumes story in the market? Above all, what are the accumulation / covering signals that you can capture from the derivatives data? It is only with all these data points that you arrive at the underlying trend. Then you need to work out whether to buy, sell, buy on dips, sell on rises, stay neutral etc. As Ben Graham put it precisely, “There are 2 kinds of investors in the market; those who don’t know and those who do not know that they don’t know”. Try and be the investor who knows the trend and acts on it.