InvestorQ : How exactly do I keep a flexible view on markets as a trader? Is the market not about convictions?
Anusha Savla made post

How exactly do I keep a flexible view on markets as a trader? Is the market not about convictions?

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Aditi Sharma answered.
3 years ago
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The idea in trading is to always try and be on the right side. If your convictions are wrong there is not point sticking to your convictions. Being a mercenary is not a very complimentary statement. At least in war! It refers to those set of fighters who have no national loyalty but fight purely for money. But more importantly, they prefer to always fight on the winning side so that they can live to fight another day. A trader in the stock market needs to think like a hard-boiled mercenary. Focus purely where the winning action is.

To understand this concept, one needs to look at two instances where investors lost large sums of money by not behaving like a mercenary. Firstly, in 2008 most people with an ear to the ground would have told you that something was rotten in market valuations. US had started imploding in 2007 giving enough time for Indian investors to embark on a course correction. Needed to be a mercenary! You had to convert at the right time. If you try to play to close to the actual event, you are not really trading like a mercenary.

The second instance was in 2012, when the trend decisively shifted from the aggressive high beta stocks to defensive stocks. The trend was visible from year 2010-11. A flailing economy, downward capital cycle and bad assets meant that it was the time to shift tack from high beta to defensives. Most high betas lost heavily while defensives held strong. A mercenary approach would have helped. From that point, it is the defensives that outperformed for the next 2 years and the aggressive names largely underperformed the markets.

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