Stock Trading: What To Do When The Market Is Gripped With FUD?
The on-going coronavirus pandemic and recession won’t make much of a difference for the long-term stock investors. They would inevitably end up with profits. However, the real worries are for the short-term players and stock traders – many of who have panic sold their assets already.
At present, admittedly, the market is gripped with Fear Uncertainty and Doubt. The stock market isn’t having its best days.
In fact, this is an incredible test for traders’ portfolios. Did they invest in companies in healthcare, pharma, and FMCG, they would still see consistent returns despite the downturn. If they had a robust risk management strategy, they would have adequate funds to buy the bottom and even try swing trading.
However, the case for the majority of the retail traders is that they have weak portfolios, misplaced strategies, and massive unpreparedness for situations that we’re going through at present. They know they can make a profit by buying low and selling high – they lack confidence in execution. They know which technical indicator is the most accurate – they don’t know how to use it.
Assuming you’re one of them – a beginner who doesn’t know much about technical analysis – what can you do in such a situation? How should you act when the stock market is gripped with FUD? Here are five tips:
1. DO NOT PANIC
This might sound too generic. But it’s essential that you don’t join the line of millions of traders (and investors) who are panic selling their holding.
Panic selling does no good to no one.
Hold back on your emotions and resist the urge of selling your stocks. There’s a good chance you would end up with losses and, of course, regrets.
Recommended Read: When Others Are Panic Selling – Drink Cola
2. Limit the risks
There’s a big difference between panic selling and selling. The latter is thoughtful, strategic, and in sync with the trading plan.
So, when the market is going down, one of your key tasks is to minimize the risks on your portfolio. A large part of it includes strategically selling the high-risk stocks that weigh down your portfolio with an uncalled risk-reward ratio. Some of such stocks would be quite evident, for others you will have to research and identify the red flags.
In addition, there are many strings you can pull to limit the risks for you. You should avoid over-trading. You should avoid investing anywhere a large sum even when the deal looks good.
So, audit your portfolio and then understand the market trends. Accordingly, minimize the risks for yourself.
3. Find safer havens
Not everyone loses their money during the recession. Smart stock traders make the most of this “opportunity” to bolster their portfolio. Of course, you need extensive experience to follow their suit. However, even during such downturns, you can proactively trade to make money.
There are many ways to do that.
One of the ways is to trade in stocks of industries that would be affected little by the recession. As mentioned, pharma, healthcare, and FMCG are considerably safer. During this time, internet-centric companies can also be an appealing option for stock traders.
So, do look around… Spend time consuming news, analyzing data and making observations. Accordingly, pick the right stocks to trade.
4. Stick to what you know
Different people have different takes and suggestions. You will hear 10 different stock market experts give you 10 different pieces of advice. It’s essential that you don’t blindly follow them all.
During the economic downturn, as a stock trader, you sure can do a lot of things to lower risks, maximize returns and bolster your portfolio. But should you do them? Can you do them efficiently?
Many traders try strategies, positions, and segments that they aren’t necessarily comfortable with. Most of them usually end up with losses. Don’t be one of them!
Stick to what you know. Follow your expertise and experience. Don’t try something that you have little idea about.
5. Take some time off
Not trading is a strategy in itself. And it’s fairly good!
When you don’t know what to do and when there’s a lot of chaos, it’s best to take a backseat and relax.
Instead of trading anyway with confusion and uncertainties, stop, sit back and relax.
This could be a great time to take a break from your trading job and rest.
Come back when the dust has settled and you have a clearer picture as to where the market stands.
Recommended Read: A Health Guide For All The Serious Stock Traders
These are five tips for the new stock traders when the market is in the grip of fear, uncertainty, and doubt.
Of course, these are difficult times. Even with the best triple Bollinger bands strategy and overall approach, stock traders around the world will struggle; this includes even the experienced names.
However, if history teaches us anything, it’s that the market will eventually pick after a crash and the bull will run at a full pace. As a stock trader, you simply have to accommodate the current reality, adapt aggressively, and have a long-term plan for your portfolio.
If you need help, contact Bharat Jhunjhunwala for consultation. He is a Master of Financial Technical Analysis and a Certified Financial Technician. Over the course of 12 years, he has worked with many stock traders, helping them build a high-worth portfolio. He also offers acclaimed stock trading courses online. Contact him for consultation. Also, follow him on Twitter.