Top Strategies to Trade Current Stock Market Trends

The markets have rallied one way for long and now when DOW trades around 12,000 there is some selling pressure clearly visible. The real trouble is the wild swings which are almost impossible to trade as many traders get stopped out amid such volatility.

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• The volatility index is trading lower and it might remain around $14-$20 till expiry, beyond which it could a different trade altogether. Traders can keep a track of June futures around $21 to $23 range and a dip below these levels can be a good buy. Buying June Futures at these levels is also good strategy for someone who is keen on hedging his market portfolio.

• Don’t work your head on which way the market is headed as this may impact your trading strategies. It’s better to position yourself for extreme bullish and bearish sessions. Your research and opinion about market trends does not matter, as the key goal is to make money. Just focus on implementing strategies which make money regardless of market movement.

• Now markets have climbed back to 2008 selloff zone, and they look indecisive for making the next big move. So, traders should keep an eye on key support and resistance levels and leave the indices till they take on a decisive trend. This may be a stock pickers market, so look for stocks staging recovery from oversold zones and be prepared to short all those high fliers, which have doubled in past 2 years, even tripled in some cases, these may present some lucrative opportunities.

• There is nothing wrong in getting stopped out in such markets, but keep a watch on the amount of risk you are taking. Don’t keep the stakes too high, as keeping cash handy will help you in dealing with volatile swings.

• As volatility creeps into the system some get scared and others get greedy. Well shying away in such times is not a bad call; at least you don’t have to go through nerve wrecking trade sessions. But, if you get greedy, these markets can give you an unexpected bashing, so learn to take smaller profits.

Final Tip for safe trading in such markets:

Well, many of us are of a view that we will see a sideways market which will see bouts of high volatility. Well this may seem like a well thought scenario but we can never rule out the unexpected. So, don’t be too sure while selling tops and buying every dip.

I have seen traders lose weeks of hard earned profits in a day or two simply because of their habit to buy at the bottom of the range each time they see a fall. Well, you might then just wonder, what to do if buying dips can be so risky? Yes its risky, but a simple solution to it having effective hedges in place. Traders without hedges are always vulnerable to market extremity.

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