If you wish to invest in stock markets during the period of volatile sessions, here are some tips for you. Volatile markets are no doubt riskier to enter; so before you jump into the volatile markets, ask yourself few questions that will help you plan your entry and exit without being affected by volatility.
- What is your risk appetite?
- Do you have contingent funds?
- Do you plan short term of long term investment?
The first rule to gain from volatile market is to act like a watchdog and start buying on dips and selling on highs. Analyse few important figures like support and resistance levels, 52-week highs and lows to estimate the extreme price a stocks can touch. For example, assume yourself a short term investor planning to buy an IT stock ABC currently trading at 100 rs. Suddenly some unfriendly news responding to which, there was heavy selling pressure in the market. As a result ABC slumped down to 60 rs. The catch here is that the company ABC has very good fundamentals with many upcoming projects. So a prudent investor will buy the stock expecting that the price will reach its level of at least 100 because its 52 week high is s high as Rs 250.
The second rule is to keep buying in bits and pieces and then selling all at once. Suppose a stock is currently trading at 52-week low price of 100. An investor wants to buy 500 shares wanting to take the opportunity of stock being at 52-week’s low. But don’t buy all the 500 shares @100, the reason is “volatility still in action”. What if market goes down further? So buy 150 shares @100, next 150 shares @95 and so on as the price keeps fluctuating. Suppose the average comes out to be 94 bucks and keeping these shares for around two months will take the price to say around 140 bucks. Selling them all at once means a profit of (140-94)*500 = 23000 bucks. Good Indeed!!
Thirdly, if you have your eye on some penny stocks; make sure that “Buy and hold” strategy is what will pay you. Keep them in your portfolio for some years and then sell when you think it has reached the expected level as per your planning.
Last but not the least, be very careful while buying stocks of blue chip companies because wanting to make huge profits, you may land up in trouble. These being the market movers, may totally invert your stock portfolio in a single day because they are quite sensitive to the rumours or market news that trend to cause volatile sessions.
In nut shell, a little vigilance is the key to gain in volatile markets. Be careful on when to enter the market and when to exit out of it. Set your own targets so that you don’t become a victim of bearish phase atleast and may gain a nominal profit. Keep tracking selected stocks and make an entry and exit accordingly.
