Avoid volatility | stockbee

8/06/2019

Avoid volatility

Avoiding volatility and bearish phases is key to making money swing trading .



Tools like Market Breadth allow you to do that. Market breadth started deteriorating few weeks ago. As you can see there were more breakdowns than breakouts. That was the signal to be defensive and change your tactics.

If you did not take notice of that then you will get caught in the accelerated selling. By the time you become defensive it is too late in that case.

Breadth tells you number of stocks participating in a move and it is market derived information. It will help you avoid volatile phases and protect your profits.

Lot of traders lose lot of money in such phases as they are slow to react to market conditions changes.

If you want to make millions trading learn the basics of market breadth and develop your own market timing tools. I developed Market Monitor 20 years ago after getting caught in such selling phases and losing money. Now most of the time MM gives signals ahead of such periods.


7 comments:

KN said...

Hi Pradeep,

Thanks for this post, do you scale back your buying or start thinking going short when you get these signals?

Thanks

Kobus

Pradeep Bonde said...

I reduce exposure. Reduce size. Switch to shorter profit targets. switch to shorts.

KN said...

Do you start reducing exposure/size when the column goes to first Amber/Red or when it is for example 5 consecutive days in Amber/Red?

Many thanks

Pradeep Bonde said...

Market breadth gives different kind of signal. I typically start reducing or change tactics once short term market breadth starts to become extreme. The number of stocks up 50% in month column when it goes above 20 typically signals impending correction/pullback. If you wait for consecutive days of red or amber you are most cases too late.

KN said...

Thank you clarifying Pradeep I have been a fan of yours for a long time...Keep it up

The Toddfather said...

Is there a video available on your youtube on how to interpret the MM? Tips such as above are very helpful and it would be awesome to see how you think about the different "tells" of the Market Breadth.

Pradeep Bonde said...

I don't think I have made video about it