How are you maneuvering through this volatility in the market of late?
According to me, there are 3 distinct kinds of market movements:
- Trending Market- Option Buyers in control causing majorly one sided moves either side. Anyone can make good money under these conditions with very little knowledge and a basic strategy.
- Volatile Market- Option Sellers in control causing price to squeeze inside a zone. Normal momentum traders will be stopped out again and again causing huge losses. To make some money you need to create a short straddle, which gives slow profit through time decay. Recent example is in Nifty 50. For the 1st 5 sessions of September, price was within the range of the big trending move made on the last day of August. People who sold CE of that day’s high and PE of that day’s low made slow and steady profit for 5–6 days without having to do any adjustments.
- Market Top/Bottom- Nobody can tell where the top or bottom of a cycle is so it is impossible to sell at the highest point or buy at the lowest point (unless you have lots of money). This creates a FOMO for inexperienced traders and they trade their emotions. It is best to take a break for this phase. Let the market first confirm the trend reversal (higher lows/lower highs).
According to me, you need to take into account all 3 of these phases to be most efficient. After a trending market, there will be a volatile market (bigger trend = more time of volatility needed to restore balance), after which the market will decide weather the trend will continue or reverse.