How to deal with an all time high market

At present, there is a chance of FIIs pulling the plug slowly and booking their profits partially, causing the market to correct by 3-4%; individual stocks may correct at higher percentage. How to deal with the market now? Please read below advice. But use your own judgment, before applying it to any stock that you own.

 

If you are sitting on 10-15-20% profit on any script, at present, it is better to start booking profits, at least partially, if not fully. The target may not have been reached, but start booking profits, if you are on profits. No point watching with hope or helplessness, when the profits start disappearing, if the market crashes.

 

If you are sitting on marginal losses and the stock has not moving recently, create a sell order on the trading system, which can be the highest price achieved on that day, by taking a look at previous day's closing and high price. Try to get a selling price, which is closest to your buy price and start exiting the positions.

 

If you are sitting on substantial loss of 8-10% or above, DONT PANIC SELL. This is a mistake we all do. We hold on to stocks which are in profits and marginal losses and sell those with bigger losses and this result in capital erosion. This category of scripts can be held on because if the market crashes, you can get some very good bargain prices to average it out. So if you have losses of 8-10% or above, just hold tight. Start averaging in small amounts when the prices are below by greater than 10%.

 

An example: My entry price in STOCK A is Rs 100 (I had bought 100). Current price is Rs 91. Markets can consolidate now. I do nothing now, but watch the daily price movements, the highs and lows (range). The market starts consolidating..price dips to 88. I buy 20 more. The price dips to 85. I buy 20 more. At 82, get 20 more and at 80 (bottoming out price, which I have to sense), I pick 40 more. When the price bottoms out at 80 and stays sideways for a few weeks, forming the base for a bounce back, my average price is 91.5, 8.5 percent lower. If you have money available, you can increase the last lot of 40 to 150, bringing down your average to 87.4. Exiting will be much easier. If it is a good script, it will go back to the levels of 95-97, or even 100.

 

New buy calls: Buy only in small quantities and as close to the call entry price, as possible. Do not expose your capital as you would have done earlier.