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Short-term traders swing into profits

This article was posted on Mar 24, 2009 and is filed under Market News

NEW DELHI: Short-term traders, better known as swing traders, are now calling the shots at Dalal Street. With stock market witnessing sharp rallies — up and down — not only swing traders but also smart investors are resorting to only short-term trading to make money in the stock market. Swing traders bet on daily and weekly movements. They don’t make money only by taking long positions but also by going short in the derivative segment. In the delivery trade, they step into the shoes of a savvy investor who is trying to book quick returns, and generally have their return estimation and stop-loss calculated before entering a trade.

“A number of these investors recently booked considerable profits
in the short-covering rally which started on March 9,” said D K Aggarwal, director at SMC Global Securities.

What has helped short-term traders gain insight into the market movement is NSE’s India Volatility Index (VIX), better known as Fear Index. “Investors are now increasingly looking at VIX to assess whether the markets are inclined to the long side or the short side in the futures segment,” said H S Sidhu, CEO of Delhi Stock Exchange
. To cite an example, VIX went up from 34.01 on January 23 to close at 42.86 on January 27, increasing by more than 8 points in one trading session. This shows that warning signals were issued in advance to the bear hug that followed on February 26. Analysts say short-term investing will be the flavour of the year. Some broking houses have even gone a step further, advising their clients not to take a long-term view in the current market scenario.

“We are advising our clients not to join the sleigh ride to Sensex 10,000 or wherever the market seems to be headed these days. In a range-bound market, there are lots of trading opportunities. We don’t see a major appreciation in the market, at least in the next six to nine months. This is not a time for long-term investing, investors need to remain patient and short-term in their outlook this year,” said Sudip Bandyopadhyay, CEO of Reliance Money.

Motilal Oswal, chairman and managing director of Motilal Oswal Financial Services, agrees. “The market is going to be rangebound. We don’t see any major trend originating from here,” he said.

History shows that swing traders tend to be proactive most when the volumes are low. Volumes in the equity market have almost halved in the last one year. “There are a lot of uncertainties in the market. One can’t wait for tomorrow, as today is an integrated world where globally markets are inter-linked,” said R K Gupta, managing director of Taurus Asset Management Company.

source: Economictimes

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