How to trade safely when budget is near?

Every year in the last week of January and First week of February the markets turn very volatile the reason being the Financial Budget. The financial budget session starts on February 1. Due to which markets can’t decide a designated way of moving.

In this situation Investors can take advantage of any fall as we saw today on 24th of January, 2022. As of today we expect the markets to dip further. Today rumour played a designated role, Acc to some sources the LTCG (Long Term Capital gain ) was likely to be increased from 10% to 15% which caused panic among the big sharks in the market. Global markets weaken on higher bond yields. Dow Jones on 24th January saw a wild swing with dropping more than 1100pts but it ended in green staging a upbeat recovery.

In our opinion, there’s quite an uncertainty in the markets. Traders are using various methods to avoid risks but the wild swings is making it very hard to catch a winning trade. Its time for investors to stay awake and find bottoms in good companies. Many good firms are available at great discounts. So Go thrift shopping!Do spot the bottom well. For all our fellow traders there are some key points you should focus on right now!

• Market Mood - The current Market mood is quite pessimistic but the main indices are in their comfortable demand zones. You traders should also focus on the budget. For Options traders, A straddle would work the best in their favour. Avoid naked trading because if the swing happens against your position, Then the swing will be huge. Use Adequate risk management and hedging mechanisms.
• Overtrading - Opening multiple new positions in this hour wont be the most idle choice. Even if your conviction is very strong then buy half of what your capital can afford so incase it goes in the opposite direction you can average it by adding more. So for newbie’s TWODS Capital would advice to not overtrade. For experienced traders we will like to advice you to hedge your risks from time to time and have a backtested Risk Management System.
• Never Hold Overnight Positions - The swings which we are seeing today is replicating the global sentiment. Heavy falls in the US Markets is triggering a bearish sentiment in the world Markets with the Fed decision due in a day. Indian markets close at 3:30 while the US Markets open at 8PM. Pertaining to past experiences in panic situations like this, It’s advisable to square off all positions in Intraday to avoid risks from highly volatile US Markets.
• Follow Your Roots - You have been an educated trader, Its advisable to follow your roots at this moment. By roots we mean, Always follow strict stop losses and targets. Having control on your Greed and Fear are two traits which make you a good trader and an educated trader. Another thing to think here is, Remember once you said that this company is overvalued and has no profits or the time you spoke “the company is overvalued.” It’s time to stick to your, Many new startup companies are available at discounts of upto 50% but stick to your word and invest in SWAT(Sleep well at Night) and Bluechip companies

Do check this blog-space back as we uncover Budget 2022. There are some of key points everyone should focus on. May the trading gods be in your favour.
Disclaimer - This blog is for educational purpose only. Please do your due diligence and risk management before entering into any trade.