Know When To Stay Out of The Market

Any good trader will know not only when to enter the market but also when to stay out. One of the biggest problems among novices is they do not know this fact and feel almost obliged to trade every single day. This apparent obligation prompts them to trade even when they know things may not work out well and when they do really lose, they are shocked that they have lost. Stock market trading is undertaken to make profits and not to engage in as many trades as possible.

Major news releases: It is wise to stay out when there are important developments being announced in the news, be they of economic or political significance. Good traders usually stay out of the market some hours before and after a major economic update such as the central government’s budget announcement for the year. This is because markets become very volatile during those announcements.

Further, when important political developments take place, such as when election results are due and the future of the ruling political party is hanging in the balance, it is best not to enter the market. This is because a change in government makes the markets very volatile.

Prices expected to fall: A good trader not only is aware of, but makes practical use of the adage 'Market is Supreme'. When he expects the market to correct and prices to fall, he engages in a short trade at the right level adjusting the risk to reward ratio and proper stop loss. When the stop loss gets hit, he exits the market acknowledging that the market has beaten him and is heading higher instead. Such a trader waits patiently until the market allows him a selling opportunity and he will ensure that this time he recovers his small loss to make a good profit. A good trader also does not act emotionally but whenever in doubt, he simply stays out.

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