How to trade a week before the Budget

We are unfortunately living in a world of extreme media scrutiny where every drop in the ocean is exaggerated as a significant event. In this kind of a scenario, the Union Budget which is presented on February 1st is being touted as a major event for the financial markets.

The fact remains that Budget is just a day where the government presents its forecast of it Profit & loss statement and Balance sheet in terms of where they plan to spend and how much will they gain in the coming year. However, this event is generally preceded by tremendous speculation which in turn could lead to a tremendously volatile market which has been witnessed over the 1st few weeks of January.

India VIX is an index which measures the market volatility which if observed has zoomed from 10-11% to currently 17-18% and is bound to only increase in the coming days. Generally, volatility leads to huge losses both traders and investors as very few people are able to successfully manage their risks in this kind of a market. Please remember, January-February also happens to be a time where corporate also announce their results for the previous quarter. Hence the best way to trade in such a market is to limit your trading only to intraday. This helps you to have a fresh perspective every day as news flow in such situations is unrelenting leading to huge market swings even on an intraday basis. People who carry their positions overnight based on the assumption that bullish candles and momentum indicators are signaling an uptrend receive a jolt as the very next day the market/stock goes down leading you to question your technical & analytical skills.

Limiting your trading to intraday helps you to focus on smaller profits and accumulate your wealth in a slow & steady manner very similar to the strategy of ‘Survive now to accelerate later’. Also use technical indicators like RSI & Stochastic for your intraday trades and ensure you Buy or Short sell only at either extremely overbought or extremely oversold levels as in such volatility, your theoretical supports & resistances hold very less value.

On the day of the Budget, one thing is certain that the market and mainly the main index Nifty 50 is going to swing both ways. In such a scenario, smart option traders should adopt a Long Straddle or Strangle a day before and act in a proactive manner on the Budget day to exercise or square off their positions on either side of the volatility. Hence understanding technical analysis & option strategies can benefit you tremendously and give you confidence in believing in your skills to help you achieve both short & long term returns from the market. Going through a detailed technical analysis course & options course which lays more emphasis on candlesticks & more importantly puts you in difficult trading situations while learning will help you sail through turbulent times in any market irrespective of the asset class.

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