No matter how much you’ve read about trading, or how much experience you have as a trader, it is difficult to trade profitably in a volatile market environment like the one we are in now. A rising market is often perceived to reflect optimism and investor faith. Enthusiasm and rejuvenated interest in the markets rides high. Many investors have multiplied their money manifolds.

Now, is it time to quit? Will the bubble burst? The investor has many questions and very few options before him. Strategies for a rising market are crucial and much depends on the risk appetite of the investor.

Don’t sell into the panic. Don’t buy the greed. This is of course obvious to say, but harder to execute when it is actually happening. When you have extreme market conditions, the individual stock movements can be big and rapid, and they are not necessarily, and in fact, usually not at all, related to fundamentals or economics.

Will the upswing continue? This is a difficult question and much depends on the factors that contribute to the bull run. Many perceive the market to be over-heated and fear to set foot in it. Others view corrections as an opportunity to make quick money. But this calls for quick decision-making and considerable tolerance to risk.

The unfailing strategy is to buy great companies with long track records of rising stock prices and dividends. Pick them low and hold on. Over a long haul, such companies with good fundamentals will not fail you. It is not unusual to find some stocks faring poorly in a bull market and some doing exceptionally well in a bear market. A bull run implies a booming economy, low unemployment rate, high production of goods and low inflation.

Read

Don’t use any meaningful amount of margin. Additionally, the data shows that with the use of margin, your long term expectancy does go to zero.

Investors must make judicious decisions when it comes to investing their hard earned money in the markets. Some stocks may become highly overpriced. An overpriced stock in a heated market is sure to burst when the bull run ends. Some investors prefer to sell all their shares and make profits. Another strategy is to sell some of the shares and buy back the stock when the price falls back to reasonably low levels.

The value of equities tends to rise fast in a bull run. Predictably, the equity investments in your portfolio will become disproportionately higher. Depending upon your age, objectives and financial obligations, you would have arrived at an asset allocation plan.

Those who feel the country’s economy is poised for a consistent growth and global factors more biased towards Indian markets, may predict the Sensex moving upwards. Such investors who can take short-term volatility on their stride can remain invested for some more time. They can hold on and see more profits.

Turn off “the noise.” CNBC, blogs, web sites, the Wall Street Journal Newspaper….whatever. The news is filled with superlatives right now, “biggest ever,” “worst ever,” “most ever,” “going out of business,” “recession,” “depression,” this talk just adds to the fear and panic and has the chance to steer you off course from your plan.

For others who have multiplied their money, even though the investment period may be very short, simply book profits and be happy with it. Some investors feel political uncertainties, oil prices, global economies and events can overturn the joy ride. Simply book profits and reenter once the market cools down.

Booking partial profits is the best thing to do for the investor who is in puzzled about his next move. The market ups and downs follow cyclic patterns. For now, it is the time of rising index and increasing volatility. Yes, increased investor enthusiasm and optimism keeps the index hovering around the big numbers. But the possibility for a bubble burst looms large and investors must keep it in mind.