• Kavita Chamaria

Stock Market Correction

Updated: Aug 27, 2021

IMPORTANT NOTE ABOUT MINDSET HERE:


What you are experiencing is a market correction - not a crash

It is a normal phenomenon and part of the market process. It is nothing to get worked up or tensed about. Often retail investors lose their nerves when faced with corrections. The sudden onset of red from the usual green fields in their portfolio puts their nerves in churners and their stomach turn. The sweat keeps pouring and all senses go out of the window. In such a situation a new trader/investor can feel lost and afraid.


Therefore I write this article to bring some objectivity to such participants and hope to calm their fried nerves.


SOME TECHNICAL ASPECT


Please understand that market moves in 'waves'. It goes up and goes down, it depends on 'YOU' what degree of wave you want to bother yourself with. Since we are primarily swing traders and investors, we are interested in two waves- the Primary wave (which itself lasts multiple years within which corrections lasts 5-6 months or even a year with downfall of over 10% in index) and one degree smaller- the intermediate wave (correction lasting 3-4 weeks to few months correction of 5-10%, anything more is extreme). There numbers are different for stocks and are indicative at best.


Elliot waves, primary, intermediate and minor.
A demonstration of the degree of waves in price movements.

WHAT SHOULD YOU DO?


It appears the correction has only touched the midcap and small cap stocks as of now. Look at your portfolio and sell stocks you might have bought for the short term.

It is okay to sit on cash for sometime.

Live to fight another day- Main objective right now should be cash preservation.

Stay objective not emotional.


WHAT SHOULD YOU NOT DO?


Do not let negative sentiments or thoughts enter your head. Do not feel upset/ angry/ sorry/ regretful or anything negative- that is where wrong decisions begin and learning stops. This is an opportunity to learn and buy stocks on sale later on.


WHATS NEXT?


I have a list of stocks which I am stalking for signs of stability or support. As soon as the market stabalises we will share these stock ideas with members. Until then, you can stay calm by taking this time to expand your knowledge about the market- pick up a book or course.


Also, there are liquid funds where you can park your cash for the next few weeks until correction is over. They give ~7% return p.a and can compensate you for the loss of interest income if you decide to leave your money in the trading account. Also there is a lock-in period of only 2 to 7 days, after which there wont be any penalty for selling the fund. Settlement takes 2 days (standard).


THE CONCLUSION


Stay calm, dont panic. For everything else, feel free to reach out to EXP-Invest!


Regards,

Kavita


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