Know your exits!

These days every trader is struggling with the problem of plenty. Almost 85-90% of the stocks are going up. Check out any small cap stock below 100 bucks and you will find parabolic price rises in almost all of these. It seems this rally in penny stocks shall continue for some more time. It is the “domestic speculator money” that drives the prices of these stocks in collusion with the promoters.Therefore, such stocks might be least affected by the FII actions.

I have myself traded stocks that have gone 2-3 times in a matter of weeks and still continue to rise sharply. At the same time, most of us can easily make out that this is reaching bubble like proportions and such high price levels cannot be sustained. Therefore, it is important for every trader to avoid over leveraging and know his/her exits.

If you don’t know what are you are getting into, you might end up being a helpless spectator when this uptrend reverses.

Ask those who have seen the 1992 or the 1999-2000 bubble in the Indian markets.