123ArticleOnline Logo
Welcome to 123ArticleOnline.com!
ALL >> Stock-Market-Future-Market-Commodity-Market >> View Article

Which Mistake Do Investors Avoid During The Covid-19 Pandemic?

Profile Picture
By Author: MarketSmith India
Total Articles: 35
Comment this article
Facebook ShareTwitter ShareGoogle+ ShareTwitter Share

The COVID-19 pandemic has brought about a lot of uncertainty in the stock market. Stock market predictions have become harder and the market is in a downtrend. Investing in a bear market is a challenge in itself. With the added pressure from the pandemic, many stocks are taking steep dives. In such times, regular stock market tips wont work anymore. Here are some of the common investing mistakes to avoid during the COVID-19 pandemic :

1. Buying before a base completes

During the recent market correction, many stocks pulled down to their respective 200-DMA and only some found support. To some traders, long-term support was a buying opportunity. The key to making money in the market is waiting until a base completes before buying. In most cases, stocks that come down to their 200-day lines do so amid signs of institutional selling. Wait the stock to prove itself more, and look for signs of institutional buying as the stock builds the right side of the base. Then you have a legitimate base.

2. Buying every possible breakout

Bullish stock charts tempt investors all the time during down markets. Some growth ...
... names will hang in there with compelling charts. A breakout may work for a while, but it will likely be short-lived. While stocks that hold up the best during down markets can go on to be the next leaders, they still should not be bought during a downtrend.

3. Keep holding a stock or even averaging down

A stock trades at Rs 100 a share. Your cost basis is Rs 100. The stock heads lower, and you buy an equal amount of shares at Rs 80, lowering your cost basis to Rs 90. Then you add further at Rs 75 after it breaches its 50-and 200-DMA. The problem is that you’re averaging down in a former leader that’s under tremendous institutional selling pressure. You will be doing some serious damage to your portfolio. It rarely makes sense to buy a stock that has the potential to spiral lower before finally hitting a bottom.

4. Buying low P/E stocks

Price-to-earnings ratio is a common valuation tool. But buying/selling decision based on P/E is not a prudent move. Expensive stocks can become cheap, but cheap stocks become cheaper in a down market. Trying to catch a stock “on sale” is fraught with risk. In many cases, stocks with low P/E ratios are suffering from weak fundamentals, where shrinking market share results in lower earnings growth. That’s not something you want to see in a stock. Remember, some of the best merchandise in the stock market often sells at a pricey valuation due to strong fundamentals and bullish growth prospects.

5. Stop paying attention

It is easy to lose interest when stocks are selling off, but market downtrends let high-quality names take a breather and eventually build new bases. When a new uptrend is confirmed, breakouts deliver the biggest gains. During a market pullback, try hard to make a list of stocks that held up the best. A few will show limited signs of distribution (heavy-volume selling) on the way down and accumulation (high-volume buying) on the way up. Focus on the most resilient names with the least amount of technical damage. They will generally be your best prospects.

Visit www.marketsmithindia.com for more stock tips and share market tips.

More About the Author

Investment advisory product based on William O’Neil’s CAN SLIM method with model portfolio, pattern recognition, idea lists powered by institutional quality data

Total Views: 93Word Count: 545See All articles From Author

Add Comment

Stock Market/Future Market/Commodity Market Articles

1. Cryptocurrency Investing: It’s Not As Risky As You Think
Author: Miraclechaser

2. Is Day Trading Profitable? The Difficulties Of Earning Profits With Day Trading
Author: madhav joshi

3. Why People Prefer The Best Online Trading Platform?
Author: tradingpathsala

4. What Is Auction Market Theory?
Author: vtrender

5. How To Start Forex Trading With Forex Broker
Author: jessica smith

6. What Does A $2 Billion Unicorn Do?
Author: FinReads

7. How To Recover Money Lost In Stock Market
Author: David Smith

8. Why Indian Business People Are Interested In Stock Trading?
Author: tradingpathsala

9. How To Trade Cryptocurrency Effectively
Author: Jessica

10. 3 Awesome Things You Can Learn From Share Trading
Author: Anamika Patel

11. Top Reasons Why Companies Decide To Go Public
Author: Rashmi Dey

12. Fractional Shares: What Are They And How Do They Work?
Author: Rashmi Dey

13. Details About Auction Market Theory
Author: vtrender

14. What Is The Best Online Stock Trading Site For A Beginner
Author: Rashmi Dey

15. Tips For Buying Usdt For First Timers
Author: Coin Tiger

Login To Account
Login Email:
Password:
Forgot Password?
New User?
Sign Up Newsletter
Email Address: