How to use Market Gauge?
Market gauge can give macro or micro view of an index or a security. We have to look at both to make an informed decision. A typical process would look like this:
Entering the market
Look at NEPSE Market Gauge.This gives us a picture of overall market.
Look at particular Sector's Market Gauge and comparison chart.This gives us information if a particular sector is moving with the whole market or against it. For eg. Let's pick "Tradings" sector for an example. NEPSE might be increasing BUT trading sector might be decreasing. Along with Market Gauge, we also have comparison chart for NEPSE and a sector, you can see this in the tradings sector page. This chart helps us know the degree of correlation between the overall market and a particular sector. We have explained in more detail on the method to use the comparison chart here.
Look at particular Security's Market Gauge and comparison chart.After we have picked a particular sector to invest in, we need to pick a security from a bunch of them. Similar to step 2, we have chart that shows performance of each security vs the sector it belongs to. We combine that information with Market Gauge of that security and pick the best performing asset or the one which has the highest potential.
Exiting the market
When exiting the market we perform the steps in "Entering the market" in reverse. The reason we do it in reverse is because a particular security might underperform or go against the market even if the sector or the whole market (NEPSE) is performing well. Similarly, even if overall market index (NEPSE) is going in one direction, a particular sector might go in a different direction. Thus we follow the following order:
- Look at particular security's Market Gauge and comparison chart.
- Look at particular sector's Market Gauge and comparison chart.
- Look at NEPSE Market Gauge.
Can we follow exit strategy to enter?
Yes. We can use the exit strategy to enter the market too. However, the problem is when we are going bottom up, we'd have to look at hundreds of security's charts and gauge which is tedious and time consuming. Going from top down is quick and is still a reliable method. Typically people don't hold hundreds of security assets, we assume that on average a person would own somewhere between 10-15 security assets, which makes it a viable strategy.