InvestorQ : Are there conditions I can actually sit on cash while trading?
Aditi Sharma made post

Are there conditions I can actually sit on cash while trading?

Answer
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Anu Biswas answered.
2 years ago


It is said that there are three decisions in the market viz. when to buy, when to sell and when to do nothing. Doing nothing is also equivalent to sitting on cash. There are times of market uncertainty when the markets may be too volatile to trade with a stop loss and profit target. These are brief periods when it makes sense to sit on cash. But when you sit on cash there is a cost to it in terms of lower returns and also in terms of insufficient churning of capital. The whole idea of trading is about rolling your money to make the best of opportunities both ways in the market. As long as it is possible to take a view, one can always adjust the stop loss and profit targets and trade accordingly. It is only it times of extreme volatility and uncertainty that it makes sense to sit out of the market altogether. As a trader, sitting on cash is not a strategy at all. It is an approach that should be used by the trader only in the rarest of circumstances.