There are 4 camps of trader-psychologies in a relief rally:-
1) One is of the opinion that the market correction is over and hence they will start taking long positions,
2) Second camp (those who were trapped in the market with long positions) is of the opinion that they have got a chance to get out of the falling market in this relief rally with lesser losses,
3) Third camp (brothers of Second camp) is of the opinion that although their losses will get reduced due to this relief rally but they will not get out with the hope of recovering all their losses,
4) Forth camp is of the opinion that they have got a chance to again short the market at high points of this technical dead cat bounceback, anticipating the continuation of the falling trend.......
Finally there will be a punters' camp which will be watching every other camp and try to win by trapping everyone.
Punters don't react to the market but react to the reactions of others in the market.....
none of the 4 camps discussed above are wrong, because no one is sure about the future.....
so whatever u do in the dead cat bounce or relief rally in falling trend, do it with full awareness. Do it with full safety precautions.
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