Here are some questions and queries that one often cross the minds of traders and investors.
Do note these are just guidelines. There is no hard and fast rule. Every situation, trade, and person is unique and everyone comes with their own mindset and limitations.
If a stock is bullish but the index is bearish, should one take a position in the stock ?
If the stop loss is clear and within one’s risk parameters, then the short answer is a conditional or qualified yes, one should take a position on the stock. To explain more in detail – specifically, if the setup is based on a preceding clear 5 wave impulse, then the trade could be taken on the appropriate fibonacci retrace level and a stop loss should be maintained. For other setups besides the clear 5 wave impulse, then the answer becomes more difficult, as patterns can morph into different patterns, so we ourselves would not take bullish trades based on non-5 wave impulse patterns if the larger index is bearish.
If a stock is bullish, but the index is unclear, should one take a position in the stock ?
Then yes for 5 wave impulses and other patterns, with an appropriate stop loss.
If the stock is bullish, and the index is bullish – then certainly enter the trade. And possibly, instead of waiting for a 61%~78% fibonacci retrace for a 5 wave impulse, it may be better to get in (or scale in) from the 38% ~ 50% fibonacci retrace.