Posted at 4:50 PM , on April 28, 2015
An important step towards becoming a smart investor is your ability to question almost everything. When you get a hot tip in the market, question its logic. When your broker gives a buy or sell call, learn to question it. When you read the latest news on a company, ask how it can impact you. Also, when you expect prices to go up and they don’t, question yourself, if you are missing out on a message from the market.
More you question, more you get
We have all heard of the proverbial herd mentality in markets. Most people tend to follow others when they find them making profits on trades. It does not matter that you do not understand anything about the stock. It also does not matter that the stock is priced at a ridiculously high P/E ratio. It also does not matter that you never made money by jumping on the bandwagon. Welcome to herds! Continue reading
Posted at 4:32 PM , on April 27, 2015
The market was ripe for strangles; it probably still is…
First let me enlighten what I am referring to by a strangle. In options trading, when you are not sure of the market direction, you can buy a call option as well as a put option. The result will be that you make money, no matter the markets go up or down. So, a Strangle is that simple really?
Not exactly that simple, though…
A strangle involves buying a higher call option and a lower put option at the same time. If the stock goes up you make money on the call; if the stock goes down you make money on the put. Continue reading
Posted at 2:50 PM , on April 15, 2015
A successful self trader – Rule # 9
Before getting into any trading or investment position, it makes sense to check out what the men in the know are doing. Try to check out what the directors and promoters of the company are buying. Also check if global institutions and mutual funds are trying to go aggressive on either side. Track the bulk deal and block deal patterns and the ownership changes to pick up useful signals before investing.
What are informed investors doing?
Informed traders give you the best clues about any stock. Back in 2009, before Satyam owned up to its massive accounting fraud, a group of very large institutions had been silently offloading their long positions in the stock. Not only some of the men in the know exited the stock, but many also made a fortune by short selling the stock just before its disastrous fall from grace. Continue reading
Posted at 2:37 PM , on March 9, 2015
A successful self trader – Rule # 4
We tend to define capital in plain monetary terms. Some may extend this definition to include political capital, social capital and intellectual capital. But for a trader or an investor, what matters most is the Mental Capital. It is the capacity to think clearly, irrespective of the noise in the market. It is a mix of intellectual and psychological capital. The best traders are never short on mental capital! Continue reading