Posted at 7:22 PM , on August 28, 2015
A successful self trader – Rule # 22
Averaging is the cardinal sin of investing
Let me begin with the caveat that, averaging your position is not theoretically wrong. Just that it does not work in practice. You bought a great stock, the stock corrected; you averaged and lost money. You averaged your short position and again ended up with losses. Why does averaging not work in reality? Are there situations where averaging makes sense?
Posted at 7:37 PM , on August 14, 2015
Have we not heard these arguments? This stock has been with me for last 12 years. I bought it at Rs.10, I can afford to wait. I am a long term investor, so I’m not bothered by blips. Absolute fallacy! You just can’t fall in love with your stock. Don’t ever look at your portfolio emotionally. Some stories are not working. Some will give you a better entry level. Some have opportunity costs.
WHY NOT TO FALL IN LOVE WITH STOCKS
You will find a lot of investors advising you not to fall in love with stocks. Believe me, as much as it is easy to say, it is extremely difficult to practice. We all build an emotional attachment to the stocks that we hold; and that is why this rule becomes so important. More often than not, falling in love with a stock forces you to live under a fallacy. Let me explain. Continue reading
Posted at 1:41 PM , on August 7, 2015
Forget about hot tips and peer pressure. Buy the stock of a company, whose products you or your family members understand. This familiarity could stem from your jobs, purchases or usage. These ideas are available all around if you care to observe. Don’t ever hold on to a stock which does not pass the litmus test of your conviction! It is actually quite simple. Continue reading
Posted at 3:39 PM , on June 23, 2015
If you thought that there are bulls and bears in the market, you are grossly mistaken. The market has always been about opportunities and always will be about opportunities. A bull will not keep buying even when they see a shorting opportunity and the same holds true for the bears. Remember the old adage in the market, “Bulls and bears may make money but pigs always get slaughtered”
Bullish and bearish are just states of mind…
Are you bearish or bullish on markets? Is this not the question you have heard umpteen times? Quite a tough question! What do you do in this kind of a market where the Nifty has moves up 80% from 5200 levels in August 2013 to 9100 levels in Mar 2015? And then, the market volatility intimidates and threatens to give it all up. Continue reading
Posted at 4:10 PM , on June 12, 2015
What does a trading rule book mean?
It is a set of rules and discipline points you will not transgress at any cost. You will not deplete more than 20% of your initial capital. As a 50-year old person you will not have more than 40% of your money in equities. You will make it a point to book profits if returns on a stock cross 30% in a quarter. And you will be out of equities at a market p/e of over 25. So on. Continue reading