Monday, 11 January 2016
Wednesday, 17 December 2014
Tuesday, 16 December 2014
Common mistakes made by novice and amateur traders in the stock markets.
How many commonly known trading mistakes have you committed in your trading.....
- Traded blindly without any homework or trading plans (poor discipline).
- Traded impulsively or at a no-trade zone (poor or no trade plan).
- Traded without Stop Loss or with too big Stop Loss (poor Risk Management).
- Traded way too many trades in a day resulting net losses - over trading. (poor Risk and Money Management).
- Traded against the trend and then booked losses (poor Plan and Risk Management).
- Traded with the trend but booked small profit and too early.
- Traded with good plan (mm, rm, plan, discipline) but with no confidence in the plan resulting less profit to cover other big losses.
- Traded booking small profits and big losses.
- Traded at Market Price in less volume scrips resulting big losses.
- Traded on speculations, rumour or news and getting trapped in market makers game resulting in big losses.
- Traded with fear/greed and without knowing risk/reward ratio.
- Traded on others tips resulting huge losses.
- Traded after reacting to watching CNBC or US/Europe NEWS and resulted in losses.
- Trading not knowing and realising which time frame suits your personality.
- Averaging and overleveraging losing position and selling in panic.
- Converted intraday or swing trades into short term and long term without reasons.
- Revenge trading. Unable to bear losses and then traded more and more to recover the loss.......nearly wiping out your account.
- Holding on to a losing position and trying to justify the trade which has gone against you.Using mental stop
- Trying to exit a trade on a larger timeframe than the one entered in to.
- Hoping and praying that a losing trade will turn a winner – praying to god! Reluctance to accept reality and changing your opinion of the market.
- Not analysing loosing trades and not trying to LEARN lessons from it..... repeating same mistakes over and over.
-CP
Invest-mints/fb
Learn,earn and have fun!
P.S. Do jot down any questions or comments below and share as needed.
Fundamental Analysis v/s Technical analysis.
People often ask me how they can become a better investor/trader or even a professional one.
Most
people think you can make money ONLY when the market is going up.
However, most don't know how to make money when the market goes down.That art/science is called as short selling(Pl see the video to understand the concept better).
They also ask me the difference between Fundamental and Technical analysis.
The answer also lies in understanding the difference between fundamental and technical investing.
Fundamental Analysis.
A
fundamental investor seeks value and growth by looking at the
financials of the company.For the fundamental stock investor, the most
important consideration for selecting a good stock for investment is the
future earnings potential of a company.
A fundamental
investor carefully reviews the financial statements of any company
before investing in it. He or she also takes into consideration the
outlook for the economy as a whole, as well as the specific industry in
which the company is involved, and the direction of interest rates.
Technical Analysis.
A technical analyst invests looking at the emotions of the market.The most important consideration for selecting a good stock is based on the supply and demand for the company’s stock.For that, they study the price of the company.
The technical analyst studies the
patterns of the price of the company’s stock.Patterns of the price
denotes the emotions in the market.Will the supply of the shares be more
than Demand or Vice versa?
Large institutions buy/sell stock depending on careful and detailed fundamental analysis of the stock.When they buy/sell, a demand and supply is created for that stock.Technical analysis detects that demand /supply and helps in decision making.
So,Simply put,
Fundamental analysis will tell you the 'business' of the company and how well that 'business' is conducted.For that you need to read and understand balance sheet/annual report.
Technical analysis
will tell you if people in the markets are buying / selling and the
emotions of the market.Your decisions then will be based on what others
are doing in the market at that point.
Both styles need formal education and learning.
Do mention your comments or questions below and share as needed.Thanks.
- Chetan Potdar
Invest-mints/fb
Most
people think you can make money ONLY when the market is going up.However, most don't know how to make money when the market goes down.That art/science is called as short selling(Pl see the video to understand the concept better).
They also ask me the difference between Fundamental and Technical analysis.
The answer also lies in understanding the difference between fundamental and technical investing.
Fundamental Analysis.
A
fundamental investor seeks value and growth by looking at the
financials of the company.For the fundamental stock investor, the most
important consideration for selecting a good stock for investment is the
future earnings potential of a company.A fundamental
investor carefully reviews the financial statements of any company
before investing in it. He or she also takes into consideration the
outlook for the economy as a whole, as well as the specific industry in
which the company is involved, and the direction of interest rates.Technical Analysis.
A technical analyst invests looking at the emotions of the market.The most important consideration for selecting a good stock is based on the supply and demand for the company’s stock.For that, they study the price of the company.
Large institutions buy/sell stock depending on careful and detailed fundamental analysis of the stock.When they buy/sell, a demand and supply is created for that stock.Technical analysis detects that demand /supply and helps in decision making.
So,Simply put,
Fundamental analysis will tell you the 'business' of the company and how well that 'business' is conducted.For that you need to read and understand balance sheet/annual report.
Technical analysis
will tell you if people in the markets are buying / selling and the
emotions of the market.Your decisions then will be based on what others
are doing in the market at that point.Both styles need formal education and learning.
Do mention your comments or questions below and share as needed.Thanks.
- Chetan Potdar
Invest-mints/fb
Traders, Investors and Gamblers.....
................difference between Trader, Investor and a Gambler.
Different people - different opinions. If I ask you wether you are a “trader” or an “investor”- you may say, I am “long term” investor without even understanding what it means.
An investor is usually a “buy and hold” types. He lives on hope. He buys a security and hopes that the price will go up. He does his “fundamental analysis” (whatever little that he does)and falls in love with his/her investment.
Even when the price of security is going down, he doesn’t
believe in selling it because he is convinced about his analysis. He
doesn’t believe in timing the market but a strong believer in
“valuation” and “growth” of companies whose securities he owns.
If his analysis turns out to be true, he makes money in the “long term”. Otherwise, he ends up losing badly.
A trader is usually an “opportunistic ” person who believes in inefficient market theories. He believes that markets are driven by human emotions like greed/fear and due to demand / Supply.
No stock is fairly priced at any point of time. He tries to take advantage of these mispricing and profit's from the excessive “greed” and “fear”.
A
trader always uses “probability”. He never uses words like “should” or
“will”. He know's that no one can predict the markets and he never even
tries. Like the markets “will” do this or the markets “should” do that.
It is always, something “may” happen or “may not”. He is always
optimistic that a trade might work out but turns into a “realist” when
it doesn’t.
He changes his opinion as many times as the market changes its direction. That’s how he always manages his risk and believes in cutting his losses. Traders take ‘directional” bets and also use some “leverage” to enhance their returns.
Traders also use “market timing” techniques to get an edge in the market. A trader can choose to trade a “single market” or “multiple markets” like stocks, commodities, currencies, etc. Trading multiple markets helps him reduces his risk.
Usually when we hear the word “trader” we start thinking of “short term traders or intra day traders” who buy and sell 50 times in a day.
Contrary, Swing trading last for 5-7 days, Position trading last for a month and long term trading often last for 3- 12 months. So difference between a “trader’ and an “investor” is not the time frame but rather the difference in their thinking, approach and attitudes.
Next are category of people who calls themselves “investors” or “traders” but are actually gamblers.
They say that they are in the markets to “make money” but actually are in the market “for excitement”. They treat markets like a “casino”. They DO NOT have any EDGE in the markets. They look for new ideas everyday, they buy and sell lots of securities everyday.
They DO NOT understand risk! They get on a “high” when they are winning and then they start to overtrade. This results in heavy losses and they get into “depression” when they lose money. In order to “recover” their money, they double their bets and lose even more! In the end, they lose their money and confidence.
So, simply put.....
If you are only interested in Buying / Selling and your profits - you are a Trader.
If you are interested in understanding the "Business" of the company AND invest in the business of the company by doing "Fundamental Analysis", you are a Investor.
However, if you are not interested in either and the hard work the above requires but simply wants to become rich very quickly - you are simply a Gambler.
- CP.
Invest-mints/fb
Learn,earn and have fun!
P.S. Do jot down any questions or comments below and share as needed.
Different people - different opinions. If I ask you wether you are a “trader” or an “investor”- you may say, I am “long term” investor without even understanding what it means.
Here’s my take on this subject.
An investor is usually a “buy and hold” types. He lives on hope. He buys a security and hopes that the price will go up. He does his “fundamental analysis” (whatever little that he does)and falls in love with his/her investment.
If his analysis turns out to be true, he makes money in the “long term”. Otherwise, he ends up losing badly.
A trader is usually an “opportunistic ” person who believes in inefficient market theories. He believes that markets are driven by human emotions like greed/fear and due to demand / Supply.
No stock is fairly priced at any point of time. He tries to take advantage of these mispricing and profit's from the excessive “greed” and “fear”.
A
trader always uses “probability”. He never uses words like “should” or
“will”. He know's that no one can predict the markets and he never even
tries. Like the markets “will” do this or the markets “should” do that.
It is always, something “may” happen or “may not”. He is always
optimistic that a trade might work out but turns into a “realist” when
it doesn’t.He changes his opinion as many times as the market changes its direction. That’s how he always manages his risk and believes in cutting his losses. Traders take ‘directional” bets and also use some “leverage” to enhance their returns.
Traders also use “market timing” techniques to get an edge in the market. A trader can choose to trade a “single market” or “multiple markets” like stocks, commodities, currencies, etc. Trading multiple markets helps him reduces his risk.
Usually when we hear the word “trader” we start thinking of “short term traders or intra day traders” who buy and sell 50 times in a day.
Contrary, Swing trading last for 5-7 days, Position trading last for a month and long term trading often last for 3- 12 months. So difference between a “trader’ and an “investor” is not the time frame but rather the difference in their thinking, approach and attitudes.
Next are category of people who calls themselves “investors” or “traders” but are actually gamblers.
They say that they are in the markets to “make money” but actually are in the market “for excitement”. They treat markets like a “casino”. They DO NOT have any EDGE in the markets. They look for new ideas everyday, they buy and sell lots of securities everyday.
They DO NOT understand risk! They get on a “high” when they are winning and then they start to overtrade. This results in heavy losses and they get into “depression” when they lose money. In order to “recover” their money, they double their bets and lose even more! In the end, they lose their money and confidence.
So, simply put.....
If you are only interested in Buying / Selling and your profits - you are a Trader.
If you are interested in understanding the "Business" of the company AND invest in the business of the company by doing "Fundamental Analysis", you are a Investor.
However, if you are not interested in either and the hard work the above requires but simply wants to become rich very quickly - you are simply a Gambler.
- CP.
Invest-mints/fb
Learn,earn and have fun!
P.S. Do jot down any questions or comments below and share as needed.
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