Team-BHP - Do you play the stock market

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Originally Posted by swiftnfurious (Post 3403181)

Just curious - Will we see a downward movement as we near the elections? There could be a sense of insecurity with the new government formation right?

I might get cash and want to invest into stocks - after 6 years or so. :) And would it make sense to split the cash and invest into different stocks - say 50K each for each share?

One tip (well sort of) - I invested in JK Bank - read about their business and decide for yourself; I believe this is recession/election/stability proof investment; the dividend yield in 4.5% (dividends are tax-free), dividend growth rate is pretty good and the bank has a legal monopoly in its largest business area.

bunch of others I invested in are risk investments, but the risk is not election risk (policy risk; currency risk; high debt/equity ratio - which I believe will be less of a problem once interest rates fall). Some of them will make me losses there is no doubt but I am hoping most will not.

Now I'm thinking of buying tax-free bonds (yield 8.5% tax free; PPF does better but is isn't liquid) - if the interest rates go down as they are widely expected to, then the bond prices will go up; if they don't I'll just hold the bonds to maturity (another 9yrs). The bonds are backed by quasi govt. entities (NHAI, etc.) so risk of default is practically none and the liquidity is pretty good because they are traded on NSE/BSE.

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Originally Posted by S_U_N (Post 3403386)

Just curious why the foreign investors are putting in money now, in these uncertain times, when nothing else seems to be going fine.
Any thoughts on that?

If you are an investor you don't really have that many opportunities. Growth in US is severely constrained (India grows more in recession that they do in high-growth years), China is not only slowing due to internal problems, it is an opaque place that makes people nervous.

Other emerging markets are good, but not as large and/or deep enough; and many of them (Russia, Venezuela, Mexico; even China) are so corrupt they will make our politicians look like saints - some of them actually have some shady practices institutionalized (e.g. Chinese companies are forbidden by law to disclose some key information the US GAAP and even Indian accounting laws require public companies to disclose to the investors)

In our stock market the biggest problem is corporate governance. If SEBI and Companies Law Board improve compliance then a lot more money will flow in.

Despite the election risk, the "political risk" India poses is nothing in comparison to other options.

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Originally Posted by JMaruru (Post 3403191)

Please do NOT invest unless you see a dip. Market is overheated and everyone is heading in one direction. Warren Buffet's words 'Be Fearful When Others Are Greedy and Greedy When Others Are Fearful' suit these times. Having said that there are few value buys even now, and one can get into these only when there is a dip.

agree: People are wise to postpone buying a home as prices are very high, but the same analogy is not used while buying stocks. Stock price going up should not be the reason to buy a stock. The typical mindset we have for buying other asset classes (buy low with adequate margin of safety and sell high) is missing in the case of stocks. This is mainly due to the fact that there is a price quote for stocks daily, combined with all the noise from the so called macro and micro experts.

Ok. My 2 cents.

I have been trading the markets for 7 years now. 6 years for a bank and for the past one year, I've been trading markets for a living, from my home office. These are my general observations.

-A sure shot way to loose your savings, is by investing based on other people's opinions, views, tips. They may be well meaning but its not a sustainable way to make trades. Lets say you doubled your money on a tip! great. what next? is that your last trade ever? Will the gentlemen be around for as long as you are, to keep giving you tips? If the tips are so good, why doesn't he charge for it? Do you have his monthly track record? so on and so forth

-It takes a long time to be successful at this game. My guesstimate is at least 5 years. Some of the smartest people are in this industry, so why should one will be allowed to take away their money? It is like gaining proficiency in any other profession/game of skill. Have you ever walked up to a brain surgeon and asked him if he can teach you how to become and expert surgeon in 6 weeks or 1 year. 2 years!?

- making money in trading is a 3 part process. 1) is the trading system. i.e. the rules you use to buy/sell/when to buy/when to sell etc. By the way if you don't have concrete rules on when to buy and sell, you are just trading on tips. the importance of rules will become clear during a draw-down period. 2) Money management i.e how much are you willing to risk on each trade. you can't risk everything on one trade. 3) The most important part of being a great trader is psychology. I can go on about this, but it suffices to say that if you are afraid to loose money, have ego etc then you need to resolve these first before trading. Some of the most difficult times for traders are drawdowns (i..e loosing periods). They get depressed, loose confidence, start overeating/smoking etc. It is precisely these times that the average trader gives up his system and goes looking for new methods/advice.

Solution: Test your system on historical prices to see what is the max drawdown it has previously encountered. Then be prepared to endure double that during actual trading

-- Finally, you have to invest your time and interest to get better at this. there is no other way out. MFs just track the market and make money when it goes up, only to give it all back when it goes down. And they charge you fees for tracking the market.

I believe, markets are still the last bastion of a good capitalistic system where-in even today, one can hope to come-in with a few thousand rupees and with time and effort make crores. It is difficult, but possible. I would start by reading the experiences of great traders and how they did it?
-Market wizard series-- By jack Shwager is an excellent 4 series books, that i have read and re-read a few times.

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Originally Posted by Shortsell (Post 3405607)

Thanks for your nicely written post.
I plan to go through the series you've mentioned.
Just curious to know, as you said you now-a-days trade for a living. So, what exactly do you trade into? is it equity, F&O, Commodity or a mixed bag?

I have tried my hand at markets on and off, made some lost some. But, I am not able to set rules (as you said) for my trades.

Would solicit and appreciate your guidance / help wherever you can.

Thanks,

Abhijeet

Quote:

Originally Posted by Shortsell (Post 3405607)

Very well written. As some one who trades myself I could not agree more.

Psychology is the number one enemy or friend. As a trader its 10% technique 20% common sense or money management and a whopping 70% Psychology. The markets are a continuous give and take operation. They dont rest, are unsympathetic and unrelenting. Yet more turnover is seen here around 30 trillion dollars a day in all world markets, than in any other business or market.

Work on Psychology first and start with Equity, FnO is not good for beginners. And remember margin is your enemy.
Also open investopedia and have a good read on their articles on trading and technical analysis.

Remember one very important thing, do not hope of being an overnight rich man. Hope of learning the right mind set and actions. There is a reason only 2% of all traders succeed.

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Originally Posted by abhijeetsng (Post 3405711)

Just curious to know, as you said you now-a-days trade for a living. So, what exactly do you trade into? is it equity, F&O, Commodity or a mixed bag?

I have tried my hand at markets on and off, made some lost some. But, I am not able to set rules (as you said) for my trades.

Would solicit and appreciate your guidance / help wherever you can.

Thanks,

Abhijeet

Hi Abhijeet

I currently trade only cash equities. I use F&O mainly on downside or If i want to explore a low risk set-up. I used to trade commodities and FX till Aug-13. But the huge volatility and late hours (MCX is open upto 11:30 PM and 12:00 AM some months) was too much to handle. I like 9:15 to 3:30 better :D
I don't day trade. My minimum holding period varies from 1 day to about 3-4 months. I'm a 90% system trader (trading a system that I developed) and 10% discretionary.

I was break-even to slightly loosing trader for 5 years. Only in the last 2 years have i been able to navigate better. I believe the best way is to learn what other successful people did and learn from there. In that regard the market wizard series (& many more) are surely there to guide us.

Let's do chat up if you have any queries.

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Originally Posted by S_U_N (Post 3405744)

Just curious, would this book give tips? And would this not contradict your earlier statement? Will they give in their trade secrets?

Excellent question :D

Let me elaborate on what these books are about.

These are interviews conducted with some of the greatest traders of their generation beginning in the 1970s till 2010s. It talks about the genesis of their interest in the markets. Why they chose to do this? what were their initial experiences (some are very painful). How did they finally arrive at the rules they currently use to trade. And most importantly what are their beliefs about how the market functions. There are successful day traders interviews as well as someone like ray dalio for whom a 10 year period might be a normal holding time. What the traders discuss there are some of the basic tenets, or i would say the very fundamentals required to be a great trader. things like

- Discipline. Why it is important. if one thinks it isn't, one should read about what happened to a few in the book
- stop loss/respecting risk: if you don't respect risk, overtrade, eventually they are going to carry you out
- finding a system that suits your personality
- the importance of embracing losses.
- psychology. It doesn't surprise me that a lot of good traders tend to have Buddhist bent of mind. Not getting political here stupid: but what I mean is, you almost have to let go to do well in trading. letting go of your instincts to let losses run and take quick profits etc.

In summary a big takeaway from the books is that there are no trade secrets. There are a million ways to make money and they are all difficult to find. But it does tell you that given enough time and interest, it is possible.

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Originally Posted by Shortsell (Post 3405752)

Excellent question :D

...
In summary a big takeaway from the books is that there are no trade secrets. There are a million ways to make money and they are all difficult to find. But it does tell you that given enough time and interest, it is possible.

OK. I get the picture now.
But for someone like me, I am not interested in trading.
I am trying to follow my maternal grandfather.
He invested in L&T, Reliance and a few others several decades ago and then simply did nothing about that investment. He watches news and reads the news paper - now he is 85+.
His advise to all his grand-children: stay way from the stock market.
This, despite the fact that he is a multi-millionaire thanks to the stock market. He does not spend any time/ effort at buying/ selling shares or reading books related to trading. I doubt he has ever read any books related to trading.

So, reading these books does not help you find the next Reliance or L&T, right?
Sorry if you feel I am going on a tangent, but as I said, I am trying to follow my grand father here and see if I can duplicate his almost zero effort success.

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Originally Posted by Shortsell (Post 3405724)

Thank you for such prompt response.

Would definately connect with you.

Cheers..