Good Entry+Bad Exit = Bad Trade!

Good entry+bad exit

Chicken  Says Good Entry+Bad Exit = Bad Trade!

It is good to respect risk in trading. However, if you are overly cautious, it is equally detrimental to your trading as you will see from my today’s FAZ trading.

My paper trade: I usually paper trade in USA markets. The reason is there to do that. I may tell the reason some other day in the separate post.

Today, I went long on FAZ the first time. The entry was almost perfect. But I left so much money on the table. Why? I chickened out. Here is the chart. What makes trading hard is that we will have to make almost everything aligned for a successful trade.

For example:

1: a good entry.
2: a good exit
3: luck
4: willpower to stick to your plan (emotion control)

It was a textbook set-up (a wedge) again. There are just so many patterns to trade.

Here is the 5 min chart off Good entry+bad exit 🙂 (open in new window to see larger image)

5 min chart

My entry was good, but not perfect. If I had waited a bit more, I would not have bought it on the head of that candle (upper shadow). Since this guy moves big and fast, we really do not have to fuss over a small spread like that. So the entry was very solid.

 

My exit was horrible. It was beyond the words. After it spiked by 2 percent, I started my trailing stop which took out of my stop. It was a thief who stole my money and ran faster than anyone. See how big and fast it moved after shaking me out. The reason I started my trailing stop was that I chickened out. It was simple as that.

So, what is the learning? Trade will full conviction and do not chicken out. Once a trade is on, Exit should be based on pre-defined set of trading rules. Even the pro-trader like me can make such mistakes. Welcome to the trading world. You miss – Market hits.

 

How to become Better Investor

How to become better Investor faster

better investor

It’s only natural that everyone should strive to become better at their profession. Professional athletes want to get to the major leagues. Musicians want to play in Bollywood. Professional actors want to star in a blockbuster movie. Likewise, it is the goal of anyone learning about the stock market is to become a better investor.

First Know the difference between Trading and Investing.

Learning to invest correctly is the key. That’s why education plays a critical educational role for anyone who aspires to make money in the stock market. A student who enrolls in the program will be equipped with the information needed to help them make intelligent stock market decisions. Continue reading “How to become Better Investor”

Three rules on Diversification

Diversification

Dalal Street’s watchword has always been diversification, but what does it mean and why do they say it?

The standard Dalal Street definition is flexible because each broker or financial planner will vary the portfolio based on your age and income. They say that the younger you are the more risk you should take and the older you are the less risk. They design a group of individual stocks, mutual funds, and bonds to fit your personal profile and inclination toward risk.

For a young guy under age, 30 they will put you into more high flyer type stocks, hardly any mutual funds, and no bonds. As you go over 40 they start adding bonds to your mix and nearing retirement you will find a huge portion of bonds. Their goal is to have your money fully invested at all times and hope for a return of about 12% annually.

Why a little here, a little there? Because they have no idea how to make money so they hope that one segment of this hodgepodge will make enough to money to offset losses in the other area. They never look at each group separately for its performance and they NEVER tell you to sell anything at a loss so you can move into an area that is earning the better profit. Dalal Street brokerage houses really have no idea how to make money. Their job is to make the commission. These portfolios that have been designed for all the little investors were made that way so they would not be sued by dissatisfied clients. Continue reading “Three rules on Diversification”

Why should i invest?

why should i investWhy should I invest?

 

Prerequisite of the question, Where should I invest is! Why should I invest? Remember the days when you just got your first job – your father probably told you to open a recurring deposit account in a bank and make all your tax saving investments in provident funds. After all, who would give you assured returns with a capital guarantee? Those were words of wisdom, then, but not anymore. Times have changed and how!

Inflation is eating away your returns

Today, inflation is eating into your returns even as you sit here reading this. If your monthly expenses today are Rs 15,000 and annual inflation is at 5%, 20 years later, when you will probably retire, expect your monthly expenses to rise to at least Rs 39,000. Bank deposits will give you a return of 6%, but post inflation and tax; you will be left with a rate of return which runs into the negative. This means that while on paper your returns look a healthy 6%, your capital is actually eroding in the real world.

You are going to live longer

Continue reading “Why should i invest?”

Strategies to Make Money in the Stock Market

Strategies to Make Money in the Stock Market

strategies to make money
The stock market is one of the most powerful places to invest. Over the long term, it can really pay off. But there is not a one size fits all method of making money from it. Everyone is different and there are 5 different methods that traders will use.

Buying and Holding

The first strategy is the same one that most mutual funds and the media preach. This consists of simply buying a stock and holding onto it for the long term. Because stocks tend to go up over the long term this can be the easiest and most passive way to make money.

Trading the Trend

One other strategy is called trend trading. It involves buying stocks that are going up and selling stocks that are not going up. While it might sound like it was invented by a 5-year-old it really can work if you get the hang of it. Sometimes the simplest answer is the best.

Swing Trading

Swing trading is the process of using technical indicators to give traders buy and sell signals in the short term. The idea here is to constantly monitor your positions, cutting your losses short and letting your winners ride in order to maximize gains over the long term. Any trade with a profit target and a stop loss and are a 1 day long is basically a swing trade of some sort.

Option Trading

Options give buyers the right to buy or sell a stock at a specific price on or before a specific date. Basically, it gives traders a way to greatly increase their returns on stock trades. This works best for traders who are already profitable trend trading or swing trading because it can be a fast way to lose money if you have no idea what you are doing.

Day Trading Stocks

Day trading is exactly what the name suggests. You buy and sell stock within one day in order to make money on the small moves that occur throughout the day. Day traders are not always profitable, but over the long term, it can be a great way to make money.

Every strategy has its ups and downs. But it is up to the individual trader to determine which one fits them the best. Learning the basics of each and experimenting with them can help you determine how you want to approach the market. Hope, you like the strategies to make money mentioned in the post.

How to treat a losing trade?

You have to cut your losing trade asap

losing trade
Do you think your family and friends (assume they are not traders like you) will understand you when you tell them that the first thing a trader learns is how to lose money. Aka cuts, losing trade? Would they confiscate your trading stake if you tell them something like Sweetie, I am so happy today because I just lost 500 dollars by selling Stock XYZ 10 minutes ago. They perhaps would! They would also think you are nuts and a saboteur sent by some evil spirit to destroy the family financial order. The next thing they think is that you need to see a shrink.

Yeah, I know it is painful to watch a stop loss order kick in, take out your position and show a red number in your account. You can twitch, squirm, whine or bang your head against the wall or anything but remove your stop loss orders. And this rule is THE most important since one big losing trade will totally knock you out cold and you will perhaps NEVER recover from that one single big loss. It is more important than riding winners, which is second most important in trading/investing. Riding winners is much harder than cutting losers. We will talk about it in the future. Here are 2 real world examples that might help imprint this rule in your head permanently.

Continue reading “How to treat a losing trade?”

What Does it Take to be a Stock Trader?

What needs to be done to be a Stock Trader?

Stock trader
Being a stock trader takes a total mental commitment to the task. It becomes a complete way of life. You cannot be a part timer. You cannot work at a regular job and trade stocks successfully.

When you decide to make your living this way you must be willing to work 365 days a year, 7 days each week, 24 hours every day with no time off. I know.

How do I know? As a blogger for 7 years and a part-time stock trader, I can personally tell you there is no time off. Never. Almost every waking moment is given to thinking about your current positions. Where should I sell? Should I move my stop up a little more? There are 3 more trades I’d like to make, but I need to save some extra cash in case I need it for a margin call. It is hard to pass up a trade that looks as good as XYZ, but I have to maintain my trading discipline. And so much more.

These are just a few of the thoughts that run through your head. You are constantly being torn by the natural enemies of fear and greed, yet you must hold your equilibrium to try to make dispassionate decisions. The first law of trading is to protect your capital so that any single trade will not have you going home broke.

If you are working a regular job or you own a business, you cannot be a stock trader. One or the other or both of these pursuits will suffer. When I owned my advisory company I did not make one single trade for 2 years because I understood the commitment necessary to be a successful trader.
Why am I telling you all this? Because I don’t want you to lose your money in the market as so many people do and I especially don’t want you to think you can be a day trader. You can still make money in the market and beat 90% of the Dalal Street experts.

Here’s how.

First, you must learn that you CAN time the market even though your broker and all those “experts” will tell you that you can’t. There are several good timing advisory services that you may subscribe to or you can develop your own method.

Second, don’t believe all that horse wash about research. That is Dalal Street smoke and mirrors. Don’t try to pick individual stocks. Stick to no-load mutual funds with a discount broker. Buy only the best performing funds during the past 6 and 12 months. When they quit being in the top 1%sell them and find new ones that are going up.

There isn’t enough space here to give you the details. I want you to realize that you can safely make plenty of money in the market without devoting 365/7/24.

How to be positive

HOW TO REMAIN STRESS-FREE AND BE POSITIVE

be positive
Everyone falls into the trap of negativity sometime in their lives. Few points listed below can help you turn back to be positive.

THINK POSITIVE
TALK POSITIVE
FEEL POSITIVE
ACT POSITIVE

Tips…

 

  1. Concentrate on what you need and not on what, you don’t wish.
  2. Concentrate your brain on the great things you as of now have in your life. If you focus on them, these good things will gain in your life.
  3. Do not fill your psyche with considerations of need. Think and trust that you as of now have plenitude, achievement, love, and joy.
  4. Figure out how to feel, think and even act, as though you are as of now carrying on with the life you picture. On the off chance that you can feel, think and act reliably along these lines, you will wind up noticeably more joyful and will pull in new open doors into your life.
  5. Think about what you need, make a photo of it in your psyche and make it clear and exact. Hold it there and concentrate on it emphatically, until the point that it turns into a reality in your life.
  6. Always let yourself know “I can”, “I am capable”, “I can do it”, “I am a constructive individual”.
  7. Often, amid the day, rehash positive insistences about what you need. Do as such with confidence, sentiments, expectation, and core interest.
  8. Look for the positive qualities in each circumstance. It is continually something great or at rent something helpful to learn, even in the troublesome or repulsive circumstances.
  9. Follow your positive considerations with positive activities.
  10. Always concentrate your brain on the full 50% of the glass, and not on the vacant half.
  11. Do your best to dismiss negative contemplations and supplant them with positive musings.
  12. Be mindful of the organization. Associate with constructive individuals.
  13. Read about other individuals’ prosperity. Read things that move you and make you can rest easy.
  14. Concentrate your psyche on the best way to be certain and you will find more approaches to be so.

beginners guide for investing in stocks

This is an absolute beginner guide for investing in stocks

investing in stocks
In order to start investing in stocks.We need to buy and sell stocks of a company. You require two things:

1) Demat Account:

In the early days, we had to store physical copies of our share certificates with us.
Now stocks and other securities like debentures, bonds, government securities, units, etc. can be stored electronically in a Demat (de-materialized) account.
In India, we have two depositories, central depository service, Limited (CDSL) and national securities depository limited (NSDL).
An investor cannot directly open an account with them but has to use the services of depository participants (DP), to open a Demat account.
List of documents required for opening a Demat account is given below.

Proof of Identity: PAN card, driver’s license, passport, voter card etc.

Proof of Address: Ration card, passport, drivers license, voter card, landline telephone bill not more than 2 months old etc.

Passport size photo
Pan card copy

2) Trading Account:

Continue reading “beginners guide for investing in stocks”