8 Similarities between Cricket and Trading

8 Similarities between Cricket and Trading

Eight Similarities between Cricket and Trading

Cricket is a passion in India and the audience treats cricketers as Gods. For those who are in the stock market whether by trading or investing, it is nothing less than a passion. It would be interesting to find similarities between the two passions of almost every Indian, The Cricket and Trading.

1. Toss

– In Cricket Toss is very crucial. The team decides it strategy beforehand what they will do after they win or lose the toss.

-Similarly in Trading, When you approach the trading in morning. You need to have a Plan B in place too. You do not know whether the market will act as per your understanding or not. Plan B will keep you in the game and help you win too in case something goes wrong.

2. Formats

There are three versions of international cricket:

-Test cricket (longer version)
-One-day cricket
-T-20 (Shorter version)

The stock market also has 3 versions:

· Long-term investment
· Medium-term investment
· Day trading Continue reading “8 Similarities between Cricket and Trading”

How to Trade Support and Resistance in Stocks

How to Trade Support and Resistance on a stock chart

Trading happens over exchange with various participants punching the orders round the clock. This cumulative activity creates some price zones or levels. Those levels signify something and are used as a reference by many traders. Those levels are called Support and Resistance levels.

The Invisible magic of price action?

You must have felt that a stock sometimes rebounds from a certain price zone or level many times and you wonder what makes it do so? Most of the times stock reverse from a particular price and you again fail to know why this is happening. This is not a magic. These price levels are called as the support and resistance levels.

How are these support and resistance created?

When trading action takes place in a new script. The psychology of the traders helps create those price zones where they feel the stock is either overbought or expensive(Resistance levels), Price at which stock is cheap and oversold( Support level). As the trading involves a large number of traders the probability of what they think is right level is going to be high. Simply, because of the Wisdom of the crowd principle.

After some time of trading activity, that stock develops a price pattern based on the psychology described above. Now, the new traders or investors base their future prediction of price movement based on the historical price pattern they just saw. They Just see left and find out where the price has normally taken reversal. They utilize Technical Analysis to gauge the price action and predict targets. Continue reading “How to Trade Support and Resistance in Stocks”

Stock Picking Strategies

Stock picking

is the most exciting yet challenging tasks of earning money through the investment in stocks. There are a lot of misconceptions about investing in stocks.

One of the largest misconceptions of all is that one size fits for all. That isn’t true at all. Other very famous misunderstanding about stock picking is that people think that once they have opted for one strategy after a lot of careful evaluation, they don’t need to change that at all. This is also

Other very famous misunderstanding about stock picking is that people think that once they have opted for one strategy after a lot of careful evaluation, they don’t need to change that at all. This is also the false concept. There is nothing like a perfect stock picking strategy. The most common explanation for not having a perfect stock picking strategy is the change in the economic circumstances of countries which lead to the change in economic conditions of the industries operating in those countries. Such problems totally tilt the balance of attractiveness from one stock to other.

Allocating assets or (capital) amongst different stocks is, therefore, a tricky affair and will always remain a tricky affair forever because of so many uncertainties involved. A lot of theories have been presented about stock picking which may be proven right or wrong.

Then What to do?

Continue reading “Stock Picking Strategies”

Advice for traders

Top 8 Practical Advice for traders

Advice for traders

I have tried to compile some Advice for Traders. The post is lengthy but is important to communicate the subject in detail with the traders.

BE CONFIDENT IN YOUR TRADING

Taking up a position in a stock when you are less than 100% confident is just a disaster waiting to happen. Being confident doesn’t mean being right. You can’t always be right. However, based on the facts you have available to you regarding the stock and/or company, you can be 100% confident that you have done your homework based on what information you have available to you. Anything less than this will tend to induce uncertainty into your trading. This will often times undermine your confidence and ultimately your ability to stand firm when others are selling.

By the same token, you must also be confident enough to exit a position when you realize you have made a mistake in a trade. No one is suggesting you hold a stock that is in trouble. Rather, you base your trading on facts, not fluctuations in the markets. Once you have made your decision to buy or sell, if you are right, ultimately the markets will come to you with a profit. Others may sell because they see someone next to them sell, but that is not, and never has been, the road to success on Dalal Street. Don’t follow the crowd – follow your brain, follow the facts. Be confident in your trading and thinking and you will generally (if you are smart and use all the facts at hand) come out on top a large percentage of the time.

HAVE A COMPLETE PLAN BEFORE ENTERING ANY TRADE

This is so critical to successful trading, yet so rarely do I see people do it. Before you ever place a trade, you must – absolutely must – have a plan of action for how you are going to handle the trade. What price you are going to pay, what price you are going to sell at, how many shares you will buy, what price you will cut your losses at, etc. This is critical. You must have a strategy to handle not only the upside but also the downside. The good and the bad about the trade. Where will you sell the stock should it move up and what price will you exit the trade should it move south. How long will you hold the stock if it doesn’t move at all? These are all questions that should be asked and answered before you purchase any stock for a trade. This goes hand in hand with being 100% confident. You must have a plan of attack.

Think of each stock you buy like a battle to be fought on the battlefield. You are the 4 star General of the trade. Do you think a General would direct his troops onto the battlefield without a full plan of attack? Without thinking out every possible scenario or what could go right or wrong? This is exactly how you must approach each trade you make.

Just as important: once you develop a plan, adhere to it. If the stock hits your sell price, sell and move on; if the stock hits your stop, get out. Don’t change your strategies because of your emotions – change only because of additional facts which you did not have when you formulated your plan, or if you clearly identify an error. Never change your plan to try to justify your actions or justify the movement of the stock.

Remember the old saying: the market is always right. To be successful, you need to understand the only mistakes that are made in trading are your own. As soon as you identify a mistake, take action to correct it, not justify it. Continue reading “Advice for traders”

Advice for Day trading in India

Few Tips for day trading in India

Before you start day trading in India, Find out is day trading meant for you?

DON’T CHASE STOCKS

Stocks go up because people (usually large numbers of people) are buying the stock. As a trader, this is usually not a good time to also be buying. As such, be very cautious about buying stocks that are rapidly moving away from you. The true money in stocks is made by buying stocks prior to a sudden move, not during a sudden move. The one possible exception to this may be if there is some very positive news that has caught the markets off guard and/or if the news is so outstanding that there is a high probability that the stock may benefit for multiple days. Sudden moves tend to reverse and if you get into the habit of chasing stocks that are moving up, more times than not you’ll end up paying overly high prices and/or getting caught in a downward move shortly thereafter.

Again, generally, people that buy late are buying on pure emotion (greed and fear). Those are the two worst reasons to buy anything – not just stocks. True, you may miss out on the stock, however, in most all cases, it’s better to wait and find another stock, than to pay too much. Patience in the stock market is very important; usually, you’ll do better by avoiding the temptation to “jump” when that impulse is largely a result of a move in the share price alone.

DON’T RUSH INTO ANY TRADE

This is along the lines of the above comment; however, it is worth elaborating on. Often time’s stocks will give you many chances to get into them at current (or sometimes even lower) levels. Generally, there are few cases that require sudden action if you are really careful in how you trade. Sometimes the best trades are ones in which you wait patiently for the stock to come to you. If you feel the need to rush to order a stock, that’s sometimes (not always, but sometimes) a warning sign that you are acting not on a well laid out plan for the trade, but an impulse to “get into a trade” regardless of whether or not the stock is trading at what is really an ideal price.

Keep in mind as well: it’s often not a bad idea to take up positions in a trade little by little. If you plan to own 1000 shares, consider buying 300 shares and then seeing how the stock trades. Often times this will allow you to better judge the market and take advantage of Intraday weakness. If you do happen to miss purchasing the additional shares, there is almost always another trade you can put the cash to work in.

TRYING FOR TOPS AND BOTTOMS

People tend to have a desire to buy at the bottom and sell at the top. Not just near the top, but the “exact” top. It’s simply human nature to want to be the best at something and day trading in India is no different. Most people that take up day trading in India want to be the best they can be. I would much rather give away 10% at the top and 10% at the bottom. You will drive yourself crazy if you punish yourself for not selling at the high or buying at the low, as it’s almost impossible for most people to do on any sort of consistent basis. Far more often than not, you’ll simply end up missing the trade. Even missing a top or bottom by 20% is nothing to worry about. As many a successful trader has said, “You can worry about the tops and bottoms and I’ll worry about the remaining 60%”. In fact, it’s often much safer to wait until a stock clearly signals a move either up or down before taking up your position.

DON’T GET GREEDY

Two of the biggest emotions a trader has to overcome is fear and greed. Many traders fall victim to greed once they see a trade become profitable – simply by not having a firm exit point in mind. It’s generally best to decide on what levels you wish to sell prior to entering into a trade to avoid this. If you feel yourself trying to justify higher levels of the stock and/or ignoring the current profit “as though it were nothing” you probably need to stop and consider not only the value of your profit but the current risk to it by holding longer.

Often times traders who are successful tend to lose respect for the actual value of a dollar. Regardless of how much money you have, you must not lose sight of what each trade produces and the value of the returns in relation to the capital used to produce those gains. An example might be someone with several million dollars. If this person puts $10,000 in a position and saw it produce a gain of $2,000 they might not realize it’s time to take profits. While $2,000 is nothing when compared to several million, a 20% gain should always sound alarm (i.e. Sell) bells in a trader’s head. A common method to help combat this is to look at your trades strictly from a percentage standpoint of view, rather than a dollar standpoint. This allows you to always calculate gains and losses with consideration to the amount of capital at risk for any given trade.

In the movies, “greed is good”, but in day trading in India, it’s generally an emotion that does little more than getting in the way of clear and level headed thinking.

Continue reading “Advice for Day trading in India”

Who are Stock traders?

Who are Stock Traders and what they do?

 

The most common method of involvement in the stock market, the concept grasped by most people, is a simple stock purchase. Stock traders have been around for hundreds of years, buying and selling stock on the open market. Investors seek a company they like, one which has potential to make a profit and buy a piece of the company known as a share of stock.
Stock traders usually like the tangible aspects of purchasing stock. They feel more emotional involvement with the company and can often form some sort of unspoken bond with the company. They typically follow the stock’s progress each day and feel better when the stock’s price rise and worse when the price drops. Their goal in this process is to buy the stock when it is undervalued and sell it when the price exceeds the commonly perceived value. This is known as a buy-and-hold strategy and has been used for many years to produce profits.
Stock traders have two basic strategies when it comes to making money in the stock market. They are:

  • Buying the stock. A trader will purchase the stock at a low point and sell it at a higher price, thus creating a profit for their account. This is known as buying low and selling high. Someone who does this on a consistent basis will make a lot of money.
  • Shorting the stock. Not all stocks increase in value, so when a stock’s price is going down, a trader can make money by shorting the stock. This means selling stock that you don’t even own to open a trade, then replacing it later with the stock you purchase at a lower price. When you short a stock and the stock loses money, you make a profit.

One of the most common stock patterns is known as “channeling.” It is a simple, potentially profitable pattern that a stock follows between two price points, known as support and resistance levels. When a stock trades in the same repeatable manner, stock traders can buy the low and sell when the price nears its peak. Traders who find stocks that trade in a repeatable pattern have discovered a potential key to the door of profitability. A big selling point for the stock is the permanence of the transaction. An individual who purchases stock in a company owns that stock until they sell it or give it away, or until the company no longer exists. This is unlike an option purchase, which has a limited shelf life.

Some investors have owned the same shares of stock for decades. Stocks also often come with dividends, quarterly or yearly payments made to individuals who have invested in the company. Those who own options do not receive dividends. A student can learn how to be an effective trader by following prescribed guidelines which are designed for safety and enhanced profitability.

A newbie can learn how to be an effective trader by following prescribed guidelines which are designed for safety and enhanced profitability. If you are interested in joining our guidance program. Please shoot us a message. Continue reading “Who are Stock traders?”