| 1.Can
you
give me some points which I
should remember in order to make profit in Indian Stock
Markets in India? |
|
Ans- Remember that trading or investing is
not a game just for playing. Trading should be planned properly
before venturing. Remember the below mentioned rules (though you
will find these things written everywhere).
-Never venture into stock markets without a
proper plan. You should know the money you are ready to invest, the
risk you are going to take and know your expectations. Have a clear
plan, as one wrong move in stock markets can take all your money
away from you.
-Keep a notebook with you to note the amount
you are losing and winning in trades. Never overtrade and trade only
in limited quantity. Learn from the losses you make in trading. One
important thing you learn from trading is patience. Failures are the
stepping stones to success.
-A hard
reality of stock trading is that good trader of today had been a
loser in stock trading at one time.
-If
you do not overtrade, you will never lose your temper. Losing
patience and overtrading go hand in hand
-Do not fall in love with any particular stock. It
has been seen that if a person has lost in Reliance stock, then that
person wants to earn from that stock only.
-Treat
stock market trading as a business and not a “do or die” act.
-Don't
put all your eggs in one basket means i.e., do not put all your money
in stock markets at one go. Put a part of it only.
-Do not give big losses and take small
profits. It should be big profits and small losses.
-Try and judge the effect of news. It is
generally seen that good news bring the market down and bad news
take the markets up. Treat market
to be supreme and do not think that market will go as per your
wishes. You will have to go as per the wishes of the market.
-Do not try to buy stocks at the bottom and
sell at the top, be prepared to buy stocks at the top, and sell at
low. There is no end to a top and no end to a
fall also. We believe that if one is trading with the trend,
then only one will earn.
- It has been seen that investors go to the
Nse (National Stock Exchange) or Bse (Bombay Stock Exchange) terminal or their brokers office with a view that they
want to sell a particular stock but the
investors sitting there convince him to rather buy that
stock. Investor should not be influenced by judgment or opinion of
others. Investors must believe in themselves and do their own home work,
after all it is their money at stake.
-
Know your limits in trading i.e. you should know the maximum loss you
are ready to give. A
trader or an investor who does not care for the stop loss will
ultimately lose all his money and then a stage will come where he
will only blame his luck. So a clear cut stoploss is a must before
buying or shorting.
-Do
not enter the stock market just because you want to play something.
Remember it is not a toy. Wait for the clear opportunity to enter.
-Beginners
must not do intraday trading.
-Trading
is like a war, always have a set of rules which you are going to
follow before venturing into trading. Do not sing praises of your
winning trades.
-Do not try to earn all profits in starting. Have realistic
expectation and know it clearly that Rome is not built in a day.
-Remember
that even the best of traders are
still learning, so one can never be a master of trading. It
is an ever learning process. After 15 years of education does a person
become a graduate and you expect to be a master of trading in just
an year. Impossible.
-Risk
Management is another important thing in trading.Test the waters
before swimming in deep. Do not worry if good opportunity has gone
by today, it will again come up tomorrow but if you think today is
the end of world, it might really be.
-
Cut your loss before booking your profits. If in one stock you are
having loss and in the other profit, then cut the one which is
giving you loss before booking your profits.
-Never
borrow money for trading. Trade with money which
you can spare to lose.
-Do
not let success go to your head. It has been seen that the best of
traders who earned for years lost everything once they became over
confident.
|
| 2.Could
you tell me how to apply stoploss as I am unable to understand how
to implement it .Whenever I put a stoploss it always gets
triggered and then the stock starts moving in the direction in
which I had thought. |
| Ans-
Handling
of stop loss is one of the trickiest thing in stock market trading.
Generally one should not give a loss more than one is expecting the
profit from a particular trade. If you expect a return of 20 % from
a particular trade, then your loss should not be more than 20%. If
you are playing intraday and are expecting a profit of 3% then your
loss should not be more than 3%. Controlling loss means half
the battle won. It is seen that even if majority of your
trades have given you a loss and only minority of trades have given
a profit, still you can be a winner provided your stop losses were
small and your profits were big. (Give a link of our intraday trades
details of monthly chart).
-When
talking of stop loss, I am reminded of a person who did not have any
graphs, fundamentals or computer but he traded very well. He just
chose some stocks at random of his liking and would buy those stocks
and would quit the stock if it closed below his buying price for
three days (it need not necessarily have to close for consecutive
three days but on any three days). At the end of the month on last
working day he would again treat that closing price as the cut off
price and next month he would again wait for the stock to close
three days below the price of last month's last day. This way he
would keep his profits running and kept cutting the losses. (This is
a small way he would take care of his portfolio. When he was short,
he would play just the reverse. In the sideways market he gave
losses but when market became trendy he earned good profits. ) So
keep running your profits and cut your losses fast.
|
| 3.My
broker is telling me to trade in futures at very less margin. In
your view which is better, buying delivery or trading in Futures. |
|
Ans-
Delivery trading and Margin trading are two different trades and
both have their advantages and disadvantages.
-These
days it has become common for Brokers to ask their clients to trade
in futures and the clients are also happy trading with margin as it
gives them a kick as well as chances of trading big positions and a
hope of making good money.
|
| 4.What security do I
have while trading in stock market as I am told that what I
need is just a computer terminal to trade at home. Can I enjoy my
life and secure my family with trading? |
| Ans-
On
one side you are looking for security for family and on other side
you are entering a field which is unpredictable. So do not expect
stability in stock trading. Be clear to invest only that money you
can afford to lose in stock market. If you do not have spare money,
then forget trading.
|
| 5.Someone
told me that Option trading is good and if done carefully with the
trend it can reward me well. What is your view ? |
|
Ans-
Option
trading is for a mature trader. But remember losses are unlimited
so it is best for experienced traders only.
-The worst thing about options
is that investors keep holding the options even when the
market trend changes and with the result they expire worthless. Most of
the people have a notion that most of options expire worthless which
might be wrong.
|
| 6.Can
you guide me whether I should do intraday trading i.e. go to the
trading terminal daily and trade or just invest in deliveries and
forget them ?
|
|
Ans-
First
let us differentiate between both
Intraday
Trading can be also called Naked Speculation as you are going to
trade for every rupee or two or say 1-3 percent maximum during the
market trading day. For Intraday Traders, a stock is like a
toy. Just as a child in happiness
holds the toy and when sad throws it away. It is just like
guessing a child’s mood which
can be guessed to some extent. Similarly Intraday Trader keeps
guessing the mood of the stock every now and then and sees whether
it is happy or sad. If sad they short and if happy they buy. You
need to sit with an eagle’s eye only guessing the mood of the
stock. Tension is too high. But at the end of day if you are able to
guess it, you tend to make good profit. Long term Investor is
interested in health of economy along with wealth of economy. Long
term Investor tries to find the intrinsic worth of the company’s
stock and tries to buy if he finds the stock is available less than
its actual value. Intraday Traders might buy the stock for just 10
minutes but Long term Investor
might buy for 10 months or 10 years.
-Now
if you as an Intraday trader can judge the mood of the stock on
small intervals then only you can think of Intraday trading. You
must be good at technical analysis as technical tools help in short
term movements of stock. Fundamentals play less role in predicting
the movements of a stock for small intervals. But if one sees
fundamentals then Long
term Investor is better.
|
| 7.Is
there any objective analysis which I can do to determine whether my
trading is going fine or not, and also when I should increase or
reduce?
|
| Ans-
Well,
a nice and tricky question. If you can plot a graph of each day’s
return on an "xy" axis graph and can join the dots to see if the chart
is making a higher bottom higher top. If making a higher bottom
higher top, it means you are making profits then you can increase
your quantity but if the
graph making a lower bottom lower top formation, then stop your
trading (It is not an easy exercise).
|
| 8.Can
any outside force manipulate the market? |
| Ans- Stock market moves either on the basis of
fundamentals which take care of long term valuations where as the
technical governs the short term movements of it. The short term
movements are influenced more by short term sentiments which can be
quite volatile at times. The short term movements seems to a lay
investors sometimes as if they are manipulated but actually it is a
play of fear and believe in the short term and hence it becomes very
volatile. |
9.What
is a difference between a stock market and a new issue market? Does
any opening in new issue market effects stock market?
|
| Ans- A stock market is a place where people buy and
sell shares where as a new issue market is just a part of the stock
market, in the sense that any company which has to raise its money
from public has to come out with a public issue only after which
that stock can be listed on the stock exchange. Sometimes an issue
of an existing listed company comes which increases the floating
stock of that company as a result that when more stock is available,
there is a pressure on the stock and at times till the new stock is
not absorbed by the market and the stock remains depressed. |
| 10.Can
I trade without hard money? |
| Ans- One can trade in the stock market without hard
money provided one has stocks with him to give as margin for any
exposure he wishes to take. |
| 11.Stock
exchange sometimes gives negative returns as well. Should I still
enter? |
| Ans- In stock markets at times it has been seen that
some big brokers/manipulators manipulate the stocks and create an
artificial demand and supply with the result that they take the
investors for a ride and the poor investor is struck up with junk
stocks but this situation is present every where in all trades. So,
if you are a new investor then it is much better that you go through
the mutual fund route where your money is in the hands of
professionally qualified people and in the mean time you may read
some good books and trade on paper to improve your skills and then
enter the stock market on your own. |
| 12.What
is Paper Trading? |
| Ans- Paper Trading means you should not trade in the
stock market with the real money but what ever you want to buy or
sell do it on a paper i.e., write in your diary that you have bought
and sold assuming that you have done real trading. You should see
that you are able to make profits on paper and only then you should
move on real trading. |
| 13.I
am a very small investor, so what would be my position in the stock
market? |
| Ans- If you are a small investor, you should take a
mutual fund route or first do some paper trading and generate
profits on paper and then think of directly entering the stock
market. If possible make sure that at no point of time you loose
more than 10% of your capital. |
| 14.What
is Defensive Trading? |
| Ans- Defensive
Trading means not taking a course of action that might cause you
harm or loss of money. It is a technique that involves knowing what
to do and what not to do in order to get into
accident.
For example Investor who takes delivery of good stocks and holds
them for long. Defensive investor should not indulge in intraday
trading or speculative trading. |
| 15.Returns
from stock market are tax free or taxable? |
| Ans- Returns from stock market fall under Short Term
Capital Gain /Long Term Capital Gain and the rules for them
vary from country to country. |
| 16.What
is Bear and Bull market? |
| Ans- Bear Market is a
term which refers to the declining market where stocks are falling.
Bull Market refers to a rising
market where stocks are slowly going up. The general investor makes
money in the bull market and looses in the bear market. There
is a market which is side ways where stocks are more or less
stagnant and move in a side way zone. |
| 17.What
is Blue Chip stock? |
| Ans- A blue chip stock is a stock of a good, reputed
and branded company. The company in question enjoys an excellent credibility
in the minds of general public and has a good dividend record and
history of rewarding its shareholders well. |
| 18.What is the
difference between the Intrinsic Value and Market Price? |
| Ans- Theoretically speaking
the stock price of a given company reflects everything which is
basically the Intrinsic Value of the company. But practically
the analyst tries to find the difference between the market price of
the company and its actual value. When he finds a company's
intrinsic value more than the market price he tries to buy stock and
vice-versa. |
| 19.When should I
sell my existing shares? |
| Ans- A good strategy to sell a share would be getting
out when you have lost 25% of your notional
gain.
For example You have brought share worth Rs.1000 and it goes upto
Rs.10000. If it starts falling and comes down to Rs.7500, You should
sell it. |
| 20.How much target
should an investor keep in mind while investing? |
| Ans- Investors should not have any such targets. we
can only invest in the realm of possibility and the possibilities
change with circumstance and time. So, we must re-evaluate our
strategies periodically. For example
An investment of Rs.1000 in Infosys has given a return of more than
100 times. So, if an investor had invested with a longer time frame
of 5 years then he did get the returns. But we should be very clear
of our target as well as the time we are ready to hold. |
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