Tag: Share Market

The Internal Analysis of Akruti Crash

Posted on by Jagoinvestor

Numbers and Graphs Speak.

I thought of starting my articles from some Analysis on Akruti City Crash .

In this article we will learn , how can we before hand get some idea about events like this and have clear picture of whats going on .

See my previous posts on Warning about Akruti City : Post 1 , Post 2 , Post 3

– Lets see 2 yrs old chart first


If you see the chart you will see the steep rise in prices in last month , you can also see that its was not a normal price movement , when compared with previous movements .

For a closer view , lets see 3 months charts


If you see the chart you will see ,that prices moved up crazy and then crashed in two stages .

First Downmove : This happened because of the news that SEBI is excluding it from F&O segment . (If you dont know F&O , dont worry) .

Second Downmove : Second downmove came near 25-26 Mar , when it was F&O expiry . What happened ? Lots of positions were built up in F&O and after a sharp upmove , everyone rushed to get out as fast as they can , at any price . So selling pressure came in and prices tanked 45% .

See High Volumes in the month of March (3rd half of the graph) . Suddenly there was so much participation . Most of the buying which was happening on this stock was not for long term basis (delivery basis) .

What is Delivery Basis : delivery buying means , people actually get the stock in there demat accounts , it simply means its delivered physically to there account , But when you buy in the morning and sell the stock in evening , then its not delivery basis . you just make profit or loss same day .

Lets understand an important concept called “Deliverable Percentage” , which simply means , percentage of shares out traded shares which are actually delivered .

So if its higher , it means that most of the buying and selling is happening for delivery basis and people want to keep it with them for some time , When its too low , it means lot of trading (speculation) is going on to catch the pie in the price movement and hence its not sustainable most probably .

Example :

So , for some XYZ company , if volume is 100 shares and and deliverable % is 50% , it means that 50 shares where delivered and 50 were speculated , which is normal ..

But if its 20% or 10% , then things are fishy , there is no value buying happening and shares are just exchanging hands from one to another where each one wants to sell it at higher price , also there are people who want to buy the shares at higher price , because they know that there will be some idiot who will buy from them at much higher price to continue the madness .

And when it ends then what happens , There are no buyers !! , every one has sold at lower prices and then suddenly the selling madness comes in and the bunch of people who get out first (at higher prices) make the most money . And in this pressure everyone is ready to sell at a lower price than someone else .

You can easily imagine that day price movement , see 26th Mar downmove of 45% crash .

So how do we find out that this is happening , Is there some place we can get data from , and the answers is nseindia.com website , it has all the information on needs to know .

Source : https://nseindia.com/content/equities/eq_scriphistdata.htm

Go here , choose 3rd radio button (Security-wise Price volume & Deliverable position data) , and choose share name and dates for which you want data . You will get all the data .

You must see “Price” , “Total Traded Quantity” , and “% Dly Qt to Traded Qty”, you will get good idea at looking it .

But I will not leave you with boring looking numbers . I have taken the AKRUTI data for 3 months (Feb 1 – Mar 27) and then smoothed it with 5 period moving average for each of them and then plotted it on graph , so that you can get the picture pretty well .

The points do not represent the actual value , it only shows you the relationship of each other . see the below graph .

If you enlarge the chart , you will see this relationship

Price : Prices picked up and start moving up . (Orange line)

Traded Quantity : You will see how it started moving up wildly and picked up a pick high speed in March (3rd half portion) (RED line)

Deliverable % : you will notice that it started going down and down , which indicated that even though Traded quantity is going up and up , the delivery is not happening , which means lots of speculation , which is an indication of a building of Bubble which can burst anytime .

So whats the learning , If you see Price movement in one direction and see Rising Traded Quantity and falling Deliverable % , you should suspect the move . It is normal to some extent , but an extra ordinary move is truly suspectable .

And whats happening now to Akruti ?

from last some sessions there is no buyer , only sellers are there and from the peak price of 2100 levels , its now down to 380 (at the time of writing) . I had already warned of this long back , dont take it as any success in prediction of stocks 🙂 .

If you see the current Volumes of Akruti , it was 2137 on NSE , where as average volume was at 4.5 lacs !! , Which means that this down move is not supported by volumes , (watch volumes in 2nd chart , you will see nothing) .

Its just the fear of handful traders who have no idea why they are selling . So we can again expect some wild moves on upside in future when prices starts picking up .

Conclusion : When you see prices moving in one direction without any great fundamental change or significant news , You can use the numbers and see there relationship and you will see something which most of the people have no clue about .

Disclosure : I had learned this technique from Mr. Sunil Saranjame blog , timamo.blogspot.com , an excellent market reviewer as per my thinking . So credit goes to him .

Please join jagoinvestor google groups , see the upper right area at the start of the page , I will be sending instant notifications about the post and we can also share options trades there or some other stock trades when there is good opportunity . Also who all have not left there comments/suggestions , please do so on the suggestions/comments post

I also Introduced my self in the last post , see My Introduction

3 M’s of Successful Trading

Posted on by Jagoinvestor

In the last Article , we had seen an Introduction to trading . In this section we will see what are the 3 M’s of Successful Trading as per Dr Alexander Elder .

I will give brief introduction of each of it , Its your responsibility to take it further and learn it in detail . take this as just a starting point .

3M of successful trading

The 3 M’s are :

  • MIND
  • METHOD
  • MONEY

MIND

This part of Trading is most important . It deals with Psychology . When one enters Trading business , he/she has some beliefs about the environment, about markets. They have to understand the importance of Discipline, How people think , how greed and fear affects investors. There are sub-parts to this

# Individual psychology of traders : You have to understand how to control Fear and Greed . How you should take rational decisions and not fall pray to your emotions while trading .

# Mass psychology of the markets : You also have to understand how mass psychology works . Why most of the people do what they do .

# The rules for maintaining personal discipline : You also have to understand the importance of Self Discipline, why you must be always consistent with your trading . You must never violate your rules . because in long run your discipline in one thing which will make you most money , not your knowledge or your skills .

METHOD

This is the part which deals with your knowledge about market , technical analysis , other tools which you can use to make Entry and Exit from any trade . This part is perceived to be the most important aspect and most of the people run after these a lot , but these are the least important part of your trading . Let us see part of this .

#Technical indicators :

These deals with the tools available for making decisions , for example , MACD, RSI , Stocastics, OBV and other 200 weird words.

#The best chart patterns :

Then you must know different types of patterns, which gives some idea about future action and how masses are thinking, some examples can be double top, Head and shoulder pattern etc.

#Developing a trading system :

Then finally after you are done with knowledge part, you should build up your trading system. what is trading system ? Its your rules for buying, selling, booking profits and cutting losses.

For learning on some technical tools you can see my series of articles on “How to be a better than average Investor”

MONEY

Now this part is an amazing one and my favorite 🙂 . What this determines is how will you manage your money , it decides how much money will put in market at any given time , and how much loss will you take maximum on any given trade . How much will be your maximum loss on any one trade, things like that .

Basically this part decides how long can you in the game of trading if things would go wrong . This part is extremely important . Without proper money management no can can survive for long in Trading . Lets see some basic and widely accepted views .

# The 2% Rule for individual traders :

This rule days that on any given trade your loss should not exceed 2% of total capital . So if you have Rs 1,00,000 , first time your loss should not be more than 2,000 . This rule makes sure that even if you make long series of loosing trades , still you are in the game .

Even if you make 10 consecutive loosing trades , your overall loss will be 18.3% , Though this will be rare , still you take care of this situation .

# The 6% Rules for every trading account :

This rule says that your monthly loss should not cross more than 6% in a month . Sometimes when you trade it may happen that there is some problem with your analysis or some issue between you and market which can not be explained , you keep trying to win , but don’t succeed, that time you have a great urge to revenge trade and get your money back .

The best thing at that time is to stop and get some rest , go for vacation and come back with fresh mind . This rule will make sure that if your chemistry with market doesn’t fit , you stop after loosing 6% of your capital . You can choose your own percentage amount .

I would like to choose 12% for me . it all depends on your risk appetite and stubbornness 😉

You might be interested in my previous money management example

# Essential record keeping for success :

This part says that you should always keep all the information regarding each trade . Buy price , sell price , date of purchase , how many days you carried , Reason for buy , reason of sell , what you learned from the trade , chart at the time of buying , charts at the time of selling etc etc .

Why do you do this ?

Record keeping makes sure that any day you can go back to your records and see what kind of mistakes you have done, why some trade failed , why you succeeded in some trade ? you can get lots of information from your records , you need to analyse your performance over days/months/years .

Its extremely important , after a series of trades when you look back to your records , you may be able to find out some pattern , some particular aspect or mistake which you do with each loosing trade and hence can take corrective measures .

So, finally we are done with 3 M’s of successful trading . Professor Van Tharp , in this legendary book “Trade your way to Financial Freedom” talks about how the weightage they would give on these 3 M’s .

According to him in Trading the importance factor is like this

Mind : 60%
Money : 30%
Method : 10%

Its totally opposite of what people perceive it to be , general people think that having all market knowledge and technical analysis is most important .

Nothing is far from truth , It wont be too ambitious to say that you can make money in market by simple coin toss if your have sound money management Techniques and Great control over your self , you need to cut your looser short without any emotion and let your profits run till they can by sitting tight and doing nothing .

Conclusion

So finally if you want to start learning Trading , Work hard on your Psychology part and money management techniques , Technical analysis and other knowledge is important but not vital !! .

Some other article’s you might be interested in :

– Options Trading
– Trading , What is it ?
– Swing Trading Presentation by Mr. Sudarshan Sukhani

you might also be interested in simple technical analysis example given by me with charts at my analysis blog

A Small tutorial on “How to start Trading?”

Posted on by Jagoinvestor

What does it takes to be successful in Trading ?

We are going to see 2 articles on this subject, this is Part 1. In this part I will give introduction to Trading and tell you what exactly is it and how should you approach it (if you want to do it).

Trading

Dr. Alexander Elder, explains in his legendary book “Come in to My Trading Room”, the 3 M’s of Successful trading, which I will touch upon today and will explain it in my own way to you. In the second part we will see the 3 M’s in my way of explanation.

Let us first see what exactly is the difference between Trading and Investing and then we will go over the explanation.

Difference between Investing and Trading

Investing means buying a stock of financial instrument for a long period of time, typically over several years. Assessing good investment opportunities often makes use of fundamental information, such as earnings, but can also use technical analysis to detect long-term trends.

Trading means buying and selling stocks or other financial instruments for shorter periods of time, typically less than a few months. Assessing good trading opportunities typically makes use of trading systems or chart-based techniques to detect short-term patterns.

The main advantage of trading over investing is that it provides the ability to make money regardless of the overall direction of the market or the price of an individual stock. The general consensus is that You can make more money in bear markets with Trading than Bull markets. Because bear markets provide steep movements compared to bull markets .

How Risky and Rewarding is Trading ?

Risk : Trading is considered as one of the most risky business you can ever do. Trading can wipe out your entire money so fast that you cant even imagine. As per the data, every 19 person out of 20 who does trading eventually looses. So the success ratio is not more than 5%, even out of this 5%, 3-4% just make small money, actually big money is made by 1% of people.

Reward : If done correctly and successfully trading can make you enough money you cant imagine. Most of the successful traders make more money in a month than people who are considered as “making good money” make in a year. but this numbers is for highly successful traders.

The other reward for successful trader is Independence. Once successful, you are your own boss, can work whenever you want, trade from all corner of the world while travelling.

For people who want to try there skills in trading can try mock trading on moneyvidya.com, Just buy and sell stocks and see how much money are you able to make in 2-3 months, It will give you some feel of trading. You can also read past my article on MoneyVidya.

Should you try Trading ?

Well, Just anyone who thinks that trading is a “get rich quick” thing, is doomed to failure, this is the biggest reason why people fail, they start or see trading with wrong attitude, they want to make millions (if not billions) in just a month or a year from Trading, They underestimate the Risk part and over estimate Reward part of Trading and eventually fall pray to Market’s anger.

Just because its “BUY” or “SELL”, they think its easy. and they need to read a little bit and because they are so successful and smart in whatever they are doing currently, they will succeed in Trading too. The approach Trading in a wrong way with totally unrealistic expectations.

So the main question still is “Is it for you ?”

you have to ask your self some of the questions which are as:

  • Are you ready to take Great risk of losing money ?
  • Do you have time and energy to learn the stuff required to Trading ?
  • Do you like Markets, numbers and what ever required for Trading ?

Some of the thing which “does not matter much” in Trading are :

  • Are you highly intelligent person ?
  • How successful you have always been in whatever you have done earlier in your life ?

Conclusion :

Understand very well that Trading is a very very risky business and not an easy thing , you have to learn it just like any other profession like Medicine or Software and it takes time . But , now a days I would say Trading is much easier compared to earlier days , Now with the online trading and lots of data available on Internet , there is lot of scope in Trading now .

In the next post we will quickly see 3 M’s for successful Trading . here is Part 2

Disclaimer : I am myself a student of Trading and still in my learning Phase , I have lost good money in Trading and still struggling to break even . But Eventually its going to happen, because I have not lost the confidence and still on fighting in the battlefield (Markets) .

 

How to use Oscillators to BUY an SELL

Posted on by Jagoinvestor

Hi

This is 4th part of the “How to be a better than average Investor” series of articles. Today’s lesson is on Oscillators .

What are Oscillators :

Oscillators are the indicators which move from overbought to oversold area, generally from 0 to 100. when they are nearing 100 it means stocks are overbought and “expected” to go down now. when they are nearing 0, it means, stocks are in oversold area and fresh buying can come and move the stock up.

Oscillators

hey .. wait a min, did you vote on the poll upper right side, I have asked on what all topics do you want me to write. Please select topics from them, so that you also get to read your favorite thing some time 🙂 cheers … go ahead ..

I will discuss just 2 oscillators which Investors can use to make better BUY AND SELL decisions.

Let take a time frame of 6 months and see how indicators gave signals of buy and sell. We will see 2 indicators here RSI and Slow Stocastics (SS) (Read what is RSI and What is Slow Stocastic ).

Rules

When it’s overbought, we SELL the share.
When it’s oversold, we BUY the share.

SS BUY signal = when blue color line crosses down the Red line.
SS SELL signal = when blue color line crosses above the Red line.

RSI BUY signal = when RSI has moved below 30 and starts moving up.
RSI SELL signal = when RSI has moved above 70 and starts falling down.

To make signals more stronger, we will use both the indicators signal and take BUY or SELL only when both shows same kind of signal.

OVERBOUGHT = when RSI and SS both are overbought
OVERSOLD = when RSI and SS both are oversold.

Note

At any point of time, markets may be in any of 3 state.

– Uptrend
– Downtrend
– Side ways Movement

Understand that these signals work best in range bound market, like we had for last 6 months. When market were moving in range of 3100-2600. If markets are in strong Uptrend or Downtrend, these indicators will generate many false signals.

Hence, In different markets we have to use different strategies.

Uptrend Market : IN Uptrend, you should avoid selling the stock, when there is small correction, Indicators can fast move in oversold region, that is the time you should BUY. But not SELL when prices are in over bought market.

Downtrend Market : In Downtrend, you should avoid Buying the stock, only SELL when the indicators are in overbought region .

Sideways Market : In this market, you can buy and sell both.

Lets see some examples for last 6 months. This was a Sideways market (but still downward bias was there, so be careful with BUY, you can take SELL easily).

DLF Chart

ICICI Chart
RELIANCE CAPITAL


Some Important things to NOTE (very important)

Oscillators should not be used in Isolation alone, You should also confirm it with other things like Support and resistance to make your BUY or SELL more stronger.

For example : If prices are near the Overbought, but you see that prices have broken the resistance point, its tells you that you should not BUY. because Oscillators are secondary thing, prices are primary.

Also, If prices are near support and not breaking it, and oscillator are in over sold area, then its safe to BUY. Never rely just on Oscillators, they are only helping tools used with other signals.

Lets see one Chart of JaiAss for testing what you have learnt.

Questions for you

– Tell me where are the buying and selling opportunities.
– Tell me where you should have avoided the signals.
– What according to you can help along with these oscillators.
– Can you come up with some other oscillator of your own which can measure some important thing )

JAIPRAKASH ASSOCIATES CHART

ok, So finally we end the 4th part of this series of articles on Technical Analysis. I hope you have learnt some things from me.

Earlier Posts

Part 1: What is Fundamental and Technical Analysis and which should be used When

Part 2 : How to use Support and Resistance to BUY and SELL ?

Part 3 : How to use Trendlines to find Support and Resistance ?

Understand that we are not learning how to trade, we are learning some trading tools which can be used by long term traders to make better Buy and Sell decisions .

Incase you want to trade stocks/futures/options just after learning from these 4 articles, I must tell you have you have not learned even 1% required for trading. 99% is still there to be learned and over all knowledge of markets, technical analysis blah blah is just 10%. 90% is Psychology, your attitude and your Discipline.

Trading is risky and not easy to do for long term.

Leave you comments / thoughts / suggestions / and answers to test question.

hey .. wait a min, did you vote on the poll upper right side, I have asked on what all topics do you want me to write. Please select topics from them, so that you also get to read your favorite thing some time 🙂 cheers …

How to use Trendlines to find Support and Resistance

Posted on by Jagoinvestor

Hi Readers

This is 3rd part of “How to become Better than average investor” Series. Read

Fundamental and Technical Analysis, What and When ?: Part 1
Using Support and Resistance: Part 2.

Let us today discuss how can we use Trendlines to use Support and resistance levels and make better Entry or Exits.

What is a TrendLine?

A trend line is a straight line that connects two or more price points and then extends into the future to act as a line of support or resistance. In the Uptrend , we join two low prices points and in Downtrend, we join two high prices and extend it further. Next time when prices approach them, it should probably act as a Support or resistance point.

Let us see one example of each of them.

Example of trend line while DOWNTREND


You can see in the chart how Two high prices were joined and the line acted as Strong Resistance in future, 3 times prices touched it and broke down again, These are good price area where either one can go Short (sell), or book their profits. You can see that now prices are again Approaching to this Resistance line, so once prices reach this point, it may provide a good opportunity to sell.

What will happen exactly, better not to predict and let the market decide?

Understand that we are not saying that prices have to necessarily touch the Resistance line and then go back down , the trend line only provides Resistance, it may again go back much before touching it .

Example of trend line UPTREND

Below if the 2 yrs chart of HIND LEVER, Let us try to make a trend line which acts as support.

If you see the chart, I have connected two low prices and extended it in future, you can clearly see how it acted as support area and prices went back up from there, At the end, you can see how prices are again approaching this support area, most probably this will again hold and it should be a good BUY 🙂

Let us see one more example of Trend lines. This example will show us the following things :

– Resistance line using a trend line.
– Breakout
– How Resistance once is broken became Support
– Resistance line using trendline for a shorter time frame.

Let us see a 2 yrs chart of JAIPRAKASH ASSOCIATES


You can see here how I joined two HIGH Points and extended the trendline in the future, and how prices reacted to this Resistance line. Recently Prices broke out of this resistance line and then this same resistance line acted as the Support line and prices bounced back from there.

Also, you can see a small trendline, which was made joining the low points . you can see how prices bounced up as this support line held the prices. So, we have seen some examples of Trend lines and how they can act as Resistance or Support lines (as per situation).

Some of the important points to note are :

– It’s more of an art to making a trendline, it depends on how you make them using HIGH PRICE, CLOSE PRICE, etc.

– You can make Trendline for any time frame.

– It’s not necessary for prices to touch trendlines, you should not expect it.

– It’s a wise decision to BUY OR SELL using trendlines. If the trade goes in your favor, let your profits run, if it fails, cut your losses short and accept it. there is no problem with being wrong . even the best in Industry fail.

– Trendlines will be of no help unless you control your GREED in markets. Don’t put all your money in a single trade. Keep adequate cash for bad times.

– Once trendlines are broken, take it seriously, it has happened for a reason :).

– Make sure that the two points used to make the trendline are not very near, there should be some time gap between them to believe in them.

– More times the trendline is touched by the price stronger it becomes, And stronger is the break out from that trendline.


Test for you 🙂

Below is a chart, and I have drawn several trendlines in different time frames, I have marked some points with 1,2,3,4,5, please tell me what are each of them and comments on each point. please do it individually. Let me see who comments correctly on each of them. Also, tell me if there is any other trendline that could have been made, but I have left it?



People who are good with Videos can watch the following videos

 


Please comment on this article, did you like it? Was it easy to understand? Is it too difficult to use Trendlines ?

Conclusion :

So we end this Article here, We saw the Importance of Support and Resistance and how to make trendlines and use them. In the next part (last part), we will see how we can use some of the Indicators from technical Analysis to make the decision better.

Also, we can see that even by visual inspection we can get some idea about which area is support and resistance area.

For people interested in learning these things in detail, I would recommend the book “How to make money trading with Charts” by Ashwini Gujral.

 

How to use Support and Resistance to Buy or Sell Stocks

Posted on by Jagoinvestor

This is Part 2 of the How to become a better than average Investor series, see Part 1

In the last post we discussed the importance of Fundamental and Technical Analysis. Now we will see one of the most simple, easy and powerful thing called Support and Resistance.

This is for people who have no idea about what is it and have at most heard about it.

Support and resistance

Let us see both of them one by one.

Support :

Support for a price is a price area where there are lots of buyers ready to buy the stocks rather than sellers. At that price point, the general perception is that its a good buy, and lots of buyers come to buy it. Hence buyers outnumber sellers and there is a higher possibility that prices will bounce back from that point . This is a point where Buying has less risk.

In other words, at support levels demand is thought to be strong enough to prevent the price from declining further. Please understand that Support point is not a place from where it will for sure bounce back, Its only the higher probability that it will bounce back.

Also understand that its not exactly a fixed price which should be considered as Support, generally its a range like 98-100 or 560-570 ..

Which point is Support point : Every Low made by the price can be considered as Support Area.

Let see Example :

Support Example 1 : Below chart is for Jaiprakash Associates (click to enlarge), It made a low of Rs.53 (closing price) on 27th Oct 2008 and then bounced up from there.

Now Rs.53 is the support point, Prices went up from that point and after reaching Rs.90, it again started heading down, You can clearly see in charts that it reached Rs.53 levels, but could not break down from that point and again bounced back from there.

It was a very good “BUY” around Rs.53. Understand that buying around Rs.53, is only a less-risky trade, not a “no-risk” trade. Prices can break down from there also.

Support Example 2 :

Below is a chart of RPL. Here you can see that prices made lows of Rs 70 around Dec 1, 08. That became a support point, and then prices reached thought levels around first week of Mar 09, It bounces back from that point, It was a less risk trade around Rs.70.

Resistance : Resistance is just opposite of Support, At this price levels there are more sellers than buyers and with high probability prices reverses from this point. At this point there are enough sellers in the market to prevent it from rising further.

Resistance point is the High made by a price. All the high’s will act as some kind of resistance points.

Lets see examples :

Resistance Example 1 :

Below is Reliance Charts, You can see that reliance made a high of Rs.1400 around Dec 2008, After that you can see how it reversed from that point 2 times in Jan and Feb 2009. It was a wise decision to sell at those points.

You can also find many examples like this if you investigate yourself. Try to see other charts if you are interested, you can look at charts at ichart.in or https://www.bazaartrend.com/index.php , find yourself)

Important Note : When prices are near Support or Resistance levels, you should be more alert. It does not mean that you just jump onto market and buy or sell, Be patient to see the actual price reversal, Though you will loose some part , that would be a better trade.

Also there are several other factors which should be considered, but for now lets not touch upon them. lets keep it simple for readers.

Lets also look at some important points

Break Down :

Always remember that when prices don’t hold support and break them and fall further, it tells that buyers are not strong enough and Sellers have taken over them and prices will make new lows, When support is broken, Sell further.

Example : Below is the chart of RPL, which shows how it broke down its support point and then made further lows.

Break Out :

When prices don’t hold resistance points and break them on upside, prices then indicate that they are going to make new highs. Better to buy at that point.

I have put a post on my analysis blog for Reliance Break out : please see it :
https://manishanalysis.blogspot.com/2009/04/reliance-break-out-target-1800.html

Some Other points to remember :

1. Support and Resistance points are places where you should be more alert and look for other signals to buy or Sell, just don’t buy because prices have reached near support, buy it when it starts rising and there are positive signals.

2. Support once broken becomes Resistance for next time, and Resistance once broken becomes Support point for next time, use this knowledge. See : https://candlestickmania.blogspot.com/2008/07/resistance-becomes-support.html

3. Many times there are false breakout and breakdown, So it will many times happen that you get out at important levels and miss the large movement, that’s fine, you can always enter after getting out.

4. This is most important point, Everything I talked about in this article can increase your chances of making more money in trading, but remember that you are dealing in Markets, and if you don’t control your GREED and emotions, your failure is guaranteed.

Use strict Stop losses and use Money management techniques (it means not putting all your money at once, if you have 10 lacs, put only 1 lac, don’t be greedy enough, else someday you markets will punish you badly, then no Technical analysis or any thing will help. have good amount of cash with you always ).

All technical Analysis and knowledge are of no help if a person cant control his greed and emotions in Market. TA and your knowledge will contribute not more than 20% of your success in long run.

This was end of Part 2 of this series, In next port (Part 3) we will see how to find support and resistance levels using TRENDLINES. wait for it.

Comments please, Its sometimes disheartening to see no comments after I put up a post after some hard work. I don’t want “good post or Great Article kind of comments, but at least share what you have learned and ask questions, make it little interactive please.

Question for you all :

Question 1 : Do you think this support or resistance thing works , or can you add anything else how to buy or sell and what things to observe at support and resistance levels , which can make buying and selling more successful?

Question 2 : What do you think about Chambal Fertilizrs at this point , see the charts at : https://www.bazaartrend.com/index.php?symbolname=CHAMBLFERT (click on the upper left button to make it full screen).

Suggest what should be done at this point of time ?

I came across very nice video, about difference between winning and success, a worth watch. See it below

Note : All the things discussed here are available on net with great detail. learn more of it yourself.

Fundamental Analysis and Technical Analysis , What and When !!

Posted on by Jagoinvestor

I am starting a series of articles that will deal with “How to invest in stocks efficiently”. This post is Part 1.

There are two important questions which you have to answer when you want to buy shares? They are “What to buy” and “When to buy”?

How to invest in stocks efficiently

Fundamental analysis

You may be familiar with Fundamental Analysis, Fundamental Analysis answers the question “What to buy” ? . It a study of companies Financial statements, cash books, markets study to find out the future prospects of a company. It answers the question “Will this company is a good buy for long term”? , “Will it be more valuable than what it is now ” etc, etc ”

But !!, Even though you have picked up some excellent companies for your long term investments, That’s not the end of the story. Now the biggest challenge and question you have is “When to buy it”?

You should not just go the next day and buy the share, that’s not the right approach. There can be a price area where buying is best in terms of risk/reward .

Technical analysis

Technical Analysis is the study of charts, price and volume patterns and other indicators derived from price and volume. Technical Analysis gives us hint on what can happen in the future, understand that it only gives you chances, not a guarantee.

So everything should be taken with crossed fingers, Decisions are taken on the basis of TA only increases your risk/reward scenario.

I will give you an example :

Reliance is a very good long term Investment (do your own analysis to find out why, but it is :).

Investment Analysis

 

On Feb 1, 2009, Ajay and Robert want to invest Rs 1 lac in Reliance for the long term. Both of them understand that Reliance is a truly long term buy. Ajay invests in Reliance on Feb 1, because share is going up and he feels its a good time to enter others. He buys the stock at Rs 1360.

After some days Stock starts falling and reaches around Rs 1,150. Roberts buys the stock at that time.

see the chart here

Here you can see that Robert has got the stock at a 15% lower price, which means his profits will always be more than Ajay’s by that much. What did Robert do? Robert used simple Technical Analysis concepts and entered in the stock with better prices, It does not mean it will always happen, but there are good chances for getting a better price.

In the above case of Reliance, there is no significant price difference, but there can be cases, where there can be drastic differences, and it would be really worth using basic Technical Analysis.

Don’t be scared, I will tell you some very basic things of technical Analysis in some of the next post.

I will talk about

Part 2: Support, Resistance
Part 3: Trend Lines
Part 4: Simple Oscillators to use for short term investments.

Watch out for the second part soon.

Please share any real-life example which happened with you, May be we all can try to find out what could have been done to make a better entry or exit from the stock.

cheers 🙂

Investment mistakes by retail Investors and how to avoid them

Posted on by Jagoinvestor

“People who take some pain eventually Gain”

Have you invested in the peak of bull run (Nov Dec 2007 or Jan 2008) or in middle of this downturn (Mid of 2008) and now sitting on heavy losses.

In this article we will discuss how and why should we avoid it. This article mainly covers investors who invest there money in some share for relatively short term like 6 months to 2 years, even though its applicable for all kind of investors.

investor mistake

Robert bought 100 shares of Jaiprakash Associates around May 2008, at Rs.300. His reason was simple, The stock has fallen “a lot”, “how low can it go? “, ” What if I don’t buy it and it goes up again, I will miss the profits”.

Does it sound similar?

Then stocks moves upto 350, and he is so furious that why he didn’t out more money. within some days stock comes down to 250. Now he feels that he probably made a mistake and made investments at right decision. He was sad that he is now in loss , he says to himself, that he will get out at cost once it moves up to 300.

Now it comes down to 200, He is not thinking why didn’t he get out at small loss? He is not ready to get out at 250, and he is determined to get out. But it never happens and stock tumbles down to 160, Now he tries to play a trick with market, and wants to prove his point that he is also smart.

He triples his shares by buying additional 200 shares by buying the share at 160 and averages his price to Rs.207, He can now get out once shares move to Rs.200 or 210 and he can get out at cost price or may be he can make some profits also.

But stocks still goes low and reaches low of 45-50. At the time of writing this article, the price for the share is around Rs.90. Probably it will take at least 1-2 yrs for this share to reach Rs.200 levels and that will happen once overall markets stabilizes.

Does all this sound similar to you?

What are the wrong decisions Robert made?

1. Trying to Time the Market :

The one reason was that he was trying to find out if share has made a low. He believes that share has lost a lot of value and will not go further.

Learning : There is an old saying, “Dont catch Falling Knives”, When a share has started its down move, the chances that it will move more down is more than its going up. The overall mood is bad. There is no MRP of shares, there is only market value. Prices are governed by emotions and sentiments, Don’t try to get in middle buying them. Rather short sell it or wait more.

2. Patience :

The other problem was no patience, Just imagine if this person had more patience, What if he waited for stock to go as low as possible and then start its journey upwards and then buy it. I am not saying, its a right time to buy, but current scenario provide much better risk/reward ratio.

Learning : Don’t go against the trend, if markets are falling like hell. don’t mess with it by buying in between. Have patience, No profits are better than losses I guess. Always try to be with the trend, A stock has more chances of going in the same direction of the trend rather than counter trend.

On the day Satyam bad news came in, I don’t know why people bought shares in between it was falling, It fell from 170 to 40-50, But people bought it in between around Rs 120 levels, thinking, “How low it can go”. Eventually some people bought it at 20-25 levels and many have doubled there money in weeks.

Patience helps.

3. No Stop loss or Targets set :

Often people emotions come in between there trading or investing. “If only it comes back to Rs XYZ I will get out”, Once it goes up by Rs PQR more, I will get out”.

People invest without knowing there risk capability, They don’t invest with some target, once your shares rises by 20% in 1 month, you may often think, what if it goes up to 50%, then I will miss out those profits.

They also don’t want to take losses, they only want profits, once prices go against them, they are not ready to get out at small loss. They want there money back. Then prices move a little more down and then this vicious circle of “If only it comes back to this point, I will get out” continues

Learning : Do you invest to be right or to make money. What is your goal? I guess its to make money. So don’t feel bad if you are wrong some times, it happens with everyone. The most important thing is to not let it become so big, that it becomes pain.

Have a stop loss, When you buy something at 300, say to your self that if it comes down to 250, I will take Rs.50 loss and accept I was wrong and move on to find out a new opportunity. And also tell yourself that if it moves to Rs 500, I will get out, take my “excellent profit” and then find out some thing else. Don’t be too greedy.

It hurts in long term. “just a little more” is a not a good idea.

You can read a similar article where I discussed 5 mistakes of my First trade.

Watch this video to know why no Retail Investors make money in the Stock Markets:

Conclusion :

The main idea of investing is to make money, don’t try to prove market that you were correct and no one can make you wrong, keep your emotions at home, If you are wrong, you are wrong, Just accept it, take small loss and try to find out new opportunity. Don’t waste time with the losing trade and give all your time and effort in that.

Know some rules and stick to it. Mainly this is applicable to traders whose time horizon is very less like day or a week, but this also applies to investors. Even if you are investing for long term like 10-20 yrs. Buying a share at low cost can have dramatic affect on your corpus. Just imagine this :

Ajay invests 1 lac in Unitech at Rs.150 just after it fell from 900 levels in Jan 2008. His investment after 30 yrs was 66 lacs.

But Robert waited patiently to let this share go as much down it can be and after markets shows some strength and signs of recovery bought it at Rs.30, His corpus would be Rs.3 crores.

Just imagine the difference of having some patience and respecting some ground rules of investing. It pays .. believe me.

Keep coming to the blog as in coming days I will post an article about how a common person can use basic technical analysis to make his investments more powerful and less risky.

Question for readers : What do you think Robert could have done better? Or How what are the other mistakes which I have not mentioned?

Please post your views/comments/questions. Make it interactive.
I hope you have read my article on : How to use your losses to reduce your taxes

That’s all for now.

Akruti crashes by 50% , Finally it happened

Posted on by Jagoinvestor

Akruti crashed by almost 45-50% today . This happened inspite of strong global clues and strong rally in markets which touched 3100 levels on nifty .

From the levels of 2250 some days back , today its near 900-950 levels .

This crash was due anyways … Some days back I had warned that there was a Evening Star seen on this stock charts and It should be seen as a shorting Stock on every rise . read it here : https://www.jagoinvestor.com/2009/03/akruti-city-plunges-25-in-early-trade.html

Read my previous post how to invest in this market

Evening Star shows you the shift of power from bulls to bears . Markets were near expiry and all the punters who were holding the stock from the time of strong rise which started , had to clear there positions and hence a sharp selling was expected . No Surprise that it happened today , As markets were rising , every short term long holder wanted to clear his positions , this resulted in panic selling and stock went down so much .

Now it has come to its normal levels and with this strong rally , it has good chance to move up in coming weeks . Dont over invest incase you want to invest .

You can put 10% of your capital in this and liquidate half position after you are in 20-30% profit . It can give some quick gains later . Dont be greedy , sell in profit once you are in 50%+ profit . otherwise one fine day again it will drop heavily and you will be left crying .

Why am I now suggesting to invest in this , last time I said stay away ?

Investing or trading should be done on high probability trades . This stock went up heavily and then corrected a lot to come back to normal levels now . This is a ideal time to take calculated risks , The risk/reward of this trade would be worth taking .

It does not mean , you cant loose from here , why not !! , but its worth taking that risk , because profit potential is very good . Have a logical stop loss and once its hit , get out with loss .. first loss is the best loss .

Did any one make profits or loss on Akruti ? Share it with other readers , so that everyone comes to know about it .

Read my previous post how to invest in this market

Importance of small profits in your Trading

Posted on by Jagoinvestor

Bill Craft discusses a very important aspect of trading in stock markets . It says that trading success comes from taking small profits often . There should be small losses , small profits and big winners . These small profits will take care of small losses and give you over all profits only , and the big winners will give you more than average profits .

Its totally unrealistic to expect big winners each time you buy some stock , Have a reasonable target and take the profits . Once in a while a situation will come when you will get exceptional returns on some trades .

Read this article :
http://marketfn.com/blog/2007/07/i-wish-i-could-always-know-which-stocks.html