My advice for these “innocent” investors:
1. Indian stock markets are not investment centres at current valuations. They became gambling centres in the recent days. Can anyone finally make money in gambling?
2. Do you what happened to the investors during Harshad Mehta days and IT boom time?
3. Do you know, like Ambanis now, Wipro’s Premji became the second richest man in the world for some days due to these stock markets? Anil Ambani will become the world richest man after Reliance Power listing. Do you think they can stay there?
4. Never believe in the words of CNBC analysts and broker’s words. They will change their words according to the market sentiment. Just analyse their statements by going through the archives of business newspapers or moneycontrol.com. Do you what they have said about Ispat Industries when it was at Rs 14?
5. Don’t lose your hard earned money in the stock markets by investing at these valuations. Stock markets already discounted 2009-10 earnings also. I know it is very difficult to control one after seeing the euphoric mood among your friends. Have patience. Better opportunities will come for investments at reasonable valuations.
6. Any government will take populist decisions before elections. Don’t expect significant industry helping decisions in the election year.
7. Accumulate more knowledge about various companies and businesses by regularly reading business newspapers and magazines.
8. Know basic fundamentals about stocks like P/E ratio, Book value, historical stock prices, when to buy/sell shares etc.
9. Day trading may give you some short term gains but long term investors are always the real winners in stock markets. Never indulge in day trading. Leave it for big brokers.
10. Never invest in stock markets just basing on tips of brokers and friends. Do your own research on the company and business and its growth prospects and valuations.
11. Never invest in Z, S and other unknown company shares with poor management. They may hit upper circuits in bull markets. You will finally left with some papers with no buyers. Biggest losers in any bull market are these kind of investors who may never able to sell their shares of those unknown companies.
12. Never enter into stock markets to make big money in small time. You need to work hard by doing enough research on companies before making big money. Long term investors in good companies will always become millionaires.
13. Compared to secondary markets, IPOs are safe in these times. Focus on primary markets by investing in good IPOs.
14. But sometimes, you need to follow herds as in Reliance Power IPO. We know it is not a good idea to invest in Reliance Power at such a steep price. But in bull markets, investors never follow caution and reason. So invest in Reliance Power and book profits on the day of listing.
15. United States is experiencing its worst recession after 2001. So better prepare for more bad news.
Why Indian stock markets are rising and falling?
Current steep rise in stock markets is not due to fundaments but just due to liquidity. Mutual funds and Insurance companies are providing domestic liquidity while foreign investors are gambling in Indian markets. Foreign money will move out of our country at any point of time. Stock exchanges are adding fuel to the fire by encouraging derivative market. We have to wait and watch when this mess will clear up and better senses will prevail.
Final advice: Don’t put your hard earned money in these gambling centres. BSE Sensex will oscillate between 18,000-21,000 points for some more time. New innocent investors should stay away from Indian stock markets until the emergence of clear picture. I am against investments even in mutual funds also. Most of these mutual fund managers are inexperienced ones as they have never managed funds in bear market. Sometimes patience will save you from catastrophes. Don't move your money into stock markets from bank deposits. Greed is not good for your financial health.
Saturday, January 26, 2008
Message to Young Investors
10 Qualities of a young Investor
Pre-requisites of a young investor:
1. Discipline – Most essential quality.
2. Ability to follow rules
3. Love for hard work.
4. Ability to identify mistakes and rectify them
5. An investor must be skilled in reading and understanding financial statements.
6. A trader should have good knowledge of technical analysis.
7. One must spend time on study, analysis and preparation of trading plans.
8. Youngsters should find good role models like Warren buffet, Mark Faber, Peter Lynch, Rakesh Jhunjhunwala etc.
9. Never hesitate when it comes to investing in knowledge.
10. Young investors would do well to make long term plans and goals and work towards achieving them.
Message to young investors:
1. Have a definitive goal in life and work towards it.
2. You should sacrifice some hobbies in order to achieve your goal.
3. Dissociate yourself from people who have a negative influence on you.
4. Dare to dream.
5. Do not afraid of failures.
6. Be open to change and in imbibing new ideas.
Pre-requisites of a young investor:
1. Discipline – Most essential quality.
2. Ability to follow rules
3. Love for hard work.
4. Ability to identify mistakes and rectify them
5. An investor must be skilled in reading and understanding financial statements.
6. A trader should have good knowledge of technical analysis.
7. One must spend time on study, analysis and preparation of trading plans.
8. Youngsters should find good role models like Warren buffet, Mark Faber, Peter Lynch, Rakesh Jhunjhunwala etc.
9. Never hesitate when it comes to investing in knowledge.
10. Young investors would do well to make long term plans and goals and work towards achieving them.
Message to young investors:
1. Have a definitive goal in life and work towards it.
2. You should sacrifice some hobbies in order to achieve your goal.
3. Dissociate yourself from people who have a negative influence on you.
4. Dare to dream.
5. Do not afraid of failures.
6. Be open to change and in imbibing new ideas.
Investing in stock market
Tips and advice for stock market investors:
1. You will never succeed in Share Markets if your investment decisions are based on tips from Brokers and friends. You should study the markets, analyze the trends, take calculated risks and then invest in stocks.
2. Learn lessons from failures. Even great investors like Warren Buffett suffered losses in his early days.
3. Identify your risk profile basing on your age, economical status, risk bearing capacity and future needs.
4. Never put all your money in single investment portfolio. Diversify them.
5. There are no shortcuts to earn money in share markets. You should work hard to make money in stocks as in other fields.
6. Never follow herd mentality. Buy valuable stocks when panic investors are selling them. Sell over valued shares when all are buying them. Never afraid to buy a fundamentally strong but undervalued stock. This is the key to the success of Warren Buffett. This is called Value investing.
7. Large caps are secure while midcaps give high returns. Identify the future sector and find the best stock in that sector. Accumulate those stocks. Power and Shipping are the future growth sectors in India.
8. Never invest in Z category stocks or rupee stocks just for the sake of high returns.
9. Never invest without stop loss and target. Never change them without any specific reason.
10. Read at least 2 business news papers and investment magazines.
Take care, happy investing!
1. You will never succeed in Share Markets if your investment decisions are based on tips from Brokers and friends. You should study the markets, analyze the trends, take calculated risks and then invest in stocks.
2. Learn lessons from failures. Even great investors like Warren Buffett suffered losses in his early days.
3. Identify your risk profile basing on your age, economical status, risk bearing capacity and future needs.
4. Never put all your money in single investment portfolio. Diversify them.
5. There are no shortcuts to earn money in share markets. You should work hard to make money in stocks as in other fields.
6. Never follow herd mentality. Buy valuable stocks when panic investors are selling them. Sell over valued shares when all are buying them. Never afraid to buy a fundamentally strong but undervalued stock. This is the key to the success of Warren Buffett. This is called Value investing.
7. Large caps are secure while midcaps give high returns. Identify the future sector and find the best stock in that sector. Accumulate those stocks. Power and Shipping are the future growth sectors in India.
8. Never invest in Z category stocks or rupee stocks just for the sake of high returns.
9. Never invest without stop loss and target. Never change them without any specific reason.
10. Read at least 2 business news papers and investment magazines.
Take care, happy investing!
Significant Views:
1. S&P included IT giants, Infosys, Wipro and Satyam, in Warren Buffett model portfolio.
2. Indian Stock Market is the most expensive one in Asia-Pacific region. India is the least attractive one for Investments – Citi Group.
Positive News:
1. JSW Steel acquired 2.5-acre property of Orbit Corporation in Mumbai for Rs 800 crore.
2. ONGC-Mittal won gas block in Trinidad-Tobago.
3. TTML won bid for coin operated telephones.
4. Government will sell 10% stake in Oil India to Oil refineries.
5. Wipro is in JV with Boeing MRO facility.
6. Government will announce new Aviation policy in this week.
7. Bisleri will enter into International markets by September.
Negative News:
1. More delay in Tata Motors 1-lakh car project due to problems in Singur project.
2. Hindustan Oil Exploration shut down well at PY-3 field.
Stock Market Analysis:
1. Central banks are pumping more money into the financial markets to save from liquidity and credit crisis in the short term but it will have negative implications in the medium to long term.
2. IFCI stake sale news will continue to give strength to this stock. Be cautious around Rs 68-69 level. IFCI should break its strong resistance level of Rs 68-69 for the future rally.
3. Reliance Communications will bounce back at any time. Accumulate this stock in SIP way.
4. Nifty may bounce back
5. Biggest problem is no one exactly knows the severity of Subprime market crisis. Unless this is solved, markets will continue this current volatile run. Domestic Financial Institutions are saving the market from collapse by buying in equities. Will this continue?
6. RNRL and JP Hydro will consolidate in the short term due to their vertical run-up.
7. Banking Stocks: Benefits of new ECB norms are nullified by Subprime crisis.
1. S&P included IT giants, Infosys, Wipro and Satyam, in Warren Buffett model portfolio.
2. Indian Stock Market is the most expensive one in Asia-Pacific region. India is the least attractive one for Investments – Citi Group.
Positive News:
1. JSW Steel acquired 2.5-acre property of Orbit Corporation in Mumbai for Rs 800 crore.
2. ONGC-Mittal won gas block in Trinidad-Tobago.
3. TTML won bid for coin operated telephones.
4. Government will sell 10% stake in Oil India to Oil refineries.
5. Wipro is in JV with Boeing MRO facility.
6. Government will announce new Aviation policy in this week.
7. Bisleri will enter into International markets by September.
Negative News:
1. More delay in Tata Motors 1-lakh car project due to problems in Singur project.
2. Hindustan Oil Exploration shut down well at PY-3 field.
Stock Market Analysis:
1. Central banks are pumping more money into the financial markets to save from liquidity and credit crisis in the short term but it will have negative implications in the medium to long term.
2. IFCI stake sale news will continue to give strength to this stock. Be cautious around Rs 68-69 level. IFCI should break its strong resistance level of Rs 68-69 for the future rally.
3. Reliance Communications will bounce back at any time. Accumulate this stock in SIP way.
4. Nifty may bounce back
5. Biggest problem is no one exactly knows the severity of Subprime market crisis. Unless this is solved, markets will continue this current volatile run. Domestic Financial Institutions are saving the market from collapse by buying in equities. Will this continue?
6. RNRL and JP Hydro will consolidate in the short term due to their vertical run-up.
7. Banking Stocks: Benefits of new ECB norms are nullified by Subprime crisis.
Severity of American crisis
Popular theory: Indian economy will less likely be affected by American economic crisis. So our stock markets are safe heavens for investments. Is it really correct?
My opinion: As they are saying, our economy is less dependent on American economy unlike Japan (Except sectors like IT and Pharma). But our stock markets are no longer representing our economy. They are the “bubbles” created due to irrational investments by foreign and domestic institutions. So they will be definitely affected by American financial crisis. Don’t believe in “decoupling theory”. If you believe in it, you will face the similar fate of BJP in 2004 elections (India Shining campaign).
Severity of American crisis:
1. US Federal is aiding in increasing American crisis as it did in 2001 by cutting interest rates. Instead of taking long term measures, it is opting for stop gap measures like rate cut which will further aggravate crisis.
2. When a company like “Apple” after announcing superb results gave cautious growth signs. It is a clear sign of future growth problems.
3. When a company like “Google” shed 30% of its stock price (good fundamentals, growth opportunities etc.), we should understand the severity of the problem.
4. Soros: "World is facing worst ever economic crisis after world war 2". When an experienced expert gave that statement, we should understand the problem.
5. United States housing sales fell first time in 25 years and prices are declined for the first time since 1929 great American depression.
Note: Stock Markets will see ups and downs until President George Bush comes with great relief package. These are more testing times for world stock markets due to lack of confidence in investors.
My advice: Indian stock markets (BSE SENSEX) will move between 14,500-18,500 points with extreme volatility. It is difficult for ordinary investors to plan their investments in such an extreme volatile situation.
If you are a long term investor, invest in good companies which are less dependent on United States like Reliance Communications, Tata Motors, L&T, and Reliance Industries etc.
Stay away from penny stocks and overvalued stocks like RNRL, Ispat, and Essar Oil etc.
Save your money for upcoming wonderful IPOs like ATPL.
Long term investors should continue to accumulate good stocks and forget about them for 1-2 years. Speculators will bite the dust in these unpredictable times. Conservative investors should stay away from markets until “recession” fears are cleared.
My opinion: As they are saying, our economy is less dependent on American economy unlike Japan (Except sectors like IT and Pharma). But our stock markets are no longer representing our economy. They are the “bubbles” created due to irrational investments by foreign and domestic institutions. So they will be definitely affected by American financial crisis. Don’t believe in “decoupling theory”. If you believe in it, you will face the similar fate of BJP in 2004 elections (India Shining campaign).
Severity of American crisis:
1. US Federal is aiding in increasing American crisis as it did in 2001 by cutting interest rates. Instead of taking long term measures, it is opting for stop gap measures like rate cut which will further aggravate crisis.
2. When a company like “Apple” after announcing superb results gave cautious growth signs. It is a clear sign of future growth problems.
3. When a company like “Google” shed 30% of its stock price (good fundamentals, growth opportunities etc.), we should understand the severity of the problem.
4. Soros: "World is facing worst ever economic crisis after world war 2". When an experienced expert gave that statement, we should understand the problem.
5. United States housing sales fell first time in 25 years and prices are declined for the first time since 1929 great American depression.
Note: Stock Markets will see ups and downs until President George Bush comes with great relief package. These are more testing times for world stock markets due to lack of confidence in investors.
My advice: Indian stock markets (BSE SENSEX) will move between 14,500-18,500 points with extreme volatility. It is difficult for ordinary investors to plan their investments in such an extreme volatile situation.
If you are a long term investor, invest in good companies which are less dependent on United States like Reliance Communications, Tata Motors, L&T, and Reliance Industries etc.
Stay away from penny stocks and overvalued stocks like RNRL, Ispat, and Essar Oil etc.
Save your money for upcoming wonderful IPOs like ATPL.
Long term investors should continue to accumulate good stocks and forget about them for 1-2 years. Speculators will bite the dust in these unpredictable times. Conservative investors should stay away from markets until “recession” fears are cleared.
Value Picks is not easy
People go by the rumour of a company and starts accumulating stocks likr RNRL, Essar Oil, Hind Motors just based on pure speculation. I agree that these are the stocks which can give you high returns but always remember theses are the stocks which can give you a higher loss as well.
I recommend clients to invest in good companies with strong fundamentals which are trading at good levels...
Remember investors will continue to lose money in stock markets as long as they want to make big money in small time period without basic knowledge on companies.
I recommend clients to invest in good companies with strong fundamentals which are trading at good levels...
Remember investors will continue to lose money in stock markets as long as they want to make big money in small time period without basic knowledge on companies.
What is Short term trading?
Short Term Trading
Short term trading means a duration of around 2 to 3 months.
Short Term stock picking is a visual interpretation of technical charts. A basic moving average on a time frame chart will show the direction of the scrips movement.
Moving averages is a mathematical results calculated by averaging a number of past data points. Moving averages (MA) in it's basic form is calculated by taking the arithmetic mean of a given set of values on a rolling window of timeframe. Once the value of MA has been calculated, they are plotted onto a chart and then connected to create a moving average line. Typical moving averages used for short term trading are 50 MA and 100 MA.
Types of Moving Averages
1) Simple Moving Average (SMA)
SMA is calculated by taking the arithmetic mean of a given set of values on a rolling window of timeframe. The usefulness of the SMA is limited because each point in the data series is weighted the same, regardless of where it occurs in the sequence. Critics argue that the most recent data is more significant than the older data and should have a greater influence on the final result.
2) Exponential Moving Average (EMA)
EMA overcomes the limits of SMA, where more weight is given to the recent prices in an attempt to make it more responsive to new information. When calculating the first point of the EMA, we may notice that there is no value available to use as the previous EMA. This small problem can be solved by starting the calculation with a simple moving average and continuing on with calculating the EMA.
The primary functions of a moving average is to identify trends and reversals, measure the strength of an asset's momentum and determine potential areas where an asset will find support or resistance. Moving averages are lagging indicator, which means they do not predict new trend, but confirm trends once they have been established.
A stock is deemed to be in an uptrend when the price is above a moving average and the average is sloping upward. Conversely, a trader will use a price below a downward sloping average to confirm a downtrend. Many traders will only consider holding a long position in an asset when the price is trading above a moving average.
In general, short-term momentum can be gauged by looking at moving averages that focus on time periods of 50 days or less. Looking at moving averages that are created with a period of 50 to 100 days is generally regarded as a good measure of medium-term momentum. Finally, any moving average that uses 100 days or more in the calculation can be used as a measure of long-term momentum.
Support, resistence and stoploss can be infered by referring the closet MA below or above the market price. The other factor that is used in short term momentum is the trading volume. The moving averages along with the trading volume can provide a better insight to short term movement.
Markets are moved by their largest participants - I believe this is the single most important principle in short-term trading. Accordingly, I track the presence of large traders by determining how much volume is in the market and how that compares to average. Because volume correlates very highly with volatility, the market's relative volume helps you determine the amount of movement likely at any given time frame--and it helps you handicap the odds of trending vs. remaining slow and range bound.
Short term trading means a duration of around 2 to 3 months.
Short Term stock picking is a visual interpretation of technical charts. A basic moving average on a time frame chart will show the direction of the scrips movement.
Moving averages is a mathematical results calculated by averaging a number of past data points. Moving averages (MA) in it's basic form is calculated by taking the arithmetic mean of a given set of values on a rolling window of timeframe. Once the value of MA has been calculated, they are plotted onto a chart and then connected to create a moving average line. Typical moving averages used for short term trading are 50 MA and 100 MA.
Types of Moving Averages
1) Simple Moving Average (SMA)
SMA is calculated by taking the arithmetic mean of a given set of values on a rolling window of timeframe. The usefulness of the SMA is limited because each point in the data series is weighted the same, regardless of where it occurs in the sequence. Critics argue that the most recent data is more significant than the older data and should have a greater influence on the final result.
2) Exponential Moving Average (EMA)
EMA overcomes the limits of SMA, where more weight is given to the recent prices in an attempt to make it more responsive to new information. When calculating the first point of the EMA, we may notice that there is no value available to use as the previous EMA. This small problem can be solved by starting the calculation with a simple moving average and continuing on with calculating the EMA.
The primary functions of a moving average is to identify trends and reversals, measure the strength of an asset's momentum and determine potential areas where an asset will find support or resistance. Moving averages are lagging indicator, which means they do not predict new trend, but confirm trends once they have been established.
A stock is deemed to be in an uptrend when the price is above a moving average and the average is sloping upward. Conversely, a trader will use a price below a downward sloping average to confirm a downtrend. Many traders will only consider holding a long position in an asset when the price is trading above a moving average.
In general, short-term momentum can be gauged by looking at moving averages that focus on time periods of 50 days or less. Looking at moving averages that are created with a period of 50 to 100 days is generally regarded as a good measure of medium-term momentum. Finally, any moving average that uses 100 days or more in the calculation can be used as a measure of long-term momentum.
Support, resistence and stoploss can be infered by referring the closet MA below or above the market price. The other factor that is used in short term momentum is the trading volume. The moving averages along with the trading volume can provide a better insight to short term movement.
Markets are moved by their largest participants - I believe this is the single most important principle in short-term trading. Accordingly, I track the presence of large traders by determining how much volume is in the market and how that compares to average. Because volume correlates very highly with volatility, the market's relative volume helps you determine the amount of movement likely at any given time frame--and it helps you handicap the odds of trending vs. remaining slow and range bound.
Selling in Option
When you sell call/put and dont do anything till expiry following things can happen
1) If at the expiry spot rates are lower than sell rate ,you may get profit.
2)REVERSE is if the spot rates are lower you may loose
3)if the spot rate is lower/higher than strike rate,depending upon if it is a call or put you may loose entire money.
4)if the trade turn into opposite direction before expiry , and crosses your margin deposit ,exchange/broker will square off the deal and you may loose infinitely.
so if you sell options (which one should not do unless he is HNI or an expert) it requires to closely watch the movements and not go to sleep till expiry.
1) If at the expiry spot rates are lower than sell rate ,you may get profit.
2)REVERSE is if the spot rates are lower you may loose
3)if the spot rate is lower/higher than strike rate,depending upon if it is a call or put you may loose entire money.
4)if the trade turn into opposite direction before expiry , and crosses your margin deposit ,exchange/broker will square off the deal and you may loose infinitely.
so if you sell options (which one should not do unless he is HNI or an expert) it requires to closely watch the movements and not go to sleep till expiry.
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