Why people are not able to make money by investing?

The answer is impatience.

If you buy 10 stocks, 5 of them are gonna rise and 5 of them are gonna lose(just taking a 50% scenario). People will book profit as soon as those 5 stocks rise by 10% and they will keep hold on to their losers.

But, if someone just keep holding on to both losers and gainers, they will surely make money.

Business today mentioned 13 stocks in  may 2014. I did this study around 2 months back so profits are calculated as per that and overall profit was 60%. I have taken split into account too.

One could do that on today's price and would still find it profitable.

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Some of them are going are give tremendous trends and some will lose but overall had 60% gain over 2 year span.

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Bias in stock markets

Bias 1: Overconfidence

Many novice investors get lucky: The first few stocks they pick do extremely well. Unfortunately, they start believing in themselves. They think they have a magic touch; or worse, they think they are smarter than everyone else. This often leads to disaster….

Therefore, the wise investor not only knows how to recognize signs of overconfidence in himself (such as bragging about one’s short-term investment performance), he also knows how to apply the brakes when the signs become visible. In other words, he has learned at some point how to use reasoning to overrule his emotions.

Bias 2: Familiarity
The second bias, called familiarity bias, may cause some investors to be too concentrated on opportunities in their own countries. They are more familiar with and confident about local investment opportunities, so despite the fact that it’s much easier than in the past to diversify investments across geographies, they go with what they know and can easily understand.

Another example of familiarity bias is a tendency by investors to buy shares in the companies they work for. In doing so, the investor may become over-allocated to the company stock and the unsystematic risks that come from being under-diversified. Individuals that are over-allocated to company stock take the risk of having their assets and their income significantly reduced should the company go through a period of financial difficulty. To weed out familiarity bias, a good approach for the New Year would be to discuss different investing strategies than you typically use with your financial adviser and then consider employing those that are appropriate for meeting your unique financial goals

Bias 3: Anchoring
A third and final bias I want to touch on is the idea of anchoring, or becoming fixated on past information and using that information to make inappropriate investment decisions.

When investors are influenced by this bias, they may not be able to get their mind off a particular sell-price target, even if new information is available or the investing landscape has shifted significantly. They become stuck and may even ride markets to the bottom if they cannot let go of what they think the price “should” be. 


One thing to remember said by one of the experienced trader 

"Psychologically we as human beings are habituated to expect mercy and leniency right from our childhood. If we dont do our homework, teacher will punish us but not injure us....if we dont get good grades in school/college our parents will give punishment but will fergive us soon...in a job if we do mistakes, our boss does not kill us. All these things have mercies because we are dealing with living beings on the other side.

Market is a non living thing. It has no idea of your position, your loss, your hardships. So it has no mercy...it can ruin the life,families. Not respecting risk is like jumping in front of a running train and expecting the train to be lenient and not harm you much....".

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My Journey into markets

I started my journey 5 years back in stock market and I had my ups and downs. Like, most people I was also trying to find the holy grail but the truth is there is no holy grail.

First year

I came to know about the biggest and successful investor of market "Warren Buffet". He uses a fundamental approach for investing. Started using his philosophy of value investing using p/e ratio and read books from Benjamin Graham. Made some wrong calls as I was trying to catch the bottom and didn't use a stop loss as I was doing a value investing.

Then, started reading the books on how to read the balance sheet of a company. This also didn't help as there were a lot of companies and how many balance sheets can I read and I couldn't make much sense or fruitful decision out of it.

I think as a retail Investor it's hard to do "value investing" as you need to look at lot of factors. But, some people are still making money using this approach and I am not denying that.

"If you had spent Rs 55,000 to buy a Royal Enfield motorcycle in 2001, you would now have an old, rugged bike. But if you had invested the same Rs 55,000 in shares (at Rs 17.50 per share) of Eicher Motors, the company that makes Enfield bikes, your investment will be worth Rs 6 crore now."

Many companies like Asian Paints, Maruti, Tata Motors, Tech companies, Pharma companies would have made the money for you and they can still make.

Second year

Came to hear about Technical analysis i.e. reading from the chart and joined some forums like babypips, elitetrader, traderslaboratory and traderji etc. I started learning about support and resistance, bullish patterns, bearish patterns, trend lines and these things were making sense, I also read from the books like Steve Nisson candlesticks and tried to read Albrooks books and his lectures but couldn't understand. But, these things were just making sense and not money.

So, I went to the next stage of technical analysis and started learning about indicators stochastics, RSI, williams etc. They sometimes worked and sometimes they didn't. After that, I started mixing multiple indicators as I thought it if two indicators will agree on the same thing, then it's a high probabilty trade. But, that failed as the indicators were showing the similar characteristics. Started learning about EMA crossover, Bollinger bands, ichimoku trading, cowbunga trading system and a lot more systems and applied  them over the charts. Now, everything was visible on the chart just not the candles. That also didn't work out. I also went through a lot of methods mentioned on forums with which people were making money.

So, finally I thought market is not for me as almost 95% of the traders lose money and I am one of those. I went onto made some investment in mutual funds which are giving me good returns today.

Third Year

Started focusing on my career and didn't look much into markets, I was making investment through mutual funds only.

Fourth Year
Totally out of touch.

Current Year
Came back in Feb. Made some investment in stocks which were really down and made some money. Started reading about technical analysis again and still I was not successful. I thought the problem was not with the strategy and it was with my psychology. So, I started reading about it but that also didn't help as the problem lied with the trading methods I was using and they didn't had an edge and  I didn't back test them properly. Started going through the threads again of traderji, got some hard-copy of threads and I tried to see where would I trade and compared with them. I gave some serious thoughts to risk management and money management. Well, not much to money management as I am trading with a low capital.

I went back to indicators again but left them within a week as they didn't work out for me. Stochastics is still there but I just use them for looking divergence.

Now, I look at pure price action and also a 21 EMA/SMA is there on my chart.  I go with the trend and things are making more sense to me now than my initial years. I sit with patience now and only takes the trade which gives me a good risk reward ratio as I believe on low risk reward the market won't move in that direction as smart player will not take that trade.

We need not only learn but we need to apply it too.

I feel like I am on to something good now and I can make money. May be again, I am still in one of the phases of learning. I am also learning to invest in fundamentally sound midcap companies these days.


Learning to trade is a hard process as you have to go through a lot of failures. You need to practice only one thing in market and become master of that. As Bruce Lee said "I fear not the man who has practiced 10,000 kicks once, but I fear the man who has practiced one kick 10,000 times." We need to practice only one trading style and follow that but first you have to find out what suits you which can you practice 10,000 times.

Thankfully, I played with small money in my initial stages, I will increase the capital once I see consistency in my profits. I hope I will be successful one day.

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Intraday calls for 11 May 2016

Buy Calls
NSE:DISHMAN  SL - 155 Target 162
NSE:UFLEX SL - 185 Target 190

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Swing Trade in ICICI Bank

A bullish harami pattern has been formed in the icic bank on daily time frame.

A bullish harami is formed when the previous bar is a big red bar and the current bar is a green bar and it looks like red bar is carrying a green bar as a child.

Target can be set as 240 as it has been a good resistance twice in the past.

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Websites for fundamental analysis of stocks

Personally, I like the one below. There are some others too.
 http://www.screener.in/

1.Balance sheet Comparison

http://economictimes.indiatimes.com/...nyid-13554.cms

The economic times used to gives data backing to 1990s.But now they seem to limit it to 5 years. But neat compilation and mostly accurate data.

2. Stock Screener 

http://www.edelweiss.in/Tools/screener.aspx

Edelweiss.You can screen stocks based on PE, Dividend Yield, Mcap and EPS.

3.Company snapshot

http://investing.businessweek.com/re...ticker=SOTL:IN

For a quick snapshot of what the company does.Very useful for the first look at a company you think of investing.



4. Current Performance

http://www.edelweiss.in/company/ITC-Ltd.html

Again Edelweiss. Excellent website. You can find almost anything from ROE to 3year CAGR profit/Sales

5. Latest company announcements

http://www.corpfiling.co.in/InsiderT...erTrading.aspx

Though this website gives almost every information the most important according to me is the insider trading details it provides on a daily basis. The site may sometimes give server error may be due to the huge traffic but the finding information part is very easy.

6. Brokerage reports

http://www.valuenotes.com/

A comprehensive collection of brokerage reports. Reports from almost everyone and has almost all companies.You will most probably find atleast one report on even unheard companies.Excellent website and best of all it is free and you dont even have to register.

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