What are few tips for trading in Indian stock market? What are the trading secrets?

 

The most important trading secret in Stock Market is not to go with the flow. What I mean to say is don’t listen to any tip and get trapped in it.

I started trading at the age of 22, and gradually I am still learning about it.When I just started trading, I would read Economic Times and get tips on what to buy/sell every day. Because at that time I was not aware of Balance sheets and quarterly results or any such terms as EPS,P/E,dividend yield etc. I used to simply read the news and get the tips from my broker or any news channel and I would invest my money in stocks. Gradually I understood that it is only the small investors who lose money in the market just by following the tips. And I was contributing to the famous quote of stock market “ 70% of people lose money in stock market and only 30% people earn money in stock market”

Earlier I faced various losses, most of the times I invested in a stock whose price was lower irrespective of the sector or fundamentals of the company. Best example would be UCO Bank. I had bought UCO bank at 85 Rs in Nov 2014 just because I had read about it Economic Times that it has a target of 95Rs and now it is trading around 40.

Following is the link for the same

'BUY' or 'SELL' ideas from experts for Monday, 17 November 2014

I was never interested in stocks whose price was higher(1000+) even though the fundamentals of the company were quite strong. For eg, if I had 5000Rs in my hand then I would think of buying at least 50 to 100 shares of any company. I never thought of buying 1 share of Blue Chip company such as TCS, Lupin. Dr. Reddy because I thought that it was a huge price. Was I completely wrong? Probably not. But where I went wrong was I never allowed my horizon to cross the price to get the best bets in the market. I was happy to own 100 shares of a company with poor fundamentals than owning 5–10 shares of a company with strong fundamentals.

Then gradually I learned a lot about Stock market by Reading,Reading, and Reading and solved the doubts about the following questions.

Why does the stock fluctuate? What are the effects of Quarterly/Yearly results on the stock? How does the news related to the stock or the sector of the stock affect the Stocks? How to analyze the future prospects of the Stock. How does the Economy affect the Stock? Found out the possible ways which can cause the Stock to move up/down.

Most of the times, the company posts profits in its quarterly result and still the stock plunges. Obvious for a common investor is if the company is in profit the stock should rise.But it is not the case most of the times. And here the concept of “MARKET ESTIMATES” comes into the picture. Irrespective of the profit/loss posted by the company, if it has beaten the market estimates then it will rise else it will fall. (If 100Rs was the expected profit by the market for company X then if it posts profit greater than or equal to 100 Rs then it will rise else it will fall. Also if Rs 100 loss was expected by the market then if the company posts a loss of less than Rs 100 then it will rise else it will fall. Not true in each and every case though but it works most of the time)

And now I am in a much better position as compared to what I was when I was 22 years old.

Whenever I have to invest in stocks, I make a thorough analysis of the stock before investing.

My recent bets were

Bought Cipla at 470 now it is 530

Bought Castrol at 362 now it is 535

Bought Lupin at 1300 now it is 1650

Bought Sun Pharma at 750 now it is 850

Bought REC at 160 now it is 215.

(ALL the prices mentioned as now are as on 3rd August 2016)

One more thing, as of 4th August 2016, GST is passed on 3rd August 2016 in Raj Sabha and after the passage of GST, Logistics stocks were going to benefit the most.

The news for the same has started from Dec 2015. Here are the following links which say GATI and VRL Logistics will be benefited the most by GST.

 

1. Don’t scare yourself out of a trade by going into lower time frames

Look:

If you enter a trade on the daily time frame, then manage that trade on the daily time frame.

A big mistake you can do is, drilling down into a lower time frame, and scare yourself out of the trade.

Here’s what I mean…

The takeaway is this…

If you enter off the daily time frame, you set your stop loss and manage your trade on the daily time frame.

If you enter off the 1-hour time frame, you set your stop loss and manage your trade on the 1-hour time frame.

If you enter off the 15 minutes time frame, you set your stop loss and manage your trade on the 15 minutes time frame.

Get it?

2. Place your stop loss at a level where your trading setup is invalidated

Don’t set your stop loss based on a dollar amount you’re willing to lose.

Instead…

Set it based on the structure of the markets, where if your stop loss is triggered, you know you’re wrong.

For example, if you’re long at support, then a break of support would mean you’re wrong…

Or if you’re trading a breakout, then a close back into the range would mean you’re wrong…

3. Trading with the trend increases the probability of your trades

When the market is trending, it has an ebb and flow with two different “legs” in it.

Impulse move – Longer “leg” that trades in the direction of the trend

Corrective move – Shorter “leg” that trades against the direction of the trend

By trading with the trend, you’ll get a bigger bang for your buck as the impulse move is stronger than the corrective move. This gives you greater profitability for the same amount of risk.

Here’s what I mean:

The trend is your friend… right?

4. You need to find a trading method that suits you

If you love watching the markets and have all the time in the world, then long term trend following will not suit you. You’d micro manage your trades on the shorter time frames, and miss the longer term trend.

Or…

If you have a full-time job and cant afford to watch the markets, then intraday trading will not suit you. You’d miss trading opportunities because you do not focus on the trading session.

Or…

If you love to build systematic trading systems, then learning how to read chart patterns and price action will not suit you. You’d be frustrated because there are some things in the market that can’t be quantified.

So whats my point?

My point is… you need to find a trading approach that suits you, yourself.

Here’s how you can increase the odds of your success:

• Adopt a trading method that fits your belief about the markets (if you don’t believe in trends, then trying to be a trend follower is ridiculous)
• Find a trading time frame that suits your schedule (if you have little time to trade, stick to the higher time frames)
• Don’t hop from one trading system to the next, just because you see another trader having success with it (that’s a sure fire way to remain a consistently inconsistent trader)

5. Don’t abandon your trading strategy after a few losing trades

Why?

Because no matter how good a trading strategy is, in the short run your results are random.

And this can be explained using the law of large number…

If you take a coin and toss it 1000 times, you’d get close to 50% heads and 50% tails.

However, if you toss it 10 times only, it’s unlikely to be 50% heads and 50% tails due to the small sample size.

And its the same in trading…

You cannot conclude a trading strategy doesn’t work based on a small sample size because, in the short run, your results are random.

Instead… you need a minimum of 100 trades to find out whether your trading strategy has an edge in the markets.

6. A trading plan makes you a more disciplined trader

One of the biggest reasons why you fail as a trader is because you don’t have a trading plan.

... (more)

 

Nowadays most of serious traders have facility to access advanced to technical chart as well as many automated trading system. Most of traders can’t understand that almost all trading systems have some cycles. Some systems will work in some market conditions for eg most of trend following systems will give tremendous profit in trending market.( either bullish or bearish) some Strategies like "covered call" will work on mild bull markets.

Since most of traders seeking Secret even though they already know many good system, this makes good business opportunities for Investment Gurus, Strategy sellers and trading system developers.

First of all ,no one will be revealing you the trading secrets at any point  over here!
Although people spend too much time in identifying  their stratgey,  they fail to understand the importance of Trading psychology and discipline .The below picture depicts it.

For example 2014 was very good bull year in Indian market. Many small cap and mid cap stocks rose multiple times during this year. So Many investors started to believe fundamentals than technical. So to fill this Gap many Investment Guru who sells their investment ideas or their investment methods to public are appearing on media like TV, Social media and online forums to teach Value investing .

Suppose the learning period of Value investing for normal investor is two year and he starts to learn value investing on beginning of 2015. he could able to pick right stocks by his own knowledge only at end of 2017. At that time he might not able to pick stock at right valuation. Chances there to buy some stocks by chasing market. In short……. it is better to adapt value investing at the early stage of bull market or late stage of bear market than late stage of bull market or early stage bear market. So it is vital to know when bull market ends or bear market starts.

The above scenario also applicable for trading system. most of trading system which uses leverage has smaller cycles than investment cycle. Most of Strategy sellers would start to claim as they have secret system that would give profit for life time. Most them may have given good profits in recent times but no one knows when it starts to give losses (whips or drawdown). Even some strategy sellers keep on teaching many new strategies time to time (to keep their regular customers ) . From traders point of view it is very tougher to find when that cycle (Or Trend ) end comparing to “when bull market ends”. I have seen many traders who had spent more money than their trading capital to learn trading/investing Strategies  and failing to meet out their expectations.

I have seen very less people (may be less than 5% ) who are doing well in both trading as well as teaching .So one has more probable to find a coach or a mentor who do not having good trade records than good one.

Most of people seeks the Secret outside and failed realize that the Secret is in inner side them.

I have tested many trading systems that looks very foolish that are not giving consistent loss. This suggests even fools can’t loss money if he follows a regular Strategy with right money management.

So if one traders follows any of proven rules like

• CUT YOUR LOSSES LET YOUR PROFIT RUN
• YOUR BIGGEST LOSER CAN’T EXCEED YOUR BIGGEST WINNER
• THE FIRST LOSS IS THE BEST LOSS
• DEVELOP A METHODOLOGY AND STICK WITH IT. DON’T CHANGE METHODOLOGIES FROM DAY TO DAY.
• CONSISTENCY BUILDS CONFIDENCE
• THE MARKET PAYS YOU TO BE DISCIPLINED
• DON’T RISK MORE THAN 2% OF YOUR CAPITAL IN A SINGLE TRADE

he/she will have definite edge than average traders.

One may have seen these kind of rules every where. But one should note that one may not create wealth over the night by using above rules. But I can assure that one can’t loose money at least if he is disciplined. Over the period this disciplined approach builds wealth slowly but steadily
 

Below are some tips for trading in Indian stock market:
Application Type
There are two types of application of online trading in a market, for which we can practice online trading skills and techniques. There is a way of performing stock market without much involve of real money, in this case there is no financial risk. The two types of stock market duplicate are the financial and the other one is the stock game of fantasy simulator. It is always the best thing to go for the guidance of good stock market consultant.
Market situations
So, the online trading systems are also very in making the simulators as they were very strict about it. They were afraid of the market situation also, since their information can affect the market. So, all the simulator of the on line trading ensures that all the information regarding the stock market as well as the data may not be used or function in the actual trading of the stock market after, before or during the stock market hours.

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The amateur thinks winning in the market is about predicting the future. The amateur buys some shares and hopes the market rises. He has no idea what to do if something unexpected happens. He wings it completely and ends up trading with his emotions. There's nothing more destructive to wealth than emotional trading.

The market is a game of probability. It has nothing to do with predicting the future. When you treat the market as a game of probability, money management becomes your most important weapon. What I mean is, the stocks you buy become far less important than the position size you use and the decisions you make after you pull the trigger.

This is the secret to beating the stock market. Maybe one speculator in 1,000 knows this. Until you realize this, you have hardly any chance of making money in the market.

• Risk a constant amount of capital in each trade... and keep it small.
• Cut your losses. You are trading against some of the world's smartest people, armed with incredible research budgets and advanced supercomputers. They don't trade as a side job or as a hobby. These people live, eat, and sleep the market.

To control your losses, use a stop loss. This way you know exactly how much money you stand to lose if your stock falls, before you've even entered the trade. The stop loss applies at all times and can never be overridden.

• If your trading idea shows a profit, add to your position. If it keeps rising, add more.

Social media predicts the stock market. Scientists reported an 87.6% accuracy rate in predicting daily changes in the Dow Jones Industrial Average when they studied the mood of large-scale Twitter feeds.

The market is run by robots, not people.

The "hottest deal" may in fact be an overvalued investment.

Education has a higher return on investment. The Brookings Institution (link is external)reported that long-term investments in stocks, bonds or housing may return less profit than getting a college degree. The benefits of a four-year college degree are equivalent to an investment that returns 15.2% annually.

Online traders don't have a direct connection to the market. You might expect that when you push send or call your broker that the trade is instantly placed. But your broker decides which market to send it to, and prices can change before it reaches its destination. Investors may not always receive the price they saw on their screen or the price their broker quoted over the phone.

You'll always pay more for a stock than it's worth, and you'll always sell it for less than it's worth. It's called a bid-ask spread. The reason for the discrepancy? Purchasers pay the ask price while sellers receive the bid price.

Your fully invested portfolio's returns and volatility depend on whether you've chosen high or low beta stocks. Never heard of it? High-risk stocks that have a beta of 2 will have higher volatility in the market. Apple has a beta of .74, while McDonald's has a beta of .40. If you want to reduce risk (and some profit) increase the number of low beta stocks in your portfolio.

Big bank institutions buy when the stock tanks and sell when it's high. We're all buying in the same market, so what's the catch? Most investors are wired to buy when the market is rallying. But institutions do the opposite.

 

I am not going to go into an every detail that explain the nature of trading( the learning curve and the evolvement of your strategy).
 As it seems that you are just looking for a one simple, yet effective tip.

"COMPLETE AT LEAST 1,000 PAPER TRADES"

I believe this is the most important advice I could ever give to anyone. Many starters want to deposit and start profiting as soon as possible. Eventually most of those fail to become successful.

Trading enough on the virtual currency account can certainly boost up your chances of joining the minority of profitable traders.

Of course, you should also learn about the trading itself and develop the needed skills and strategies. I wouldn't go into the detail,

The main tip - trade, trade, trade. And do analyse your trades before and after entering them. 

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