Overview
In my four years of experience associated with stock markets, I have witnessed two types of people. The first kind is extremely afraid of stock markets. When I use the word investments or stocks, they avoid talking to me. Maybe, they are afraid I am into gambling and lost all my money, and I might drag them into gambling as well. These people neither make nor lose any money in investments.
The second kind is extremely fond of stock markets. According to them, the stock market speculating (they assume it as investing) is going to make them millionaires. They aspire and try to emulate Rakesh Jhunhunwala and other greats in Indian stock markets. 95% of them successfully lose their money.
First of all, to make money in stock markets, you should know the basic difference between investment and speculation. Since I understand that difference, I can make some profits trading the stocks. Do not expect that I am making lakhs of rupees monthly. It just pays me enough similar to how a typical job does. Also, do not believe anyone who says to have made ₹1 Lakh or ₹10 Lakhs in a day or a week.
If anyone thinks that they will be a millionaire by trading stocks and following hot tips in the media and financial websites, they will only find themselves in a hot soup.
You may be starting to doubt what’s relation timing the markets and knowing the difference between investment and speculation.
Market Trends:
Let me make it clear for you. The stock markets are subjected to both short term and long term trends.
The short term trend runs for a few weeks to months. It depends on individual stocks. Most of the stocks’ short term fluctuations are deliberately caused by some big players and operators. Sometimes, you see a stock rising by 20% or more in a single day. On the next day itself, it crashes again by 15% or something like that.
You must question yourself what has happened in a single day that caused so much chaos in its price. The answer is simple. There are various types of trading strategies in the stock markets. Long position, Short position, Futures, and Options, etc. influence a company’s share prices in the market.
I am not against trading strategies as they are purely legal. Stock Trading is a job that pays me. But it is not meant for a juvenile investor.
If you invest in a good company shares with strong fundamentals, your money is not only safe, but it could get excellent returns. All you need to do is to wait. The short term fluctuations do not jeopardize the price of a high-quality stock. Because, as long as the company continues to do well, report good profits, the share price will only rise in the future.
It is not the business of a sincere investor to time the markets or a stock price. When the stock market crashes, a lot of high-quality stocks are available at awesome discounts. Warren Buffet, the greatest investor of all time, does this well than anyone else on the planet.
My recent experience:
Let me share one of my experiences. This happened very recently, to be exact, it’s today. I have completed the trade and started this article. I usually do equity delivery based trading.
Last month, maybe on 4th March 2020, I bought the shares of a company. Generally, I trade in only high-quality stocks, because there is a very minute chance of losing all of my money. Although, there is a risk in every trade and investment.
That stock had already reached my expectations five days ago, on the 24th of this month. I speak like a yogi in my articles, but I am a human, after all. I got greedy and did not sell those shares. The stock might have reached the operators’ expectations. The excessive dumping of the shares started. There were more than 5 Lakh shares for selling already by 9:45 AM that day. It fell to the lower circuit for that day.
One major disadvantage that a retail trader or investor has is he/she cannot fight and win against the might of operators and large institutions. They have their hands on the most recent technology. There is a procedure called Algo-Trading. The computer writes the code and executes trading. To be frank, a computer trades much better than a person.
Everyday, before I even place an order, I would find 6 Lakh shares selling for lower circuit of that day. This process continued for four days.
I do not know what happened today; maybe the computer has even better plans for the future. The share prices began rising sharply since today morning. As I was already fed up losing around 40% of the profits, I sold all the shares for market price. I did not wait any longer even though the prices continued to soar.
Nevertheless, I made around 30% profit in my trade. I held onto the shares for two months. But, I would have made around 45% gains if I had not tried to time the market.
Lesson Learnt: No matter how confident you feel, and how experienced you are; do not try to time the markets.
Note:
I provide the information and my views on the website only to educate new investors, stock market enthusiasts, and the common public on equity or stock market investments. Please consult your financial adviser before making any investments in the stock market. In case of any queries, you can contact me via email ID: shivakumar.lachapeta@valueinvesting.online.
