Wednesday, April 1, 2009

Investing in Stock Markets - 1

Investing in Stock Markets - 1

I have decided to write my thoughts on investing in stock markets. Pls note that I am not claiming myself a genius in stock markets. But I am associated with stock markets from 1992 and learned few good things. I think, it is important for me to share the basics with society or investing public. I would recommend to use it with your own discretion. All the views expressed are my own and derived from my own experience and any resemblance is purely co-incidental.


1. Be ready to lose some portion of your capital / money before investing. Your capital must be free from your daily requirements i.e., you must not buy a stock and sell the same just to pay off your rent ! Stock market is not a place to play when you have less capital, less time frame, faster rotation etc.

2. Who are you? Are you a speculator? Trader? or Investor? is something you must decide before you start playing in stock market.

Speculator is the one who trades daily and trades for even 50paise fluctuation. Trader does not carry over position to next day or takes delivery of stocks.

Trader can take position in cash market or derivatives and plays for small fluctuations to make profits. He can go long or short depending on that days movement and makes the most out of it. Speculator carries out 3 to 25 trades a day and aims for say Rs.8000/- to Rs.10,000/- as daily profit.

Trader is the one trades with a view to square off position between 1 to 7 days. Trader can follow technical, fundamental cues and takes position in stocks. Trader does not take momentum position and trades little less frequently. Trader can have long in one counter and short in other stock at the same time too !

Investor is the one who can take delivery of stock and have some medium term of view. He is mostly looking to buy and sell stocks and there by represents bull attitude. Investors must buy only on dips or huge fall days and can sell on rallies. A true investor would not chase stocks on gap up days but he places the order on falling days at various low prices and would wait for uptrend to happen. In other words, investor is a contrarion who buys on gloomy days !

3. Why one must play in stock market? Stock market can give decent returns provided you are disciplined. Else, it can take away your capital or make you to get struck for a long period. But keep it as secondary activity., if the time spent on stocks overtakes your main activity that means you are addicted.

Simple Guidelines

1. Determine your bet size - your bet size determines your loss or profit. Make sure your bet size is in line with how much you can lose.

2. Trade in A group stocks only. Do not venture out in other stocks until you master the trick.

3. Do watch Business channels, Do read business papers - but make your own decision.

4. Learn the basics of financial terminologies - like sales, EPS, PE Ratio etc. Learn the basics of technical analysis too.

5. Learn to book losses otherwise you might get struck in bad company stock for years.

6. Be disciplined, apply stop loss when you trade on technical advice.

7. Make baby steps, you can not become crorepati in a short term

8. Maintain simple excel sheet of your trades for future analysis

9. Do not blindly copy some body's trade

10. Try to be little contrarion while trading.

11. Have target for every trade

12. Use your discretion on market gabbars, broker tips. No one will kill you if you dont follow them on each and every call !


  1. You forgot Anti-depressant Nice one, precisely put :)

  2. Thanks for the basic tips.. hope it is not fooling anyone (since published on April 1)

  3. Sapna., that was good suggestion seriously.
    Ravi., Stock market fool people everyday., so nothing great on apr 1. LOL :)

  4. Hi, This is a good post, indeed a great job. Stock market basics Concept