I always thought, so many people
make money out of stock market by speculating, why not me? Here i'm not talking about me speculating based on my own analysis but on someone else's tips.
I asked myself, why shouldn't I take tips /
recommendations / calls from an established player and put my money in that
particular stock and exit once I made considerable profit in no time. Mainly
focusing on short term trading / BTST / intraday calls.
I wanted to make quick money through
stock market. And I somehow convinced myself that speculation is the only
answer to easy money making. But before taking the plunge, I decided to
analyze a broker's tips to see if it's safe to put my money in his
recommendations and make profits. I started analysis his tips. Few successful calls and I was convinced that
this man knows his job too well. His every call money
rained. And that's when I decided to jump into trading based on rumours. I knew I am spinning a mess-web for myself. it was like the Ring from "Lord of the Rings" that once you
wear, the evil within you come out in open. So the evil power of gambling my
money took over me. But I was prepared to lose some money. With the Evil within me, i just forgot the definition of "losing some money".
I'd put small (token) money in first few calls and made small profits. I started thinking that I know this
System, this is easy and am the master of the game. I completely forgot that I
was relying on someone else's calls to make free money. I started trading high
volumes. This phase of my life "making money" was called "Greed".
Now i started thinking to play big. Trade high volumes and be a billionaire in no time. I started day dreaming of retiring early. You see, when you make small profits, money attracts you like a magnet. I was so taken by it, that i lose my senses and soon forgot the universal truth of life "Karma is a Bitch". Continue reading to know what happened next.
I bought few high volume shares based on rumours / speculation / tips received from multiple sources. I had no idea how the trader concluded it's safe to buy the stock at this price and it will go to this price in X number of days. I waited for X days to finish. But while the countdown was on, i could see most shares plunging. Traders assured not to worry and buy on dips. I did that for few stocks. So more money was at stake. With every passing minute, hour, day, my heart beat kept thumping to see the free fall of stocks i invested.
One fine day, when i asked speculator what is to be done now. He simply said, do your own study and invest. He asked me to hold but i was worried, i mean, literally every nerve in my body was short of air. And that's when Karma turned from friend to bitch for me. I could not stand the pressure of seeing the stock fall further down, i exited with heavy losses. My losses were more than the profits i made. This phase of my life "losing money" was called "Misery".
I soon realized, Speculation is easiest way of losing money. That was the first lesson learned along with many others. Continue reading other lessons i learnt in this journey.
- Do not go into Speculation
/short term trading / intraday unless you yourself has studied the technicals /
fundamentals / techno-fundamentals of the stock and know when it's safe to
enter and exit. I see many facebook groups, pages, whatsapp groups
suggest tips for short term trading and people like me get into such traps just
to either make some quick profits and eventually lose big.
If you are planning to make an
earning from stocks, understand the stock market first, learn the technical and
fundamentals of the company. Educate yourself. Have a mentor who can train you.
Read books. Understand the graphs, what they mean, how to understand /
interpret them. Practice a lot.
- Be a full time trader and keep a watch on market 24x8 if you want to make money from short term trading.
- it's your hard earned money. Don't
burn your fingers by speculating in stocks.
- Better invest in Mutual funds instead of speculating your hard earned money. Or invest in large cap stocks to play safe.
- Being a retail investor, I
had no idea how the circuits work or what is stock manipulation and how volume
triggers, trends work. But I still jumped into it. Never do that.
- Avoid rumors / tips / recommednations
You should not invest based on someone
else's idea about the stock. Do your own research and invest in the
company. Do not have a blind faith in recommendations. it's like
gambling in the casino. You do not ask the unknown person next to you which
number to bet your chip on in roulette game.
- Traders invest in a bunch of stocks to compensate losses.
Even they make mistakes but they always have a backup plan.They invets in multiple stocks to cover up losses from few stocks. As yourself, can you do the same. Do you have a backup plan.
- Once you start speculating
and invest in stocks for short term gains, you lose focus on other stuff.
You keep worrying about your stock price movement. Will it go up / down ? What
if I lose ? if it goes up, can I wait for some more time to gain extra profit ?
What if it crash now and I lose out on the current profit ? All these questions
and many more start popping and you lose focus. So better stay away from such
speculative trading.
- You not only lose patience as you
keep an eye on stock movement with every passing second, you also end up
losing lot of time and money.
- if you trade smaller amounts to
gain quick profits (in smaller amounts), you end up paying more
transaction / brokerage charges & shidt term capital gain taxes.
- Technical Analysis do not worry about under / over valued stocks. So you should not be emotionally attached to the stock if you miss the profit ride.
You tend to hold onto the stock if
the technical target is not reached and stock has fallen down from your buy
price. Psychologically, you start thinking about the fundamentals of the
stock now. Suddenly the stock becomes a fundamental stock after you
had losses. And you are emotionally attached to it. You don't want
to sell it for sometime till you recover your money. That's nothing but suicide.
- No broker, speculative trader will
take responsibility if his tip / recommendations back fires. They always go
with an unwritten disclaimer: Do your own study !!!
- Profits that you make in technical trading, major chunk of it goes in brokerage charges, taxes etc. So you are left with only minor profits unless you trade heavy volumes.
I personally believe you can make
money in day trading only if you know what you are doing and is fully devoted to it. if you can't and still want to make money from day trading, better hire a financial advisor and pay him for the services.
I also believe that one can make lot of money in long term trading by holding fundamentally strong companies. it's owning the business. But you need to do your own research for that. Don't go for tips in knowing fundamental stocks as well. Read Annual Reports and do your own analysis. And let the Magic of Compounding work for you.
Thanks
