When investor buy stocks they take just limited view to buy stocks or they take insider information or tips to buy stocks, problem with this is if things go wrong they are not able take a decision whether to hold/sell as they lack conviction as the decision was borrowed one. To magnify many buy in Futures- which become a disasters- When you buy in Futures you become a traders as that has expiry, being a Zero sum game strict stop loss has to be followed. But in contrary people citing previous example never follow stop loss, they feel Stop is triggered and then target reaches. Market cheats everyone @ every point of time to be correct, I have been victim of this many times but if we scarify our discipline @ some point of time we lose total capital. Never look to make profit in every trade there will be losses in some trade if you are 50% correct and with good system you make good money.
What is good system?
1) Trader should follow strict stop loss
2) Whenever you get a profitable trade and if the market condition is favorable then never let go your trade, run your profit with trailing stop loss.
3) Never accumulate your losses try and take small losses early, otherwise it could turn into mother of all losses.
4) If your brokers calls, to increase margin or cut few position then you should have messed up your position and possibility of making money becomes very difficult. Wise people normally close all the trade and go for holiday and come back with fresh mind, Break is important for a trader.
5) When you make a loss forget it and trade fresh, if you try to recover your lost money you can end up making more losses as your mind is struck and you can’t make wise decision
Below is a classic example how people trade their mind, Auto sales have been improving in last 24months and many calculated that Auto ancillary units like TYRE & Component would do good but TYRES companies profits were down due to high raw material cost which slipped out of many investors, seeing CEAT results things were clear but as many brought stocks on tips/insider info/operator call many don’t understand want decision should be taken and now losses could accumulate.
APOLLOTYRES Cmp Rs.66, we had given a caution to investors that this stock is looking weak @ Rs.79 due to high Rubber prices and now TYRE companies are planning to cut down production or hike prices by 15-20%.
http://akprabhakar.blogspot.com/2010/10/apollo-tyre-flat-tyre.html APOLLO TYRE - A flat tyre? APOLLOTYRE Rs 79 looks weak
http://in.reuters.com/article/idINSGE6AA05W20101111 INTERVIEW-Apollo Tyres to up prices, rubber imports, To raise prices by 15-20 pct on high rubber prices, * To increase imports at higher rates to meet demand
http://akprabhakar.blogspot.com/2010/10/apollo-tyre-flat-tyre.html APOLLO TYRE - A flat tyre? APOLLOTYRE Rs 79 looks weak
CEAT announced its results where net profit dropped by 75% as reason being 40% rise in raw material and 100% jump in Rubber prices which can impact other tyre stocks which has run up too much on expectation that high Auto sales would benefit MRF, APOLLOTYRES, JKTYRE and few Auto ancillary could turn weaker.
http://www.financialexpress.com/news/Tyre-cos-threaten-to-scale-down-production/709955/ With natural rubber prices rising over Rs 200 per kg this week, major tyre manufacturing companies have threatened to cut down on their production to minimise losses arising out of rising input costs. Market watchers said this could have serious implication on regular tyre supply to vehicle manufacturers (OEMs), replacement market, state transport undertakings, defense and exports markets.
http://prabhakar-views.blogspot.com/2010/11/mind-of-investor-check-nifty-graph.html This was interesting picture of Investors mindset
