Can We Please Get This One Basic Thing Right? (Part III)

Yeah, we’re digging deeper.

How does an investor arrive at an investment decision?

It’s pretty obvious to us by now that traders and investors have their own rationales for entry and exit, and that these rationales are pretty much diametrically opposite to each other.

So, what’s the exact story here?

The seasoned investor will look at FUNDAMENTALS, and will exhibit PATIENCE before entering into an investment.

The versatile trader will look at TECHNICALS, and will NOT BE AFRAID of entry or exit, any time, any place. He or she will be in a hurry to cut a loss, and will allow a profit to blossom with patience.

What are fundamentals?

Well, fundamentals are vital pieces of information about a company. When one checks them out, one gets a fair idea about the valuation and the functioning of the company, and whether it would be a good idea to be part of the story or not.

A good portion of a company’s fundamental information is propagated in terms of key ratios, like the Price to Earnings Ratio, or the Debt to Equity Ratio, the Price to Book Value ratio, the Enterprise Value to EBITDA Ratio, the Price to Cash-flow Ratio, the Price to Sales ratio, etc. etc. etc.

What a ratio does for you is that in one shot, it delivers vital info to you about the company’s performance over the past one year. If it’s not a trailing ratio, but a projected one, then the info being given to you is a projection into the future.

What kind of a promotership / management does a company have? Are these people share-holder friendly, or are they crooks? Do they create value for their investors? Do they give decent dividend payouts? Do they like to borrow big, and not pay back on time? Do they juggle their finances, and tweak them around, to make them look good? Do they use company funds for their personal purposes? Researching the management is a paramount fundamental exercise.

Then, the company’s product profile needs to be looked into. The multibagger-seeking investor looks to avoid a cyclical product, like steel, or automobiles. For a long-term investment to pan out into a multibagger, the product of a company needs to have non-cyclical scalability.

After that, one needs to see if one is able to pick up stock of the particular company at a decent discount to its actual value. If not, then the investor earmarks the company as a prospective investment candidate, and waits for circumstances to allow him or her to pick up the stock at a discount.

There are number-crunching investors too, who use cash-flow, cash allocation and other balance-sheet details to gauge whether a coveted company with an expensive earnings multiple can still be picked up. For example, such growth-based investors would not have problems picking up a company like Tata Global Beverages at an earnings multiple of 28, because for them, Tata Global’s balance-sheet projects future earnings that will soon lessen the current multiple to below sector average, for example.

Value-based investors like to buy really cheap. Growth-based investors don’t mind spending an extra buck where they see growth. Value-based investors buy upon the prospect of growth. Growth-based investors buy upon actual growth.

The trader doesn’t bother with fundamentals. He or she wants a management to be flashy, with lots of media hype. That’s how the trader will get volatility. The scrips that the trader tracks will rise and fall big, and that’s sugar and honey for the trader, because he or she will trade them both ways, up and down. Most of the scrips that the trader tracks have lousy fundamentals. They’ve caught the public’s attention, and the masses have sprung upon them, causing them to generate large spikes and crashes. That’s exactly what the trader needs.

So, how does a trader track these scrips? Well, he or she uses charts. Specifically, price versus time charts. The trader doesn’t need to do much here. There’s no manual plotting involved. I mean, this is 2012, almost 2013, and we stand upon the shoulders of giants, if I’m allowed to borrow that quote. Market data is downloaded from the data-provider, via the internet and onto one’s computer, and one’s charting software uses the data to spit out charts. These charts can be modified to the nth degree, and transformed into that particular form which one finds convenient for viewing. Modern charting software is very versatile. What exactly is the trader looking for in these charts?

Technicals – the nitty-gritty that emerges upon close chart scrutiny.

How does price behave with regard to time?

What is the slope of a fall, or the gradient of a rise? What’s the momentum like?

What patterns are emerging?

How many people are latching on? What’s the volume like?

There are hundreds of chart-studies that can be performed on a chart. Some are named after their creators, like Bollinger bands. Others have a mathematical name, like stochastics. Names get sophisticated too, like Williams %R, Parabolic SAR and Andrew’s Pitchfork. There’s no end to chart  studies. One can look for and at Elliott Waves. Or, one can gauge a fall, using Fibonacci Retracement. One can use momentum to set targets. One can see where the public supports a stock, or where it supplies the stock, causing resistance. One can join points on a chart to form a trendline. The chart’s bars / candle-sticks will give an idea about existing volatility. Trading strategy can be formulated after studying these and many more factors.

Where do stops need to be set? Where does one enter? Exit? All these questions and more are answered after going through the technicals that a chart is exhibiting.

One needs to adhere to a couple of logical studies, and then move on. One shouldn’t get too caught up in the world of studies, since the scrip will still manage to behave in a peculiar fashion, despite all the studies in the world. If the markets were predictable, we’d all be millionaires.

How does the trader decide upon which scrips to trade? I mean, today’s exchanges have five to ten thousand scrips that quote.

Simple. Scans.

The trader has a set of scan criteria. He or she feeds these into the charting software, and starts the scan. Within five minutes, the software spits out fifty odd tradable scrips as per the scan criteria. The trader quickly goes through all fifty charts, and selects five to six scrips that he or she finds best to trade on a particular day. Within all of fifteen minutes, the trader has singled out his or her trading scrips.

Do you now see how different both games are?

I’m glad you do!

🙂

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Can We Please Get This One Basic Thing Right? (Part II)

Now that we’ve laid the foundation, we need to build on it.

The most important aspect of investing is the entry. For a trader, entry is the least important aspect of the trade.

An investor enters after a thorough study. That’s the one and only time the investor is calling the shots regarding the investment. The right entry point needs to be waited for. After entry, the investor is no longer in control. Therefore, the entry must be right, if the investor is required to sit for long. If the entry is not right, then one will not be able to sit quietly, and will jump up and down, to eventually exit at a huge loss.

The trader can even take potshots at the morning newspaper, and enter the scrip hit by a dart at current market price (cmp). There’s a 50:50 chance of the scrip going up or down. If, after entry, the trade is managed properly, the trader will make money in the long run. A loss will need to be nipped in the bud. A profit will be allowed to grow into a larger profit. Once the target is met, the trader will not just exit slam-bam-boom, but will keep raising the stop as the scrip soars higher, and will eventually want the market to throw him or her out of the trade. If the scrip is sizzling, and closes above the stop, the trader will be happy that the market has allowed him or her to remain in the trade, because chances are very high that the scrip will open up with a gap the next morning. Then the trader will take the median of the gap for example as a stop, and will continue to raise this stop, should the scrip go even higher. Eventually, the correcting scrip will throw the trader out of the trade. One or two big winning trades like this one will give the trader a fat cushion for future trades. Now, the trader will position-size. He or she will again take his or her dart, and will select the next scrip. The amount traded will be more, because the trader is winning, and because the pre-decided stop percentage level now amounts to a larger sum. The trader’s position will be sized as per his or her trading networth. So, you see here how unimportant entry is for trading, when one compares it to trade management and exit.

For the investor, there’s no investment management in the interim period between entry and exit, unless the investor goes for a staggered entry or exit. That again falls under entry and exit, so let’s not speak about interim investment management at all. If anything, the investor needs to manage him or herself. The market is not to be followed real-time. One’s investment-threshold should be low enough so as to not have the portfolio on one’s mind all day. You got the gist. Also, exit happens when no value is seen. The investor just loses interest. He or she just tells his or her broker to sell the ABC or XYZ stake entirely. Frankly, that’s not right. Proper exits are what the trader does, and the investor can learn a trick or two here. Then, again, the investor would be following the market real-time in the process, and will get into the trader’s mind-set, and that would be dangerous for the rest of the portfolio. On second thoughts, it’s ok for the true investor to just go in for an ad-hoc exit.

You see, the investor likes it straight-forward. A scrip will be bought, and then sold for a profit, years later. That’s how a typical investment should unfold.

The trader, on the other hand, likes to think in a warped manner. He or she has no problems selling first and buying later. It’s called shorting followed by short-covering. The market can be shorted with specific instruments, like futures, or options. In seasoned markets, one can even borrow common stock and short it, while one pays interest on the borrowed stock to the person it was borrowed from. Yeah, many traders like to go in for all these weird-seeming permutations and combinations in their market-play.

A person who trades and invests runs the danger of confusing one for the other and ruining both. We’ve spoken about how proper segregation avoids confusion. Another piece of advice is to specialize in one and do the other for kicks. Specializing in both will require a good amount of mind-control, and one will be running a higher risk of ruining both games. At the same time, doing both will give you a good taste of both fields, so that you don’t keep yearning for that activity which you aren’t doing.

You see, sometimes the trader has it good, and sometimes, the investor is king.

When there’s a bull-run, the fully invested investor is the envy of all traders. Mr. Trader Golightly has gone light all his life, and now that the market has shot up, he is crying because he’s hardly got anything in the market, and is scared to enter at such high levels.

During a bear-market, Mr. Investor Heavypants wishes he were Mr.Trader Golightly. Heavy’s large and heavy portfolio has been bludgeoned, whereas Lightly’s money-market fund is burgeoning from his winnings through shorting the market. Lightly doesn’t hold a single stock, parties every night, and sleeps till late. Upon waking up, he shorts a 100 lots of the sensory index, and covers in the early evening to rake in a solid profit.

When Mrs. Market goes nowhere in the middle, Lightly gets stopped out again and again, and loses small amounts on many trades. He’s frustrated, and wishes he were Mr. Heavypants, who entered much lower, when margin of safety was there, and whose winning positions allow him to stay invested without him having to bother about his portfolio.

Such are the two worlds of trading and investing, and I wish for you that you understand what you are doing.

When you trade, you TRADE. The rules of trading need to apply to your actions.

When you invest, you INVEST. The rules of investing need to apply to your actions.

Intermingling and confusion will burn you.

Either burn and learn, or read this post and the last one.

Choice is yours.

Cheers.  🙂

Can We Please Get This One Basic Thing Right?

Pop-quiz, people – how many of us know the basic difference between investing and trading?

The logical follow-up question would be – why is it so important that one is aware of this difference?

When you buy into deep value cheaply, you are investing. Your idea is to sell high, after everyone else discovers the value which you saw, and acted upon, before everyone.

When you’re not getting deep value, and you still buy – high – you are trading. Your idea is to sell even higher, to the next idiot standing, and to get out before becoming the last pig holding the red-hot scrip, which would by now have become so hot, that no one else would want to take it off you.

The above two paras need to be understood thoroughly.

Why?

So that you don’t get confused while managing a long-term portfolio. Many of us actually start trading with it. Mistake.

Also, so that you don’t start treating your trades as investments. Even bigger mistake.

You see, investing and trading both involve diametrically opposite strategies. What’s good for the goose is poison for the gander. And vice-versa.

For example, while trading, you do not average down. Period. Averaging down in a trade is like committing hara-kiri. What if the scrip goes down further? How big a notional loss will you sit upon, as a trader? Don’t ignore the mental tension being caused. The thumb rule is, that a scrip can refuse to turn in your direction longer than you can remain solvent, so if you’re leveraged, get the hell out even faster. If you’re not leveraged, still get the hell out and put the money pulled out into a new trade. Have some stamina left for the new trade. Don’t subject yourself to anguish by sitting on a huge notional loss. Just move to the next trade. Something or the other will move in your direction.

On the other hand, a seasoned investor has no problems averaging down. He or she has researched his or her scrip well, is seeing  deep-value as clearly as anything, is acting with long-term conviction, and is following a staggered buying strategy. If on the second, third or fourth buy the stock is available cheaper, the seasoned investor will feel that he or she is getting the stock at an even bigger discount, and will go for it.

Then, you invest with money you don’t need for the next two to three years. If you don’t have funds to spare for so long, you don’t invest …

… but nobody’s going to stop you from trading with funds you don’t need for the next two to three months. Of course you’re trading with a strict stop-loss with a clear-cut numerical value. Furthermore, you’ve also set your bail-out level. If your total loss exceeds a certain percentage, you’re absolutely gonna stop trading for the next two to three months, and are probably gonna get an extra part-time job to earn back the lost funds, so that your financial planning for the coming months doesn’t go awry. Yeah, while trading, you’ve got your worst-case strategies sorted out.

The investor doesn’t look at a stop-loss number. He or she is happy if he or she continues to see deep-value, or even value. When the investor fails to see value, it’s like a bail-out signal, and the investor exits. For example, Mr. Rakesh Jhunjhunwala continues to see growth-based value in Titan Industries at 42 times earnings, and Titan constitutes about 30% of his billion dollar portfolio. On the other hand, Mr. Warren Buffett could well decide to dump Goldman Sachs at 11 – 12 times earnings if he were to consider it over-valued.

Then there’s taxes.

In India, short-term capital gains tax amounts to 15%  of the profits. Losses can be carried forward for eight years, and within that time, they must be written off against profits. As a trader, if you buy stock and then sell it within one year, you must pay short term capital gains tax. Investors have it good here. Long-term capital gains tax is nil (!!). Also, all the dividends you receive are tax-free for you.

Of course we are not going to forget brokerage.

Traders are brokerage-generating dynamos. Investors hardly take a hit here.

What about the paper-work?

An active trader generates lots of paper-work, which means head-aches for the accountant. Of course the accountant must be hired and paid for, and is not going to suffer the headaches for free.

Investing involves much lesser action, and its paper-work can easily be managed on your own, without any head-aches.

Lastly, we come to frame of mind.

Sheer activity knocks the wind out of the average trader. He or she has problems enjoying other portions of life, because stamina is invariably low. Tomorrow is another trading day, and one needs to prepare for it. Mind is full of tension. Sleep is bad. These are some of the pitfalls that the trader has to iron out of his or her life. It is very possible to do so. One can trade and lead a happy family life. This status is not easy to achieve, though, and involves mental training and discipline.

The average investor who is heavily invested can barely sleep too, during a market down-turn. The mind constantly wanders towards the mayhem being inflicted upon the portfolio. An investor needs to learn to buy with margin of safety, which makes sitting possible. An investor needs to learn to sit. The investor should not be more heavily invested than his or her sleep-threshold. The investor’s portfolio should not be on the investor’s mind all day. It is ideal if the investor does not follow the market in real-time. One can be heavily invested and still lead a happy family life, even during a market down-turn, if one has bought with safety and has even saved buying power for such cheaper times. This status is not easy to achieve either. To have cash when cash is king – that’s the name of the game.

I’m not saying that investing is better than trading, or that trading is better than investing.

Discover what’s good for you.

Many do both. I certainly do both.

If you want to do both, make sure you have segregated portfolios.

Your software should be in a position to make you look at only your trading stocks, or only your investing stocks at one time, in one snapshot. You don’t even need separate holding accounts; your desktop software can sort out the segregation for you.

That’s all it takes to do both – proper segregation – on your computer and in your mind.

Anatomy of a Multibagger

Wouldn’t we all like to rake it in?

A multibagger does just that for you. Over a longish period, its growth defies normalcy.

In the stock markets, a 1000-bagger over 10 years – happens. Don’t be surprised if you currently find more than 20 such stocks in your own native markets.

Furthermore, our goal is to be a part of the story as it unfolds.

Before we can invest in a multibagger, we need to identify it before it breaks loose.

What are we looking for?

Primarily, a dynamic management with integrity. We are looking for signs of honesty while researching a company. Honest people don’t like to impose on others. Look for a manageable debt-equity ratio. Transparency in accounting and disclosure counts big. You don’t want to see any wheelin’-dealin’ or Ponzi behavior. If I’d been in the markets in the early ’80s and I’d heard that Mr. Azim Premji drove a Fiat or an 800, and flew economy class, I’d have picked up a large stake in Wipro. 10k in Wipro in ’79 multiplied to 3 billion by ’04. That can only happen when the management is shareholder-friendly and keeps on creating value for those invested. Wipro coupled physical value-creation with market value-creation. It kept announcing bonus after bonus after bonus. God bless Mr. Premji, he made many common people millionaires, or perhaps even billionaires.

A good management will have a clean balance-sheet. That’s the number two item.

The company you’ re looking at will need to have a scalable business model.

It will need to produce something that has the ability to catch the imagination of the world for a decade or more.

The company you’re looking at will need to come from the micro-cap or the small-cap segment. A market-cap of 1B is not as likely to appreciate to 1000B as a market-cap of 25M is to 25B.

Then, one needs to get in at a price that is low enough to give oneself half a chance of getting such an appreciation multiple.

Needless to say, the low price must invariably be coupled to huge inherent value which the market is not seeing yet, but which you are able to correctly see.

After that, one needs the courage and conviction to act upon what one is seeing and has recognized.

One needs to have learnt how to sit, otherwise one will nip the multibagger in the bud. Two articles on this blog have already been dedicated to “sitting”. Patience is paramount.

The money that goes in needs to be a small amount. It’s magnitude shouldn’t affect your normal functioning.

Once a story has started unfolding, please remember one thing. If a stock has caught the imagination of the public, it can continue to quote at extended valuation multiples for a long time. As long as there is buying pressure, don’t exit. One needs to recognize buying pressure. That’s why, one needs to learn charting basics.

Phew, am I forgetting something here? Please feel welcome to comment and add factors to the above list.

Here’s wishing that you are able to latch on to many multibaggers in your investing career.

🙂

How To Nip A Ponzi In The Bud

Mirror Mirror on the wall…

Who’s most prone of them all?

As in, most prone to Ponzis…

Frankly, I think it is us gullible Indians.

Everyday, there’s some report of a Ponzi scheme being busted, with thousands already duped.

Charles Ponzi’s is a case of the tip of the iceberg – maximum recognition came posthumously. If Charlie would have received a cut every time his scheme was used by mankind, he would probably have become the richest man in the world. Unfortunately for him, he popped it before reaping the full rewards of his crookedness.

What Charlie did leave behind was a legacy. Yeah, Charlie did an Elvis, meaning that many have tried to emulate Charles Ponzi since he departed. Maybe I’ve gotten the chronology wrong, but you know what I mean…

Chances are, a Ponzi will eventually cross your path sooner or later. More sooner than later.

How do you recognize a Ponzi? Yeah, that’s the first step here – identification.

A Ponzi will talk big – he or she will flash. There will be a small track record to back up what is being said, and this will almost be blown into your face, after you’ve been dazzled by the Ponzi’s fancy car, expensive clothes and gold pen. The Ponzi will be a good orator, and his words will have a hypnotic effect on you (ward this off with full strength). The Ponzi will show off, making you feel awkward. You will feel like being “as successful” as what is being projected before you, right there, right then. When all these symptoms match, and such feelings well up inside of you, you are, with very high probability, talking to a Ponzi, who is trying to suck you in with a promise of stupendously high returns.

After you have identified the Ponzi, the next step is to not get sucked in. This is going to take all your self-control. Remember, the grass is not greener elsewhere. Take charge of your emotions. You’ve identified a Ponzi, man, that’s big. Now you need to follow through and see to it that a minimum number of people come to harm.

Hear the Ponzi out. Don’t react. In fact, don’t say a word. Don’t commit a penny. Keep reminding yourself, that you have it in you to succeed. You don’t need the Ponzi’s help to get good returns on your money. You certainly don’t want to lose all your money. With that thought in mind, block the Ponzi and his promises out. Leave politely and inconspicuously.

After you’ve left securely, without having committed a penny and without having left your details with the Ponzi, you now need to sound the alarm. Tell all your friends of the lurking danger. Forewarn them, so that no one you know gets sucked in. Ask everyone to spread the word. The whole town needs to know within no time.

Identify – Control – Alarm – this is a three step programme to nip the Ponzi In the bud – try it out, it works!

Cheers! 🙂

Learning to Sit (Part II)

Can you sit?

I mean, can you really sit?

Maximum money is made by sitting, not by wiggling about.

I didn’t say that, but people far, far greater did.

To name just two who did say so, I’m sure you’ve heard of Jesse Livermore and Warren Buffett.

Fact remains – if you’re a long-term investor, you have to be able to sit.

One can’t sit for very long if one isn’t comfortable.

So, logic dictates – make yourself comfortable first.

Get rid of all extra background noise that disturbs you.

Keep consolidating – till you are comfortable to a point of not wanting to move from where you are.

You’ve gotten rid of investments you don’t understand.

Then, you’ve also dumped those investments that you do understand, but which don’t interest you.

Your rapport with your family is healthy.

You eat and sleep well.

You enjoy your life.

Then, the investments that you’re gonna sit on – are their volumes influencing the normal flow of your life?

If yes, it’ll be hard to stay focused somewhere down the line, because some fragment of your life will invariably be disturbed positively or negatively due to the voluminous investment in question.

Can you digest the volume such that its level does not interfere with your daily life?

What is your capacity for volume digestion?

Some have very large digestive capacities, like RJ. Such people can sleep comfortably on gigantic invested volumes for a very long time.

Others don’t digest volume at all, and can’t sleep over volume, like that day-trader who lives down the road. When the market closes, his invested volume is nil. Otherwise, the rest of his day is ruined.

Identify your volume threshold.

Invest below it. Then, you’ll be able to sit on your investment.

Any investment must have a rationale. Is your investment rationale sound? You’ll only be able to sit long-term on an investment made with sound rationale.

Therefore, take your time. Do solid research. Your research is pivotal for your investment. It doesn’t have to be so technical or so fundamental as to psyche a lay-person. It doesn’t have to deal with nitty-gritty. It doesn’t have to look for wheels within wheels.

In my opinion, market research needs to be broad-minded, and done with common-sense. Researching a company is an art. One doesn’t need to go ballistic with numbers, mathematics, projections, charts etc. One needs to formulate the long-term picture in one’s mind, based on key ratios, charting basics, knowledge of cycles, quality of management etc., and of course (based on) the million dollar question – is one looking at a multibagger? You can fill in the blanks here, for yourself.

Then, don’t enter with too big a bang. That’s my formula. Enter small. You can always top up later, if your conviction about your investment has grown. That’ll allow you to sit if your investment goes wrong in the initial stages. If you’ve entered too big and things go awry, you won’t be able to sleep, and then the first thing you’ll do is exit. So, enter small.

See, you can average down if you’re an expert, but for the longest time and till you get the hang of things, do not average down.

Why am I saying this?

Averaging down can make you even more jumpy if the stock in question goes down further. Your chances of sitting on your investment become even lesser.

Now for the flip-side. Sitting on a profit? Are you booking? Yes? No?

Depends. On you. On your outlook.

I mean, are you going to nip a multibagger in the bud?

I think you got the point.

So, till when do you sit?

Till you’re comfortable. Till you can sleep and eat well. Till you have a happy family life. Again, define you own “tills”.

The rest, as they say, is (your own investing) History.

Satisfying One’s Video Game Urge

We’re all kids on some level.

Do you remember when video game parlours hit your town?

We used to pretty much storm them, and blow up a lot of pocket money.

Do you remember the Gulf War (1991), and how it was portrayed on television like a video game?

Our life is about button-clicks.

If we don’t click a button for a day, we have an urge to click buttons. We get withdrawal symptoms.

Cut to the markets.

The marketplace today is at your fingertips. You can contol your interaction with a few button-clicks.

What’s the inherent danger?

More and more clicks, of course.

Your circumstances allow you to get as much action as you please. Play the markets to your heart’s content.

Is that good?

Depends.

What this does is satisfy your craving for action.

It also generates fat brokerage for your broker.

Volume does not necessarily translate into profits. So, it’s not a given that you’ve made more money by trading more.

The inherent danger is that your A-game is threatened by the extra action.

Never let anything threaten your A-game.

For example, if your A-game is investing, the extra trading action might confuse you, and you might start treating your investment portfolio like a trading portfolio.

Over a few months, your investment portfolio will then actually start looking like a trading portfolio. Does that solve your purpose?

No.

You’ve ruined your A-game.

Nobody’s asking you not to get your daily shot of button-clicks. It’s a free world. Go, get your daily dose. Fine.

However, anyone with common-sense will ask you to keep your A-game intact. Your reckless button-clicking, thus, needs to be channelized, and should not blow over to ruin your A-game.

Welcome to the world of options, as in the trading instruments called “options”. Fire away, satisfy your video game urge. There are cheap options, and there are expensive options. Move amongst the cheaper ones. Satisfy your video game urge. It doesn’t matter if you lose money. The sums in question will be small. At least you’ve gotten all your impulsiveness out of the way. Now, when you approach your long-term investment portfolio, you are not brash, but focused.

What happens when trading is your A-game, and not investing?

Ever heard of overtrading?

Can drain you. Life might become moody. Kids and family would then bear the brunt of your trading hangover.

Worth it? Naehhhh.

So what do you do?

If trading’s your A-game, satisfy your video-game urge on an actual playstation or something. Use your imagination. Play the keyboard. Write. Whatever it takes for you not to …

… overtrade. Do not overtrade at any cost. Save ample energy and your good mood phase for your family.

What’s the thin line between normal trading and overtrading? How do you notice that you are overtrading?

Energy reserves. You know it when energy you’ve reserved for something else is seeping into your trading. That’s when you are overtrading.

You see, so much in this field is not mathematical or formula-based, but feeling- and art-based. Discovering the thin line between normal trading and overtrading is an art.

Frankly, even stock-picking is an art. You can go on about numbers, and trendlines and blah, blah, blah, but fact remains that ultimately and in the end, picking a multibagger is more of a gut-feel thing.

While trading, you’re looking for spikes. When and where is the next spike going to happen? Ultimately and in the end, that’s also a gut-feel thing.

In the marketplace, apart from needing to be technically savvy, or needing to be a number-cruncher, one needs to be an artist too. Yeah, the artist’s touch binds the game together, and makes it enjoyable to play.