You Miss, I Hit

We’re in the markets to…

…capture gains. 

How do gains come about?

Buy low sell high?

Sure, you’ve then got some gains. 

Enough?

Probably not, because everyone of us holds enough losers. That’s part of the game. Amongst many losers, we then find a winner.

How does one maximize gain?

One looks for mispricing. 

Let’s say we’ve id’d a stock. 

It passes our entry criteria.

Now, we look for an entry point that will give us a price advantage. 

We would ideally like the public to misprice the stock on the downside. 

That’s when we would like to pick it up. Higher the misplacing, higher our advantage. 

When is maximum gain captured?

This happens when the same stock is mispriced by the same public on the upside. 

Is such a strategy easy to implement?

Sounds easy, but NO!

Why?

(For starters), That’s because it goes against our grain to buy something really low, for fear of it going even lower, since sentiments are so down. 

Can well happen. You buy something really cheap, and before you know it, your something is down by another half. 

What’s your protection?

Rock-solid research. Identification of sound fundamentals. A shareholder-friendly management. Technicals that support you. Mispriced entry point. Product-profile that’s going to be around. Lack of debt. Substantial free cash flow. Etc.

If you’ve got such pillars going for you, it’s only a matter of time till they start to shine forth. 

If mass-depression causes you to wilt, though, it’s on you. 

Mispricing on the upside causes us to blunder too. 

Most sell their big winners which still have sound fundamentals, and can potentially go on to bag much higher multiples. 

Do this, sure, but only if you NEED the money. 

If not, give your potential multibaggers the time to become full-fledged ones. 

Sell early, and you won’t perhaps ever find another entry point. Winners barely ever give an entry-window. 

At market highs, sell your losers, because they’ll perhaps be inflated too, and you might get a good exit. 

When others misprice, make sure you hit some home-runs. 

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Nath on Trading – V – Make that a Hundred

81). Paper trading has limited value.

82). That’s because money on the line activates your emotions.

83). Is there a holy grail? No. Stop looking for it.

84). Small edges taken to the nth – that’s what cuts it.

85). Most advisories make more money advising and less money trading.

86). Many advisories ignore sheer basics such as risk : reward.

87). Advisories are after commission and management fees rather than your long-term benefit.

88). If you’re lookig for an advisory, look hard, and don’t be afraid to keep rejecting till you find someone who knows the game and is not greedy.

89). Everything is out there, for you, for the taking, on the internet.

90). Most of this everything is free, if you just make that extra effort to get it.

91). Disclosure laws are so strict, that you can get into the un*erp*nts of a management today, literally at the speed of thought.

92). Thus, to play the market, any market, all you need is funds, due diligence and a device.

93). Due diligence gives you confidence to hold the line.

94). Funds need to be saved first. What goes into trading is that portion of your savings which you are not going to need – at all, at best.

95). Your device needs to become a seamless extension of you. Work on your device till it becomes that.

96). The best ideas are born in silence.

97). The best ideas are also the simplest in nature.

98). Sophistication is a net-net loser’s game.

99). If you’re doing it right, and if you’re not a day-trader by profession, trading takes up only a small portion of your day.

100). Life has myriads of avenues, trading being one small such aspect. Being a trader doesn’t mean losing out on life’s countless drawing boards. Trade. Fine. Live too, and live well. Do all-round justice to your opportunity.

Robotic Stock Selection Anyone?

No…

…thank you…

…is it?

Sure, stockscreens.

We use them all the time. 

A stock screen is a robot.

So why am I still saying no thank you?

I use stockscreens day in and day out.

I use them for trade selection, and I use them for long-term stock selection.

However,…

…(here comes the hammer),…

…the final say is mine. 

I’d like the human touch to answer yes or no.

Also, out of say a hundred selections, I can still say no to all.

And, if something catches my eye, I can dig deeper. 

I’d like to keep all these things in my hand.

I’d like my market approach to be with open eyes and usage of common-sense.

So where are we exactly?

Somewhere between one-fourth and half robotic.

That suits us. 

We save hours of sweat labour.

After sweat labour has done its work, we start applying our minds. 

We take over where the robot has left off.

Stocks and the Art of Synthesis

A lot comes together.

This coming-together is called synthesis.

The word synthesis has now become universal.

It is applied in various fields, including Chemistry, manufacturing and the like.

It is also applied in areas where deep thought boils down facts to unity, to arrive at a conclusion.

What all are we looking at, with stocks?

No action.

Action.

Time-frames.

Market-level.

Selection.

Entry.

Management.

Exit.

One can list other stuff, but this list should do too.

One needs to synthesize the ingredients in such a manner, that the resultant matches one’s risk-profile. [[Why? Matching means successful market-play. Try it out.]]

That, my dear friends, is the art of synthesis, in a nutshell.

 

Dance the Bawwdy Music!

..dance the body music

makes you feel so happy

dance the body music

music makes you happy

hear the music play

feel your body sway

hear the dj say

oh what a big smash big smash

dance the body music…

 

Osibisa, was it, late ‘70s?

Yup. 

What an cool swingy number, sung by an unforgettable band!

Disco beat. Rhythm. Easy peasy lyrics. Synth. Floor’s going crazy. Song’s all over the people. People are all over the song. 

Euphoria. 

Why are we talking about it?

Music or euphoria?

Euphoria. 

I used the music element to paint a picture of euphoria in your mind.

What is it about euphoria?

Why does it push me on alert?

Is it that I don’t wish to enjoy my life?

What could I have against euphoria?

I’ll tell you. 

Before I tell you, I’d like to mention that I love the feeling. 

It fantastic being in the feeling. I’ve got one eye on my alerts though. 

WHY?

We make our biggest mistakes when hit by Euphoria. 

Yes. 

Surprised?

Don’t be. 

Under the influence of Euphoria, our biochemistry is so, so different. 

We’re far from peak. 

Our defences are down. 

We are highly capable of plunging into…an abyss…oblivion…call it what you feel is befitting. 

We let go of safety. 

We bet big. 

We bet dangerous. 

We bet the farm.

That’s what euphoria can do to us. 

I do feel euphoric, at times. 

A trade’s gone well. 

A deal’s come through. 

Stability at home. 

Euphoria. 

However…

…as I told you…

…one eye is on my alerts. 

If even a single thought emerges of betting big, bigger than my normal size, well, my predefined red-alert also goes up with such a thought. 

I see my alert’s red flare, and the unwanted thought subsides. 

I am able to sick to within the confines of my position-size rule.

If even one thought emerges of trying a new untested line, just because all current lines are doing ok, well, my predefined strategy saturation alert also goes up with such a thought. 

I remind myself that I’ve decided upon financial strategy saturation, and don’t plan to add a new line, at least not in a hurry or upon an impulse. 

I’m able to stick to my strategy saturation decision. 

Are you understanding what I’m trying to tell you?

If yes, I’m so happy for you. 

You’re not leaving it for later. You’re understanding it without being hit by the aftermath of a decision taken under the influence of euphoria. 

Cheers mate!

🙂

Saturation

I don’t wish to add to my repertoire.

It has reached some kind of saturation. 

There’s no limit to how far I can go within my repertoire.

However, it is not comfortable with strategy addition. 

Fine. 

Did you just have this dialogue?

With yourself?

It’s good you did. 

While you start out in a field, you’re developing it. 

There needs to come a stage, in a while, where you have exactly identified, that you’re developing this, this and this further. Nothing else. 

Once you know what the exact game is, all your focus is required to take it to the nth level. What that n is going to be is up to you, again. 

Bottomline is, after a point, know your game. 

This is the game. 

This is what you are scaling up. 

That, that, that and that you are discarding, or have discarded. 

You need to reach this point within a reasonable time-frame. 

Then comes the next step. 

Pray, what might that be?

Automation. 

Before embarking upon scaling up, that what remains in your saturated repertoire – automate it. 

Staff. 

Technology. 

What have you.

Use any means for automation. 

Anything that’s legit, and which works. 

Use it. 

Standing instruction. 

Alarm. 

Alert.

Whatever. 

Automation is a huge blessing if used properly and after having tied up all the loose ends. 

If implemented in a hurry with sieve-like loopholes, it can even take you to the cleaner’s.

Implement automation in a justified and sure-shot fashion. 

Do you know what’s going to happen now?

You have created a situation, where scaling up means just punching in an additional 0 in the right corner, before the decimal point. 

Wow.

After a while, the complete field will be on auto. 

Why?

If you’re wise, you won’t scale up beyond your sweet-spot. 

Why?

Because obnoxious scales come with obnoxious problems.

What’s obnoxious?

Anything beyond your sweet-spot…

…is obnoxious. 

What is your sweet-spot?

That only you can discover. 

So what now is the exact status of the field?

Your repertoire in the field has reached complete saturation regarding strategy and scale. It is on full auto. It is adding to your well-being without you batting an eye-lid. 

Congratulations. 

However, where does that leave you?

Is that even a question?

There’s so much to do in the world. 

Discover a new field. 

Develop your new repertoire in this field. 

Take it to strategy saturation. Automate it. Scale it up. Take it to the sweet-spot. Wean off the scaling up. Move on. 

What a life it’s going to be for you!

The Difference between Winning and Losing

It’s a whisker. 

You’re doing everything right. 

You’re following a proven strategy. 

You’ve adapted. 

You’ve removed many mistakes from your resumé.

Your strategy has undergone refinement. 

Why haven’t you started winning yet?

Yeah, we’re used to asking million dollar questions by now. 

In fact, such questions are all we ever ask. 

What do you think is the answer?

The answer is you. 

Yes. 

There’s something about you. 

It’s not fitting. 

You’ve got two options. 

Either make your strategy fit to this something, or …

… make yourself fit to the strategy. 

Both options can work, and you can start winning. 

Which option is easier to implement?

I think the more relevant question here is a different one. 

Which option befits the situation?

I’ll give you an example. 

I’ve got time issues. 

I make my market strategies fit my time issues. 

I can’t change my time issues, for something or someone will fall short then. Like everyone, I have many commitments too. 

Therefore, I fit my market strategy around me. 

I keep fitting, fitting, fitting, till the strategy either works, or is discarded for want of a win. 

Yeah, that’s me. 

Maybe your situation is different. 

Maybe you need to cater to the public. 

You’re not expecting the public to change to your whims and fancies, are you?

Not as a newbie, no no, that would be a cardinal sin. 

After all, the public is your paymaster, right?

Customer is your king, or queen. 

It becomes different when you turn into a celeb. 

Then you can dictate fashion. 

However, till you become a celeb, fit to the public, if you want to win. 

Behave in a manner that people want to pay for what you have to offer, again and again and again.

Maybe there’s a slight whisker of a trait in your behaviour that people don’t like. 

Change it. 

Whether you’re changing yourself, or fitting your strategy to meet your unchangeable nature or schedule, sometimes it’s only a whisker that makes the difference between winning and losing. 

People have lost olympic medals by one-hundredth of a second. 

What’s that millisecond lag in your own life that you need to get rid of?