Hello all.....trading for the last 9 yrs

Nifty Trader

Well-Known Member
#1
A big hello to everyone here. My name is Jai & I have a background in business (HR Consulting & Renewable Energy to be precise). I am based in Mumbai & have been an avid follower of the stock markets for the last 9 years & in that process, tried my hand at all forms of trading – intraday, positional, long term investments – with a view to understand the markets in greater depth.

Through this channel, I aim to share my experiences & hope that it benefits a few forum members in one form or another. As they say, it is cheaper to learn from other people’s mistakes & that is esp. true when it comes to trading the markets :)

I shall also be posting my own trades on an EOD (End of Day) basis as regularly as I can with entry price & SL. As the SL is trailed I shall update it here. This will be posted under the "Equities" --> "Position Trading" part of the forum. Pl note that this is not to be considered as trading advice or a recommendation & is purely for information & discussion purposes. Pl consult a certified finance professional for trading advice & expertise before initiating any trades.

The main features of this trading system/method are:

1) Stop Loss is always fixed before trade entry whereas target / exit to be determined by the market i.e. we are prepared to lose only x amount but will take whatever profits the market wants to give us. This may be x multiplied by 2,3,5,8 etc. This way, risk-reward ratio in our favour.
2) Typical holding period - anywhere between 1 day to 1 month.
3) Trades placed before the trading day begins
4) No watching the markets intraday / real-time i.e. a passive system
5) Trading in Cash / FnO market on both Long as well as Short side depending on the trend
6) Returns to be evaluated on an annual basis
7) No watching of business channels so as to avoid the role of external influences
8) Only stocks will be traded, not the indices

Look forward to interacting with fellow traders.
 
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Nifty Trader

Well-Known Member
#2
My experience in the stock markets:

I developed an interest in the markets somewhere in early 2002 & it was born out of my desire to earn a return better than the 8-10% offered by bank fixed deposits (FDs). I realized very early, having read a lot of books by successful businessmen, that in todays day & age, I should not be the only one working while my money just sits around in my bank account doing very little. My money should also be working equally hard! This is why the rich keep getting richer they have their money, assets, employees all working hard to generate returns for them. Because my FD money is doing very little that is exactly the return I would get at the end of the year very little! Now dont get me wrong. Theres nothing wrong in parking your money in FDs but no one ever became wealthy on bank returns. With inflation hovering around 9-10% the purchasing power of money is just about staying the same, forget enhancing the capital. If you count taxes, the real effective return is actually negative.

With the motive being clear I set my sights on the most logical place I could think of for generating the superior returns I was seeking & without compromising my work the stock markets. I remember following the stock price of NIIT everyday in the business section of the Times of India & noticing that the price would oscillate between Rs. 240-260. i.e. it would hit 240 & go up & hit 260 & move back to 240. I thought I had discovered something great & I made money trading what I later found out was called a channel. In 1 week I was able to make more than what my bank offered me for an entire year! I thought to myself well that was easy. It would have remained easy if only the markets were not, well, markets. One day the channel broke on the downside & I had to exit at a loss wiping out all previous gains. Sounds familiar, doesnt it? :) So that was the end of strategy 1.

I tried my hand at options then as some experts told me they were safe. Some failed trades (strongly recommended by my broker) later I was down both in terms of money & more importantly, confidence. I did a lot of reading to improve my knowledge & finally settled on long term investing as a strategy. At this point, due to time constraints, I didnt want to be involved with the markets on a day-to-day basis. So I bought a few stocks & reviewed them once in a few days. The time was somewhere around mid to late 2003 just when the bull market was beginning to take shape.

Heres a summary of my investments & some comparisons. There have been other investments made but those have been much later into the bull market & hence, have not been considered. The table below might not be very clear to understand. Hence, I have uploaded a Word document (titled "Trades taken before the bull market" as well which shows this clearly.

No. - Scrip Name - Entry Price - Peak stock price - Peak Returns (%) Todays stock price - Todays returns (%)

No. Scrip Name Entry Price Peak stock
price Peak Returns
(%) Todays stock
price Todays returns
(%)
1. Bharti Tele 47.7 562 1078 345 623
2. Tisco 155 931 501 341 120
3. Jindal Stainless 92 242 163 72 -22
4. Moser Baer 138.2 341 147 14.4 -90
5. IPCA Labs 55 350 536 274 398
6. Federal Bank 74 499 574 337 355
7. SAIL 14.5 292 1914 82 466
8. Kochi Refineries 69 241 249 163* 136
9. Aftek Infosys 58 148 155 10 -83
10. Balaji Tele 48 388 708 32 -33
11. Arvind Mills 38 141 271 65 71
12. HCL Infosys 94 291 210 39 -59
13. Jisco 304 427.4# 41 - -
14. Canara Bank 63 839 1232 366 481
15. JSW Steel 126 3164 2411 387 207
16. Union Bank 31 427 1277 173 458
17. Allahabad Bank 47.6 271 469 117 146
18. Aventis Pharma 285 2424 751 2302 708

Annualized Returns 88 27

* - Company was taken over by BPCL in 2006.
 

Nifty Trader

Well-Known Member
#3
Observations from the above table:

o Now the peak returns look fantastic but you only know what the peak is after it has been formed i.e. no one can exit at the peak.
o If you look at todays annualized returns they are good but less than 1/3rd of the peak returns!
o Annualized returns over the last 8 years (buy & hold strategy) are also not very attractive considering we caught the entire bull market from the beginning. It could also be argued that we also caught the bear market from 2008 onwards but then thats the inherent risk in a simple buy & hold strategy. i.e. you can only make money if the market goes up.
o My own exit was much before the peak & I made an average of 110% returns in a years time which to me seemed impressive at the time but in hindsight was a lost opportunity.

All of the above indicate that knowing when to buy is one thing but more important is to also know when to sell. That would have allowed the above portfolio to generate even better returns by:

1. Allowing the investor to not cut his positions too soon (like I did) so that he could ride most of the trend.
2. Exiting the portfolio when a bear market emerged thereby avoiding the subsequent losses. A rupee saved is a rupee earned & this alone can save a lot of time & enable you to reach your financial goals faster.

Now you might think why did I not re-enter the stock markets even after exiting & seeing the markets go up further? Here are a few reasons I did not:

1. The market has run up far too much. The Sensex was already at an all-time high & I thought how much further can this go? I didnt want to enter & see it tanking.
2. Against the normal investor mentality of buy low & sell high. Buying at Sensex level of 8000 would have meant I was buying high. But low & high are all relative terms. The price is never too high in a bull market & never too low in a bear market.
3. Absence of a trading system / method which could indicate clearly when to enter & when to exit.
4. Incorrect understanding of how the market functions. It takes time to learn any subject & become good at it esp. the financial markets.

I realized that with all these deficiencies I needed to evolve to be able to trade the markets with success and so started another long journey to tame the beast. Heres what I diligently did for a good 3-4 years:

1. Subscribed to The Economic Times & started reading it daily.
2. Watched a lot of CNBC & other business channels as much as I could.
3. Subscribed to a lot of paid services by so-called experts & traded those calls diligently.
4. Read books on technical analysis & did a lot of research on the subject.
5. Subscribed to technical analysis softwares in the hope of finding the holy grail.

Inspite of doing the above, I was still not successful in finding a trading system that worked consistently. What I had gained though, was invaluable trading experience which helped me to really understand the markets. I also realized that a lot of the experts on tv are just as clueless as we are. They would say something one day & the exact opposite would happen. In my eagerness to find a good system I had mistakenly assumed that these analysts on tv would surely know how to trade (thats why they are on tv, right?) & hence, I subscribed to their services. I must have subscribed to at least 20 such services. My experience with them was nothing short of deeply disappointing. Not only was I losing money by paying for their subscription fees, I was also losing money trading their calls! I also found a lot of them to be quite unscrupulous to be honest.

Here are some of my experiences with these service / tips providers:

1. The calls were such that they would succeed maybe 30-50% of the time & the risk-reward ratio would be equal. Add brokerage, slippage etc. & you end up making losses overall.
2. A lot of the times you couldnt even get an entry into the trade as the price was already near the target by the time the trading sms came in. But of course, the analyst was quick to show this trade in his trading performance next month. A trade which none of his subscribers could have entered!
3. The past performance would be manipulated. For example, a call would come in to Buy Reliance at Rs. 2000, Stop Loss - 1980. Target 1 2020, Target 2 2040, Target 3 2060. Now if Reliance moved to 2020, you would get an sms to book partial profits at 2020. Then if it moved to 2040, you would get another sms to book more profits at 2040 & then finally if it hits 2060 to book full profits at 2060. Now logically, we booked at Rs. 2040 (average of 2020 & 2060) but the con artists would show profit booked at Rs. 2060. In the same scenario if Reliance had touched 2020 & then hit the stop loss, they would show profit booked at 2020. So either way, they were covered.
4. I realized that a lot of them made their money not from trading but from selling their subscription services. Even 20 people taking their service after watching them on tv translates into a cool Rs. 1,60,000 every month (at an average of Rs. 8000).
5. On a telephone inquiry they would claim the moon but would never ever give a single reference of a satisfied client. In hindsight there probably werent any.
 
#4
Warm welcome to the forum, Nifty Trader.

Please start a new thread in Equities section under Daytrading/Swing Trading/ Position Trading wherever you feel appropriate and then I will shift your second post in this introduction thread to that new thread, so that you can continue building up that thread with your posts.New thread will help people to thank your posts, ask questions etc.

Smart_trade
 

Nifty Trader

Well-Known Member
#5
Warm welcome to the forum, Nifty Trader.

Please start a new thread in Equities section under Daytrading/Swing Trading/ Position Trading wherever you feel appropriate and then I will shift your second post in this introduction thread to that new thread, so that you can continue building up that thread with your posts.New thread will help people to thank your posts, ask questions etc.

Smart_trade
Thank you Smart Trade. I shall do so immediately. Apologies for posting it in the wrong section.
 

SavantGarde

Well-Known Member
#6
Hi Jai,

Your posts #2 & 3 in this thread, if you can copy and repost these here in the thread, so that one can do the needful as suggested by ST.

Reason for my request is because if the original posts 2 & 3 are moved they will appear chronologically... in the new thread started by you....and if they are reposted here they will have new Date & Time stamp and will appear in the correct order as intended by you...when moved to the new thread...!!!


SG
 

Nifty Trader

Well-Known Member
#7
Hi Jai,

Your posts #2 & 3 in this thread, if you can copy and repost these here in the thread, so that one can do the needful as suggested by ST.

Reason for my request is because if the original posts 2 & 3 are moved they will appear chronologically... in the new thread started by you....and if they are reposted here they will have new Date & Time stamp and will appear in the correct order as intended by you...when moved to the new thread...!!!


SG
Hi. Sorry I didnt quite comprehend :confused: However, by the time I had read this I had already copy / pasted posts #2 & 3 to the other thread under Equities --> Position Trading under the thread title "My EOD Stock trades.....updated regularly". So you could even delete the same posts in this introductory thread if you like :)
 

SavantGarde

Well-Known Member
#8
Yup...Noticed ...what you had done...it was perfect...:)

Let me clarify the confusion...

a) I didn't want you to go through the trouble of re-typing
b) Wasn't sure you could copy from this Thread of yours and post it in the New Thread
c) If your original posts#2 & 3 which had earlier Time & Date stamp, had it been moved to the new thread... they would have appeared as Post#1 & 2 respectively and your introductory post would have appeared as #3
d) To maintain the chronological order I suggested to copy and re-post 2&3 here and those would have been moved by ST or myself... and would have reflected in the right order as you intended.


SG

Hi. Sorry I didnt quite comprehend :confused: However, by the time I had read this I had already copy / pasted posts #2 & 3 to the other thread under Equities --> Position Trading under the thread title "My EOD Stock trades.....updated regularly". So you could even delete the same posts in this introductory thread if you like :)
 

Nifty Trader

Well-Known Member
#9
Yup...Noticed ...what you had done...it was perfect...:)

Let me clarify the confusion...

a) I didn't want you to go through the trouble of re-typing
b) Wasn't sure you could copy from this Thread of yours and post it in the New Thread
c) If your original posts#2 & 3 which had earlier Time & Date stamp, had it been moved to the new thread... they would have appeared as Post#1 & 2 respectively and your introductory post would have appeared as #3
d) To maintain the chronological order I suggested to copy and re-post 2&3 here and those would have been moved by ST or myself... and would have reflected in the right order as you intended.


SG
Ah! Ok. Understood. Must say I admire your dedication. Working even on a Sunday & writing at length to make a newbie understand. Great job :thumb:
 

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