Restoring Traders/Investors Faith into Investing

[Einstein]

Kirubakaran Rajendran, 8 years of exp in Indian stock market - www.squareoff.in
Answered May 2, 2016


Lost 1.5 lacs in one day!
During the beginning phase, I use to trade with few thousands, take 10 times margin exposure, was able to make few 1000 rupees but after 2nd or 3rd attempt i end up losing all due to bad position size. Later, just like everyone, started learning about technical analysis, fundamental analysis but one important factor that i did not give much importance earlier was "Trading Psychology" which plays a vital role in trading. After few years, all I tried to do was "surviving in markets with my capital", i did not focus on earning higher profits, instead focused on protecting my capital.
This habit helped me in risking only 2% of my capital on every trade, due to which I was able to trade regularly - intraday and as well as positional. After I was doing decently well in equity cash segment, tried my hands on Option trading.

I started learning option trading, there are multiple factors involved in options like volatility, theta, gamma, delta.., all these are Greeks and Latin to me. So did not learn about it, instead i just understood one concept.
If you expect the stock price to go down, Buy put option. If you expect the stock to rise, buy Call option.
So based on my little technical knowledge, i tried dabbling with options. I trade only with few 1000s, few times i made 5 to 10 times, most of the times i loss all.
During the quarterly result season, i noticed many stocks spike up or break down like anything. But we cannot judge the outcome of the quarterly results, so I started "Long Strangle" trades, it means, i buy both put and call option. After the results, the stock has to move up drastically or move down drastically to make profits with my trade. So i bought both the options, so that if the stock tanks then my put option will give enormous profits and if the stock goes up, my call option will give higher profits.
Say Rs.5000 i buy Put option and Rs.5000 i buy call option. Total investment is Rs.10,000. Most of the time, its OTM. If put options works,that is if the stock price goes down drastically after the results. then Rs.5000 on put option can become Rs.25000 to Rs.50000 and Rs.5000 on call option can go to zero(doesn't matter if i can make 10x returns on my total investment). Similarly, if the stock shoots up drastically after the results, then Rs.5000 on call option can become Rs.25000 to Rs.50000 and Rs.5000 on put option can go to zero.
I tried this trick many times(during my initial days, finding this strategy was a eureka moment - i felt like as if i found the holy grail-later realized how dumb i was ), and I was able to make decent returns most of the time.
Now the real shaitan started appearing my mind, if i could make good returns with lesser capital, then why not with higher capital. Infosys quarterly results was due next day. So i pulled in my savings money and bought call and put options for 1.5 lacs.

D - day
Next day, market was about to open, and before market opened the results was out, Infosys quarterly results was in fact good and meets analyst expectations, I was sure am going to make enormous profits on my call option, as the results was good, i was expecting the stock price to shoot up. And i started calculating in my mind, what should i do the profits.
As expected Infosys stock price opened with gap up, but the real shock of my life came when i checked my option price. Booom!! Both my call option and put option price tanked, my 1.5 lacs is down to Rs.50,000. For a moment I was like, whatthefuck!! When i was started looking for the reason for the loss, the options price started declining steadily and came down to Rs.20000. That's it. I realized, am screwed. Squared off the position and booked the loss and was wondering rest of the day what has happened.
Lesson learned: Options Trading involves immense knowledge, need to understand how option premium price works, should have good understanding on implied volatility, historical volatility, open interest, and so many other things. Only then its possible to be successful in option trading, until i learn all these i decided to stay away.

After many ups and down,and many years of learning, slowly and steadily I was able to make decent returns. Enrolled myself with NSE technical analysis courses, won couple of Zerodha 60 days challenge.
Completed Technical analysis module

Completed currency Derivatives module

Won Zerodha challenge with my day trading and positional trading strategy.

What I do now?
Finally created my own strategy, coded it and converted into 100% automated algorithm that will trade automatically without any manual intervention. As it was profitable, i started my own startup(www.squareoff.in), which is now specialized on providing these algorithm platform to retail traders who do not have time to do analysis due to their job. The Algorithm makes the trading decision for the investors.

 

[Einstein]

Here are the great Story of Heavy Losses by some really great guys:-
'The Dot Com Bubble' (Period 1997-2002)

Many Trades Lost Huge sum of Money in these markets these stories are one of them:-

1. Monument Internet Fund

During mid 1999 the Monument Internet Fund reached it's pinnacle of heavy returns of 117.4% in just first five months of the Year.
Monument's Fund manager 'Alexender Cheung' predicted that his fund would gain 50% over the next 3 - 5 years and an annual average of 35% over the next 20 years.
He stated that his fund would $ 10,000 to $ 4 million over 20 years.
Cheung was overoptimistic and Investors threw their money at him. Having more than $100 million in his Fund by the year 1999.
But disaster awaited him in just two years his fund would return $10,000 invested to a mere $2,000 (Shrinking the fund by one fifth of its original Capital).
The monument Fund now no longer exists and yes he was not the only one
2. Amerindo Tech Fund
This Fund rose an increadible 250% in 1999 managed by Alberto Vilar who ridiculed anyone who dared to doubt that internet was the "Machine that made Money".
He even said that "If you are out of this sector you will heavily under perform You would be like a Bullock Cart while I 'm a Porsche. You don't like growth Opportunites than go Somewhere else."

Here too Disaster awaited a $10,000 investment in his Fund would leave you with mere $1,195 worst of the losses in the history of Mutual Funds.
3. James J Cramer

This guy lost more then anyone could have ever imagined he stated during dot com bubble that "Internet is the new era for investing and so here old laws of picking stocks don't apply anymore people should buy Growth companies which only internet could provide".
He lost heaviest of them all a $10,000 investment in his Fund would leave you with a mere $597.
most of his investments lost more than 94% of their value.

These guys lost more than what Individual Traders would loose aka their "REPUTATION".​

P.S:- By the way I have not incured heavy losses till day and hope not to incur them in Future. Small Fluctuations have been my only personal experiences but these guys make me realize that anything can happen and you must be ready for it or else you loose.
Warren Buffet:- "Always learn from other people's mistakes rather than committing them by yourselves."
Well Chanakya also stated this thing.
By the way the Guy who asked this Question might be some real Witty Guy .

 

[Einstein]

3 words. “Shilpi Cable Technologies”.
Date: 24 May 2017
There is no timeline. This is a current stock which resulted in a 20% loss (of overall investment value), entered into lower circuit (only sellers in market) and stock price fell from Rs. 220 (at the time of entry, 3 weeks back) to Rs. 45 (today). The funny part is,

1. I am no finance guru but I have not come across anyone able to identify the reason behind this fall. There are some red flags (for ex: low cash flow, promoters share pledged) but there are also positives (FII shares increased in last quarter).
2. Everyone (including Shilpi cable management) says that the board of directors are having an in-fight amongst themselves and they are dragging down the share price by willingly putting their stake (huge number of shares) for sale.

Can something be done about it? : Nope.
Lesson learnt: Never every invest in small cap unless you know it inside-out or you are in for a very short term investment.
The whole point is, one never knows if these small cap companies are run by professionals or “locals”. One never knows if the financial results of these companies are cooked up or not. One never knows if the operators are playing with these stocks or not.
Everybody talks about if one had invested in Wipro in 1981 or in bitcoins in 2011 or stuff, but the story I tell my near and dears will be different.
“If I had invested 1,00,000 in Shilpi in 2017, I would be 1,00,000 poorer today”.
Honest advice to fellow beginner traders: Please take extra caution when identifying ‘potential multi-baggers’. There were hundreds of stocks in the market in 1981. Not all turned out like Wipro. There are thousands of stocks in the market today. 30 years down the line, no point regretting choosing stock X over stock Y.

 

[Einstein]

Nitish, studied at National Institutes of Technology
Updated Jul 26, 2016


Rs 2,34,000 in one day.
My stock was trading at around Rs 17.85 at 11:45 am when I bought it and sold it around 2:30 PM at Rs 15.50. I was doing intraday trading at 10 times margin capital with me. I had bought 100000 shares. Where did I go wrong?
1) I chose stock that was being traded at a very low volume.
2) The quantity of shares I bought was way too high for that stock with that low volume.
3) I had got enough time to do square off but over-optimism led me down.
4) I chose wrong stock having low value.
5) I didn't care about its sector. Whether it was an automobile or IT or manufacturing sector, that was area of my least concern.
6) Lack of knowledge in trading.
This loss was equivalent to my 6 months salary that time. My eyes became teary and heart beat almost stopped. After that, I stopped doing real trading and started to read and anylyse stocks extensively. I started trading again after 7 months and not only recovered my loss in about 4 months but earned a lot more money after that. Most of the weeks, I would make profit 4 days and loss on only one day. I don't trade anymore because of my demanding job.
Strategy I opted to make money:
(You can say it's kind of Jugaad strategy but it served the purpose)

• I began with delivery trading as the risk is much low compared to intraday trading. But the rate of earning money is very slow in delivery trading, so I shifted to intraday trading once again after earning sufficient capital. An average trader who trades alone at home without any external information has to rely solely upon luck. Company's financial performance sheets/information are not much beneficial to him.
• After analysing stocks for about 7 months, I started to predict the movement of stock by +/- Re1 only for the stocks ranging between Rs 100-300 and +/- Rs 2 for shares having value between Rs 600-900. But I was more confident about my prediction for shares in former case, I started trading 1500/1000 shares of them. This way I controlled my greed and earned on an average Rs 4000-5000 per day. My portfolio consisted of shares ranging between Rs100-300 only and thus, I was able to focus on limited number of stocks.
• Many websites/trading platforms have information on hourly/half-hourly/time based top losers and gainers. I would pick the stock(from top 3) with medium to high volume from that list having value in my specified range and analyse its graph. Obviously, its graph will look like a vertical line either going up or down. Now, here is the trick. In most of the cases, if the volume is sufficiently high, the price will follow the same pattern. Means, if the price is going up, it will keep going up atleast for a few more seconds. I think the reason behind this is that the price is going up for a particular reason like something good might have happened in the company and more and more people are buying it. So, there will be a very little chance that the price of the stock will fall immediately. Hence, don't try to use sell before buy option in a hope that it will fall down (remember, you need only +/-Re 1 or Rs 2 change in value??). Similar will be the case with top losers.
• I started using 2 trading platforms and traded only those shares which were very volatile. On one platform, I would use "buy before sell" option and on the other "sell before buy" option simultaneously at the same price on two different browsers and then immediately square off the one which would make loss. I would make a little loss on one and high profit on the other. Mostly, such volatile shares have high value. Since, my capital was low, I traded stocks having value between Rs 900-Rs 1800. I earned alot of money this way. Remember, this will work best only with the volatile stocks.
• Best time to do intraday trading is before 9:50 am. Because, this is the only time when stocks show wild variations. Look at Sensex/Nifty and then your stock and trade immediately. If possible square it off before 10 am. I used to earn Rs 1000-2000 before 10 am.
• See which sector is going up. If your stock is listed in Sensex or Nifty, co-plot the graph of Sensex/Nifty with your stock, you will get an idea whether your stock will go up or down or remain neutral.
• In all the above 5 points, I was concerned with only +/- Re 1 or Rs 2 change in value. My trading quantity took care of my profits. Generally, 1000/1500 shares per trade is enough to earn a decent money without risking much.
• Always trade only those stocks which are being traded at a high volume because it will be easier to get out of the trade early without bearing much loss.
• Never go against the market.
• It is not necessary to trade everyday. If you feel like you are confident enough or your prediction is most likely to give you good results, only then trade. There were days when I was in full mood to trade but didn't trade only because I was not sure of the market.
• Set a particular profit target and it should not be much high.
• I don't know why people say that Stop Loss option saves you. Because most of the time, the stock gets traded at stop loss value and jumps again. So, it's up to you. I never used Stop Loss.
• Always keep an eye on US/Japanese/Chinese/Hong Kong stock market (NYSE/NASDAQ/NIKKEI/SSE/SEHK) a night before. It will give you an idea of the performance of a particular sector. I don't know the reason behind it, but I got benefited mostly from NASDAQ.

What gave me confidence to trade again?
Marksans Pharma was trading at Rs 1.65 in 2012 and it was valued at Rs 115/share in 2015. I earned a lot of profit by investing in it.

I hope it will be helpful.
Thank you.

 

[Einstein]

Rajbir Singh Chawla, CA with 30+ years of experience, running blog on finance www.itrtoday.com
Answered Dec 25, 2016


I will like to share my personal experience here
Upsides

1. My entry in share market was an accidental one.
2. I had lent Rs 40000 to a friend of mine in 1991 who promised to return Rs 80,000
3. He went bankrupt and all he could give me was shares worth Rs 5000 as full settlement
4. It was time of Harshad Mehta boom, and my shares wre sold for Rs 5 lacs in next 10 days.
5. I againt bought shares, which were sold for Rs 22 lacs in next 45 days
6. I bought a house for Rs 15 lacs, which is now worth Rs 5 Cr and invested Rs 7 lacs in share again

Now down side

1. After such gains, I started feeling as if the share market was a Make it rich Quick scheme and one could earn endlessly
2. The markets crashed and The said shares of 7 lacs could get sold for Rs 1.75 lacs
3. For the moment i said bye to share market
4. However soon after 2 years, the greed in me got better of me
5. I started investing in share markets and again earned some money
6. I ensured that I bought only Blue Chip shares.
7. However soon driven by greed, I started buying futures and options
8. With about 1/10 of money, i could earn much larger quantity and earn good money
9. By March 2008 I had invested Rs 18 lacs again in share market and all in futures.
10. The markers crashed and my wealth was reduced to Rs 1lac.
11. After that Now I am clear, I buy only blue chip shares, No Mid cap shares NEVER, no blank sales, first buy and sell if profit or else hold the shares and i have been making decent money in the range of about 4% per month, or say about 50% per year
12. Driven by my experience, I have shared my thoughts on intra-day share trading here

 

[Einstein]

Mohammed Thaufeek, co-founder, equityboss.com and level 1 certified financial advisor
Answered May 3, 2016


-35% of the allocated amount
Who has burnt the cash?
The mysteries around the stock? Global sell-off? Wrong analysis?
Naah..all credit goes to one and only "ME"
Tree House is the stock which incurred me a loss of -22,500 bucks
No!!! let me put it in the right way...I have lost -225,500 bucks while investing in Tree House shares because of not sticking to my strategy and over-confidence in my "incorrect" analysis
I bought 208 shares of Tree House based on the entry signal triggered by "Chaikin Oscillator" with the hope that I'll ride along the newly formed momentum in the stock

A week later, the stock fell by almost 6% and the oscillator turned negative i.e. time to exit
Here's the interesting part (which I think most of the investors would've come across and acted in the same manner I am gonna describe below)
When I got the exit signal of Tree House with -6% down, I reviewed my trading strategy using Chaikin Oscillator and found out

• Many trades have earned a decent to good returns in relatively short time
• I have booked loss in some of the trades and it went down further (Felt proud to have taken a smart decision)
• Some of the stocks booked with loss raised significantly a week later (Here's the challenge for my smartness)

Yes you guessed it right - Now my mind started to scramble for an answer "Why not Tree House also follow the stocks which raised a week later?)
I started reaching out to forums & discussions (honestly speaking I've never done that before) looking for positive clues and found some positive & negative reviews
At last I concluded that there's a strong resistance lying around 260 - so even if the stock goes to that level it will bounce back and reach 400
A week later, stock plummeted by 10% and closed just above the strong resistance level I've calculated (I am still proud of my smartness)
For two weeks it traded above that level and one afternoon, the strong resistance was shattered and so was my heart - Now I couldn't get out with 13% loss; still my mind said I can't be wrong
The irony here was,a week before when I gave a demo to our new customer he'd Tree House shares in his portfolio and asked me for my opinion - I told him to get out if 260 levels are broken
He acted on my opinion but I couldn't and by the time I made up my mind to exit from the position, the stock has reached 200 levels in less than 1 month time
And then the stock came down by another 120 rupees and currently trading below IPO price (78 rupees to be precise)
What I've learnt?
In one sentence
" Plan Your Trade and Trade Your Plan"
"Never try to avoid loss when your strategy indicates clear exit"
Post this incident, none of my trades have met out a loss of more than 5% of the allocated amount and never had any sleepless nights worrying how much I'd lose in a trade

 

[Einstein]

Updated Jun 19

The above screenshot was taken on 23rd march 2018 12:15 pm, Nifty trading at 9970, lowest point of the day and showing my open position in stock DCM Shriram Ltd. . This is all my life savings and even though they say don’t put all your eggs in one basket, I made the mistake (and I learnt my lesson). I did not expect it to come down to such levels after hitting a 52 week high of above 620 in November-December 2017.
DCM Shriram Ltd. is a leading business conglomerate. It is into Agri-Rural, Chlor-Vinyl and some other value added business.
Coming to companies current valuations, I invested in DCM shriram in staggered manner because of the following reasons:
The cash reserves of the company have been increasing YOY, along with Net profit, paying regular dividends . The debt of company has been decreasing continuously with significant increase in Interest coverage ratio. Trading at PE of 9 which is very cheap compared to Industry PE and company is adding value of its books with EPS improving over every quarter. There are all the making of a very good company supported by a good management.
Anyway, my heart skips a beat when I see this huge loss because I am new to Indian equity but I am quite confident of companies performance in coming quarters and I see DCM shriram giving multifold returns from current levels.
PS: I will come back here to update my answer after I book profit/loss in some years time.
Update 1: Attaching screenshot of 11 June, 2018 when the stock was trading at 271, went as low as 240.

Update 2: On June 18, 2018 company announced buy-back of equity shares at 450, which is a positive news, will not be participating in buy back though. Hopefully this will give a boost to the stock price. Fingers crossed.

 

[Einstein]

Nishant Sheth, Partner (2009-present)
Answered Feb 17


I stayed away from stock market for first 10 years of my life after started earning. Only had LIC, ULIP and Insurance policies .
One fine day after 16 years, one of my school friend met. We discussed our work and since we met after so long we went for a quick bite. He was working for Deutche Bank and thus asked me about my investments and I told him, since I am running business, I am always out of money and thus dont have “extra” money to invest in Stock market. Another reason I stayed away was , my father had lost 14 Lacs during Harshad Mehta time and so while growing up,I have never ever had memories discussing stocks with my father or for that any of friends. Moment my friends discuss stocks, I leave conversation or place!
My friend told me download an app named- Moneycontrol and track a stock named Meenakshi Enterpises Ltd. (MEL). Today’s closing is 318 and it will close 321 tomorrow.
Next day, Bang on- 321. He told, tomorrow’s closing will be 324.
Next day, Bang ON!It was 324. He Next day he told 327!
Bang on..it was 327.
That day we discussed in lengths- He told this company has potential to reach 600 in 2 months. He himself had invested 25 Lacs . The “Operator” was his friend and he will tell me to exit at right moment.
THE GREED MOVEMENT- I told him, shall I invest in that company? He told close your eyes and see the magical ride of doubling money in 2 months. So i bought 500 Shares at 331.
I was fascinated with the accuracy with which stock would move as it was absolutely perfect with the levels my friend told.
Meanwhile he had recommended me another penny stock- “ Sai Baba Investements Ltd” . I invested in that too crazily influenced by “Greed”.
Things were fine till the time stock reached 357 and stock started falling-Direct Lower circuit..20% minus that day. My friend dint receive my call that day and called next day he told “Operator” is not picking his call etc etc.
Following trading day, -20% and -20% the next and…
it was extremely painful to see stock plunge to 44 in 4 months and then “Operator” gave chance to exit.
I lost 1,43,500/-. First ever investment that I made.
Thanks to my mistake, I started learning basics of finance,stock market,investing,different assets class. Started SIP. Invested in Quality stocks.
Thanks to wonderful free resources at Zerodha Varsity, started learning technical charts, Options, Futures, hedging etc
Looking back, I have no hard feeling for anyone. Took time, but forgive myself too. After all,it was my mistake in trusting my friend blindly instead of doing- studying a company,balance sheet,its projects or its financial health.
Now I feel i am more confident in investments, reading financial news and analyzing balance sheet, forecasting values with DCF etc. None of this would have ever happened if I had not lost money.
Working in tip based investments, cannot make you expert in that and its not permanent. Sure,you can earn money! But yes, skills you yourself master by studying,reading and experiencing will stay with you for life.
Last thing - Even after 30 years in market,one of my Uncle calls him “Student of the Market”. Hope that humble feeling ingrains in me too!
#HappyInvesting

 

[Einstein]

Lost 2.48 lakhs in a single trade in May 2004. The day when Vajpayee lost and Congress took over. markets were limit down twice and all short positions were freezed. I was short on many stocks, many of them were running huge profits. The next day when markets opened for trading, that is when the freezed accounts were allowed to trade. My loss in one of the positions in TATASTEEL, had lost 2.48 lakhs.
Not a big amount today, while it was a good percentage of my capital. It was a learning. In 2009 election result time it gave back multifold as the markets had an up freeze and in march 2009, just 2 months before the election result day, markets had turned up after the sub-prime lending crisis.
Big time gains were made, again a lesson. Follow your system rules with discipline, you will eventually be at an advantage. At times of adversities, one needs to have very belief and continue doing what he is doing. To get such high belief, you need to have confidence on your system and that confidence comes from past experience and records.

 

[Einstein]

Allaparthi Sai SriHarsha, Trader, Investor in Indian Stock markets
Answered Jul 12, 2016
Originally Answered: What is your story of losing a lot of money in stock market?

Like an ordinary trader, my account blown few times during starting days of my trading career. Many experiences.
One of the most disappointing experience was, during penultimate days of my engineering project submission. My RM called me on phone and said, crude is giving good movements, it's seems a good buy here, then I said OK buy it, so he bought on behalf of me.. In the meanwhile, I was preparing myself and batch(I was batch leader for project), for our project.
After few mins I got a call and my RM ,
RM: sorry sir, crude inventory is not in our favour, so it seen a sudden fall, so it hit our SL ..
Me: Ohh. It seems not a good day for me. Leave it.
RM: Sir, we can now take a short position, as inventory data is negative for crude you will end in profits.
Me: No I am busy, I can't concentrate there, please next time we will do.
RM: No sir, I feel it will go according to our prediction. Take the position.
MeI was in great confusion, can't focus on the project clearly, my weak mind says, listen to him).OK take it .
After few mins, again a call from him.
RM: S..si..sir... It seems not at all a good day
Me: What happened?
RM: It went up, it seems a knee jerk reaction after the release of inventory data, our initial buy was a good call, shall I close the trade?
Me: Uff! Close it first...
He's going to say few things all seem irrelevant.. I was full of anger and asked him to cut the call..
Learning: It was such a bad mindset then, didn't manage my emotions.
Also, learnt never listen to RM, because he will call only for his perks.
You must be clear, which work is important for you, judge correctly and fix to if with respect.