Stock Market Trading Strategies-2: Finance Trading Times

Stock Market Trading Strategies-2

This is part II of the article: Stock Market Trading Strategies-I, please read the first part before proceeding with this part:

Ultimately, it depends upon your psychological biases and targets that you set with the level of certainty. As I’ve explained in my previous post Forex currency trading and Hedging strategies, that hedging is used for eliminating the risk and to achieve a certainty in the future prices. So if you loose on a significant bull run while you are in a hedged position, you should not repent because your purpose for hedging was to eliminate the risk and achieve the desired level of certainity in your profits.

Same thing goes here as well. If you are happy by beating the bank rate, don’t repent on loosing on a 50% bull run in the market.
One more thing to notice is that you should know how to calculate the profits. That includes deducting the brokerage charges, demat charges, internet charges (if you pay for it), phone calls (if trading by call-n-trade) and basically anything that accrues a cost for your trading activities.

Another aspect of looking at this strategy is effort v/s reward. Is beating the bank rate justified for the amount of time, effort and energy you put in?

We should not forget that the bank rate that we get is effortless and with 100% certainity. You just walk into a bank branch, put in your money with a particular saving scheme in a bank account and walk away without any worries. You come back on the maturity date and happily take away your money plus the interest or return that you’ve earned. Simple and Straightforward.

But is it same for trading stocks with having an aim of beating the bank rate? One cannot quantify the effort you put in stock picking skills, the time you invest in researching the stocks, or refreshing the stock prices webpage for trading on a daily basis. It is difficult to keep track of internet usage or telephone bills. We tend to forget the demat charges and brokerage fee – even if we do so, we do not usually take the time value of discounted cash flows.

Ultimately, this is the randomness that one trader has to fight against. No one can have any control on which way the market goes, which way the stock prices move and how much you can make from your stock picks. Remember that it is not possible to quantify the efforts that you put in while trading, leave apart the brokerage and other charges. No point in beating the bank rate by a mere 1% or 2%; one just has to be lucky to make a significantly high profit than that offered by the bank.
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4 Comments: Post your Comments

Anonymous said...(on 8 January 2008 at 04:06 )  

Hi Shobhit,

I can only say one thing - measuring a self performance in the stock market is a highly subjective thing.
One ends up looking only at profits. As you have pointed out previously, we dont take all the cost into consideration.


Aniruddha said...(on 8 January 2008 at 21:16 )  

Thanks Shobhit
You have given encouraging reply to my query. It seems that in this random world little more money can be earned by such ways. or more money by tuning one's skills in stock picking and discipline. Of course nothing comes free in this world, to earn more money by this way one has to keep constant watch on the market, be vigil all the time, little pain is there but it's affordable when one know the ending is in profit.

Thanks Again.

Aniruddha said...(on 8 January 2008 at 22:21 )  

Hi Shobhit
please comment on this also, as it is the next step which i am implementing and asking people to comment on that. so that their free comments will help me out.

Andy K

Unknown said...(on 22 January 2008 at 03:34 )  

I feel that strategy mentioned in the article link you pasted in your comments would work most of the times in a bull market. But I am afraid the person could lose his shirt in the bear market.
What do you say,Shobhit?

It would be interesting to know how he fared in market crash of 21st and 22nd jan 2008.

Wish you all happy and fruitful trading and investing activities with safety! = = = Post a Comment

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