Most traders have been in that one monster, parabolic trade where they made a killing. The problem is the exit. It is important to always be wary and plan a trailing stop to get out of your huge winners. So many investors and traders just get lucky, get in the right trade at the right time, and catch a monster trend. Their patience to hold pays off by catching a full move in their favour by letting their winner run. Unfortunately, this patience is a liability if they also hold all the way back down, coughing up big profits. One part of the exit is a well-placed trailing stop under a near term support price, or moving average. Additionally, you can use the psychology of the market as an indicator that it is time to look for a profitable exit.
10 Signs Your Big Winning Trade Is About To Go Bad and it is time to look for the exit.
If they put the ticker symbol, currency, commodity, or index that you are trading as a live permanent quote on CNBC, the end of the trend is near.
If a bull or bear is on the cover of a major national magazine, that market is very close to ending.
If you are on the side of the vast majority of traders, and people against you are vilified, then the trend is almost over. Continue Reading →
Benchmark indices erased their early gains to close Friday’s session lower, dragged down by metal stocks.
The benchmark S&P BSE Sensex closed 192 points, or 0.48 per cent, lower, with YES Bank, IndusInd Bank, Tata Motors, Reliance Industries, and ONGC the top losers.
The broader Nifty50 index slipped 53 points, or 0.45 per cent, to 11,789. The market breadth remained in favour of sellers. About 919 stocks declined and 822 advanced on the NSE.
On a weekly basis, however, the indices gained with the Sensex closing 0.5 per cent higher and the Nifty climbing 0.6 per cent.
Among Nifty sectoral indices, only three closed the day in the green. Nifty Metal, down 1.1 per cent, took the deepest cuts while the Nifty Private Bank index dipped 0.6 per cent.
In the broader market, the S&P BSE MidCap index settled 45 points, or 0.3 per cent, lower at 14,808, while the S&P BSE SmallCap index lost 10 points, or 0.07 per cent, to 14,239.
October 1987 was a devastating month for most investors as the world stock markets witnessed a collapse that rivaled 1929. That same month, the Tudor Futures Fund, managed by Paul Tudor Jones, registered an incredible 62 percent return. Jones has always been a maverick trader. His trading style is unique and his performance is uncorrelated with other money managers. Perhaps most important, he has done what many thought impossible: combine five consecutive, triple-digit return years with very low equity retracements. (I am fudging slightly; in 1986, Paul’s fund realized only a 99.2 percent gain!)
Jones has succeeded in every major venture he has tried. He started out in the business as a broker and in his second year grossed over $1 million in commissions. In fall 1980, Jones went to the New York Cotton Exchange as an independent floor trader. Again he was spectacularly successful, making millions during the next few years. His really impressive achievement though was not the magnitude of his winnings, but the consistency of his performance: During his three and a half years as a floor trader, he witnessed only one losing month.
It’s been 25 years since Paul Tudor Jones (PTJ) was featured in the original Market Wizards. He has since maintained his all-star track record. According to the New York Times, as of mid-2014, PTJ’s flagship fund averaged long-term annual returns of around 19.5%. And what’s even more impressive is that he didn’t have a single losing year over those 25 consecutive years — a feat unheard of in the hedge fund industry.
To follow is an examination of this legendary fund manager, whose trading style resembles that of a street fighter and whose gut-instinct for market turns are unparalleled.
AK has been an analyst at long/short equity investment firms, global macro funds, and corporate economics departments. He co-founded Macro Ops and is the host of Fallible.
AK speaks with Tyler of Macro Ops all about how important it is to avoid overtrading in the market. We also cover tactics you can use to prevent yourself from making this mistake. Make sure you watch the video above for the full conversation!
Benchmark indices extend their losses in Friday’s last-hour trading session, dragged down by heavyweights like HDFC twins and Reliance Industries.
The S&P BSE Sensex dipped 372 points, or 0.94 per cent, to 39,229, with YES Bank, Maruti Suzuki, Sun Pharma, HDFC, and Hero MotoCorp leading the list of losers. The broader Nifty50 index slipped 97 points, or 0.82 per cent, to 11,734.
All the NSE sectoral indices except Nifty PSU Bank indices were trading in the red. Nifty Pharma and Nifty Auto indexes, down 1.5 per cent each, took the deepest cuts.
In the broader market, the S&P BSE MidCap index was trading 92 points, or 0.63 per cent, lower at Rs 14,588, while the S&P BSE SmallCap gave up its early gains to trade 13 points, or 0.09 per cent, lower at 14,052.
I’m sure every trader on their journey has experienced the novelty of Revengeful Trading. Firstly, what is Revengeful Trading?
As with anything in life, if something belongs to you and it’s taken away from you, you then develop a belief system that dictates that you are to seek and claim back what is rightfully yours. So if you are using your mobile phone, someone rushes up to you and snatches your phone from your hands, you have every right to challenge the thief and take back what is yours.
In Forex, many new traders experience a bad loss and they most likely say one of the following statements:
” That was my hard earned money, i want to make it back”
“i don’t deserve to experience this loss, what have i done wrong, I’m not a bad person?”
“That is not fair, my entry was fine, what did i do wrong to lose my money, ah man, my account is low, i have to trade to earn it back”
So, you’ve missed the great bull market. But that isn’t as irritating as that of seeing the neighbour – whose IQ is close to room temperature – drive up in his third new Jaguar in as many years. You consider yourself a ‘value’ investor at a time when such concept seems to be totally discredited. Year after year, you expected – convincingly – that the great bull would crumble. But it hasn’t. You purchased gold and lost. You sold Amazon.Com short. You lost. You’ve missed out on Microsoft, Dell, Qualcomm, Intel, Cisco, Yahoo and the assorted Internet wannabes. You expected an end to the mania but it has not come. O.K., you’ve simply earned the right to be frustrated. But now what?
If, on the other hand, you are the bold and lucky fellow who loaded up on Cisco five years ago, your knees must be a little shaky as you stand at the Temple of Unrealized Gains. ‘This bull will go on’ you reason, but then you doubt yourself. You don’t know. You aren’t sure. You hear little voices, conflicting opinions; you see the volatility, the excess, the mania, and the mother of all bubbles staring you in the face – not to speak of a hefty capital gains tax lurking out there. So, what will it be?
What are we, investors, to do?
Let’s talk about it. But first, let us examine the great investment paradox. The making of a fortune, whether small or large, in one’s chosen profession is certainly a significant achievement. To put it aside for a rainy day, the next generation, or as a source of future income and financial security is also prudent and wise. But to preserve and manage this wealth is an endeavor far more difficult than that of making it in the first place. And this is the paradox.
A selloff towards the fag end of Friday’s session dragged the benchmark indices lower after a range-bound trade for most part of the day.
Reliance Industries and banking stocks remained the top drags for the indices with the Bank Nifty dipping 1.17 per cent.
The benchmark S&P BSE Sensex ended 289 points, or 0.73 per cent, lower at 39,452, after touching an intra-day low of 39,363. Only five out of the 30 BSE constituents ended the day in the green, with IndusInd, Bharti Airtel, Kotak Bank, Axis Bank, and Tata Motors taking the deepest cuts.
The broader Nifty50 index tumbled 91 points to 11,823. About 808 shares advanced, 1686 shares declined, and 144 shares remained unchanged on the NSE.
On a weekly basis, both the Sensex slipped 0.5 per cent each.
All the Nifty sectoral indices ended Friday’s session with losses. Nifty Realty, down 2.1 per cent, was among the top losers, while Nifty Bank,Nifty Auto, Nifty FMCG, and Nifty Private Bank all slipped over 1 per cent.
In the broader market, the S&P BSE MidCap index was down 1 per cent to 14,721, while the S&P BSE SmallCap ended the day 110 points, or 0.76 per cent, lower at 14,366.
In 14 points to keep in mind when buying small-cap stocks, I threw light on what one must look at specifically and diligently.
While, I am not undermining the importance that must be given to facets such as industry growth, company growth, return ratios, profitability, cash flows and debt, I would like to present a broader perspective too.
Experienced investors will not only scrutinise all of the above, but also look at potential trigger or what could provide a supportive growth environment.
Let’s look at some of them.
1. Next-Gen
Keep a track of when the next generation takes over. More often than not, the next-gen are educated from Ivy league institutes, work for renown investment banks/consultancies globally for a few years before heading back to join the family business in India. This is not just a formal transfer of responsibility, but the birthing of a culture that realizes the importance of clean corporate governance and the upside it gives to valuations.
You can see it evident during the recent past in some companies such as a leading tyre manufacturer, glassware producer and an iconic automobile player.
2. Entrepreneurs
Keep an eye out for entrepreneurs who take over a listed shell company or a very small operating company or a loss-making company. They buyout the existing promoters, make mandatory open offers to the public and once in control of the company, they come up with a strategy to turn it around.
This has recently been noticeable; a Harvard graduate taking over a forestry related company, a pipe company promoter taking over such companies to diversify in related fields.
Finance academics define risk as volatility, whereas value investors see risk as the probability that adverse outcomes in the future will permanently impair the business’s potential cash flow and investor’s capital. Which is correct? It all depends on your investment horizon. But if maximising terminal wealth is of importance to investors, and it is difficult to argue otherwise, then value investors have it right.
Let me explain.
There are two types of fundamental analysts: short-term and long-term. Short-term fundamental analysts are the typical financial analysts. They accept the stock price as given and try to determine what will make the stock price move. Their price targets and investment calls are affected by the release of short-term economic or corporate news. They react to such announcements.
Value investors are long-term fundamental analysts. They do not react to short-term announcements. For example, the short-term noise of whether the next quarter’s earnings deviate from expectations is immaterial. What is material for value investors is whether the company continues to have strong fundamentals, be well managed and financially sound, as well as “cheap.” The stock price is not important; instead, it is the difference between the intrinsic value and the stock price that is important. If the stock price is significantly below the intrinsic value (by a predetermined margin of safety), then the stock is considered cheap, and value investors buy. Otherwise, they wait.
