9 Mantras for:Trading & Investing Mantras By: Rohan Mehta
Mantra - 1Who are you? “If you don’t know who you are, the Stock Market is a Expensive Place to Find out” - George Goodman • Do you ask Generally the Question to yourself or to our Clients that “Who are you”? • We take Every Details of the Clients but we forget to ask the Most Important Question of this Business • Have you traveled in a bus that was being driven too fast ? Or that was being driven too slow? Did it make you uncomfortable? But not to all co-travelers • If some one Comes for Lunch or Dinner than too we Ask Them and make food according to their Choices and Taste! • But Unfortunately in Our Business No one Asks!! • It is Very Important for us to Know who is our Client and Understanding Things Like? • Trader or Investor? • Risk Appetite • Which Other Products of Equity he is Interested to Invest or Trade? • How he would Like to Communicate etc
The Answer is “Client Profiling” • Why Client Profiling? • Every Client in Our Business have Different Way or Working, Attitude, Thinking & Risk Appetite • It gives an Exact Clarity that what your client wants? • 90% of Client Comes as an Investor then Positional Trader, then Short Term and then No Term! • We have seen that most of the Client get into Risk because of not knowing their Risk Profile • If something Good Comes at that time we are not sure whom to tell whom not to and the Opportunity Slips! • Client will feel a Distinct Services that will make as USP in your Business! A Biggest Broker I met once gave me an advice “To be best in this Business make sure that your Client Stays forever and Comes Tomorrow to your Office again!”
Action Plan • Use the Pareto Rule 80 – 20% • Decide to Profile your 20% client • There would be some clients who will have Profile of Trading & Investing Both take a note to make both of this Account Different. • Also ensure to use Other Product Column!
Mantra - 3All Markets are Bearish! • Above all other Reasons the Beauty of our BUSINESS is to “SHORT” Are you using this Beauty? • I have reviewed 10 Best Traders and Investors and among most of them have made Billions in Shorting and Long Both! • This is for Both a Investor & Trader learn the Art of Shorting to Survive in to this Market. • I Understand that Shorting is Not Liked by us, but don’t forget that “Market Generally goes opposite to what We Like”! • No bias short or long. • A fall is Fast and Brutal if u Start making money in this u will be among the top 10 winners Circle • So Start having a Approach for Shorting markets be open for it!
Mantra – 4Stop Loss Works! Amateur people know when to book Profits – Professional knows when to Exit! • We all believe that Stop Loss should not be Maintained because it Triggers • But if you keep with Statics laws of Technical it Really Works • It wont save only your Client but it will also keep your Clients life long. • Just Imagine if a client is buying a stock @ 100 for Short Term and he is not Exiting at 90 then 85 he averages then 70 Either you Cut the stock or He will! • Client is gone, mostly he will not come back • Brokerage Lost • He will de market to whole group that stock market is not good! • But if he buys at 100 u keep sl for e.g. at 95 Exit the Positions, Short in to Markets and again cover in Profits – There is a Bigger Probability of Client for a Longer Life “It should be must that when trade Gets Executed and Client Comes in Trader’s Profile the 2nd thing is to Place Stop Loss” – Mark my words you both will be HAPPY!
Mantra – 5Avoid Adding up the Losers (Averaging) Among the Mistake the Biggest Mistake is Averaging in Trading. • In Investing too If it is Systematic and it feels Value Buy Averaging is Good! • Look at your Clients Portfolios the biggest Reason of Client loss is because of this. • We have seen Several Stocks has come from high to 52 week so called “Blue chips” • When you Want to Do Average ask a Question will u Pyramid in Profits? • Enron one of the Biggest Bubble Ended up from 90$ to 0.50 because of only 1 thing Average’s! • A Question a Broker Asked me • Action Plan: • Educate Clients that Averaging is Not at all Healthy in Trading • Start Cutting Losses and Keep Stop Losses Its hard but you have to treat your Business as you are Doctor! • This is a Win - Win Situation for your Client and your Business!
Mantra -6Understand Leverage “Mother of all Evil is Speculation with Leverage” • Most of the Traders go Burst because of not understanding Leverage Properly • The biggest Reason people tell me they do Derivatives is because of “Less money” • Don’t forget that if your client is Taking 100 NIFTY with Margin of 60,000 taking 500000 as a total contract size then he is taking 9 times Leverage i.e. 900% risk in a single Trade! • Trading 1000 Copper at a margin of 30,000 total Contract size of 4,00,000 is 1300% Risk. Same Applies in Every Commodity! • It is said that if u Get a Margin Call – “It clearly Says you are Wrong side of the Markets” • The Whole U.S. Scam of Housing was only because of Leverage • The Fall of 2008 and We had one of the Highest Risk is only Because of Leverage! One thing is sure if you Control Leverage – Your client will LIVE More!
Mantra – 7Formal Education It take 6 Years to be Doctor, 5 Years to be an MBA, 4 Years to Be an Eng., 3+ Years to be a C.A. and to Handle or Manage Clients & Funds of Trader & Investor? • It is a Truth that Client come with Lot of Money & End up with lot of Experience, but we need to break the Trend we need to Educate ourselves • This is the Right time it is the time to Brush up your Skills as to Capitalize the Best coming time… • Do you Read the Jainam Reports Regularly? • Have you Read any Book Regarding Trading & Investing? • Have u taken any Formal Education for the same? • Are you Associated with People who are really making money in this markets? “The Way of Goddess Lakshmi Passes from the Way of Goddess Sarasvati”
Action Plan for Getting Educated! Taking Education is Very Boring and Expensive but it is very much exciting and cheap than losses made in Markets. - Larry (The Biggest Trader & Investor of Wall street) • Give 10 Min. Every day in Morning to read “Market Mirror” & “Commodity Mirror” • Give 1 hour of Reading Every Day to the Best Books enhancing skills • Take “Professional Trader” Course that have really developed Sub Brokers for the Fund Management Side. • Give 30 min on Saturday to Read “Malamaal Weekly” & Special Reports. • Give 10 Min. every Thursday to Read “Forthcoming Corporate Actions” for Dividend, Split, Bonus etc.
Mantra – 8An Indicator you cannot IGNORE! “Take Care of the Downside and Upside will take care of you” • Above every Indicator one Indicator has the Biggest Strength is ???? • In this many Years one thing I have seen that this Indicator Says Everything about the Stocks. • Lets Take Some example of the People Favorite Stocks:
The Magic Indicator! This indicator is 200 DMA!! • You can find in BSE – NSE – Money Control or any Technical Software • Action Plan: • Check your 20% Client Portfolios and see where the stock is Lying its Above or Below 200 DMA • Also When taking New Long Term Positions do Check this Indictor before taking and Advising the Client!
Mantra – 9Learn from Past Mistakes! Market gives chance to do 1 Mistake, 2nd Mistake “it is a high Tution fees you have to pay” • Here there are many Brokers who are from many years seen biggest burst biggest booms • The Biggest thing is Learning from Mistakes we did before: • Over Leverage • Operator Scripts • No Stop Losses • Averaging • Churning • No change in working Methodology Definition of Insanity: Doing the Same thing and Expecting different Results We need to Learn from the Past and see that we don’t repeat the same mistakes again and again..
Action Plan for Mistakes we did Before! Mistakes are Mistakes only that is Repeated Twice! • Today Jot down the Mistakes you or your client that you are aware that if repeated will be Bad for Business and client survival • Make a “Not to Do List” and put it near your Screen in big Letters and I Assure it wont be Repeated! • You can also come to us that how to Overcome the Mistakes!