Sometimes Price moves first and fundamentals follow later . Look at zylog , Arshiya , geodesic . If someone has high allocation to these stocks and is averaging down he will surely go bankrupt . Only way to get out of these stocks is stoploss otherwise they are getting cheaper day by day . In stock market cheap + quality management is hard to find .
I have not much idea on Geodesic. But as far as Arshiya and Zylog are concerned, high D/E ratio, and high promoter pledging are the reason why stock price of these stocks melted.
High DE, High Promoter pledging, low promoter shareholding, unethical promoter behavior make a stock fragile; almost like a landmine, waiting for some hapless soul to keep his foot, and boom !!!
Averaging works for solid fundamental stocks preferably with good moat, not on stocks which have a high fragility.
We should look for antifragile stocks, which can withstand couple of bad news, bad quarter, without much blood spilling in the street, and emerge victorious. Recent example is Ajanta, which despite the income tax issue, didnât fall too much, and an unexpected good result, and bang, a positive black swan.
Hi,
Regarding R S Software and Granules - both are stocks which people like fundamentally but are they really that good ?
My concerns stems from the fact the move in Granules was with very low volumes and the last last jump from 180-220 was more a distribution. The most important top for the stock was at 110-115 where i might review a re look.
R S Software again the rise before recent quarter results without much volumes did make me a concern. For now the stock one may review around 115-130.
Many a times price action on downside with clear technical patterns may help you delay your buying or an accumulation process then to jump on to the screaming buys.
So when i take a fundamental call on a smallcap the technicals is used mainly to see such distribution and accumulation patterns to accordingly spread my buying and selling.
Regards,
Nooresh
Once I had finished my first reading reading the basics books, and started serious practicals under guidance of market veterans like Ayush, Ayushâs Dad, Hitesh, Mr D, Mr M, Mr S, the first NEW thing I came to appreciate is âListen to Mr Marketâ!
There are many times you canât put a finger on whatâs exactly/definitely wrong, but if for a long time things are not going the way it logically should, be sure Mr Market is telling you something! Listen to it, pay respect, dig deeper. Sometimes we are just blind to something for a reason. Sometimes there are things in the companies and in markets, that prove beyond our individual (or, combined) diligence/ability/smarts to decipher.
I learned to respect Mr Market by taking his hint of studying deeper whatâs wrong with Opto Circuits. I have put this on record before and happy to re-iterate again, I was saved from the Opto disaster - only because I paid heed to that advice from Ayushâs Dad in 2010. There are atleast 4-5 naturally skeptic, risk averse, brilliant guys I know and respect who COULD NOT save themselves, despite much of the (latent Optoâs) malaise being laid out before them - ONLY FOR, failing to listen properly to Mr Market.
Its good to continuously challenge based on your convictions (I prefer that style myself, but with an open mind), so if you can rise above the semantics, you may appreciate that the Bottomline is paying attention to what Mr MARKET is telling you! - essentially the message Hitesh, Nooresh, Bala and other veterans are trying to drive at.
Markets know more than us! Over any extended period of time, Markets are usually right! I have developed a healthy respect - for the pointers that it throws at us! And would encourage all learners to have an open mind.
One way to overcomeaversion for TA(in-built, some guys like me cant help it; I couldnât either when I started out) is to read a book likeReminiscences Of A Stock Operatorabout_Jesse Livermore,___one of the worldâs greatest stock speculators who won and lost tens of millions of dollars.Its an extremely entertaining and very very informative read (on how markets operate), and may just open your eyes! Strongly recommend it for Learners.
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Six trading lessons from speculator Jesse Livermore
1). Learn how to lose
2). Learn how to sit tight
3). Learn to take a small loss early
4). Learn to ignore tips and gifts
5). Study the underlying market conditions and trends
6). Learn how to buy and sell stocks
Each of this is explained in the article at the below link:
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Sanjoy Bhattacharyyaâs rant against TA:
Two questions arise: Where are we currently in the cycle and how is it possible to accurately pick the point of inflection? A surprisingly large number of investors, professionals and amateurs, rely on charts or similar variants described as atechnical analysisa. The tribe of chartists has a deservedly wretched reputation among sensible investors. For one, their prognosis is based on the ludicrous assumption that history repeats itself at regular intervals! The widespread professional disdain for chartists is rooted in the belief that their analysis is not particularly logical and the predictions adequately ambiguous to have any economic value. There is little evidence that individuals or systems use these methods with consistent success. The primary difficulty in identifying patterns is not the absence of such patterns. Rather, it is the absence of techniques sufficiently powerful to identify them. The David versus Goliath notion is truly laughable in the context of investing. If the mighty institutions with incredible talent and resources at their disposal fail to get it right more often than not, the prospect of an individual creating a system to divine market psychology with superior odds is next to impossible. So what advantage can the little guy investing in mean markets come up with?
I wholly agree with Donald that one has to listen to Mr. Market and pay it due respect. Many investors like to follow others blindly wanting tips on what to buy and what to sell. Personally, I feel it is the easy way of doing things. My experience in the market has been otherwise. Earlier I used to buy and sell listening to the morons on business channels. There was no self conviction. However, since the time I have been at Valuepickr my learning has been immense. I read and reread the analysis of my fellow tribe here with an open mind. Thereafter I do an analysis myself and if convinced I go and buy or sell a stock. Today, I never depend on others. If one is fully convinced of what he/she is doing then there is no place for fear.
There are many factors to be considered while buying or selling a stock. A few among them are:
1). Fundamental Analysis
2). Market Analysis
3). Sector Analysis
4). Relative Strength of a stock to market/peers
5). Trend Analysis
If one does these analysis and some more, then although one may find oneself at the wrong side of the market in the short term, one will eventually come out trumps in the long run.
It is nice to read others opinions and views, but of primary importance is to do your own analysis. If you do this I am sure you will be rewarded for your hard work. This is my personal experience.
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Subash Nayak thanks for starting the thread. My views match with yours on the importance of technical analysis. I have read a lot of books on technical analysis and have tried using it but with limited success. Now ofcourse, it might be my misunderstanding of the technical analysis concepts that I failed but anyways itdidnâtwork for me. It might work for someone who can track markets continuously and are willing to trade frequently. But for long term investors(more than 3 years) it has limited application.
As for Mr Market I like to believe what Warren Buffet says âMr. Market is there to serve you and not guide youâ.A long term investor should benefit from the markets mispricing of securities.
And as for making mistakesJohn Templeton used to say that there is no investment manager who is going to be right more than two times out of three. (Learned this in one of Mohnish Pabraiâs lecture at MDI )
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Are there people in this forum who successfully implement technical analysis for intraday trading in Indian market. At personal level I found itâs very difficult to compete with algotraders with mere technical analysis tools.
This is my first post (and hardly have âseenâ markets - experience only of less than a year) so excuse me if some general âgyanâ defies logic.
I try to correlate the technical indicators with behavioral aspect of fear and greed - Oversold zone being extreme fear or almost end of it. (so you should be greedy as Buffett says) and vice versa. Or âsupportâ being a zone where people start getting greedy and âresistanceâ being a zone where people start getting nervous or fearful. Seeing it in that context helps gauge market behavior.
In my opinion, TA works well more in âhomogenous marketsâ - say FX, int. rates, commodities, or maybe equity indices. To some extent maybe for large cos but in all stocks, company specific risk is higher which maybe making TA âless usefulâ
Regarding success rates, in my opinion, TA as a science does make sense in the maths lab and simulation models. A successfully back tested strategy, i believe, can indeed lead to spectacular returns. But the problem with ârealâ returns and âsimulatedâ returns, i think, is behavioral interference of trader/investor. How often will stop loss trigger but you will not âobeyâ the system? how often will system indicate âprofit bookingâ but you will be greedy? That is the reason why TA may fail in real life for many people.
That brings us to âsuccess rateâ query. As very few investors/traders have a very disciplined approach of following TA (or even FA for that matter) and most others are âtheir worst own enemyâ (due to our fear and greed overridden behavior), that is why small % of guys who apply TA may be winning.
And also due to lack of money management/risk control techniques. So TA followers kind of have âfat tailâ outcomes (super millionaires or super bankrupts).
The book series âMarket Wizardsâ has many successful traders and makes for a good read from behavioral, money management, discipline aspects of trading/investing.
Thanks
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Itâs possible but there are a lot of issues:
- Is being glued to a monitor and being unproductive most of the time worth your time?
- I have made some money in the past trading hourly charts. Some people swear by 10m charts but the smaller the time frame, more the trades. It gets tiring.
- The delta may not be much actually. Large moves happen overnight, seldom will the market trend a lot intra day (comparatively speaking)
- Discipline is utmost important. Itâs tough. Really tough. When your chart says sell but you âfeelâ that you should buy recognize that you have already lost the game. Thereâs no place for feelings.
- Youâll lose 75% of the trades and win 25% of the times. (Or some such skewed numbers). A good system is one in which the wins are huge and losses are small so the 25% winners will more than cover the 75% loss trades in value. But this really requires nerves of steel. You can be on a losing streak for a very long time meanwhile, buy and holders, liquid fund investors, and a bunch of others are making decent money. Can you hold on? Do you have the faith
- Many systems work but how will you be convinced that they work? Back testing? Well back testing is only looking behind but whatâs the guarantee that the past performance will guarantee future results?
- To make big money you need to bet big money. Can you do that? What % of net worth are you willing to bet because the closing price was above 20EMA (or some such number). Are you really willing to stick to these huge bets even when the market moves seriously against you? And donât forget itâs actually very hard to hold on when youâre making enormous profits. The mind says âIâve made enough, let me encash and goâ and thatâs when you miss out on the massive wins.
All said and done, I donât despise technical analysts and what they do but I have come to the realization that itâs not for me. The Graham approach of just buying cheap companies and selling them at fair value is far better suited for me. Of course, to each his own.
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Excellent thread thanks subash for this . I was a non believer in technical analysis till 2009.Then i spend about 2 years trying to learn it from some smart people and from countless books.Now i believe in using a combination of both fa and ta .I think TA is inevitable to succeed in market because without this you will be at a disadvantage.A combination of fa,ta and perhaps wave study can at least bring us in line with the person at the other end of the trade with whom we compete every trade.
This thread reminded me of a question on quora: Does Technical Analysis really work?. The description read:
Is technical analysis the Holy Grail for investors? Or is it just tea leaf reading?
what is the guarantee that a particular pattern will give the correct indication regarding trend reversal or trend continuation.
My answer is relevant to some of the issues raised here. Presenting without edit:
Actually someone would definitely say this as answer to your question sometime very soon: fundamental analysis is the holy grail for investors, and it is not possible to time the market so you should not rely on technical analysis etcâŚ
If you are new to both fundamental and technical analysis consider this:
You see people using technical analysis getting most of their calls wrong ⌠so is it that the theory is wrong or is it possible that the analysts are applying it incorrectly?
You see that people using fundamental analysis getting most of their calls wrong ⌠again you should ask ⌠is the there a problem with the theory? or is it possible that analysts application is incorrect?
A lot of academicians have always been inclined towards fundamental analysis. Most of them really believe that the market is semi-strong efficient, markets are random and any attempt to time the market is futile etc. They would even point to some academic studies saying technical analysis has no forecasting value. Un-fortunately for a long time technical analysis has received step motherly treatment from academicians, only recently some serious research is being taken up in this area, especially after the 2008 financial crisis which made most fundamental analysts look like idiots. (Its a different story that some people who actually dig deep into the data predicted the housing crisis in U.S. and profited immensely from it, read the book or watch the movie big short to learn about these people, they were not technical analysts).
You would be surprised to know that technical analysis is actually older than fundamental analysis. The first recorded use of technical analysis was in Japan in 1700s where it was used to trade rice. While western use of technical analysis was pioneered by Dow at a time when companies in U.S were not even obligated to release their financial information even to the shareholders. It was a time when insider trading was also considered to be legal.
Technical analysis and fundamental analysis actually serve different but often inter-related purposes. Fundamental analysis tells you about the current and past financial and operational performance of the company, while technical analysis tells you the consensus investor perception of the current and future performance of the company. You can understand that they are inter-related to a certain extent but are two different criteria / parameters to judge a company by.
If you are really playing with your own money, I believe ignoring either of these theories is only going to work against you. Its like you going to a doctor who relies only either on your blood sugar level or your blood pressure to diagnose you instead of measuring both, because both of them represent fundamentally different parameters. I see technical analysis and fundamental analysis in the same sense.
Now, coming to the point of what is the guarantee that a particular pattern will give correct indication ? The fact that you have mentioned the word guarantee indicates that you are new to the investing world, and the short answer is that you are guaranteed to get no guarantees. If a pattern forecasts price moves correctly even 60% of the times, it is a great pattern, in fact it might be a rarely accurate pattern, because in reality most patterns have lesser accuracy rates.
The idea is not that the pattern will always give correct forecasts, instead a pattern that works out to be profitable is expected to be correct just over 50% of the times with a risk-reward ratio such that if you repeatedly trade that pattern over time, on average you end up making money. You have some trades on which you actually lose money and some trades on which you make money. You want that the number of trades on which you make money is slightly more than the number of trades on lose money. You also want that profit-loss ratio is skewed in such a way that over time you make substantial money as reward for religiously trading the pattern.
That said, do not judge a book by its cover or what âmostâ people say, if you really want to judge either fundamental or technical analysis (or both), become a religious student of the theory, learn as much about it, apply it over years, and then form an opinion on it. Anyone who passes his opinion on any of these theories without going through this process is essentially doing nothing more than (in your words) tea leaf reading.
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I am not comfortable with the fact that getting more than 50% right with patterns would make you profit eventually. One might be right 99% of the times earning pennies. But that 1% wrong might wipe off dollars out of oneâs portfolio.
The gurus who publish stop loss BS using TA on excel sheets thrive on the statistic that they were right 90% of the time they predicted. What they hide is the fact that the rest 10% of the time, their wrong prediction made a heck lot of loss.
So number of right trades outnumbering wrong trades doesnât necessarily skew profit:loss ratio in such a way that in the end you are rewarded.
It works I am a trader for the last one decade . But I dont use any of the indicators except RSI. It is just a simple concept of Swing High, Swing Low and FIBO. If you get the FIBO right and go with the trend, one can be successful. But good money can never be made in Trading. For that , I am an investor.
I have been trading for the last couple of years and I have found day trading to be the safest way to make money consistently. You are not exposed to sudden overnight swings and the overall exposure to the market is also very low. I have had returns of around 50% so far using a really simple breakout strategy. The least important part of trading is the entry signal so any entry strategy will work provided you have a good risk - reward ratio. Discipline is paramount. Here are my rules:
- Only 1 trade per day
- Only 1 symbol (NIFTY Futures)
- Entry via cover order only with Stoploss of 20 points
- Exit at end of day or stop loss.
Once I get an entry signal I close my computer(or at least my trading platform). If I donât get stopped out the cover order automatically exits my trade at the end of day.I get around 35% profitable trades but the risk-reward ratio is quite high. Time frames donât matter because my stop loss and exit are not dependent on them.
I have won 3 zerodha sixty day challenges in a row by just doing the above everyday. Its simple and it works.
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remember that it will be taxed as business income and will be at slab rates
invest good fundamentlly good stock
Good show. But the problem here is the transaction cost is very high. Every day, one has to pay STT, Stampduty - the two major cost component. I trade the swing. As per my system which shows the reversal I take either long or short. I buy every dip or sell every rise based on the trend. Slowly, i reduce my positions. or part book as they call it. The last swing up gave me more than 800 pts.
Again, we are dealing with the probabilities and not certainties. Investment is also the same but less pronounced. I will tell you the probability now. Nifty held 7546 ( EOD 7-4-16) throughout on 8-4-16 which can be a reversal. How one can confirm this. Now on Monday if 7546 is held and 7561-7583 is crossed , it is a sign of reversal and one has to consider long. One has to be alert on Monday morning for 7560 ( Swing High) for going long with sl.
IMHO, Nifty made a low of 6825 and whoever invested at that price will be sitting pretty in the coming months as there is low probability nifty revisiting that level unless something drastic happens.