Monday, September 13, 2010

Patience, our friend

In the stock market, patience usually wins. In the same way, impatience usually loses (although in the momentum phase of the market, it appears that only the impatient win - bu not for long).

Thanks to 24 hour TV, our ability to wait has been reduced. While the patient investor could look forward to handsome gains over a few years, that time frame hs changed so much that gains are expected immediately. We cannot wait for time to do its own thing. We want results. Now!

As an example, reading habits have changed because of the cable TV & internet. People have bcome impatient readers. They have become used to channel surfing or sufring the web, quickly moving from one page/channel to another. people send SMS instead of calling or sending emails.

As a trader, impatience and the need for instant results cause us to make poor quality trades. There is a stock, for example, we can take Hindalco. You have heard experts (who else but  me!) say on TV today that Hindalco is a buy.

You check up your charts and find the share is up almost four percent today. Now what? You tell yourself that the stock will run away so you must enter it quickly. Tomorrow, suppose the share opens one percent lower. You buy quickly since you know this is going up big time.

Much to your horror, the share price keeps on falling, finally ends up 11% lower over a period of three weeks. At that point, you curse the expert, sell off the shares and begin paying attention to the other experts. Now, the share (Hindalco) stops falling, slowly starts rising, then over a period of three months, makes new highs.

Suppose you had the patience to tell yourself: I will buy, but only on a correction. If I do not get a correction, then I will not buy. Would the outcome be different? Your views are welcome.

8 comments:

rajv malik said...

namaskar sukhani ji,

your blog is really so informative and teaches so much.

on hindalco, your views are quite practical. however when there is say 11 % correction, then we will forget what you said and others will start giving lower targets. even you would say do not buy a falling knife. so for a layman there is a total state of confusion. one analyst says metal will lead the rally. other would say metals have run up too much.

in fact an ordinary trader/investor is utterly confused and gets be fooled in this market.

no one could predict market would go up so much. no one could predict sbi will touch 3150 and l&t 2000 just a few weeks back.

when market was at lower levels many analysts said sell sell you will get all these stocks at a lower level.

finally i think there are very few people who are making money out of this market. especially in the trader community. maybe i am wrong.

kk said...

RESPECTED SIR
WHEN WE SUFFER FROM ANY DISEASE OR DISORDER , WE IMMEDIATELY CONTACT A DOCTOR. TO CONSTRUCT A BUILDING , WE CONTACT A BUILDER. FOR EVERY LITTLE THINGS, WE ARE KEEN TO HAVE A SPECIALIST .

THEN WHY NOT STOCK MARKETS???????

FOR ME ,THERE ARE ONLY TWO WAYS TO INVEST IN STOCK MARKETS- EITHER BE A SPECIALIST OR HIRE A SPECIALIST.

SOME DAYS BACK, I BOUGHT UNION BANK AND MY BROKER TOLD ME -
RELIANCE LE LE MUKESH AMBANI APNE SHARE KO GIRNE NAHIN DETA, AS IF HE HAS DAILY SITTINGS WITH MUKESH.

WHENEVER THESE KIND OF PEOPLE LOOSE MONEY, THEY BLAME ANALYSTS . BECAUSE ACCEPTING MISTAKES HURT THEIR EGO.

Intraday Analyst said...

Why you always talk and write about NIFTY and index stocks. They are not everything. I didnt trade nifty in last one yr ( also not index stocks mostly). Your current post also delas with Nifty or index stocks. I trade only momentum stocks with half percent stop loss n 2-3% 1st intraday target. Still get 85% accuracy. Volumes of stocks are very large, sometimes in 1st 5 most traded stocks in NSE by trading turnover. And by your surprise targets hits within 5-15 mints. We want quick results and we get, depends on some1 trading abilties, knowledge and trading style. Like if I buy BASF above 617 for targets 632-648 with sl 613. My target will be hit in 5-15 minutes. Think beyond nifty please

R John Christy said...

What you have said is absolutely correct. For me, impatience and intra day trading always resulted in net loss. Well said Sir.

haresh said...

Good morning Sirjee,

Cant agree more with your views. You just said it!

Have been an investor since 2000 and have respected your views during the dot com bust and even now. It was you on CNBC who was 'THE ONLY' analyst who predicted the Nifty 'U turn' and now too, the 15 week theory makes a lot of sense (of course markets may have their own choice)

Great investing is all about buying value with good management. Business cycles will eventually turn.

When Hindalco was 35, in March 2009, people wanted to short and now go long at these valuations, wherein there is no or little value left.



Regards,

Haresh

TOOCOOL7610 said...

namaskar sudarshan ji

market today again raced to new highs and probably didnt give any chance to intra trade atleast to me , sir do you think on todays chart it was to possible to trade on your 15 minute range break rule?? kindly share your thoughts

regards

akshat arora

cooldent said...

I agree with sir. I have made decent returns on the stock market with this strategy.

men said...

It all depends on the time frame of investing which can decide the profits, now you are talking like a short term investor, not a trader.