how to trade ? why only buy ?

thanks rashmi and gurvinder for taking out time for this and leaving your comments.

guru, there is no correct or best way to judge a company. There is a simplistic approach that's easy to understand and hard to execute.

for people with a trader's attitude, like yourself, it does not really matter which company your buying. its more of momentum play and bahti ganga mein haath dhone waali baat ! its more about getting in and getting out fast. setting a target (both if you make a profit and if you make a loss) and sticking to it. this is tough if you have a 10 am to 10 pm job ;)

the biggest problem arises, when you turn from trader to investor on stocks which are red and keep on holding till it drops further and try to average it out. its never wise to catch a falling knife. on the other hand, its equally bad to book out profits on good performing stocks.

if you can limit your loss to 7-10% and keep holding your winning trades, trust me, you will be surprised at the returns. booking losses early is important. i have learned this the hard way, you will too soon :)

as regards to your buying dabur, i would have looked at the market leaders in the fmcg sector. itc, hll ... these are very defensive picks. and over the last 1 and a half year hardly shown any big rally. as regards, to some of the financial numbers there are theories and counter-theories for every theory ! no financial or technical chart would have suggested that jai corp will go from 400 to 25000 in a years time !

rashmi, just in case you are wondering, a trader is one who trades with a short term outlook, means he buys and sells within a period that can be one day to 2-3 months. Whereas, an investor "buys" the stock and keeps holding it.

before you start to invest, you need to ask yourself two questions. the money that you are putting in the markets, when do you want it ? remember the good old days of kisan vikas patra, fd, recurring, etc ? these all were locked for at least 5-6 years. if you have similar or more time frame in mind then its comparatively much easier to make money in stocks.

understand this, stock price is nothing but a reflection of how a company is performing. so if you want profits from your investment, you have to give it time. coming from the baniya community, we understand that profits do not come from day 1 of opening a dukaan :)

stock market becomes a pseudo-gambling if you are speculating the price in short term. the drive for quick gains. people go for 10% annual return from fixed deposits, however, they want 100% return in a month from stocks ! this is where you get burnt.

its proven that if you have moderate expectations you will make money.

in short, someone who is just getting started, have an investors outlook. do not run for quick gains. buy and hold. monitor. add more if the price reaches a certain level. say you buy 5 shares of reliance at 3000 each. you set a target if it reaches 3300, i will add 2 more, and so on.

hence, all you are doing is "buying". you sell it only when you have no other source of income or need the money urgently.

now, what is the guarantee that it will go up only, right ? this is where you buy companies which have been there for years. they have stood the test of time. look around yourself, things are happening. its much better than what used to be in 1995 ! so there is no reason why these companies would not be at a higher level 10 years down the line.

do not go on so called "hot tips", friends saying i made 200% in 2 months, etc. stick to the basic. buy companies which stand a chance to be there when your grandchildren will be hitting adulthood. this has been a winning strategy to most. ask any parsi !

hope i cleared your doubts. leave a comment. i really appreciate them :)