FA + TA = Sure success!

[Prashe]

Its a century old debate whether to use FA or TA in markets. Conventionally, Fundamentals are used to identify good stocks that may create wealth in the longer run and TA is used for shorter term approaches, coming down to even intra-day trading. I have been using TA extensively for many years now but great knowledge of TA did not necessarily lead to great profits. Strong tendency of traders to maximize gains using leverage as in FNO can lead to major deviation from the original loss appetite one had when he enters the trade. We are always trying to tell ourselves we can beat the mistake already made in some way or the other. Carrying over FNO positions can lead to total loss of sleep, as we tend to see what other global markets are doing after we close down for the day creating further panic should those markets go against our position direction.
FA investors almost wholly agree that TA doesnt work and every TA worth his salt will say TA factors in all the FA in the charts. Which brings me down to the topic today. Which do we chose then? Are we looking for index returns for eg. 13-17% p/a ? Or are we looking at mind boggling figures of 10% per month? Neither may be impossible if the approach is right and one knows what he his happy with in the form of returns for the risk he is willing to lose. If an Intra trader looks at 10k profit on his 1 lakh traded amount at the end of the day and is willing to lose, at worst 3-4000 bucks; then conversely on his bad day, he should not be worried or annoyed if his 1 lakh takes a 20k hit. its part of the method. The poorly trained tend to keep thinking of ways to offset that 20k loss with only that in mind, rather than learn where and what went wrong and not to repeat the same mistake, and better still find ways to beat that mistake and gain from it in future. When it comes to TA, it is not the question of which is the best; intra, scalping, 1 week, 1 month or 1 year that matters. If the risk proponent is right and frame if mind stays positive, all time frames should return profits.
In FA also it is not if one selects a great looking stock with amazing 5 year returns, q-o-q returns, low d/e, low p/e, etc. If something goes wrong down the years, a 1000 buck stock can also become a penny stock in 5 years time…so what do we do?
To start with a resounding knowledge of FA mixed with some basic TA knowledge can work wonders for the risk averse wannabe money-maker. Secondly (my bracket ), is a solid TA knowledge with a fair understanding of reading companies books, P&L, ratios,etc
Buffet always said magic words and not wanting to sound cliched, I’ll avoid original lines and just state common sense. neither Buffet nor Rakesh came to where they are without conviction in their views and discipline. Those 2 hold the key to success. if one buys a super good company which is 40-50% down from yearly peaks just because of some quarters of bad results whole sector being in trouble or index itself tanking, then very little can go wrong in buying such companies with a slightly longer time frame i mind, say a year or more. At the same time, if one can use TA using candles, indicators and various other tools to time the entry into that particular stock, then success is almost guaranteed. of course things can go awry sometimes which is always the case with markets but think of the loss and risk control that can be done by buying absolute lows into a stock that can potentially double over the next year !!
so what and from where do we chose the stocks? Its NOT simple by any means as plenty of homework is required. Initially I used to work with 5-6 on chart indicators and 6-7 below the chart ones only to realize i was over complicating things. Keep things simple. Use information available to you from internet, magazines,etc which pay analysts and research guys crores each year to dig stuff out. Look for sectors which are beaten down even if Nifty is at all time highs. Realize that the goal is to buy stocks at great valuations with excellent technical entries. Look for companies that have done well over the past 5-6 years in term of earning, PAT,etc consistently and also Q-O-Q if possible. Obviously something will be wrong if the stock has corrected 40-50% from peaks. Try to find out if the problem can be solved. If it can and the company is working on it; consider the stock. At 40-50% correction from peaks, almost all FA parameters, such as P/E, etc will be quite low making for good value buys. Besides this do some
research to find companies with low or zero debt, no promoter pledged shares, net positive growth in past 4 years and good management. Look for high promoter holdings.
Along with this a good sound knowledge of technicals is required if one is catch that so called “absolute” bottom and be sure of bounce from thereon. no shortcuts here. One has to learn TA and find indicators, trendlines, patterns that work for “that” person. What works for one may not work for another if risk-reward outlooks vary greatly. remember, one TV analyst may short stock while another may go long. neither may be wrong in his outlook. One person will be SL’d and the other will get his target…as simple as that.
Have a longer period of outlook to allow the companies to perform well without overly getting technical in that period looking for ten exits and entries. Remember, you blow up a lot in transacting charges also. If holdings generate say 70-80% at the end of 10 months after buying, consider a longer hold to save paying the 15% short term tax factor.
All this may sound like theoretical and impossible to achieve. I have been following it diligently for a year through which i have bought stocks at lows while market was at peaks and still made money despite what Nifty does. Be patient and study hard. If you are looking for consistent 50% plus returns year on year, this system works for sure. Remember that at 50% returns in investment, you are talking returns higher than almost any instrument or investment in the “world” !! So spend quality time in learning. Happy investing and Trading…or Both !!
As for me, I am still on a pursuit to convert the 50-60% p/a to 100%. God bless you all.

[Dorkstar1]

@Prashe

Its a century old debate whether to use FA or TA in markets. Conventionally, Fundamentals are used to identify good stocks that may create wealth in the longer run and TA is used for shorter term approaches, coming down to even intra-day trading. I have been using TA extensively for many years now but great knowledge of TA did not necessarily lead to great profits. Strong tendency of traders to maximize gains using leverage as in FNO can lead to major deviation from the original loss appetite one had when he enters the trade. We are always trying to tell ourselves we can beat the mistake already made in some way or the other. Carrying over FNO positions can lead to total loss of sleep, as we tend to see what other global markets are doing after we close down for the day creating further panic should those markets go against our position direction.

FA investors almost wholly agree that TA doesnt work and every TA worth his salt will say TA factors in all the FA in the charts. Which brings me down to the topic today. Which do we chose then? Are we looking for index returns for eg. 13-17% p/a ? Or are we looking at mind boggling figures of 10% per month? Neither may be impossible if the approach is right and one knows what he his happy with in the form of returns for the risk he is willing to lose. If an Intra trader looks at 10k profit on his 1 lakh traded amount at the end of the day and is willing to lose, at worst 3-4000 bucks; then conversely on his bad day, he should not be worried or annoyed if his 1 lakh takes a 20k hit. its part of the method. The poorly trained tend to keep thinking of ways to offset that 20k loss with only that in mind, rather than learn where and what went wrong and not to repeat the same mistake, and better still find ways to beat that mistake and gain from it in future. When it comes to TA, it is not the question of which is the best; intra, scalping, 1 week, 1 month or 1 year that matters. If the risk proponent is right and frame if mind stays positive, all time frames should return profits.

In FA also it is not if one selects a great looking stock with amazing 5 year returns, q-o-q returns, low d/e, low p/e, etc. If something goes wrong down the years, a 1000 buck stock can also become a penny stock in 5 years time…so what do we do?

To start with a resounding knowledge of FA mixed with some basic TA knowledge can work wonders for the risk averse wannabe money-maker. Secondly (my bracket ), is a solid TA knowledge with a fair understanding of reading companies books, P&L, ratios,etc

Buffet always said magic words and not wanting to sound cliched, I’ll avoid original lines and just state common sense. neither Buffet nor Rakesh came to where they are without conviction in their views and discipline. Those 2 hold the key to success. if one buys a super good company which is 40-50% down from yearly peaks just because of some quarters of bad results whole sector being in trouble or index itself tanking, then very little can go wrong in buying such companies with a slightly longer time frame i mind, say a year or more. At the same time, if one can use TA using candles, indicators and various other tools to time the entry into that particular stock, then success is almost guaranteed. of course things can go awry sometimes which is always the case with markets but think of the loss and risk control that can be done by buying absolute lows into a stock that can potentially double over the next year !!

so what and from where do we chose the stocks? Its NOT simple by any means as plenty of homework is required. Initially I used to work with 5-6 on chart indicators and 6-7 below the chart ones only to realize i was over complicating things. Keep things simple. Use information available to you from internet, magazines,etc which pay analysts and research guys crores each year to dig stuff out. Look for sectors which are beaten down even if Nifty is at all time highs. Realize that the goal is to buy stocks at great valuations with excellent technical entries. Look for companies that have done well over the past 5-6 years in term of earning, PAT,etc consistently and also Q-O-Q if possible. Obviously something will be wrong if the stock has corrected 40-50% from peaks. Try to find out if the problem can be solved. If it can and the company is working on it; consider the stock. At 40-50% correction from peaks, almost all FA parameters, such as P/E, etc will be quite low making for good value buys. Besides this do some

research to find companies with low or zero debt, no promoter pledged shares, net positive growth in past 4 years and good management. Look for high promoter holdings.

Along with this a good sound knowledge of technicals is required if one is catch that so called “absolute” bottom and be sure of bounce from thereon. no shortcuts here. One has to learn TA and find indicators, trendlines, patterns that work for “that” person. What works for one may not work for another if risk-reward outlooks vary greatly. remember, one TV analyst may short stock while another may go long. neither may be wrong in his outlook. One person will be SL’d and the other will get his target…as simple as that.

Have a longer period of outlook to allow the companies to perform well without overly getting technical in that period looking for ten exits and entries. Remember, you blow up a lot in transacting charges also. If holdings generate say 70-80% at the end of 10 months after buying, consider a longer hold to save paying the 15% short term tax factor.

All this may sound like theoretical and impossible to achieve. I have been following it diligently for a year through which i have bought stocks at lows while market was at peaks and still made money despite what Nifty does. Be patient and study hard. If you are looking for consistent 50% plus returns year on year, this system works for sure. Remember that at 50% returns in investment, you are talking returns higher than almost any instrument or investment in the “world” !! So spend quality time in learning. Happy investing and Trading…or Both !!

As for me, I am still on a pursuit to convert the 50-60% p/a to 100%. God bless you all.

Are you subtly trying to promote something? Or get followers to subscribe to your ‘tips’? I don’t even know why you spent so much time writing this long generic post.

My opinion: Success should speak for itself.

God bless you too.

[Prashe]

you could say promoting discipline. Long generic post is for those new “me’s” out there in TA who can lose a fortune the way i did before developing a successful system. Key being develop. There will be no tips given or recos. Can freely give advice on how to approach TA, books to read, magazine names to get data about companies,etc. Saying “success should speak for itself” hints you wanna see proof. Which i am not interested in doing. TC