Lost 20k in a month, wrong Fundamental Analysis


#1

I started trading since last month.

Last week was terrible. I lost money when I shorted Bharti Airtel after their bad result. I was pretty sure it will go down, but it went up and up.

Same thing yesterday, Asian Paints had a good result but the stock went down. I was so sure yesterday that at 9:15 I bought 2 lots of call options. crazy right? I should have waited at least 10 minutes before deciding, I lost 8k yesterday.

Most of my trade is based on quarterly results. I did some good trades before with ICICI, IBULHSFIN etc. based on their results. But now it seems I am not seeing something about market. This is really frustrating, I still don’t know why and how people react to these results.

What should I do? The amount is small but significant for me as I earn 30k a month.


#2

Welcome to Trading.

you take a view and expect it come to your way. this is the biggest mistake every new traders does.

First you should stop trading in options for one year. trade only equities. Read More information here at TRADINGQNA.

Go with the trend. I took Long in Asianpaints on Friday. still holding it.
same thing happened in Heromotors. afters results it went down. and after that it went up by 10%.

What is your exit plan, when you want to exit ? based on price and hold for two or three days ? this should be decided before you enter.

I request you to read http://zerodha.com/varsity/ before you start trading.

dont forget this Can you share an overview of your trading strategy?


#3

It seems like there’s one big mistake in your trading that you don’t use a stoploss. In any trade you always have to use stoploss to have only a calculated risk.


#4

see,
you are new investor and then you are trading options on it.
dear, options are the most risky thing to do for a new comer in this field.
when you invested the money what was your timeframe of holding the stock.
you are trading futures and options. first start with equities with the small amount and then invest in various sectors.
if you are a long term investor, then you should not make quaterly results a matter of concern.
now, coming on to you question: the stocks quarterly result are positive and the stock still fell, what you have seen might be the correction and the second thing to add is that any other news apart from quarterly results can also affect the stocks performance.
fundamental analysis is done when you want to hold for longterm like 3 years or more and then you are probable to get good appreciation in price of the stock. provided your reasoning is right.


#5

Most of the financial results to which retail investor reacts , have already been discounted by professional traders. So when retail traders jump into the market based on these reports , they are mostly on wrong side of it.

I would suggest you to learn about DOW theory and Volume Spread analysis. And try to make your trades on the basis of technical analysis because price will always tell you the whole story ( if you know what to look for)


#6

If you just trade on the basis of results announcements, do a visual back test on the charts, and see what happened when these companies announced their results for the previous quarters. You will see that the price movement will be random in nature

some times good results = price goes high, bad results = price goes down (huge moves)

other times good results = price goes down, bad results = price goes up (huge moves)

And then some times the price will just trade sideways.

It’s so random that it is not tradable. You will make huge profits on one results announcement day and on the next you will loose all the profits that you made during the previous results.

As a new trader it will be good for you if you not trade in such highly volatile market environments like results announcements, RBI Policy, election results, budget sessions etc. till you are more expereinced.

Just go and check the charts of nifty and various stocks on these days and you will see what i am trying to say.


#7

The funny thing is, you could be 100% right with your fundamental analysis and still be wrong with the direction of the price movement.

The stock Price moves based on demand and Supply.

Demand and Supply is created by Market makers and not analyst or retail investors.

On Result days, Why take the stress of trying to make an informed guess on something you have no control on ?


Karnataka bank, federal bank q3
#8

For day-trading, there are tons of wealth hidden in these following books, which hold the power to entirely change one’s outlook to a market.

  1. James Dalton’s “Mind Over Markets”
  2. J. Peter Steidlmayer’s “Steidlmayer on Markets”
  3. James Dalton’s “Markets in Profile”
  4. J. Peter Steidlmayer’s “Market Logic Trading and Investing with a Sound Understanding and Approach”

You can also refer to Camarilla Pivots (available in Pi). However, it is said that, Camarilla is “Poor man’s Market Profile”. A top-down approach must be used. First, one should try to understand “Market Profile” methodology and techniques, and by-default, the person will understand Camarilla (even, one might choose not to use it). This will enhance tremendous accuracy before pulling the trigger to buy on R4/S3 or to sell on R3/S4.

To add, indicators like Ehler Fisher Transform and CCI (14) can also help.

Fundamentals has very little to do in a short-term. It’s all about order-flow, Volume Profile and Time-Price Opportunity.

After developing a concrete plan with affordable pre-defined SL, concentrate on trading psychology (there are awesome YouTube videos by Brett Steenbarger, Ari Kiev). Never risk more than 2% of capital on a single trade.

Trading at 9:15 am indicates that you are impulsive, but that’s ok, some way or other we all are. But, we must try to listen to the market before expressing our opinion or view (the aforesaid books will certainly help).

Cheers!


#9

Techie: ““I started trading since last month.””

Hello Techie,
I am unsure if you are a novice trader. First of all shorting any scrip is a feat because profit is limited and loss is unlimited. Still if you want to go short, a stop loss is always suggested. There are several instances where stop losses shall be triggered and then after sometime the scrips bounce back the same day or the next day.

The trades at 9:15 could make you gainer/looser soon. But have to decide on the trend of the market. Patience is always rewarded.

Happy Trading…!


#10

I have known people losing much more than that & that to in a matter of minutes. I personally have encountered losses at times in past.

I know this is an older post but whatever you have written is true. Again airtel share price followed this behavior. It rallied nonstop after bad results. Many people lost big money. One is on this forum & other person is known to me in social circle.

Markets move against you & gives you a shock. Yes its all unpredictable moves shown repeatedly by many stocks after their results are declared.

Try to stay away from stocks which have declared their results during live market hours.

Because at times, insider operator game is happening & there’s a lot of manipulation going on.


#11

Hi Techie,

This is the basics of trading - Whenever you are buying anything it means that someone is selling to you at the same price. At the end of the trade either your money goes to him or you get his money. So, how many times you can be a winner :slight_smile:

Whenever people think that they can recover their trading loss then again they lose more.

Considering your monthly salary, its not a good idea to keep trading. Better buy stocks in small quantities for a long term or invest in mutual funds SIP.

Trading is an easy way to lose money!!


#12

Hello Techie,

I am also in the same boat and I have been trading for the last 6 months ( not even a single successful month). I am not giving up either as the learning gets better everyday with consistent capital erosion.

To be honest with you, with every successful trade we get high on our emotions and for every loss, it makes us so weak and lose our confidence. It takes a lot of learning and patience with good temperament and that’s what the successful people in this forum is doing.

I am glad that you opened up early and landed on this forum. Read as much as on the Varsity. Go linearly and do not skip the topics. I refer Varsity everyday and looking forward to build a network here so that people can help us.

Stay in touch and all the best !!!


#13

If anybody does trade based on Funadamentals & Recommendation from Fund houses , will loose certainly
TA helps traders, let me give an example , which happened to me, I received a research report based on Fundas on Reliance , a buy call , i do follow TA , so i was aware of that Reliance will go down , Recommended price was 902 target 1000 .After the recommendation , today Reliance

price is 886, ( refer attachment)


#14

Thanks everyone. I have been learning alot from this forum and reading many things. I have been trading with very small quantity now. Max 100shares.

Since last one month I am getting pretty good at scalping with the help of TA. I try to control my emotions and not overtrade.

Also i keep 90% of my savings are in MFs so as to protect my capital. What I have learned so far really makes me feel proud about myself. My intension now is to learn and not think about money.


#15

I suggest you to use Bo or Co orders which will help u better with exit if it’s in wrong direction.

I am also a newbie and now using BO for most of my trades and able to cut losses short if I am wrong in my trade. I learnt this from other forum members about important of stop loss and order types


#16

you can invest 1 lac and earn 1-2 crores in 20 yrs