Let me ask you something- What do you think are the qualities that make a trader successful?
Experience? Well, I’ve been investing in equity, commodities and options for the past four years.
Knowledge? I’ve been following for the market religiously for the past ten years. I’ve also read over 20 books on trading and economics.
Analytical skills? All my mathematics teachers have praised my aptitude for statistics and graphical representation.
Yet my total profit on 31st December 2014, was a miserable 33,453. That’s after investing Rs. 3,81,891 over three years and four months- an annualized return of 2.5%.
I would have been far, far better off earning interest off my saving accounts.
Whatever the reason for my failure- it’s not a lack of discipline. I’m an extremely systematic person (often accused of having an Obsessive Compulsive Disorder!). For everything I do, I develop systems that I religiously adhere to and carefully track.
For investments, I started out with a long-term system as well. In involved a well-diversified portfolio, with investment in blue chip and mid-cap stocks, commodities, across all sectors- meticulously d selected, and regularly optimized.
In fact, my outlook was so-long term that figuring out that I wasn’t doing well took over a year.
I began at August 2011, a great time to begin investing with the market between 16000-17000. By September 2012, Sensex had risen by over 13% while my portfolio had more or less remained at the same level. That’s when I knew things had gone wrong.
I began a comprehensive post-mortem. I pored through every part of my trading strategy to figure out what went wrong.
But the trading world doesn’t readily give answers. Depending upon who I listened too, and what I read, everything and nothing was wrong with my strategy. Every explanation seemed more convincing than the one that I followed.
So I began trying and testing different variations and different strategies. That’s how I became a day-trader. Amidst all the testing and the trying, it just became a habit. I found myself opening my DEMAT account at every given opportunity.
Not that it made a difference. I struggled for two more years with terrible results, with no signs of improvement. I contemplated giving up trading all together. I think the only thing that kept me in the game was my own ego.
And then, in 2015, two things changed.
The first one of these changes resulted, to my embarrassment, from the movie ‘The Wolf of Wall Street’. But, before you roll your eyes and close this article, let me assure you, the movie did not inspire me to new and bold trading strategies.
But yes, it did lead me to seriously consider Penny stocks for the first time. I had known about Penny stocks for a long time, and the relative lack of information was at odds with my approach. So I dismissed them early on and never re-considered, until I saw the movie.
Given my situation, maybe it was time to change my approach.
Around the same time, somebody suggested to me a breathtakingly process to make money off day-trading:
- Identify shares not over-priced at the start of the day. They will almost always fluctuate both ways.
- Place a sell order at a price Rs 0.10-0.20 higher than the current price of the stock.
- Use margins to make sure that the volume is high enough.
Occasional losses would be inevitable, but they would be easily offset by profits. This was an easy way to earn roughly Rs 30,000 a month.
What profit will remain after brokerage, I asked?
My advisor winked at me, “Ever heard of discount brokerages?”
Of course I had. But the prospect of saving a few bucks on brokerage was never enticing enough to shift from ICICI direct. After all, it was a platform I was comfortable with, and a broker I trusted.
Yet, here was the prospect of real financial returns for the first time for trading. Rs 30,000 wasn’t life-changing, but it was the amount I had earned over my entire trading career! It was also a strategy that left you with more than enough bandwidth to make more money from other trades. (If you could find the right strategy).
A discount broker also made sense for another reason- my decision to try penny stocks. After all, penny stocks too, often appreciate in paisa’s rather than rupees. The Rs 0.05 that ICICI charged could end up being over 10% of the gain in value.
So I did my research, and settled down on MyValueTrade- a broker with an easy to use platform and extremely low brokerage fees. My plan involved paying a fixed Rs 1000 per month, and no further brokerage.
After my switch on 23rd January 2015, I bought 5000 units of a penny stock priced at Rs 1.27. As the stock rose, I bought 5000 more.
The stock rose beyond my wildest dreams. I sold 10,000 units at over 4.15 a share, and made a total profit of roughly Rs 30,000
Somehow, I had picked the right stock- Karuturi Global, by a combination of luck and research.
Meanwhile, The ‘sell-after-10-paise’ has also been working well. Since I started, a little after republic day 2015- I touched 1.50 lakhs of profit on the 4th of October!
So have I turned around my trading career? Not completely, no- especially as my aim is to earn about 10 lakhs a year from trading. The return on my other strategies has been flat,.
But these two successes have given me strength and confidence to continue trading just when I was on the verge of going up.
My return for this year has already touched Rs 2 lakhs. It’s a lot less than what I earn from my businesses. But it’s a small step after 3 years of disappointment. After all, it’s over six times the amount I made in the previous three and a half years!