Planning to Fail

+10 Life Lessons from the Stock Markets

I’m trying to understand stock markets nowadays. By reading books and trading. Each loss is a learning lesson — the fees I pay for learning this new skill.

There are no syllabus, classes or HW.

Like swimming, you can’t learn trading by reading books. As in life, the lessons learnt by failures are not forgotten.

I am limiting my trades to small sums. But not so small that the brokerage and other charges eat up my meager profits.

I started trading to earn some extra money and pickup a new skill — but the lessons that i am learning affect my day to day life too.

For example

§ I have started to curb my impulse buying on Amazon. Have caught myself doing a lot of needless spending.

§ Patience has improved. Watching stocks is like fishing or hunting… you have to be still like a stone…as you wait for the right moment to pull the string.

§ Have become conscious of the brands I use daily at home and when I go to shop — Hawkins cooker, Kajaria ceramics, Venkys chicken, KFC …all are listed companies. What are the prospects of a product I consume? What’s the company behind a brand? How does India’s growing economy affect the company’s profits?

§ Being aware of how the society behaves — when people travel more, eat more, get sick more, buy more clothes, spend more on college education, buy more flats/cars…which stocks would be happy.

§ Momentum matters — in life as well as stock markets. There’s more probability of making money on stocks that are riding on volumes. If a stock is falling, it will take you down.

Similarly your daily habits are actually momentum plays- ride on the good ones & be aware of the bad.

§ Listen without prejudice. When the markets telling you something — tone down your mental chatter & listen.

If a stock in your portfolio is sinking — accept the mistake — and get OUT before it takes you down like an albatross.

§ Don’t get married to a decision, especially if Reality is telling you otherwise.

§ Learn to look at your feelings — are you greedy, fearful, bored, ecstatic when you buy or sell a stock.

§ Do HW, avoid impulse buying and selling.

§ Constantly learn and improve your decision box toolset.

§ Look at your own financial situation…your thrill money should be different from boring money

§ Know thyself. I can’t take a loss but am happy with a little profit (little profit >> big profit;loss=0). Plus I don’t have the bandwidth to chase a lot of stocks. Plus plus- I like to do my research.

Implies that my trading system has to reflect this. So i am not the one who can trade on tips on small cap stocks.

This Laxman Rekha would keep me safe.

§ The more you learn, the more you earn…. newspapers, Bollinger bands, RSI, MVA…the list is endless. As news affects the stocks and new technologies/events bring changes to industries — the more updated you are, the better you get.

Especially if you get into the habit of thinking what stocks would be affected by certain news. Say landing on Moon- affects which all Indian stocks?

§ Start looking at Interlinkages: If real estate is doing well then stocks of Ceramics, Banking, Pipes, Construction materials would also do well.

Pick a paper and draw a tree diagram of the various branches of a theme.

§ One should be able to see the long term as well as short term…if a certain stock is doing well on a monthly basis- zoom out the chart to look at the long term view also. And vice versa

§ A stock not doing today may do well tomorrow. So keep a watch out on the winners as well as laggards.

Ex. At times the Pharma sector is not doing well but IT is. But one can keep accumulating the Pharma stocks because 6 months down the line you may make a handsome profit on your foresight.

Which brings us to the last point:

§ § Learn to Plan .

Most of us are not good at it. But slowly and steadily we can learn it and be better than we were a year ago.

What started as #finance is now #lifehacks

😎