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Sri Lanka Equity Forum » Stock Market & Forum Help » Stock Trading - In the Game

Stock Trading - In the Game

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1 Stock Trading - In the Game on Sat Apr 23, 2011 6:39 pm

Quibit

avatar
Senior Vice President - Equity Analytics
Senior Vice President - Equity Analytics
I bought stocks, but every day I see all other stocks going up except mine. Why am I so unlucky?

You are 'probably' not unlucky. This is a common dilemma that most investors go through. Each day at least one stock starts a rally and makes a significant gain in its price. By nature we get attracted to that stock and tend to think 'why did not I buy that' or 'if I had bought that stock'.

But in reality stock rallies last for only a few days, all the other times the stock remains dull and stagnant. Unfortunately for the investor, when they continue to see different stocks rallying each day for about couple of weeks, they get the feeling that everything else moves except the stocks in the investor's portfolio.

May be you have made the wrong selection. But if you think that you have made the right selection, then your time will come. And the stock that you selected too will start its rally. But nobody knows when! Just be patient and hold.

What do 'overvalued' and 'undervalued' mean?

You can calculate a value (intrinsic value) for the shares of a company based on a number of factors such as earnings, dividends and cash flows. This value could differ from the market price of a share because market price is determined from demand and supply factors which may not reflect the above factors. Therefore, there could be a difference between the market price of a share and the intrinsic value of a share.
If the market price is less than the intrinsic value then the share is undervalued. The market has not identified the true worth of the share. If the market price is higher than the intrinsic value then the share is overvalued. It is advisable to buy shares that are undervalued because its price may reach its true value in the long run.

What is an Candlestick chart? How do I interpret it?

Candlestick is a chart that captures price movements of a stock for a particular period and shows the Opening, High, Low and Closing price of a particular stock at a particular point in time. These charts are predominantly used in technical analysis to predict future prices or direction of future prices.

What are Order Qualifiers? How can I use them?

Order qualifiers are used in specific circumstances. Most orders placed by investors are with no qualifiers. If there are no qualifiers the orders will be executed at the specified price or better.

Fill or Kill (FOK) is an order qualifier that requires the immediate purchase or sale of a security at the specified price or better. If the whole order cannot be executed immediately it will be cancelled. These orders cannot be entered during pre open.
If Immediate or Cancel (IOC) is placed on an order it requires immediate purchase or sale of security for the specified price or better for the whole or part of the order. If the whole order or part of it cannot be executed immediately it will be killed. These orders too cannot be entered during pre open.

What are Day Orders?

A Day Order will be cancelled at the end of the trading day. That is how generally orders will be placed. But if you want you can use GTC or GTD orders.

GTC stands for Good Till Cancel and these orders will remain valid until cancelled or for five (5) market days.

GTD (Good Till Day) orders will be cancelled at the end of the specified trading day if unexecuted. You can specify a day subject to a maximum of five (5) market days.

How can I predict prices from a stock chart?

There are various techniques you can use to predict likely stock prices in the future. You can check the 'Show me the Science ' section under the Education Tab of our site where we introduce one new technique every day. But you should remember that all formations, patterns and charts fail at some point and it should be used in conjunction with other methods in forming a buy or sell decision.

What is Margin Trading?

Buying on margin is borrowing money from a broker to purchase stock. You can think of it as a loan from your brokerage. Margin trading allows you to buy more stock than you'd be able to normally.

Normally margin amount would be some percentage of your portfolio value. This will help the broker to sell your portfolio and recover the money in case you default your payment. Therefore this can be considered a win-win for both the investor and broker.

You can do this only through a Margin Provider registered with the Securities and Exchange Commission of Sri Lanka. Most brokers of Colombo Stock Exchange are registered margin providers. Please check the list to see if your broker too is listed there.

I buy stocks, but I can't make up my mind to sell.

Most of us buy stocks for only one reason and one reason only, that is to SELL one day at a higher price and make a profit. But it is true that most of the time investors tend to get hesitant when trying to sell, thinking that that stock will reach higher so that they can sell at an even higher price. But in reality after a rally most stock prices will take a downward trend for some time.

It's important for you to understand that stock rallies don't happen every day and most of the time, they last for only 2-3 days. This is a common scenario in any market worldwide. Therefore the best way that you can make up your mind to sell is to determine the price at which you sell at the point of buying. You may decide, that I will exit when I get 10% return, or even 5%, 35% or even 150%. It's very crucial that you be realistic in this figure. You may consult advisor and experts when arriving at this figure.
Once the stock price reaches the price you expected its best that you consult your advisor and experts again and make you exit (sell) accordingly.

Most of the time too much greed will only end up in sorrow! EXIT when the time is right. Once you made the sale, that stock is gone, it would be best you take that stock out of your radar (until one day that the same stock becomes attractive again). Stocks are there for you to make money and exit. Don't get emotionally attached to them.

I have made few bad mistakes and I have lost big! Feel like quitting! Any advice?

It's good that you used the word 'mistakes', that mean you know you did something wrong. It is very important that you learn from your mistakes and not to do them again. If you continue to make the same mistakes over and over again, then there is nobody to blame but you. So even though you lost consider that your loss is worth the lesson you have learnt.

Stock trading is all about learning and mastering the techniques. Most probably you would never find an investor who has not made a loss in their lifetime of trading. Probably they have lost many times, but if you happen to read about any great investor, you will notice that they all have lost, but more importantly they have learnt from their mistakes.

It's your decision whether to quit or not, but keep in mind that you can't ride on your luck every day. Unless you select your stocks with an underlying reason, you are meant to make loses at some point, and surely your loses will be big when that day comes.

Copyright: Sri Lanka Equity Analytics
www.srilankaequity.com

2 thanx on Sun Apr 24, 2011 10:37 am

ssb

avatar
Manager - Equity Analytics
Manager - Equity Analytics
post is very helpful
rep added flower flower flower flower

3 thanx on Sun Apr 24, 2011 10:52 am

GD

avatar
Stock Analytic
Stock Analytic
Nice article.. Thank u... KIT. Very Happy

4 Re: Stock Trading - In the Game on Mon Apr 25, 2011 9:26 am

Kaush


Equity Analytic
Equity Analytic
Good to read over and over again when my portfolio becomes red. Really appreciate the effort keep it up.

5 Re: Stock Trading - In the Game on Mon Apr 25, 2011 5:05 pm

yoyo

avatar
Manager - Equity Analytics
Manager - Equity Analytics
Thanks Quibit for the nice valuable post. Rep from me Very Happy

6 Re: Stock Trading - In the Game on Mon Apr 25, 2011 5:15 pm

SL.Market

avatar
Vice President - Equity Analytics
Vice President - Equity Analytics
@Quibit wrote:I bought stocks, but every day I see all other stocks going up except mine. Why am I so unlucky?

You are 'probably' not unlucky. This is a common dilemma that most investors go through. Each day at least one stock starts a rally and makes a significant gain in its price. By nature we get attracted to that stock and tend to think 'why did not I buy that' or 'if I had bought that stock'.

But in reality stock rallies last for only a few days, all the other times the stock remains dull and stagnant. Unfortunately for the investor, when they continue to see different stocks rallying each day for about couple of weeks, they get the feeling that everything else moves except the stocks in the investor's portfolio.

May be you have made the wrong selection. But if you think that you have made the right selection, then your time will come. And the stock that you selected too will start its rally. But nobody knows when! Just be patient and hold.

What do 'overvalued' and 'undervalued' mean?

You can calculate a value (intrinsic value) for the shares of a company based on a number of factors such as earnings, dividends and cash flows. This value could differ from the market price of a share because market price is determined from demand and supply factors which may not reflect the above factors. Therefore, there could be a difference between the market price of a share and the intrinsic value of a share.
If the market price is less than the intrinsic value then the share is undervalued. The market has not identified the true worth of the share. If the market price is higher than the intrinsic value then the share is overvalued. It is advisable to buy shares that are undervalued because its price may reach its true value in the long run.

What is an Candlestick chart? How do I interpret it?

Candlestick is a chart that captures price movements of a stock for a particular period and shows the Opening, High, Low and Closing price of a particular stock at a particular point in time. These charts are predominantly used in technical analysis to predict future prices or direction of future prices.

What are Order Qualifiers? How can I use them?

Order qualifiers are used in specific circumstances. Most orders placed by investors are with no qualifiers. If there are no qualifiers the orders will be executed at the specified price or better.

Fill or Kill (FOK) is an order qualifier that requires the immediate purchase or sale of a security at the specified price or better. If the whole order cannot be executed immediately it will be cancelled. These orders cannot be entered during pre open.
If Immediate or Cancel (IOC) is placed on an order it requires immediate purchase or sale of security for the specified price or better for the whole or part of the order. If the whole order or part of it cannot be executed immediately it will be killed. These orders too cannot be entered during pre open.

What are Day Orders?

A Day Order will be cancelled at the end of the trading day. That is how generally orders will be placed. But if you want you can use GTC or GTD orders.

GTC stands for Good Till Cancel and these orders will remain valid until cancelled or for five (5) market days.

GTD (Good Till Day) orders will be cancelled at the end of the specified trading day if unexecuted. You can specify a day subject to a maximum of five (5) market days.

How can I predict prices from a stock chart?

There are various techniques you can use to predict likely stock prices in the future. You can check the 'Show me the Science ' section under the Education Tab of our site where we introduce one new technique every day. But you should remember that all formations, patterns and charts fail at some point and it should be used in conjunction with other methods in forming a buy or sell decision.

What is Margin Trading?

Buying on margin is borrowing money from a broker to purchase stock. You can think of it as a loan from your brokerage. Margin trading allows you to buy more stock than you'd be able to normally.

Normally margin amount would be some percentage of your portfolio value. This will help the broker to sell your portfolio and recover the money in case you default your payment. Therefore this can be considered a win-win for both the investor and broker.

You can do this only through a Margin Provider registered with the Securities and Exchange Commission of Sri Lanka. Most brokers of Colombo Stock Exchange are registered margin providers. Please check the list to see if your broker too is listed there.

I buy stocks, but I can't make up my mind to sell.

Most of us buy stocks for only one reason and one reason only, that is to SELL one day at a higher price and make a profit. But it is true that most of the time investors tend to get hesitant when trying to sell, thinking that that stock will reach higher so that they can sell at an even higher price. But in reality after a rally most stock prices will take a downward trend for some time.

It's important for you to understand that stock rallies don't happen every day and most of the time, they last for only 2-3 days. This is a common scenario in any market worldwide. Therefore the best way that you can make up your mind to sell is to determine the price at which you sell at the point of buying. You may decide, that I will exit when I get 10% return, or even 5%, 35% or even 150%. It's very crucial that you be realistic in this figure. You may consult advisor and experts when arriving at this figure.
Once the stock price reaches the price you expected its best that you consult your advisor and experts again and make you exit (sell) accordingly.

Most of the time too much greed will only end up in sorrow! EXIT when the time is right. Once you made the sale, that stock is gone, it would be best you take that stock out of your radar (until one day that the same stock becomes attractive again). Stocks are there for you to make money and exit. Don't get emotionally attached to them.

I have made few bad mistakes and I have lost big! Feel like quitting! Any advice?

It's good that you used the word 'mistakes', that mean you know you did something wrong. It is very important that you learn from your mistakes and not to do them again. If you continue to make the same mistakes over and over again, then there is nobody to blame but you. So even though you lost consider that your loss is worth the lesson you have learnt.

Stock trading is all about learning and mastering the techniques. Most probably you would never find an investor who has not made a loss in their lifetime of trading. Probably they have lost many times, but if you happen to read about any great investor, you will notice that they all have lost, but more importantly they have learnt from their mistakes.

It's your decision whether to quit or not, but keep in mind that you can't ride on your luck every day. Unless you select your stocks with an underlying reason, you are meant to make loses at some point, and surely your loses will be big when that day comes.

Copyright: Sri Lanka Equity Analytics
www.srilankaequity.com

Great.... +rep from me..

7 Re: Stock Trading - In the Game on Wed Apr 27, 2011 11:44 am

manike100


Equity Analytic
Equity Analytic
Really good to read..

8 Re: Stock Trading - In the Game on Sat Jul 02, 2011 6:08 pm

chathu

avatar
Stock Trader
i worried lot,
until read this article.
but now i know that I AM A STUDENT OF GRADE 01.


9 Re: Stock Trading - In the Game on Wed Jul 20, 2011 12:34 pm

JennyFunny


Senior Manager - Equity Analytics
Senior Manager - Equity Analytics
thanks great article..

10 Re: Stock Trading - In the Game on Sun Jul 31, 2011 9:42 am

MKT


Equity Analytic
Equity Analytic
100% True...Thanx for sharing flower

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