Friday, August 3, 2007

TRADING TIPS

Hi Frnds,

I am sure you all know it, but still these guidelines can be very helpful for you in trading.
Follow it and you can see the difference.

SYSTEM OVERVIEW
<> Research for safer quality stocks
<> Study trading ranges
<> Buy on dips and sell on peaks
<> Implement money management techniques
<> Don't be greedy
<> Short-term plays

TRADE ONLY QUALITY STOCKS
<> To reduce chances of major drops
<> Follow just a few stocks – know them intimately
<> Invest in best of each segment to reduce risk
<> Pick good industries – follow trend
<> Pick stocks with "good numbers" (fundamentals)
<> Pick stocks with good management and public imageBUYING ON DOWNSWINGS;

SELLING ON UPSWINGS
<> Know each stock's historical trading range and focus on last 60 days
<> Chart peaks and valleys and find entry and exit points that the stock hitsfrequently

PROTECT YOUR MONEY WITH MANAGEMENT TECHNIQUES
<> Pick a budget you could tolerate to lose
<> Be prepared to cost average frequently
<> Enter 50% of budget into 1st position, and 50% into 2nd position
<> Cost average when your stock bottoms out and settles to new low level only,don't cost average just because it dips

PLAN EXIT POSITION BEFORE YOU ENTER
<> Generally, try to make 50 - 100Rs /share; don't focus on percentage
<> Place sell order for day only if you can't watch the stockREDUCE RISK BY…
<> Avoiding positions with earnings coming out
<> Down or out of favor industries are to be avoided / remember these are shorttermplays and we're not investing for the long term

GET OUT OF THE "INVESTING" MENTALITY AND GET INTO "MAKE A PROFIT TODAY" MENTALITY
<> Take any profit you make as often as you can because stocks move up and down by nature
<> We're not waiting for the stock to turn or make significant moves
<> We're not trying to find the stock that can hit us a homerun

BAILING OUT
<> Sometimes you just have to bail out because time is money
<> When to? Stock drops more than 20%
<> Then what? If stock was good before, it will probably be good again. Buy it back and cost average once it finds a bottom. Then don't wait for it to come all the wayback, sell it at the top or near the top of its new trading range and repeat until you recover.


HOW TO SALVAGE A BAD TRADE POSITION
<> Cost average at 20% loss level
<> Sell out beyond 20% and wait for bottom and new range and trade-out
<> Hold for long-term, MUST USE DEEP DISCOUNT BROKERS
<> Scottrade, E-Trade etc…STAY ON TOP OF YOUR STOCK LIST
<> Keep abreast of any major bad news and delete from list immediately
<> Study and search for new stocks continuously

Suggestions and Comments are most welcomed.

Thanks & Regards
Hakim Jamali

3 comments:

isha said...

thanx for the useful insights...although it does take some time to get acquainted with the terminologies used here...but nonetheless plz do continue posting such tips.

Prashant said...

Well my first investment was LIC mutual funds. Its always a safe bet.
Mutual funds and Equity are the most common ways to invest your money. While mutual funds are an easy way to invest money, the growth associated with it is slow but assured more often than not. However, those interested in multiplying money "overnight" need to enter in the Equity market. Equity needs a little more technical knowledge though. My first equity investment was IndiaBulls Fin. Initially I had invested small amounts, like 2-4 shares per script. Well its been 6 months since I had my first shot at the share market and since then there's no turning back.
There are again 2 kinds of investments in Equity master. One is buy large amount of scripts, hold them for a short term, and sell them off. This involves a bit of risk, and requires a sound know-how of the market fluctuations and the script with which you can afford such risks. The other way is to buy fundamentally strong scripts and keep it for a long term, say 9 months to a couple of yrs. It normally yields good value for money for all the fundamentally strong scripts. There are few good blue chip companies that one can invest in like Tata Motors, M&M, Infy, TCS, RPL, Bharati etc. Even though some of these stocks may look weak on the charts at the current levels, they are never the less fundamentally very strong companies which will get good amount of profit in the long run. Dips in such blue chip companies are a good opportunity to buy them.
Thats it from me now. Happy trading !!

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