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Saturday, July 4, 2009

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Is There a Hidden Treasure in the Stock Market?

Is there a hidden treasure in the stock marketImage Source

For a long time I used to wonder about this question – if there is a hidden treasure in the stock market? I believe many stock traders would have thought about it. In fact those who turn towards stock trading from their normal professions actually develop this thinking that there may be some treasure in the stock market. For all those out there who are wondering if there is one, I am here to tell you “yes there is truly a treasure in the stock market”.

Before I started stock trading, it was completely new to me. In fact I heard about shares when I was in the final year of my graduation college. There were few Tamil friends who used to discuss it and one in particular was very much enthusiastic about it. I vaguely remember that one day that person was saying that some stocks just went up very fast as days were passing by.

Stock Market is Fascinating from the Beginning

Those times were in 2005 and you can obviously see why stocks were rising regularly. That was part of the prolonged bull market. But I did not know anything about shares or stocks at that time. In the newspaper, the section where share market information is given was completely alien to me. Now I wonder if only I tried to understand what it was at that time!

Once I joined by job, unexpectedly one day I attended a seminar by Anand Agarwal (from Hyderabad) who spoke about stock market investing, personal wealth and risk management. That was a very informative and inspiring session. After looking at the way the presenter analyzed the returns that can be made through investing in stocks, mutual funds and specifically in right stocks like Infosys, Reliance, etc., I was quick to realize that there is really something wonderful about the stock market. And moreover all this is passive income.

There Was a Hidden Treasure in the Stock Market

I too started analyzing and calculating how earnings would be by studying the history of Sensex, mutual fund NAVs, and some popular stocks of the time. I had also proactively started making a list of certain stocks and tracking them regularly. I did soon realize that buying and selling these stocks is going to give a nice passive income. As I did more calculations I realized that there is really a Hidden Treasure in the stock market.

As I am living in India, and having a day job, I used to think that I don’t have the time to trade because I thought at that time I had to spend full time to look at the market. It was also easy to get information about the stocks in the US markets on the internet. Brokerage sites were easily searchable and accessible. Slowly Indian online brokerages and stock related websites are just opening up right at that time.

My conviction about the hidden treasure in the stock market was lost when I made my first big loss in just after two months of starting. I had thought of giving up. But for the kind of success achiever I was, I did not give up but started looking for reasons for failure and how to correct them. Very soon I realized that there should be a plan for trading stocks much like we do in other types of activities.

This is when I changed my principles and strategies. I started looking for better ways to trade. For many months I didn’t make much improvement though I was making some gains and keeping pace with the general market movements. Initially I was actually lagging in pace with the market and sometimes made losses when markets gained.

No More Treasure :(

Though I had learned to keep pace with the market, I could not re-convince myself that there is a treasure in the market. As time passed, I realized that there is no guarantee that I would perpetually make profits from the market. I was quick to understand that as an average trader, I would lose more than the average indices when markets fall while I would gain less than the average indices when markets rise. This reality had forced me to reconsider my situation.

I had decided to give up like many other traders who just get lazy enough to continue when it is not better than other things. But just before that I wanted to give one last try. There was one consistent pattern I had noticed in the movement of certain stocks. So I felt if I could capture something based on consistent behavior I should be able to beat the market.

Finding the Treasure Again

Those stocks were actually beating the market but unfortunately they were not so popular. As they are not popular nobody gave any advice on them. So I could not judge if I can make an entry. The uncertainty was what stopped me for many days. But after observing their consistent movements, I wanted to give them a try.

That was the time when I made my entry into RNRL and that too with a powerful principle of no diversification. I weighed half of my portfolio into this single stock. I believed whether profit or loss that is going to change my portfolio forever.

As RNRL moved everyday, I held my breath from selling too quickly for stop loss or for small profit. Very soon after 45 days, the expected move had come and the stock just doubled in only a matter of one week's time. I had seen my portfolio gain by a whopping 18000 rupees on one single day of that week! You can note that my entry price was 47000 rupees into that stock. There was no end to my happiness over that weekend!

There is Truly a Treasure in the Stock Market

This result had absolutely convinced me that there is truly a treasure in the stock market. I could see that my newly applied strategy had done wonders in a short period of time. If I apply that consistently it is only a matter of time before I make myself very rich. That was the first time I ever felt very happy about stock trading. And it happened just about the time I finally decided to give up.

I felt glad that I gave a last try. It would have been completely different otherwise. After that I started telling my fellow traders to reconsider their situation if they are not keeping pace with the average market returns.

The Treasure is Not Hidden But the Path to It is!

And what more, it is not a hidden treasure. It is a clearly visible treasure. You can just study the stocks and their movements within a certain period of time and calculate for yourself how you would gain by trading them. You do not need to worry about some way of trading but look at the statistics and conclude that huge money is present in the stock market movements.

When my trading went onto the right path after a long time since I started trading, I had realized that the way to make money from trading is very important than anything else in the stock market. That is what told that the treasure in the market is not hidden but the way to get that treasure. You cannot clearly see how to make your way to that treasure because it is highly complicated on the outset. Only trained eyes can see a common stock chart from uncommon perspective. They can see the hidden truth in it.

It not only requires intelligence to gain from stock trading, but also skill and effort. There is no way you can succeed without putting the required effort into planning your trades and learning lessons from them. Without that you can be better to stop trading immediately.

If your trading is not going right and you are not keeping pace with the market instead of beating it, then it is time that you should reconsider your trading. Either make a commitment to learn to find the path to the treasure or stop your quest for the treasure. Don’t just keep looking at the treasure without going for it, you will then become a gambler in the stock market!

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