Review of Performance of 23-Jan-20 Stocks List

Almost 7 months ago in my last post in January, I had posted a list of 5 stocks as a study for short term trading and the market crash started soon after that month. Few weeks after that I was embarrassed to see that they performed poorly.

In the meantime I learned more things about filtering stocks and especially the short term filters and wanted to revisit this list before I could continue posting anything further on this blog. At various times I noticed these stocks and surprisingly noticed them to rebound faster after the market crash in March. What is better than systematically and simply comparing their performance after 3 weeks from filtering and after 7 months now? So here we go about that without wasting much time.

Here I am posting table comparing their LTP on 22-Jan-20 (the day the stocks are filtered), 12-Feb-20 (after 3 weeks), 20-Aug-20 (yesterday after almost 7 months).

	On the day found	After 3 weeks	Yesterday (After 7 months)
Scrip	LTP on 22-Jan-20	LTP on 12-Feb-20	LTD on 20-Aug-20
RPGLIFE	330.95	285.95	375.6
GSS	43.9	36.3	27.05
TANLA	72.25	83.3	198.8
PRICOLLTD	58.6	59.9	39
SUNFLAG	42.6	39.85	48.9

Not getting the table as it is, on blogger, so putting the same as picture below:

Now let us compare the % change.

Scrip	% Change After 3 weeks	% Change Now (After 7 months)
RPGLIFE	-13.6%	13%
GSS	-17.3%	-38%
TANLA	15.3%	175%
PRICOLLTD	2.2%	-33%
SUNFLAG	-6.5%	15%

Same thing as an image:

We can see that RPGLIFE, TANLA and SUNFLAG have fared better giving more than 10% returns with TANLA having done exceptionally well at 175% change. GSS and PRICOLLTD were the bad ones.

I actually had bitter experience with Pricolltd which did poorly and again got bitten by it in April (I do not learn with one bite). I never did anything with GSS but seeing its earlier performance in the last year, I was skeptical of it. I also bought TANLA and held through March only to book losses in April. It consolidated for quite sometime in May-June. I had tested again in June and got out for only 10% to watch it rise multifold from my exit at 77 to 199 now and still rising with Upper circuit close yesterday.

What do we learn from this? Let us check the cumulative gain if someone had invested equally in all stocks at about the same price level as on 22-Jan-20.

Cumulative performance with equal amount in each stock	% Change After 3 weeks	% Change Now (After 7 months)
Net % gain	-4.0%	26.3%

Same thing as an image:

So we can quickly conclude that these were better not for short term trading but for long term investment. 26% return in 7 months time is quite good.

While I was embarrassed for never being able to make good stock filer for short term selection of stocks, in February after 3 weeks from the time posted that I thought I did this post just at the wrong time. This post kept reminding me that I am not good with short term selection of stocks.

Long time ago in 2011 July, I tried similar posting of two stocks, PAPERPROD and PETRONET. Below is the link for it.

http://nextgoodbets.blogspot.com/2011/07/two-stocks-for-2-weeks-paperprod.html

A month after that I did a review of performance of those two stocks.Below is the link for it.

http://nextgoodbets.blogspot.com/2011/08/revisiting-two-stocks-paperprod.html

As we can see, both gained close to 20% after a month. When I posted the expectation was they rise within two weeks. But they actually rose after two weeks.

It is only two months ago that I began to realize that my stock selection is not good for short term but rather very good for long term. I used to notice PAPERPROD in the later years too for its good performance and I was not quite systematic about what I filtered and when it did better in those days. As I remembered this past post, I realized now the same thing happened this year too.

Back in those days I filtered stocks seeing price action on candlestick chart. That is why I posted charts for each. Over time I refined my selection criteria. But even now I realized timing is not certain. However when we make a list of stocks, after two weeks few could rise and few could fall. If the rising ones beat the falling ones, the list is still a winner. From here on I will do such study and post their performance after two weeks.

Now back to long term thing. I was also mentioning about debt and pledge % along with quarterly result date. The first two are fundamental filters for long term selection of stocks. The third is to estimate the time of big move based on the earnings calendar. This is more suited for short term selection than the first two. As I used first two, these eventually turned out to be good.

How could the two bad ones have been avoided? Looking at the charts, all looked good except GSS. So GSS was clearly an outlier and could have been skipped. It was jumping up fast just at the time of posting so I noticed it. PRICOLLTD was the hard one to avoid. 

Later in May-June timeframe I bought and sold SUNFLAG from 31 to 39.95. Missed TANLA and RPGLIFE. Now that it has become clear about long term I keep these three in my long term watch list.

I will post from now on a stock list for 2 week watch, on any given day I can post it up. No fundamental check here. And study the list performance after two weeks. Let us see how this goes.

If you liked this post, you can check any of the Reaction boxes below. If you want to post any questions or share thoughts, feel free to add comments below.

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Buy Low and Sell High: Why You will Not Succeed in the Long Run with This Myth?

What is the first idea everyone gets from their intelligence after looking at the stock market? Why do many traders get stuck in their first trades? Why do only few traders actually succeed in the long run in the stock trading business? At the root of all these questions lies a fundamental paradigm of stock trading. This is known as buy low and sell high. Let me assure you that if you believe in this theory, you will someday have to close your trading account!

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This is a Truly False Theory

You may be surprised to see me call this basic belief as a myth. But it is the reality which is like a violent ocean that traders have to cross before their journey can become smooth. Very few traders cross over this myth and learn the right belief. This buy low and sell high is a concept very popular and obvious for almost every stock trader or investor on the planet. Even the people who do not trade stocks understand this theory or make it on their own.

This is also one of those false theories people make immediately from their experience. It is so obvious a theory that it does not really do what it appears to do on the outset. Let me take you on a journey to debunk this myth and explore what is the right paradigm.

A Stock Trader’s Interaction with the Stock market

Whenever you think of trading stocks in general any business involving buying goods and selling them later, you can easily understand and follow that to make profits you should buy the goods at a lower price and sell them later at a higher price. The difference in price is the profit that you get to keep for your financial growth or survival.

But when it comes to trading stocks this simple theory becomes a stupid theory. It is no longer the same case with stock markets which involve highly complicated day-to-day phenomena. The basic problem with this belief is that it makes you ignore a fundamental aspect about how a trader interacts with the stock market.

There are four things a trader does when he/she comes to stocks. They are:

1. Sitting on the sidelines before entering a stock
2. Buying the stock at entry point
3. Holding the stock for some time before exiting
4. Selling the stock at exit point

Now each of these four things is equally important. But the amount of time each one takes is quite different from the other. A trader has to most likely do each of these activities for closing every single trade in and out.

Buying and selling take just a few seconds of your time while sitting on the sidelines and holding the stock are what a trader spends most of time on. It is very tempting to buy and sell stocks than waiting without doing anything other than watching stock movements.

Buying Low and Selling High…

Many beginners get caught up buying and selling stocks at the flash of thought. They don’t have a reason to do that. They just do this repeatedly for the sake of momentary pleasure that comes immediately after action. Considering this it is actually better to think of buy low and sell high a stock. In fact these beginners slowly realize this principle on their own after several unsuccessful trades.

It also makes sense a fundamental principle in making profits in a business. By sticking to a strategy as simple as these is also a good thing for many traders. A trader should always focus on long term consequences of his/her actions than doing things out of instinct or for momentary pleasure.

But the fact is that those who begin without this theory and those who learn that this theory is a myth are better off in the long run than those smart traders who learn this theory. The beginners atleast stop trading after their first losing streak and spend their time on doing other better things. The successful traders do not believe in this theory and always are on the next good bets. So they continue for the long term success.

But the traders in between who believe this theory at heart at the people who struggle all along their trading career going up and down with the stock market. They just react to the market and not ride the stock market.

Why This is a False Belief…

Let me get to the reason why this belief is not correct. In my trading I started thinking about these just after first few trades when some of them resulted in a loss that I took or yet to take. I realized that I had to carefully buy the stock when it is low and sell it after it goes high. It looked like a very smart and fundamental strategy.

But the low and high prices of a stock are only relative. You cannot really buy a stock at its lowest price and atleast not every time. Also you cannot sell a stock at its highest price and atleast not every time.

When a stock is moving in an uptrend any price is a lower price compared to future price. If you wait for the stock to come from its current price, it may not easily come unless it changes its trend for a longer time. When it does you may be too quick to enter into it.

For example, a stock at 400 appears too high if you looked at its past prices to be less than 400. If it is in upward trend, then the next days it will go up to 420, 440 and so on. Once it goes there you will see 400 as low price. See how relative it is.

As the stock moves up and up it will may be around 500 when it takes a turn back. And you will be tempted to enter into the stock at any price below 500 because all are now relatively lower prices. If you enter at 480, it does not mean that the stock has made a low there. It can down again to 460… 440 and so on. You may even buy more stock to do averaging the stock price. When it does move up any price above your buy price seems high and you will end up selling too early after seeing a little profit.

You might have sold at 480 which will be higher than the average purchase price or 500 or 520. But when a stock can move from 400 to 500 in a single leap in the current trend, it will again make such a massive move in the next leap moving from 500 to 600 or 620. Can you recollect doing similar thing in your experience?

In reality many traders end up doing like this. They are anyway happy for taking a profit though they regret for not staying for a little more time. What they miss to see is that this profit is less than what market is giving. By undermining their profit potential they become vulnerable to risks.

The Risk Side or the Real Dark Side of it!

Let me come to the risk side of this belief. The biggest problem with this principle is that people end up being caught in the fall of a stock and just cannot get out when a major trend reversal happens.

Imagine the days of January 22 and 23 and also the months of July or August. The stocks were falling everyday. They were becoming lower and lower everyday. If you believed this theory you would have bought at any price because they are lower than their all time heights they reached just a few weeks back. But the stocks did not stop there. They continued to fall and still below their high prices. Some stocks are much farther from their highs, actually.

So when you think of buy low, you will buy the stock at low price when it starts to slide after making a high price. This is a reactive approach. Of course this is not very bad idea because sometimes it can work like safety cushion. It is always good to buy stocks at lower prices.

But what happens if the stock goes lower and lower after you buy? I used to think of another myth called averaging stock price and keep buying more on “every dip”. But how much can you buy? You will be drained of your capital in only a handful of trades.

If you think that you will use a rule to handle this situation, think again. If the stock were to go down two times, you need to buy two times. You may do a 1:1 or 1:2 division of your capital for these two buys. That means you need to buy with a lesser price first so that second one will have enough weight to average.

If the stock were to go down another time, you will have to buy with even lower price. This is not practical because the stocks do not always follow a consistent pattern. You may be good in trending markets, but when they change trend you will caught up in that. And may lose all you made or even your original capital if you had just started in a single go.

The Theory itself is Dependent upon You

The concept of buying low and selling high is not wrong by itself. It becomes inappropriate when considering the trading environment and your other beliefs or reactive behavior. No trader is ideal and no stock is ideal. Things do not need to happen as we wish them to.

Considering that this theory is also dependent on your other beliefs or paradigms, I want you to understand the long term implications of this theory. This is really a big problem if you fail to recognize a trend reversal.

Most of the people, who followed it during the downturn of the last year, are the people who are deeply in trouble today. Those who recognized the trend reversal and got out of the market have some relief despite some losses.

Go Beyond the Obvious...

Go beyond the obvious things and separate yourself from the rest of the crowd. Low and high are always relative terms in trading stocks. You should not fall for a falling stock as it becomes lower and lower. On the other side you should not sell a stock quickly because it is now higher than ever before. Most often a stock making a high price continues to make highs before it does a major trend reversal. Getting out too early is disastrous for the long term.

Even if you limit losses in failed trades, low profit trades can kill your chances of long term success. Why would you spend time trading if you were only to survive? To me that is just a waste of time.

Go beyond the obvious high and low prices. Appreciate their relative nature and accordingly look for long term high and low prices. In other words you can follow buy high and sell low for a successful long term strategy. I will explore this in the future posts.

Related Posts

• Trade with the Money You can Afford to Lose: Another Myth in Stock Trading
• Someone Loses When Someone Gains: Do You have This Belief about Stock Markets?
• The Myth of Diversification in Trading Stocks
• What is the Time to Trade in a Typical Trading Day?
• Do Stock Trading Workshops or Seminars Help?
• Why You Should Keep a Journal to Track Your Trades?
• The White Monday, May 18 2009 in History: Bears Got Squeezed by the Bulls

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