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  • Psychology of investors or Traders

    Deepak Sharma 24 May 2021

    What is psychology ?

     

    The analysis of the human mind and its various roles and forces is known as psychology. Psychological science contributes to our knowledge of human emotion, attitude, intellect, memory, vision, awareness, concentration, motivation, and the biological mechanisms that underpin these roles and behaviors.

    In essence, psychology researches persons and populations to understand how citizens, cultures, and environment’s function and make them succeed.

     

    psychology of investors

     

    Behavioural finance claims that investors are subjected to several perceptual, mental, and social pressures that cause them to make sub-optimal judgments and undermine their success in the markets and elsewhere when they behave "irrationally." People may correct or compensate for these shortcomings in human actions and decision-making through understanding them. It also means that markets are not as competitive as conventional wisdom suggests, allowing smart traders to benefit from mispricings.

    Traditional economic theory states that when making investment choices, consumers are rational and consider several variables.

    Although we'd all prefer to think that investing in securities is a sound choice, someone who has done so will attest to the contrary.

    Many factors influence our investment choices. Behavioural finance is the study of the social and emotional biases that cause investors to make unreasonable decisions. Individual investors, fund managers, and financial advisers are also influenced in the same way.

    If you think investing in the stock market is just about statistics, you'll be shocked to find that your psychology is just as significant, if not more, when it comes to making essential choices. The analysis of the mind and action as it applies to how we spend is not just fascinating but also highly beneficial to investors. Since market movements are always unpredictable and irrational, self-awareness may assist us in recognising when our instincts are not based on sound reasoning. Nothing is more tragic than wasting money while getting the required analysis at hand, merely because of our natural propensity to behave and think in such respects.

     

    Investors' thought assumptions are a significant subject that stock-market psychology investigates extensively. A prejudice is a flawed form of thought that we've come to accept. Take, for example, the loss aversion reflex. Losses elicit a stronger reaction from investors then profits. As a result, the thrill of earning a Rs 15,000 profit pales in comparison to the agony of losing Rs 5,000. This explains why, as the economy falls, buyers fear and sell their stocks. And, as more people enter the frenzy, the market crashes.

    Remember the availability and confirmation biases. Investors prefer to rely on details and knowledge that is readily accessible to them while investigating a business. The availability prejudice is exemplified here. Rather than searching for valuable yet difficult-to-find evidence, investors focus their investment thesis on details they don't have to dig for. Furthermore, once they already have an opinion, they focus on evidence that supports it, dismissing all data that contradicts it. These two assumptions lead to sloppy analysis, which always comes back to bite them later.

    You would become a better investor if you can control your feelings.

    As feelings take precedence over thought, we can respond too fast, too slowly, or not at all. According to BMO's new Psychology of Investing survey, two-thirds of Canadians cannot control their impulses while making investment choices, with 60% admitting to investing on the spur of the moment at least once.

    Dalbar, a financial-services consulting company, published a survey named "Quantitative Analysis of Investor Conduct" in 2001, concluding that ordinary investors regularly struggle to outperform or even exceed market indices. The S&P 500 returned an average of 16.29 % a year from December 2000 to December 2000, compared to just 5.32 % for the median stock investor over the same period—a stunning 9 % gap! 2 It also discovered that the typical fixed-income holder collected just 6.08 % a year over the same time frame, while the long-term Government Bond Index returned 11.83 %.

    Dalbar argued in a 2015 follow-up of the same publication that ordinary investors struggle to generate market-index returns. It was discovered that "By a large margin of 8.19 %, the typical equity mutual fund investor underperformed the S&P 500. The return on the wider market was more than twice that of the typical stock mutual fund investor (13.69 % versus "5.50 % of the total)." 2 Average fixed income mutual fund investors consistently underperformed the benchmark bond market index, returning 4.81 % less.

     

    Factors affecting the psychology of investors

     

    The most challenging issues we face as traders are what we are unaware of. Certain human tendencies influence our investing, but we are always ignorant of how they impact our profits. Although there are several human traits, we'll focus on three that, if not addressed, will obstruct our progress against our financial objectives.

     

    1.We Have No Idea Who Our Enemy Is

     

    When we approach investing objectively, we will see where we've gone wrong and try to correct it for the future. We may change our exit conditions by looking at a more extended period by utilising a different indicator if we exit a transaction too early in a transfer. When we have a sound trading strategy but are still losing funds, we must examine ourselves and our psychology to find a remedy.

    While dealing with our brains, our objectivity is always distorted, and we are unable to objectively solve the issue because assumptions and shallow trivialities obscure the real problem. A trader who does not adhere to a trading strategy but does not recognise that "not keeping to it" is the issue, so he constantly changes plans, assuming that this is where the blame lies, is an illustration of this.

     

    2.Power Is in Becoming Aware

     

    Although there is no one-size-fits-all solution to any of our problems or trading woes, being mindful of any potential root causes helps us to continue monitoring our thoughts and behaviour to improve our patterns over time. Being aware of possible psychological traps will help us improve our behaviours and, potentially, increase our earnings. Let's take a look at three different personality quirks that may lead to these issues.

     

     

       2.1 Bias Caused by the Senses

     

    In specific ways, we use knowledge from our surroundings to shape an opinion or bias, which helps us to work and understand. However, we must recognise that, though we can think we are basing our decisions on credible facts, we are often not. Suppose a trader follows the business news every day and concludes that the market is rising based on all available data. In that case, he may believe he arrived at this conclusion by ignoring the media's views and listening only to the truth. However, this trader can run into a problem: since our knowledge is skewed, our prejudice is skewed as well.

    Also, evidence may be used to support a bias or an argument, but we must keep in mind that there is still another side to the tale. Furthermore, repeated exposure to a particular perspective or belief can cause people to conclude that it is the only viable position on the matter. They would be swayed by the relevant facts when they are devoid of counter-evidence.

     

    2.2Keeping the Vague at Bay

     

    Avoiding what might happen or what isn't apparent to us, often recognised as fear of the future, keeps us from doing certain things, which may trap us in an unprofitable environment. Though it might seem absurd to others, traders may be afraid of losing capital. Traders also think about widening their comfort zone or fearing that their income will be eaten away by taxation, as though they aren't sure of it. This would almost certainly result in self-sabotage. Another cause of prejudice may be trading only with the sector in which one is more acquainted, even though that industry has been shrinking for some time and is expected to continue. Because of the risk involved in the investment, the trader is preventing a result.

    Another typical mistake is to keep the losers for too long when selling the winners too soon. As values fluctuate, we must consider the extent of the transition to decide if the variation is related to noise or a natural consequence. Pulling out of trades too soon is often the product of buyers adopting a risk-averse approach and misunderstanding the security's pattern. When investors lose money, on the other side, they also become risk-takers, culminating in a long-term losing situation. Thanks to psychological biases, these departures from rational behaviour contribute to unreasonable decisions, leading investors to lose out on future rewards.

     

    2.3Anticipation's tangibility

     

    Anticipation is a powerful emotion. Anticipation is often linked to an "I like" or "I need" mindset. We expect anything to happen in the future. However, the sensation of expectation is now, and it can be a pleasurable emotion. It can be so satisfying that we dwell on enjoying anticipation rather than doing what we were expecting in the first place. Knowing that a million dollars would appear on your doorstep the next day will fill you with hope and anticipation. It's possible to get "addicted" to this sensation and postpone payment as a result.

    When items aren't that simple to come by, we might slip into the trap of using the sensation of expectation as a consolation reward—seeing billions of dollars changing hands every day but lacking the courage to stick to a schedule and take a cut might indicate that we've subconsciously decided that daydreaming about the gains is enough. We desire to be profitable, but "wanting" has replaced profitability as our primary target.

     

     

    Summary

     

    Psychology can have an unconscious impact on our investing. We have the highest chance of succeeding if we stay objective and concentrate on basic tactics. Understanding how markets work and travel would aid us in overcoming our anxiety or greed. We commit errors because we believe we are entering new territories without knowing what could happen. We should focus our decisions on objective decision-making if we grasp how the markets move.

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  • Impact of covid-19 on Stock market

    Deepak Sharma 17 May 2021

    Despite the government's national vaccination campaign, the number of new coronavirus cases has risen dramatically in recent weeks across India.

     

    An unexpected surge may hamper the economy's rebound from the previous recession we saw during the First Wave of covid-19 in coronavirus cases. The stock market has been the most impacted region since it has continued to plunge, posing the most significant barrier to the country's economic development and drowning a large amount of capital by investors, resulting in losses. Even though the re-emergence of Covid-19 cases has caused stock markets to become uncertain, economists and brokerages are not concerned this time. Though it will stall the recovery of Covid-affected industries and postpone a full-fledged economic recovery, economists believe things are unlikely to get any worse, and the country should be able to handle it much better.

    For the first time since November 6, India's daily Covid count exceeded 50,000 people on Wednesday. On Thursday, the country's overall number of active cases was 4.25 lakh, with 340 fatalities. This occurred on the first anniversary of the Covid lockout in India. Analysts said they don't expect any new national constraints like the ones implemented last year, but they concede that the rebound for Covid-affected sectors could be postponed for the time being.

     

    Changes in stock performance

     

    "Since the last market collapse, global stock markets, including Indian markets, have rallied dramatically. The Covid-19 pandemic is enough of a cause to expect a shift. Because of the rise in volatility, equity markets could correct in the near term. The likelihood of the markets entering a correction period is stronger than the likelihood of them rising dramatically from recent lows. The turbulence is likely to last for a while "Senior Vice President, Master Capital Services, Palka Chopra, says

    The India VIX is currently trading about 23 percent higher, indicating improved market uncertainty. From the viewpoint of investors, the India VIX measures the uncertainty of Indian stocks.

    A financial collapse like the one that occurred last year, on the other hand, is impossible. The return of the coronavirus, according to Abhinav Angirish, founder of Investonline, would trigger a 10-15% correction in the stock sector.

    The sort of economic and industry damage that we witnessed in 2020 is impossible to happen again. There could be a lull in demand as economic growth slows down during the next several days or weeks, but things should be back to usual in a month and a half.

    The markets would be much less worried about the second Wave than has been suggested, and we remain highly optimistic about demand for the remainder of the fiscal year and beyond. And when it comes to the business forecast, we stay highly promising.

    Hotel stocks like Lemon Tree, HLV, Indian Hotels, and EIH have dropped 5-10% in the last week. ITDC lost 12% of its value.

    Stocks in the aviation industry In the last week, SpiceJet has lost more than 15% of its value, while Jet Airways has lost around 10%. InterGlobe Aviation was utterly devoid of any passengers. PVR and Inox Leisure, the operators of theaters, have also lost about 5% of their value. In the last week, Westlife Growth, which operates the fast service restaurant chain McDoland in the south and west India, has lost 15% of its value, while Jet Airways has lost around 10% of its value. InterGlobe Aviation was utterly devoid of any passengers. PVR and Inox Leisure, the operators of theaters, have also lost about 5% of their value. The stock of Westlife Growth, which owns and operates the McDonald fast service restaurant chain in the south and west India, has fallen 15%. Domino's and Burger King India's parent company, Jubilant Foods, has seen its stock drop by as much as 5%.

     

    Impact on economy

     

    There is confusion regarding India's near-term growth outlook as it battles the second phase of Covid-19. India was gradually emerging from the pandemic-induced economic depression during the recessionary period. Nonetheless, India's economic growth has been slowed by the second round.

    According to the RBI, India's GDP growth rate is 11 percent in FY22, according to the Economic Survey, and 10.5 percent in FY22. However, how much the economy responds to the Covid-19 shock would significantly impact whether this growth rate is achieved. While there hasn't been a nationwide shutdown yet, several states have chosen localized lockdowns or other restrictions to prevent the epidemic from spreading further.

    The localized lockdowns have harmed a variety of retail and wholesale companies. However, the fact that products are still being moved and enterprises can operate can help mitigate the economic losses.

    CRISIL, a rating firm, recently said in a note that the effects on economic production during the second Wave would be less severe than the devastation seen in 2020. Nomura, a Japanese trading company, has also stated that industry investment has decreased but negatively affects the economy.

    "There are many reasons to believe that the economic consequences would be minimal. Other countries' experience shows a weaker connection between declining mobility and economic development. According to Nomura, manufacturing, fisheries, and work-from-home and online-based services should be robust among other sectors of the economy.

    According to the study, the ongoing second Wave would only trigger a "short-term negative economic shock," which also stated that the medium-term growth outlook remains positive. Another encouraging sign for the economy is the possibility that the second Wave of Covid-19 will plateau over the next 20 days. Economists at India's most significant public lender, the State Bank of India, have made this forecast. According to the SBI survey, "based on the experience of other nations, we think India can hit its second peak when the recovery rate reaches 77.8%."

     

    Impact on employment

     

    One of the most significant consequences of the lockdowns in 2020 would be a dramatic increase in unemployment, especially in the unorganized sectors. India's unemployment rate reached 23 percent in April 2020.

    The labor market began to rebound when the nation reopened, and by February 2020, the unemployment rate had dropped to 6.9%.

    The unemployment rate, on the other hand, has risen to 8.40% this month. The situation is more acute in the country's metropolitan areas, where unemployment stands at more than 10%.

     

    summary

     

    A sudden increase in coronavirus cases can hamper the recovery from the previous recession in the economy. As it has started to fall, the equity market has become the most affected area. Economists agree that conditions will not worsen and that the world will be able to cope appropriately.

     

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  • Trading vs Investing

    Deepak Sharma 11 May 2021

    What Is the Difference Between Trading and Investing?

     

    Investing in the stock market can be done in two ways: trading and investing. Buying and selling securities for a short period of time is the focus of trading, whereas buying and holding securities for a long period of time is the focus of investing. Depending on your level of market knowledge, neither method is necessarily better or worse than the other. Learn more about both to determine which strategy is best for your specific needs and objectives.

     

    Trading

     

    The goal of trading is to make frequent, short-term transactions in order to "beat the market." Traders purchase and sell stocks, commodities, foreign exchange, and other liquid securities. Long-term investors might aim for a 7% annual return, while traders might aim for a 5% gain every month.

    Technical analysis aids in the evaluation of stocks and the identification of trading opportunities. The evaluation is based on supply and demand and is based on past price movement and volume.

     

    Trading Strategy

     

    By closely monitoring price changes, traders hope to make a profit in a short period of time. Technical analysis is frequently used by active traders to research stocks and forecast trends in stock price fluctuations. Limit and stop orders are frequently used by traders to help them determine the price at which stocks will be bought or sold. Short selling is another common trading strategy that aims to make a profit by selling borrowed shares at a high price and then buying them back for a lower price later. When it comes to trading, the phrase "buy low, sell high" is frequently used.

     

    Trading- The Best Option?

     

    Trading allows you to actively engage in the market on a far more regular basis than investing. Active trading necessitates a significant amount of time spent researching companies and stocks, as well as maintaining and managing a portfolio. Until you start trading, keep in mind that short-term trading carries a high risk of loss.

     

    Investing

     

    Investing is a long-term investment approach aimed at managing and increasing capital in the economy. Many individual investors plan for retirement by investing in the stock market through an IRA (Individual Retirement Account) or 401(k) account. You can also increase your personal wealth by investing in a personal investment account, whether through a Managed Portfolio or Self-Directed Trading (a.k.a. DIY trading).

     

    Investing Strategy

     

    The longer you keep your money in circulation, the more chances you'll have to profit from compound interest or returns. Year after year, compounding helps you to grow your gains. By avoiding short-term ups and downs, you can avoid emotional investing and keep your focus ahead. To maintain a degree of risk that you're comfortable with, a diversified portfolio includes investments in a variety of asset groups, sectors, and geographic areas. It's important to realize that all investment carries the possibility of loss and fluctuating returns.

     

    Investing- The Best Option?

     

    Investing, unlike trading, does not actually require continuous monitoring of your portfolio or the economy. Trading and long-term investments are two separate approaches to achieving the ultimate financial target. If you choose to participate in the day-to-day ups and downs of the market or prefer to ride the long-term volatility will determine which strategy you use. Although no investment can guarantee a profit, using fundamental analysis can help you make better investment decisions.

     

    Best Institute for Stock market

     

    In the banking, insurance, financial, and stock market sectors, NIWS is ranked first among the top five institutes. NIWS offers a variety of short-term JOB-oriented courses in Share Market, Stock Market, Capital Market, Derivative (NIFTY CALL PUT), Options Strategy, Commodity Market, Forex Market and Financial Market. They have launched courses for all levels, from basic to advanced (from beginner to expert), and will continue to do so as new verticals in Accounting, Banking, and Financial Market Management courses become available. They are the first institute in the field of financial markets to offer online stock market courses (E-Learning Platform) as well as classroom instruction with an online mock test platform. They also have branches in different cities like Delhi, Jaipur etc.

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  • An All-Inclusive Guide on Intraday Trading 

    Deepak Sharma 1 May 2021

     

    As trading seems a complex thing for a beginner, we are here to make it easy and help you become a professional in the same domain. Whenever you try to invest some amount in securities, you will see different options like delivery trading, intraday trading, etc. For short-term investment, people usually prefer this trading. Let's understand all the aspects of intraday trading for beginners.

     

    What does Intraday trading mean?

     

    The literal meaning of intraday means 'within a day,' and thus, we can derive from this meaning that it relates to buying and selling securities within the same day, and one cannot retain it in their portfolio for the next day. The transactions are performed during business hours, and these securities include stocks and exchange-traded funds (ETFs). The highs & lows that occurred during the entire day are applied to the asset to evaluate its real-time value and hold high risk. Thus it's an excellent option for day traders who don't want to invest the funds in the long-term option (more than a day). The settlement of the positions can be done as soon as the market closes for the day.

     

    Any trader who invests in such options analyzes real-time charts for 1-60 minutes. They even use Volume Weighted Average Price (VWAP), an average price of the day, to make the right decision before buying any security.

     

    Strategies for Intraday Trading for beginners

     

    Below is the list of the intraday trading beginners may start with:

    • Scalping: It works on grabbing small profits multiple times in a day on small investments.

     

    • High-frequency: It needs analysis of the efficiencies and shortfalls of the security by using some complex predefined algorithms.

     

    • Range trading: The trader makes his investment decision after evaluating the support & resistance levels, and such an approach is known as range trading

     

    • News-based trading: As many news headlines and events can influence the stock's value; this strategy tries to determine and grab such opportunities.

     

     

     

    Reasons behind the Popularity of Intraday Trading

     

    The best part about intraday trading is that the position or net value of the asset is not influenced due to fluctuation that happens at night. Moreover, day traders get hiked leverage by increasing their investment ability with a higher margin. One can also protect positions by availing the benefit of a tight stop-loss order, which is a provision that enables to set off a stop price. Also, a majority of trading platforms offer extra privileges to their day traders like low brokerage charges.

     

    Who should opt for intraday trading?

     

    People who have the courage and time to take high risks and monitor the market fluctuations to make trading decisions every minute can choose intraday trading. The returns of this trading approach are lucrative and need expertise and a good understanding of the market. If you have time to indulge in trading for the entire day and have a good knowledge of the same, you should opt for this option.

     

    What do we mean by 'value area'?

     

    It is a significant parameter to analyze the market and refers to a price range in which 70% of the trade took place previously (yesterday or the day before yesterday). People use it to target the stocks and implement a rule like 'the 80% rule' to yield better profits. If the price of the stocks in the value area is lower and remains the same for the first hour of the day, there is an 80% chance that it will rise and vice-versa.

     

    Conclusion

     

    Although markets are always uncertain, the right strategy can help in reducing the risk. You can learn the techniques in-depth to become an expert in this domain with us. Try our courses for a better understanding of the security market.

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    • intraday trading, 
    • intraday trading for beginners, 
    • intraday trading mean
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  • The Big Bull ' Harshad Mehta'

    Deepak Sharma 10 Apr 2021

    After the release of the ‘Scam 1992- The Harshad Mehta Story’ web series, the one name which is trending in India is Harshad Mehta. 

    Now, Who was Harshad Mehta? What exactly did he do ?  

     

    Harshad Mehta, aka "Big Bull" of India, aided and abetted one of the largest scams in India in 1992. He is well-known in the ‘Indian Stock Exchange Circuit’ for his wealth and lavish lifestyle. In the 1992 securities market scam, he was charged with several financial offenses, including using the money to manipulate the stock market by rigging the price of shares.

    Mr. Harshad Mehta was accused of instigating a major stock market manipulation funded by worthless bank receipts that his company, Grow More Research and Asset Management, arranged for ready-forward transactions between banks.

    Early Days

     

    Harshad Mehta was born in 1954 in Gujrat to a middle-class Jain family and spent his childhood in Mumbai. He received his Bachelor of Commerce degree from Lajpatrai College in Mumbai. Harshad tried his hand at a variety of jobs, including diamond cutting and accounting, but he made his biggest fortune in the Indian stock market. Mr. Mehta began his career as a salesman with the New India Assurance Company after graduation (NIACL).

    After a few years of hustling and struggling to get the geek, he decided to try a career in the stock market and joined B.Ambalal & Sons, where he worked as a jobber for broker P. D. Shukla. People begin to recognize him as the ‘Stock Market's Amitabh Bachchan’ as time goes on. Harshad Mehta founded his brokerage company, Growmore Research, and Asset Management, in 1984.

    He began actively trading in the market in 1986, and by 1990, others had joined him and were investing with his business. In the meantime, he attracted several high-profile clients, including then-Minister Mr. P. Chidambaram.

    After being an industry veteran, he began to manipulate the market, causing the share price of Associated Cement Company (ACC) to rise from Rs.200 to Rs.9000 in less than three months.

    How the Scam took place?

     

    Banks were not allowed to invest in the stock market until 1990. Yeah, they were required to make a profit and keep a certain percentage (threshold) of their assets in fixed-interest bonds issued by the government. Mr. Mehta wisely took the money out of the banking system and invested it in the stock market. He assured the banks of a higher interest rate than the current rate. He requested that the funds be transferred to his account, claiming that he would purchase securities for them from other banks. 

    To buy securities and forward bonds from other banks, a bank had to go through a broker at the time. Mehta got the idea from there to put the money into his account temporarily and buy shares. When the market was at its height, he began to raise the price of some shares of well-established companies such as (ACC, Sterlite Industries, and Videocon). When the shares are finally sold, he gives a portion of the funds to the bank and holds the rest in his pocket.

    To carry out the scam, the security and payment were only delivered with the help of the broker. For example, one seller handed over the security to the broker, who then passed them on to the buyer, who then gave the broker the cheque, who then paid the seller. The buyer and seller will have no idea who they were trading with because the broker would be the only one who can link them.

    The Bank Receipt was another widely used instrument (BR). The BR is the confirmation of a security sale, and it functions similarly to a receipt issued by the selling bank. I.e. the seller of securities sent a BR to the buyer of securities. A BR claims that the seller will deliver the securities to the buyer and that the seller will keep the securities in the buyer's trust in the meantime. 

    Mehta figured out how to find a bank that would offer him fake BRs or BRs that were not backed by any government securities. The Bank of Karad (BOK) and the Metropolitan Co-operative Bank (MCB), both small and unknown banks, came in handy for this reason. He returned the money to the banks after the false BRs were released and the money was invested in the stock market and sold for a profit.

     

    Background of the 1992 Securities Scam

     

    • Government Securities paper scam

     

    In the early 1990s, Indian banks were prohibited from investing in the stock market. To retain their SLR ratio, they were required to hold a certain percentage of their total assets in government fixed interest bonds and shares (Statutory Liquidity ratio). 

     

    There was an additional provision specifying that the average percentage bond holding for the week must be greater than the SLR ratio, but the daily percentage need not be, meaning that banks will sell bonds earlier in the week and buy them back later in the week.

     

    The broker would act as a middleman for the banks. Harshad Mehta squeezed capital through banking system loopholes to meet banks' market maker requirements, then poured the money into the stock market and rigged the share prices. 

     

    Indian banks were inefficient in their securities operations in the early 1990s, and they relied on stockbrokers to find a deal as a market maker. Harshad Mehta was a shrewd broker who found the flaw in a short period. Furthermore, he guaranteed banks a higher rate of interest and occasionally requested money be transferred into his account under the pretext of purchasing securities for them from other banks.

     

    Mr. Harshad Mehta used this money from his account to purchase a large number of shares, causing the demand for those shares to spike and the price to skyrocket as well. Cipla, ACC, Hindalco, Sterlite, and Videocon Industries are some of the well-known firms. When the price of the stock skyrocketed, he sold. 

     

    Consider the euphoria he instilled in the Indian Stock Market as "The Big Bull." The BSE Sensex rose by 247 percent in a year, from April 1, 1991, to March 31, 1992, setting a new high for a financial year in the Indian equity market.

     

    The Big Bull V/S Scam 1992: Everything You Need To Know About Harshad Mehta  Stock Market Scam

     

    • Bank Receipt scam

     

    Harshad Mehta's most profitable tool for pumping capital into the stock market was the Bank Receipt. In most cases, a BR contract was a ready-forward agreement in which shares were not transferred back and forth. The borrower of capital, i.e. the seller of securities, instead of issues BR to the buyer of securities. The sale of securities has been confirmed by the BR. It also serves as a receipt for the funds earned by the selling bank and a guarantee that the securities will be sent to the buyer. The seller keeps the buyer's securities in trust (as a novation). He required banks that could issue fake BRs or BRs that were not backed by securities after finding out this way.

     

    Once the fake BRs were released, they were passed on to other banks, who then gave money to Mehta under the assumption that they were lending to other banks against government securities, which was not the case because the BRs were not backed by protection. The stock market had become overheated as a result of Mehta's buying spree, and the Sensex had risen 247 percent in a year.

     

    Observed a few inconsistencies in Harshad Mehta scam series : Chodi

     

    The 1992 Securities Fraud Outbreak

     

    Sucheta Dalal, a young financial journalist, received a tip about the bogus BRs scam. Sucheta continued her investigation into the number of bogus BRs used by Mehta to pump the stock market. In the Times of India on April 23, 1992, Sucheta Dalal revealed Harshad Mehta's fraud.

    When the fraud was revealed, banks realized they were keeping useless Bank receipts, Vijaya Bank's chairman committed suicide after intentionally issuing fake BRs to Mehta in exchange for a commission. Mr. Mehta died of cardiac arrest on December 31, 2001, at the age of 47, leaving behind the largest stock market scam of all time and the most historic bull run of all time, earning him the title "The Great Bull of Indian Stock Market."

    The scam economy - Cover Story News - Issue Date: Dec 21, 2015

    Harshad Mehta Scam Inference: 

    According to some conclusions and facts, the activity was going on in the entire market and was used by all stockbrokers, and he was made a scapegoat because he believed in a bull run when the majority of the brokers were against it. They have to suffer substantial losses as a result of Harshad Mehta's actions. Without a doubt, the entire market's method was unethical, and after Sucheta Dalal revealed the fraud, regulators enacted strict rules and regulations to prevent the manipulation of shares to manipulate the stock market.

    18 years on, Harshad Mehta's kin, firms to face trial for not filing tax  returns | Mumbai News - Times of India

     

    How Harshad Mehta died?

     

    Mr. Harshad Mehta spent one late night in Thane jail. He was admitted to Thane Civil Hospital after complaining of chest pain. He died with the following pain on December 31, 2001, at the age of 47, leaving behind the biggest financial scam in Indian history.

    Closing Thoughts

     

    This was Harshad Mehta, a man from a simple middle-class family who dreamed of a big house and jumped into the financial market's ocean, bringing a tornado with him. People made their fortunes with Mr. Mehta, but in the end, he was the culprit.

    If you dream to become a Successful Investor or Stock Market broker and do not want to be a prey of such fraudsters, then we suggest you keep your expertise and knowledge up to date. NIWS (The Best Institute for Stock Market Training) has a couple of courses to help you trade stocks strategically, whether you need an introduction to stock trading and technical analysis or a guide on day trading stock options. With over 10-15 years of experienced professionals in domestic and international markets, we strive to help students to achieve their lifelong career goals and aspirations.

     

     

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  • Stock Market Wizards-Learn & Create Wealth

    Deepak Sharma 24 Mar 2021

    Stock Market Wizards-Learn & Create Wealth

     

    “A Successful Trader Studies Human Nature and Does the Opposite of What the General Public Does”   – William Delbert Gann

     

    From the days of Jesse Livermore (an American legendary trader, 1877-1940), market participants have tried to confront the question, "How to be a successful stock trader”? Certainly, it is not just about stock trading tips and tricks, but something more, in fact, a lot of good old virtues like patience, discipline, persistence, etc. 

    What are the basic things that we need to enroot to be a good trader? These are Mind, Money, and Method, in sync if we want to succeed. If you have the best strategy but don’t have the mental discipline then, nothing will work out.

    We first need to have a Method. A method can be Technical analysis, fundamental analysis, or your gut feeling. The key is you must have a workable plan to attain success.  Your method should be measurable, objective, and easy to verify. It should be so simple that if you teach them to ten other people they can easily understand. Our Brain likes clarity, not confusion and chaos. 

    Here are the 7 rules of highly successful traders:

    • Be optimistic and realistic

    • Persistence can be your friend

    • Target on how well you execute your trades

    • Costs matter a lot when you are a trader

    • Manage your risk every second of the day

    • Learn from the market rather than trying to outwit the market

    • Be an ardent reader, researcher, and a learner

    Now, let's find the recipe for successful trading from some of the new generation millionaires.

    Delhi based - Alok Jain, a multi-bagger, IIT graduate, who makes money from just 15 minutes of trade, has raked up to 86 percent return on his portfolio says his biggest learning is that exiting is the most difficult thing in the market for both, profit or loss. The strategy is only 20% of the game, 80% is staying the course. If you are confident of your strategy and are disciplined, then any day you can beat the market.

     

    Ashu Sehrawat - one of the youngest millionaires of India, connected through chat room with traders like Derrick, Eric, and Phil. He got curious about their short selling and sent questions via private message from time to time. He concluded that these successful short sell traders were short-selling the stocks that had no business going up in price.

     After learning short selling tactics for a short while, Ashu placed his first trade. From this, he learned that patience and selectiveness were key to maximizing profits as a short-biased trader. Till the age of 22 years, Ashu Sehrawat became a successful day trader and swing trader who continues to scale and evolve his strategy.

     

    Suresh Gunda, a CA dropout to a successful trader in Hyderabad, says the amount of Patience, Risk & Stress management, years of effort, and hard work has made him a profitable Trader and established his Company. He says that “Trading in the stock market, is a battle within you and success comes from love and passion for the market”. 

    However, when asked to comment on why 90% of people lose in trading? He says, “Don’t be greedy, and it is the technical knowledge that decides your profit or loss, and make sure you always have a stop loss in place and your emotional stop loss won’t work here.” 

    He started at the age of 19, and at the age of 25 years, emerged as the youngest CEO with dedication, knowledge & persistence.

     

    India’s most successful investor Rakesh Jhunjhunwala says that one of his biggest successes was a pure luck investment. How can one think of a more reasonable rational style of investing?

    One of the best ways to find out if an investor is just lucky or genuinely successful is how they have performed in different environments. If they can succeed not just during the big bull market but can do well during the bear market in the same way, then they can be considered good investors.

     

    Most Successful Stock Traders in India

     

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    There are many big names like Rakesh Jhunjhunwala, Vijay Kedia, etc. who we misjudge as traders, but they are investors. Here are some of the most successful stock traders, their stories, strategies, and learning pieces of advice.

     

    1. Tasneem Mithaiwala

     

    A single mother, an Art student who doesn’t have any financial knowledge and financial background, started her trading journey with a capital of Rs. 5 lakh and by the end of 8 months, the capital came down to Rs. 1.75 lakh. At that time her cousin gave her leads and she placed orders as per his suggestions. 

    Mental strength and strong discipline make her the most successful stock trader over strategy.

    Learning Advice:

    What we learn from her story is that we should never depend blindly on someone else. Secondly, gain some financial and trading knowledge before you start trading in the stock market.

     

    2. Kirubakaran Rajendran

     

    Chennai based-Kirubakaran Rajendran, a Trading Bot developer (automated trading system based on a set of instructions) has achieved success after years of hard work and learning from every possible mistake one can do and probably more.

    He started his career in Infosys with a monthly salary of Rs 1500. He had built a position of Rs. 1.5 lakh, a day before Infosys' results. The next day, results were announced and the value of his strangles had come down to Rs 20,000. 

    This is the turning point of his life when he decided to move from news-based trade to rule-based trade. The other mistake he made in trading was, he borrowed money for trading. A changing shift came to his career when he started reading about the stock market.

    Learning Advice:

    His advice for an aspiring trader is to have a clear set of simple rules, and do not trade if you cannot explain your rules or strategy in two lines. You should not go for strategies that give higher returns without looking at the drawdowns. Choose the ones where risk is lower.

    For example, if a strategy gives a return of 40 % annually with a drawdown of 15 %, it is certainly better than a strategy giving 90 % returns annually and having drawdowns of 40-45 %. 

     

     3. Abhinand Basavaraj

     

    Abhinand, 29, hails from Mysore and is a hermit in the trading world. He suffered huge losses in the Satyam scam. After this, he turned stock to options for trading and later started about technical analysis and understand how trading works and financial knowledge. Presently, he trades in the Nifty options especially on the bull side, and uses many technical strategies like trend line or MACD, etc.

    Self-confidence, persistence, and family support all played an important part in his success. 

    Learning Advice:

    First, learn at least the fundamentals of the stock market then create your strategy. Secondly, never take any loan for trading plus always share your techniques with someone who knows you better.

     

    4. Naresh Nambisan

     

    Obsessed with charts, Naresh believes in the old school of trading where he prefers putting in manual efforts. During 2008, he also lost Rs.40000 like others and after failing once he didn't stop, rather initiated gathering more information about technical analysis from Google and YouTube. Later, he gained good knowledge in price chart strategy, and to date he uses the same strategy for trading. 

    Learning advice:

    Never depends on others and create your strategy. Keep your trading as simple as possible. Do not complicate the charts with too many indicators. Test the indicators yourself. 

     

    5. Madan Kumar

     

    A Full-time trader, Madan Kumar has rags to riches tale to tell. He credits all his success to his mother and wife for their support to make him what he is today. He gives credit to his mother, for motivating him to complete his education despite being very poor. And to his wife, for her financial support, after he returned to India from the US.

    Learning Advice:

    To have reading habits, as it is better to be prepared before you start your luck in trading.

     

    Closing Thoughts

    You believe it or not, trading is a game not just on the stock market but within individuals’ mind. You win or lose with the way your mind reacts to the price movement. So if you want to turn trends in your favors, you must affirm your brain the right way with the right hymns.

    Individuals with very limited knowledge and experience in trading are either afraid of losing a large amount of their portfolio value or are beguiled by hot tips that promise large rewards but seldom pay off. The pendulum of investment sentiment is said to swing between fear and greed.

    Professional traders normally prefer to ride the momentum in the market and don’t bother about valuations. They focus working on which way the market wind is blowing, which is what drives them. A bit of key learning advice here is to have discipline and knowledge before trying your hands on stock trading and investment.

    101 Inspirational Trading Quotes And What They Mean | Trading Education

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