Smita Parekh 4th May, 2019
Each time a trader makes a random entry in the market, he gives up the advantage that his particular trade set up has. The only way one can make money in the markets is by catching the right entry of a very strong trend & it is also important to make sure that your losses are not too big. This can be done by practicing proper position sizing. It is not only the entry but also to exit the trade at the right time. If any one of these things are missing then a perfectly good trade set up can also go completely against you. This method may seem like too much of work but with time and consistent efforts and discipline it will give you the right results.
A very common way of getting the perfect entry & exit is by using technical analysis. This tool helps the trader in ways which the fundamental study of the stocks cannot. Technical analysis is common amongst day & swing traders as it helps them not only in the entry and exit but also in picking the right stock for the trade.
Many a times we come across people who feel that more than the entry, picking the right stock is more important. This may not always be true.
For example – Mr X bought Maruti at 10,000 rupees thinking that it would go up to 25,000. That was his entry. He then watched the stock price go up and then go back down all the way to 6,000. Maruti being a fundamentally strong stock may go up to 25,000 but the point is that if he would have had his technical study in place he wouldn’t have to go through all the anxiety of the rising & falling stock price. So it’s safe to say that Mr X did some research about the stock but he did not plan an entry for it. His fundamental study was strong but he missed out on his technical study. If he would have made a right entry then he could have made his entry at a much lower price & then comfortably watch the stock price rise.
Various people go through different experiences in the market. Some would say that he picked the wrong stock, he should have picked something else and could have made a fortune out of his investment but not everyone is lucky that way. The point is that picking the right stock is not going to guarantee you a profit but the correct entry in that stock & even more important the perfectly timed exit will help you grow in the stock market. Success is not about picking the right stock of the Nifty 50 group as there is always a possibility that they may be dropped from the index, go bankrupt or get absorbed by some other company. This usually happens to many companies. Picking the right stock and holding it till you die is not the magic formula for success unless you are very lucky.