Vijay  Bhambwani's  page - updated monthly

                                              Why we need to change - June 25, 2003                       

I derive inspiration from management guru Sumantra Ghosal in this piece. He says that the process of change is very painful. Giving the example of the evolution of the caterpillar into a butterfly. The caterpillar undergoes tremendous pain to evolve from an ugly and ungainly crawler into a beautiful butterfly. Here's what happens to it - it goes blind, it's legs fall off, it's body splits open to allow the wings to develop. Only then does achieve perfect beauty of it's evolutionary process.

Every stock trader needs to evolve too !!!

We all are more or less living in the shadow of the markets of the "good old badla days " when we bought stocks like Colgate and waited for 24 months for liberal bonus issues, or a Reliance in the month of May at low points of the year and see it double from there, only to sink lower again. We did dividend stripping coupled with capital appreciation by buying G.E. Shipping in May and sold it during the "book-bandh" period ( no delivery during a book closure ). The whole process was very mechanical, seldom failed and quite profitable. We went for movies every Friday, ate out at good restaurants and had a comfortable time.

Then the markets evolved

Badla was banned, derivatives were ushered in and rolling settlements changed the face of short term trading forever. It was getting difficult to milk the markets - profits were hard to come by and many of us were left wondering where we were going wrong.... since many couldn't figure that out, they deserted the markets and began to pick up the pieces of their lives in other professions.... forgetting that the quantum of money lost in the stock markets could only be made in stock markets alone....

Don't quit the markets - change yourselves

There is money to be made in the markets. Only most of us have to change according to the times. Upgrade our skills, learn the rules of the new game and let our experience do the rest. It may sound simple but it's not really. Implementing the changes will be the tough part - then stick to them.

• First things first - if you've been having a bad time in the markets, take a short holiday. Come back with a clear head. Opportunities are aplenty in the markets, only a cool mind can exploit them.

• Know your aptitude before you stage a comeback. A lot may have changed since you were last a regular trader. Your experience will be your best friend here.

• Make your blueprint before you enter the markets. Decide beforehand whether you will be trading or investing. If trading - will you be a position trader or a swing trader ? Will you trade high beta counters or high relative strength stocks ?

• Learn to keep stop losses and adhere to them diligently. Many a trader stuck by these limits and survived to trade another day. This is a cardinal rule of investing and should never be forgotten.

• Rely on your own study or your qualified advisors. How many times have you given in to the temptation of listening to your friends "tips" only to lose vast sums of money ?

• Invest a little sum in insuring yourself against unpleasant losses - hire a professional advisor. This aspect is very difficult for most players as the psychological burden of admitting a lack of understanding of the markets causes subconscious embarrassment. The trader continues with the same style of functioning and continues to lose money till he withdraws from the markets completely !!!

I'm sure if you were to implement these points, you can return back to your profitable ways again - and soon. Till then - have a profitable day.

Vijay Bhambwani

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