H N Menon
View Profile

IF TIME PERMITS DO READ.

H N Menon at 11:56 AM - Sep 16, 2017 ( ) Views: 934

6 4

Greed will destroy the discipline of a stock trader.  Greed's partner is fear.  Fear also works against a trader's discipline.  Discipline is about balancing the relationship between expected gain and potential loss.  It is also about keeping fear and greed under control..

This writer once had a lengthy conversation with a friend who was working at the same brokerage firm.  His specialty was the futures markets.  He had a television show and liked to read his script to me before going on the air.  On one such occasion, I commented that I had heard that 80% of those who invest in the futures markets lose all their money.  I asked if that were true.  He said that it was definitely true.  "Why do you think I have a television show?  It's because I am in constant need of replacing clients who lose all their money."  I asked him why he does it.  "Doesn't it bother your conscience?"  "Of course it bothers me, but I don't know how to do anything else," was his reply.  He said he knew of no other way to make a living, and he was too old to learn a new profession.  On television, he talked about the potential gains possible to those who play the futures markets.  The leverage available in those markets made it possible to double your money in a few days.  Of course some of his clients came out way ahead on some trades.  However there were also offsetting losses.  I have talked with people who watch such programs.  They tend to scorn returns that are less than 100%.  The stories told on television are intended to appeal to the viewer's greed for quick gain.  The stories seem to accomplish their purpose.  The problem is that in their attempt for quick gain, investors usually do not adequately guard against loss.  It takes considerable discipline to use great leverage and still accumulate greater gains than losses.  To do that, one has to pay even more attention to the risk of loss than to the prospects of gain.  Greed does not permit that.  Greed focuses on the potential gain rather than on the potential loss.  The smart investor always looks at the potential loss and has a strategy that will protect against that loss.  Otherwise, he will look elsewhere for another opportunity, one with manageable risk.

Another individual I am aware of heard about Genentech's "Tissue Plasminogen Activator" (TPA), a thrombolitic drug Genentech was able to manufacture by using gene-splice technology.  Before this technique was perfected, the only source of TPA was human cadavers and only in very small amounts.  There were over 500,000 heart patients a year who were candidates for the drug and it was projected that Genentech could charge at least $1000 a dose.  TPA was going to be a billion-dollar a year drug, and Genentech held the patents on the manufacturing process.  This person spent close to $100,000 to buy call options on the stock because TPA was under review by the FDA, and approval was almost certain.  After all, TPA was not foreign to the human body.  It was naturally created by the body but in very small amounts.  The FDA did not approve TPA.  Instead, they wanted more data.  The individual's options plummeted from a high value of about $135,000 to nearly $0.  This individual thought it was his chance to make it big in a short time.  It was almost a sure thing.  The story behind the trade was incredible.  Again, it was greed for gain that caused him to take a much larger position than prudence would allow. This is also an example of a "story stock." Greed enhances the attractiveness of the story.  The traders at stockdisciplines.com have learned to avoid story stocks.  Why?  The "story" causes a person to ignore clear sell signals, because the investor believes in the stock.  In other words, the "story" destroys discipline.

One individual bought Qualcomm and watched his stock run to a pre-split price of $800 a share.  It then started to decline.  He knew something about support and resistance lines so when it fell below support, he was prepared to sell.  However, a major Wall Street analyst said that it would be a big mistake to sell and that the stock should reach at least $1000 per pre-split share (the stock was expected to split 4 for 1).  The investor held.  The stock kept falling.  Once again this individual was prepared to sell.  Then the analyst again said it would be a mistake to sell and that investors should keep holding.  That is what he did, because he was afraid to lock in such a big loss and because the analysts assured people that they would be rewarded for holding.  Fear of loss, made his loss greater.  The stock declined until it reached a pre-split price of about $100.  The fact that he listened to someone else means he feared to rely on his own discipline.  He should have sold when he first intended to, regardless of what the analyst said.  The analyst was later cited for securities fraud.  It does not pay to depend on someone else to tell you when to sell.  You must take responsibility for your own actions.  

Greed and fear are the enemies of discipline and either one will destroy discipline if allowed to do so.  Each individual has the freedom and the responsibility of deciding whether discipline will prevail.

 

laughing


(1 to 12 out of 12) - Latest Replies on Top | First | << Previous | Next >> | Last |
H N Menon at 11:44 AM - Sep 20, 2017 ( )

smile

thanks to all who read and liked it.

 

 

 

Dilip Nilekar at 09:42 PM - Sep 16, 2017 ( )

Harish Bhai !! Thanx for posting such a nice write up here. This is absolute Reality Greed Greed v/s Loss only.

2nd , adding my personal view unless we Learn Learn and then Earn will be th right path.

Now , your kind appreciation toward's me is  JYADA Ho Gaya,Any way i am Thankful to you, laughing I am still a Learner and i share my little knowledge here. I avoide posting regularly now a day's, due to my own personal reason's. 

Emotionally Your's, 

Dilip Crude Baba 

Alex R at 09:02 PM - Sep 16, 2017 ( )

True to the reality of basics in this arena, found such type of writeup after a long time, that seems very rare in this forum. And an eye opener too for the traders who are only looking for the higher goals without understanding its calamities and risk factors involved. 

Thx Sir

Anand Rs at 08:04 PM - Sep 16, 2017 ( )

'GREED AND FEAR ARE THE ENEMIES OF DISCIPLINE' Sir, I read, repeatedly read. I will try to emulate this and feel myself happy and pray that I maintain discipline in trading.  Thanks for the article and interest reading.

Pradip Ray at 06:45 PM - Sep 16, 2017 ( )

Talli Ho Harish. China town Style. 75K pm not bad eh ! In spite of your disapproving dalliances, at times, with RIL. I have no wish to disparage obsessive souls like you who could bring back even 60K pm. Guys here would scout to find out whether to Smile or Scowl.

Bowled out by my erudition ! I dont think. We know each other only too well. An old Unemployed spent person and watch with awe your trades. Now a days the earlier champions, the epoch making traders  are unscrupulously somnolent. Their Crystal Gazing via many stocks and indices are only a matter of recent past. The names are many. Their followers were numerous. Let us stick to gether and enjoy others success openly. No ody is a Sorcerer, a magician. Support Resistance Stop loss and rough target - make it your friend. Option I play. Money Management is the motto. Minimum loss is the aim. Profit would automatically come. Rest happy with small pft. JaiHo.

H N Menon at 02:01 PM - Sep 16, 2017 ( )

laughing

wow great you remember 

Mohanan Edavalath at 01:46 PM - Sep 16, 2017 ( )

Dear Menon Saab thank you for your kind words.  But I still remember your long articles in Mudraa when you made your entry.  If you decide to write your personal experiences, it would make a beautiful book in the genre of Chetan Bhagat.  Good luck.

H N Menon at 01:22 PM - Sep 16, 2017 ( )

smile thanks my dear Mohanan.

i appreciate dil say your comments.

have a great beautiful weekend with family and friendslaughing

 

i dont know how to write my angrezi not good .tongue-out

i can be good story teller with my experience. cool

Mohanan Edavalath at 01:06 PM - Sep 16, 2017 ( )

What a beautiful narrative.  I don't care about your profit/loss or trading capabilities.  The linquistic fluency with which you speak your mind compels me to abuse you for not becoming a full-time writer.  Of-course your trading advice is highly appreciated.

God Bless You with a looooooooong life.  Enjoy the weekend.

Balan Draj at 12:45 PM - Sep 16, 2017 ( )

VERY ENCOURAGING TO READ YOUR ARTICLE....ACTUALLY I WANT TO SPEAK PERSONALLY..I AM NATIVE OF TRIPUNITHURA..ERNAKULAM BUT NOW IN CHENNAI.PLS FWD UR NUMBER TO CONTACT. THANKS

H N Menon at 12:31 PM - Sep 16, 2017 ( )

ref. ABOVE topic

i have made loss also, in some scrips , 

 

companys when they say buy back coming , bonus, split ........ stay away from those scrips

ril from 1650 to 815  bonus ( it would fall below 700 if fail to cross 867 872 ) if x then it shoud stay above this for few months.

 

wipro every one said buy at 288 ,  320 buy back price now its going down before buy back

infosys we all know buy back price (1150)

there are many scrips in line for bonus and buy back be care ful

i beleive in bnf and nifty small trade which gives me 2500 mnm 15 days

call puts give me 700 rs to 2000 rs 10 days

scrips gives me 400 rs almost 15 days.

my tgt is 75000 per month ( average i reach 60k) X 12 big amount to live happily for my family.

i also work with pvt firm as field officer. that amount i save it for mutul funds. 

after loss i learned discipline and patience and learnt to book small profit .

my friend DILIP ( OUR CRUDE BABA TAUGHT ME ) GOD BLESS HIM AND HIS FAMILY.

I WOULD SUGGEST FOLLOW DILIP IF ANY ONE WANTS SMALL PROFITS DAILY. 

laughing

 

Subash T at 12:11 PM - Sep 16, 2017 ( )

Thanks 

a nice one *on awareness"

1 to 12 out of 12

Login to participate in discussion.



Top Gainers

MANUGRAPH INDIA LIMITED 18.00 3.00 (20.00%)
SMS LIFESCIENCES (I) LTD 512.15 85.35 (20.00%)
INDIA TOUR. DEV. CO. LTD. 267.05 44.50 (20.00%)
IFB AGRO INDUSTRIES LTD 408.80 68.10 (19.99%)
ARIES AGRO LTD. 73.60 12.25 (19.97%)
PRIME FOCUS LIMITED 48.10 8.00 (19.95%)
VISHNU CHEMICALS LIMITED 137.00 22.65 (19.81%)
MUKAND ENGINEERS LIMITED 13.95 2.30 (19.74%)
GLOBAL OFFSHORE SERV LTD 8.90 1.30 (17.11%)
THE STATE TRADING CORPN 127.75 17.90 (16.29%)



Top Losers

MALU PAPER MILLS LIMITED 28.40 -3.15 (-9.98%)
INDIAN ENERGY EXC LTD 118.70 -12.10 (-9.25%)
ALPA LABORATORIES LTD 15.90 -1.20 (-7.02%)
SANCO INDUSTRIES LIMITED 20.50 -1.25 (-5.75%)
GOA CARBON LIMITED 320.10 -17.80 (-5.27%)
GENUS P&B LIMITED 6.40 -0.35 (-5.19%)
THE BYKE HOSPITALITY LTD 24.50 -1.30 (-5.04%)
EVEREADY INDS. IND. LTD. 60.50 -3.15 (-4.95%)
ORIENT PAPER AND INDS LTD 29.95 -1.55 (-4.92%)
TALWALKAR LIFESTYLES LTD 9.70 -0.50 (-4.90%)