Stock Market and Football Game

Stock Market and Football Game

Well, I am not going to make you learn the football right now, but we will try to learn some lessons from the game. We all know that the game is as easier watching it, but difficult on the ground to play. Sometimes the best teams will play their best and loses to their opponents with a margin of error either not having a great goalkeeper or the best forwarder who can pass the ball to the striker.

The Brazilians stood out to be the favourite team to win the WorldCup2018, the youngest with more potential to strike as well as defend. The Argentinians had one of the best forward player Lionel Messi who could do all but not game winning goals. When there was almost 90% chance to score a goal, probably the opponents goalkeeper stood out to his best. The probability of winning is only 50% to score only 1 goal and defend it. In football, they don’t need 10 goals to win the game but only 1 goal and defend it.

We all know that the stock market is a probability game where winning and losing is a part of it. Sometimes there may be continues losses or continues profits. It is the trader’s commitment to stick to their trades and see the result in a longer period. It doesn’t matter whether you are a trader or an investor, the rule is to stay in the game.

Remember, only one team can win the World Cup every time and that means everybody else has to deal with defeat. The defeated team will figure out what went wrong, try to fix it, and try again the next year. This is a great lesson to learn because failure is just a temporary problem. Same thing happens to a trader.

There is no football team that has ever lost. Many top players too fail to score a goal sometimes. No matter how good you are, you will eventually lose at something and you should be prepared for that. No one wins all the time so it’s best to adjust your expectations accordingly.

Based on the above understanding, we will now see some of the FAQ’s that I come across with.

  1. What is the capital size (margin) required to trade?

Well, honestly I don’t know. All that I know is to trade with defined Capital / Margin Money for every trade I place. Suppose I have a Capital of Rs. 1 Lakh and I get a minimum of MIS exposure of Rs. 5 Lakh to trade. I go with only 2 trades (Compulsorily) of 2 Lakh MIS each irrespective of what stock price is. So here I am fixing my Trading margin that I trade every time and every day.

Suppose, I lose my first trade and the Capital is reduced by Rs. 3000/- , then I trade another stock by adding Rs. 3000/- to my existing Capital.

Ensure you trade every time with same Capital Size to have a better performance.

  1. My first trade went into losses, so I dint take the second.

When you make a choice of either one, better not to trade in markets. This format of the game is not suitable for you. The first qualification required to trade in markets is to be disciplined with Trade Size and Frequency. Take both losses and profits in an equal spirit. Once you are there in the game, then you have a chance of winning it.

  1. I have incurred series of losses, now I don’t have capital to trade.

Yes, you might have incurred a series of losses may be because of Market condition, wrong trader, wrong entry and exit or even over trading. Whatever it may be, the first understanding is to limit your Quantity if you are a day trader with MIS margin (Both Cash & Futures). The reason is you have a chance of trading everyday only when you have Capital, otherwise markets will run as usual but you will not. To avoid such situations, always keep an additional Margin (capital) in your account to use during the days of losses.

There are many more questions to be answered. Without a proper understanding, it is not advisable to trade in markets.

Now the biggest question everyone ask is “Will Nifty go up further”?

The week ended, Nifty had a fantastic rally breaking the hurdles at 10900 and made a high of 11078.3. The final 4 trading sessions were bit confusing as there was lot of volatility around. It has to make an attempt at least the coming week to hit all times high in order to complete a triangle formation. The trading range on the Index is between 10880 to 11170. Expect more volatility added by earnings from major companies.

Signing off. !

Santhosh Kumar V

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