Making money in stock market -II

This is part II of the article, Making money in stock market -I. Please read the article from part I before continuing with this one

The reason is that a model works well only when it is held upon an insignificant amount on money and only by a few individuals. The moment the invested money becomes large, placing a huge trade will be sensed by the market and will affect the prices directly. Like that happens in the case of Mutual funds. When MFs buy stocks, they have to do it in big nos. because they have to invest big money. Hence, the market senses that there is a big demand for a particular stock, the price rises immediately and MF actually ends up buying at a high price. The same thing happens for all kinds of investments.

So if you (or anyone) discovers a trading secret, a trading system or a financial model, keep it to yourself and don’t reveal it to the rest of the world. Remember, people are just looking for profitable opportunities.

Coming to the story of Sujata (and Nalin as well), I really have praise for Sujata for coming out successfully after winning the battle for her health, family and friends. Kudos to her for keeping up the spirits – people like her set examples for others.

However, there are some serious flaws in the way the article is published by rediff on Nalin and the interview of Sujata.

Nalin’s system was designed sometimes in 2003, while Sujata started trading in 2005. Since 2002, the Indian stock markets have only witnessed one direction and that is UPWARDS. Though there have been minor corrections, but they lasted only for a month or so. So it is very easy to say that “I can make up for my OCCASSIONAL losses by the REPEATED profits”.

Though Nalin quotes an example of 17th May 2004, when it was a black Monday for the stock markets – and claims that he made money that day also. Similary, Sujata claims that 19th September 2007 she made a staggering UNREALIZED profit of 600,000 in just one day, because markets went up by more than 4%. Nothing wrong in such claims, but the fact is that all this is a one-day story. After the black Monday on 17th May 2004, the market immediately went for another bull run. All that happened was in a matter of few days, hence it is easy to say I may loose BIG occasionally, but I make small profits regularly and compensate for the losses and overall I’m in profit. Nalin himself claims that the system is not foolproof, as it has never seen a bear market – not even for a period of 1 month.

Continue to Part III