6 ways to make profits in market

6 way to get consistent profits

Today we will discuss about the 6 ways to make profits from the market. But first lets ask yourself some questions before diving in.

Are you following tips/recommendations from friends or so called guru’s blindly without any proper research by yourself?

Do you know when to exit and book your profits?

If you don’t have answers for the above questions or you are not satisfied with answers, read to the end.

Though there being many people who made it big from trading the equities, but its not that easy. For making that big one should be so patient, self-disciplined. And it also requires good amount of research on the markets.

In the recent months the market is being so volatile and left traders in confusion whether to hold or sell. There is no perfect formula for markets that can give 100% assurance on the market situations. But there are some rules to get profits consistently…

1. Know the type of Trader you are :

There are basically 2 types of traders in the market.

  • Fundamental investors
  • Speculators

The major difference between these 2 types is that how they see the price of stocks. Fundamental investors gives less importance to price, they give priority to business behind the price. Business includes management, product, model they follow. But on the other hand speculators give importance to price. They follow the technical analysis, where they do not do any research related to business behind it. They follow some indicators like head & shoulders, shooting stars, MCAD, EMA 200, DMA 200…etc and these strategies built up on the historical data of the stocks. This can be called as price action trading.

2. Always have Realistic goals

You can expect best from the investments you have made, but if you don’t have realistic goals you may get in to some real trouble. Never expect same results from the markets.

Realistic goals can be short term and specific to a stock like target price. Before investing in a stock calculate ‘how much money you will make’ in this investment. Of course, you need to make a few assumptions to do this calculation. But do calculate. Most often investors tend to ask the share is undervalued or overvalued. let a share be price 100 and set a goal that if i get some 20% returns i will book my profits.

3. Trust your Intuition

Understand what makes up your value system and own it. Live it. Work it. If you don’t start leading from within, taking control to acknowledge your own values and beliefs and the person that you are on the inside, you will never be capable of being the better person on the outside. This system is unique to you and it is your responsibility to take ownership. There are times when it will be challenged or when you will give in to other’s values—and you will look back and wish you had trusted your intuition. That intuition, that gut feeling? Don’t ever mistrust it. It is a key part of you, and you should learn that it is one of your best assets. Ignore at your peril.

Believe in yourself

4. Have a disciplined approach

Study the history of markets, and one would notice that even the best bull runs have given many panic moments to the investors. The people who dont have disciplined approach have struck with these panic moments and lost money even in the best bull runs. But the people with a plan/disciplined approach have made outstanding returns of the market. so make yourself a disciplined approach now. In the next post I will be sharing an approach I follow so stay tuned 🙂

5. Always stay away from “THE HOT STOCKS”.

The hot stocks are those stocks which have some attention catching activity such as severe volatility in share prices, high trading volume or when the stock is in news. Stay away from these hot stocks.

Most people get interested in stocks when everyone else is. The time to get interested is when no one else is. You can’t buy what is popular and do well.

Warren Buffet

6. Look at quality businesses; not just the stocks.

Do a little research on the Business behind the price. Checkout the balance sheets at least for past 5 years.

When I buy a stock, I think of it in terms of buying a whole company, just as if I were buying a store down the street.

Warren Buffet

If you are buying a shop, you will analyse about the products dealt by the shop, overall sales, consistency of sales, competition for the shop, competition strength of the shop, how the shop will manage the change in customer trends and so on. We need to apply a similar logic before choosing a stock. Don’t think that you are only buying a few shares of that company. Will you buy the whole company if you had enough money?

Conclusion

Greed and FOMO( fear of missing out) are the two main things that cause losses

Never chase a running stocks and book the target profits no matter how much the stock grows. You might not know when it will dip. So book the profits at targeted price.

I am using this beautiful tool https://www.screener.in/ for my analysis on Indian market shares. It helped me alot with for doing some quick analysis.

The above mentioned are just a simple tips that can make lot of difference in your trading journey. Happy Trading 🙂

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The Art of Financial Planning

How money is created around the world?

How money is created?

How much is Trillion Dollars?

Think in this way….

Let one million seconds = 12 days

one Billion seconds = 32 years

one Trillion seconds = 32000 years

But Why are we talking in Dollars but not in rupee or any other currency. Dollar being the world reserved currency, will be very easily understood by most of us.

Lets begin..

Around the world we see the central banks print the money. But we told from our own childhood that money is very hard to earn and we need to study hard and work for life to earn the money.

But no one told us how money is created? Every one says only about how to earn.

Today I will share you, how money is created around the world.

There are 3 ways to create money in any economy.

1. Money created by Government.

Government create money indirectly, by outsourcing to the central bank of the economy. Money created by central bank will be in two forms. 1) coins & 2) paper money (i.e. notes). This money is only about 3-8% of the money that we see in the economy. But wonder how the remaining money comes from? To know read to the end.

Physical Money

Even this physical money is created only in-order to meet the obligations of the private the banks.

Ever wonder how much costs to make/print the money? For example to make 10 dollar note, it takes only 3 cents and the remaining $ 9.97 cents are profit to government. This $9.97 cents can be added to governments tax revenue. And this revenue is called as SEIGNIORAGE. This being the governments revenue, you might be thinking that why they don’t decrease taxes to be paid on public. Why the government printing money always to clear out all the debt?

Consequences of Excess printing of money

But this might results in Inflation and make money lose its worth. you wont believe in me? you have a look at Hyperinflation_in_Venezuela. In simpler words even million dollars wont get you a meal per day.

1 USD equals to 47883 VES in 2019

As inflation rate goes up people tend to loose faith in the currency. For 1000’s of years the gold is used as the measure of money. But in 1971 USA president gave a announcement that gold cannot be used to measure money anymore. This created revolution around the world and from then we are seeing the inflation in the economy.

2. Money created by private banks:

Most the money is created by banks. But its not physical money like created by government. Its completely “Digital”. yes you heard it right, its digital money. In most developed economies the around 97% money is created by the banks.

But wonder whats the digital money? you can consider a promissory note as a digital money. Any debt can be considered as digital money. For example when a consumer want to buy an house and he borrows money from the bank saying that he will pay it back with interest. so bank creates the money and lends it to the consumer. Here i mean by creating is not any form of printing money. banks use that 3-8% of money created by government which they got it from the deposits of savings/current accounts. So this is how the money will be in circulation. it sounds a bit complicated but when the consumer pays back the debt and interest. bank earns the profit on money which is not theirs. Banks mostly give debts in real estate, as they feel its the safest bet they can keep on.

How banks create and make money

But are you feeling that your money is not safe with bank now? Don’t panic. This is how private banks work , this process is known as Fractional reserve banking which is a banking system in which banks only hold a fraction of the money their customers’ deposit as reserves. This allows them to use the rest of it to make loans and thereby essentially create new money. This gives commercial banks the power to directly affect the money supply. but there is a announcement from the government that there is no need for the reserves as per the current situation, Covid-19 and can lend out the 100% of your deposited money.

If there are no borrowers, banks don’t keep the deposited money idle. They invest in different securities and try to multiply the money.

As around 97% of money is made from debt, when it cannot be paid back then the economy would collapse and then central banks will bail out the private banks.

3. Money created by Central banks:

This happens only in situations like now, Covid 19 or any financial crisis. Central banks buy the T-bills, bonds from the government. But this will be burden on Tax payers, because the public will be paying it back to government in form of tax or increased interests.

Central banks cannot go bankrupt. but they are buying the real assets with just a digital money. This is how they can bailout the stimulus packages. but why the economy didnot revive even after the stimulus packages all over the world?

When ever there is creation of money there will be increase in inflation. But haven’t seen yet the inflation in the economy?

its because the inflation comes into existence only when the money gets circulated between the people. unless then there wont be any inflation. By this stimulus packages only rich people get benefited. so rich will becomes rich always.

But what can individual do to be safe from this all cycle and be debt free? I am not an financial advisor but can tell you the options that can save you from this situations.

  • Gold
  • Silver
  • Crypto currency
  • Equities (stock market)

But YOU need to take decision how you are willing to take step forward. But take the intelligent decision so that you wont regret it after a decade.

For more follow Learn Investing

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