Let us pay rich tributes to the father of the nation, Late Muhammad Ali Jinnah (25 December 1876 – 11 September 1948) on the occasion of his birthday. His ideals of patience, foresightedness, and standing firm in the face of adversity carry deep lessons for all stock traders.
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Friday, December 25, 2020
Saturday, December 19, 2020
KSE100 met our benchmark of sustaining a weekly close above the critical level of 43300 +/- 300, breaking out of the pre-COVID19 high. The rally has been a significant accomplishment and honoring 43000 +/-300 as support opens the gateway to 44700-45500 +/-300. Weekly closing observed a net gain of +1270 points or +2.99%. We may expect a soft correction ahead, as it happens after surpassing any critical resistance and any upside is conditional to honoring previous resistance as support while a dip is a buying opportunity. One must be ready for a move on both sides to avoid getting caught by surprise. We can expect the bears to remain in hibernation during the winter (hint: late Feb to mid-March) but a hungry one can be found roaming around occasionally. Bear hunters take the trophy home!
Market capitalization surpassed the critical level exceeding the 8000+ billion/PKR benchmark on a DoD basis, while the weekly average demonstrated a net gain of +221.14 billion/PKR. We advise a word of caution here as this has typically been an exhaustion point of money flow. On a positive note, a break from here will see a new all-time high. This is literally the make or break point as we have referred to in so many previous updates.
Events that may impact the equities market are MTB auction on 30-Dec.
Thursday, December 17, 2020
Stock trading is indeed a messy business - no denying that fact, and it's entirely a game of probabilities. No technical indicator, theory, or expert can guarantee 100% success. But prudent trading practices, rational decision making, process-oriented approach with a mix of patience and risk management can make it a very profitable activity that can generate consistent returns.
In this multipart series, we will highlight the typical behaviors of bogus market experts. Feel free to post your suggestions in the comment section and provide us with tell-tale signs of bogus gurus to be covered in the next update.
- Day trading - of all trading strategies, day trading happens to be the riskiest with the least rewarding potential. Trending markets may create an opportunity to make a quick buck. In a professional sense, day trading never makes enough gains to justify its risk. From Warren Buffet to Jeff Bezos, no billionaire ever made it big from day trade. While it may look good in theory to multiply gains rapidly by taking advantage of daily highs and lows. In practice, an intraday move of the stock is random with poor predictablity.
- Social media - a successful trader needs a lot of time, energy, and focus to do their work. While some social media presence and showing off success are rational, it cannot be an obsession. Stock traders are judged on their failures, not on their success. Everyone can have enough success ratio to stay in net profit, but the frequency of failures determines the sustainability of that success. For someone to be on every possible social media outlet and spam it like a full-time business is a hint of having too much spare time and too little to do.
- Paid consultancy - successful traders do not depend on upfront fees, they get paid on their results. To have a guaranteed revenue regardless of a client benefit in an investment deal borderlines on unethical practice.
- YouTube - often seen begging their audience to subscribe to their YouTube channels in hopes of creating advertising revenue. Those who cannot make it in trading resort to advertisement laden YT channel and selling books. A good product sells itself, it does not need begging! EDIT: Jan.08.2021: There is a similar infestation of gurus peddling their advertising-laden Andriod Apps which is another way to generate revenue. Sometimes these Apps are not listed on official stores and peddled through file sharing links. Which makes them risky and can compromise your data privacy.
- Course gurus - relatively a new phenomenon that has popped up in the age of social media learning. Courses are often marketed with an overload of marketing jargon promising quick returns and expertise parallel to no other. Stock trading is a long term process needing commitment, practice, and real capital. Trading strategy has to be tailored around individual personality and psychology while individual temperament carries a strong influence. There is no shortcut to knowledge or success. A short course may get a person started, it will never make them a professional. It may be a good idea to learn from a professional but a successful trader should make enough from their own trading and do not need to sell courses.
- Lower time-frames - the lower the time higher the volatility and the higher volatility makes it difficult to predict. A difficult to predict trade is difficult to profit from. Inducement into risky trades is not worth it even if it causes no capital loss because it freezes valuable capital into non-performing trades. Experts always determine markets on a closing basis which is an established industry standard. Again, an intra-day move is typically random.
- Stop-Loss - while rational risk management is a good practice and stop-loss will get you out of a messy situation. Its application is limited and cannot be a cure-all for all situations. The same applies to position sizing. Diversity is necessary for prudent risk management but it actually comes down to trading practice, experience, and opportunity. These experts dubbed "stop-loss gurus" specialize in offering reckless trade with stops and then taking credit for hitting their stops. Hitting a stop in loss is not a matter of pride, rather it's a failure.
- Penny stocks - no self-respecting expert wants to go into this territory. Penny stocks happen to be a non-performer over a long period of time and come with a huge downside risk. Getting lucky in them has the same probability as gambling. Trading in fundamentally poor stocks or those with little strategic value is simply a waste of time and money.
- Chasing breakouts - literally expecting too much out of too little. This is a greedy approach to trade with a random success ratio. Breakouts always have a risk of failure or even collapse. Greed kills!
- Tip-Chor - there is a special salute of disrespect for this breed of gurus. Such that not a word in an English dictionary exists for them. They are present in every instant messaging avenue, often with multiple or false identities, and simply help themselves with other's work to make an "honest" living. Sometimes they do not even have a trading account of their own!
Monday, December 14, 2020
KSE100 closed another week in the positive territory, making it a continuous three weeks winning streak. The week closed with net positive gains of +263 points or +0.62%. A meager gain as compared to the earlier two weeks and a possible signal of bulls exhaustion.
Saturday, December 5, 2020
The bourse has rallied but is demonstrating stubborn pivotal resistance at 48200 +/- 100 - we do not see this as a good omen. It could be th...
Bourse remained unstable throughout as per our expectations and weekly closing failed to break the pivotal resistance at 48200 +/ 100. There...