Ashu Dutt's 22 Day Trading Secrets

Trading is one of the most rewarding careers that you can choose. It is a rare combination of chart reading and self-control. If you can have both, you have an unbelievable edge over others in the market.

While we would like to believe that stocks rise on "fundamentals", almost none of us will agree on what the "fundamentals" are.  Is PE, Cash Flow, Debt levels, Inventory levels etc(or all of them) fundamentals?  What we consider fundamentals is a representation...
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Trading is one of the most rewarding careers that you can choose. It is a rare combination of chart reading and self-control. If you can have both, you have an unbelievable edge over others in the market.

While we would like to believe that stocks rise on "fundamentals", almost none of us will agree on what the "fundamentals" are.  Is PE, Cash Flow, Debt levels, Inventory levels etc(or all of them) fundamentals?  What we consider fundamentals is a representation (not the actual picture) of the company's true fundamentals. Even when we know the "fundamentals", human beings make investing decisions that are heavily influenced by their emotions and their dreams and aspirations.

Trading is based on charts and charts are based on Price, Volume and Time.  While price indicates an uptrend or downtrend, a rise or fall in price accompanied by heavy volumes confirms the direction of the move. And if a rise in price is backed by heavy volumes and continues for a few days (or longer), it confirms the stock's direction. And for this reason, charts will only work if the promoters have integrity. The integrity of the promoters infects charts.  Charts also work when there are willing buyers and willing sellers who have not been manipulated into believing in "fixed" charts.

CHARTS WITHOUT ENOUGH BUYERS AND SELLERS DON'T REFLECT REAL SUPPLY AND DEMAND OR REAL EMOTIONS - Any chart that does not reflect a real emotion or creates an artificial supply or an artificial demand will not deliver. It is best to stick to stock of companies with impeccable reputations.

One of the toughest things to do is play against our intuition and the way we are programmed. For example, our recollection (and thus our reactions) are sharpest to things that have happened lately or in the immediate past rather than the most significant events that have happened in our life.  When we buy something for 100 rupees, we usually don't want to sell it till it gets back to 100 (i.e. if we have a loss). There is a whole gap between 100 and when the value has dropped so low (like lets say 20) where we go into a decision limbo. That is not how we do things when we buy something at 20 and it runs to 100. Usually, we sell it at lets say 30 (or some mark we set in our mind). If we hold it and it does reach 100 and starts to fall, we tend to believe it will come back to 100. In the process, we lose the gains we already have.