A key takeaway for Nepali traders in NEPSE.

 Before sharing some of the rules that I shaped for myself on trading and investing in the stock market, I would like to highlight key principles that a good trader or investor needs to embed in his/her actions. Similarly, these principles are highly valuable to our life and are useful to master our habits and other disciples. 

 

1.     Learn and grow!

In whatever sector you work, to become a successful and satisfied person you must be willing to learn and grow in the particular field. You must understand both the philosophical and technical aspects of the work you are doing. Also keeping yourself up-to-date and breaking the box of comfort is essential for growing yourself immensely. This paper provides some philosophical and technical knowledge on being a better stock market trader and investor in NEPSE.

  

2.     Love what you do

If you are doing something that you do not like doing, then you must stop. Learning what you love to learn makes way easier than learning things that you do not like or understand. So, if you are not into trading or investing – try to step in and see if you enjoy doing it, with some cash and time of investment, if you still feel like you do not enjoy watching markets and charts – then just stop and look for other things that you enjoy doing. If you do not enjoy what you do, you’ll struggle to make money out of it, and most importantly – you will start to be impatient. 

 

3.     Work hard!

Another crucial principle to become a successful investor or trader is to work hard. If you want to be a happy and successful person, there is no alternative to hard work, whatever field you choose. One should be able to wake up early morning, sleep late at night, and keep on pushing oneself to grow. And of course, to work hard – it is important that you enjoy your work so that nothing can distract you from your work. 

 

4.     Perseverance

Inconsistency is a devil for success. Working continuously to achieve the goal even after failing, again and again, is what takes to be a successful trader. No matter what you are going through, what challenges you are facing, the equal and consistent effort for a long period of time can only make you spark.

 

5.     Discipline

I don't think it is possible to become a happy person without having discipline. Discipline makes you strong, focused, and confident. To become a discipline in the stock market, you should not get too much excited or panic about what you witness in the market. The market is crazily volatile; days will be best and worst for you in the market, just accept this fact and decide best. The market doesn't give you how much you want, it gives you how much you deserve. So, be a disciplined player, you will lose and win many times – just remember you’ll need to win the war not every battle.

6.     Buy businesses - not stocks!

Here I am borrowing a quote from a legendary value investor and one of the richest persons in the world ‘Warren Buffett’. Usually, when we buy stock, it is obvious that we buy the portion of that business, but what we tend to think is that we are buying a stock of a certain price. Meaning we usually do not think about the value of the company rather wary of its value in the stock market. If you are going to buy the stock of a certain company, whether it to be a small or big chunk, just think that you are the owner of that company and remember it gives your profit out of its earning in a long run. This mindset helps you to invest in a company that you understand the business model to some extent and provides long-lasting benefits to you.  

 

7.     Make your own decisions.

An alpha character is to decide yourself and prepare for the result strongly. While in the market, it is very easy to get excited or intimidated by thousands of opinions that knock your head off. Remember, nobody is correct in the market, it is just the assumption they make, instead of believing other people’s perception, start believing in yourself and trade accordingly.

 

My trading rules at NEPSE

These trading rules are the product of my about two years of learnings from being an active trader in the Nepal Stock Exchange (NEPSE). I am still learning investment and trade, therefore, the rules that I am sharing are not absolute. With time and with more learnings and experiences, these rules will be changed or modified. Therefore, whether you are investing or trading, just one to remember is that there is ‘there is no rule in the market'. And of course, rules are not crucial – but learning from your every action (in this case transactions) and observing the social reactions (in this case market) are important. Thus, sometimes I even encourage myself to break the rules – to get along with the market trends.

 

1.     Diversify portfolio!

I started trading in NEPSE as a safe player. Most of my investments were in Banking and Investment and Trading sectors. In due course of time, I realized that bull trend or bear trend circles from one index to another. Try to have stocks from every index, so that you can enjoy the roller coaster ride of the market.

 

2.     Stay organized - possess few stocks.   

Buy those stocks that you trust and can often track. I once used to have more than 40 companies in my portfolio and I even couldn't remember them. As a result, I wasn't able to trade it when I wanted them to trade. It made my portfolio completely unorganized and I was in a total mess. Today I hold 15-20 stocks both for trading and investment. Having few stocks in your portfolio makes you organized and focused. You will be able to learn how they move and how they react to the market. In the long term, such observation will be rewarding for your trade. 

 

3.     Every dog has its day. 

What you will need to understand is that every stock in the market gets its turn. But sometimes, it might come very late. Based on your position in the market, you'll need a different strategy to deal with such behavior of the stocks. If you are an investor, it is better to hold them - because the more it consolidates, the more there is a chance to blast once there is a breakout. But, if you are a trader, analyze carefully - if you think you can make money out of switching into another company, do not hesitate to do it so. 

 

4.     Cash is King

If your cash is waiting for your right investment at the bank, then that is the best possible way to not miss any unexceptional opportunities that the market often offers to the traders. Do not invest everything that you have in the market, stay in cash and grab the chance. Also, having some cash with you will help you to manage your expenses and emergencies without having you sell your stock at an undervalued price. 

 

5.     Trade carefully, if not partially 

While trading in the stock market, most of the time, it feels like you'll miss the best price to buy or sell if you do not act instantly. And if you feel the same then, do see trading partially. Partial trading will allow you to observe your decision while allowing you to change your plan and decisions. What I have realized by now is that you will find lots of buying and selling opportunities - if you miss one, there will be other opportunities. So, do not panic, but be careful. And remember that you cannot always buy and sell at the best point in the market. Simply accept it and do your best. 

 

6.     Learn analysis! 

Learn both fundamental and technical analysis. Fundamental analysis is basically about learning the past performance of the company in real life - like its earnings, capital, assets. Such analysis gives you an understanding of the real value of the company. Whereas technical analysis is about learning the past performance of a company at the stock market - through its price action, the volume of trade, using several indicators like moving average, RSI, MACD, etc. While doing trading by analysis - I just want to say that - do learn every day and do not forget your past mistakes - if you do so you are doomed to repeat them.  

 

7.     Be calm - not greedy and fearful.

Greed and fear are two emotions that shape the stock market anywhere in the world. But if you want to be a happy trader or investor while earning decent profits out of your transactions then you will need to control your emotion of greed and fear. Know your profit-booking areas and stop loss areas and in most cases - do not let your emotion act otherwise. 

 

Key tips to buy and sell at NEPSE. 

·       Do not buy when the price has gone already up. (EBL)

·       Do not sell when the price is moving upward. (NLG)

·       Sell in the resistance level, if the value has gone tremendously up. (BNT) 

·       Do not buy immediately after the correction - let it consolidate first. (Nabil) 

·       Sell partial if your instinct says so. (Nabil, CIT) 

·       You can't always sell at the top - sell immediately if you see the sign of correction, don't expect a bounce back. (CGH) 

·       Only buy for investment when the price is down. Do not buy when the price is down for trading, instead buy at a breakout level.