“I just missed the bus,” said an investor once he saw the stocks that had become the top gainers of the day. Every trading session leaves behind top gainers and top losers of the day.
One can become a billionaire in no time by buying stocks in advance that consequently become top gainers and going short on scrips, which later turn top losers.
However, it is difficult to have such a right timing unless you are incredibly lucky, but one can always use some of the trading strategies with stocks that figure among top gainers and losers.
SundayET tries to bring to you the trading strategies but before that let’s try to understand the kind of price trends that are generally observed. Either the price trend continues for a few days before there is a reversal or the trend reverses on very second day.
Look for volume
In several cases the trend continues for a few days. For instance, Sundaram Brake Linings was one of the major losers in the National Stock Exchange on June 2, 2009, and kept losing in consequent days.
It finally closed at Rs 165 on June 4, from Rs 200 three days ago. Similarly, SKM Egg Products Export was one of the top gainers on May 27, 2009 and the trend continued till June 1, when it closed at Rs 29.
According to RK Gupta, MD at Taurus Asset Management, investors should not look at these stocks for longterm investment opportunity but shortterm trading. One should look at two things, price movement and trading volume, before taking any decision.
If the price of any stock is moving north and is supported by higher volume, most likely the trend may continue for a few more days. Similarly, declining prices with high trading volume indicate that prices may fall further.
Hence, if you observe a high volume built up on the stock you can take a position in the direction of the trend. This means if the price is going up you should buy.
Get fundamentals right
However, if you already have shares of any company and you want to book profit seeing the rise in the price before you sell, you must see the volume that the share has. In case the share prices are rising supported by strong volume, you should not sell all the stocks in one go.
Instead, one should go for gradual profit booking. Similarly, if the prices are falling dismally, you should not jump to buy the stocks even if the valuation looks compelling, rather one should wait for the prices to correct further and the trend to reverse.
Get fundamentals right:
However, one must differentiate between a fundamental story and a market-driven wave. “When an investor wishes to make money in the short term through several trading strategies, he/she should not consider the fundamental story behind the stock because the fundamental story would bear the fruits in long term,” said Mr Gupta.
Stop loss to be winner
In several cases, the cycles are much shorter. A company, which figures in the table of top gainers today, may be found out among the top losers tomorrow.
For instance, Ranbaxy Laboratories gained as much as 21% on May 25, 2009, but on very next day it lost around 8% to close at Rs 244. To avoid such losses one must use stop loss option. It is disappointing that almost 90% of the investors don’t put stop loss, says, Motilal Oswal, chairman & MD of Motilal Oswal Financial Services. “Winners of the stock market are those who use the stop-loss option,” he adds.
One must use ‘trailing stop-loss order’, which helps in gaining the maximum, while limiting the downside. Under the option of trailing stop loss, an investor fixes the stop loss price in percentage terms and not in absolute terms.
Thus, if the price of the particular scrip goes up, the stop loss price also moves up simultaneously. But in case, the price falls the stop loss price doesn’t change and gets triggered once the price touches the stop loss order price.
One can become a billionaire in no time by buying stocks in advance that consequently become top gainers and going short on scrips, which later turn top losers.
However, it is difficult to have such a right timing unless you are incredibly lucky, but one can always use some of the trading strategies with stocks that figure among top gainers and losers.
SundayET tries to bring to you the trading strategies but before that let’s try to understand the kind of price trends that are generally observed. Either the price trend continues for a few days before there is a reversal or the trend reverses on very second day.
Look for volume
In several cases the trend continues for a few days. For instance, Sundaram Brake Linings was one of the major losers in the National Stock Exchange on June 2, 2009, and kept losing in consequent days.
It finally closed at Rs 165 on June 4, from Rs 200 three days ago. Similarly, SKM Egg Products Export was one of the top gainers on May 27, 2009 and the trend continued till June 1, when it closed at Rs 29.
According to RK Gupta, MD at Taurus Asset Management, investors should not look at these stocks for longterm investment opportunity but shortterm trading. One should look at two things, price movement and trading volume, before taking any decision.
If the price of any stock is moving north and is supported by higher volume, most likely the trend may continue for a few more days. Similarly, declining prices with high trading volume indicate that prices may fall further.
Hence, if you observe a high volume built up on the stock you can take a position in the direction of the trend. This means if the price is going up you should buy.
Get fundamentals right
However, if you already have shares of any company and you want to book profit seeing the rise in the price before you sell, you must see the volume that the share has. In case the share prices are rising supported by strong volume, you should not sell all the stocks in one go.
Instead, one should go for gradual profit booking. Similarly, if the prices are falling dismally, you should not jump to buy the stocks even if the valuation looks compelling, rather one should wait for the prices to correct further and the trend to reverse.
Get fundamentals right:
However, one must differentiate between a fundamental story and a market-driven wave. “When an investor wishes to make money in the short term through several trading strategies, he/she should not consider the fundamental story behind the stock because the fundamental story would bear the fruits in long term,” said Mr Gupta.
Stop loss to be winner
In several cases, the cycles are much shorter. A company, which figures in the table of top gainers today, may be found out among the top losers tomorrow.
For instance, Ranbaxy Laboratories gained as much as 21% on May 25, 2009, but on very next day it lost around 8% to close at Rs 244. To avoid such losses one must use stop loss option. It is disappointing that almost 90% of the investors don’t put stop loss, says, Motilal Oswal, chairman & MD of Motilal Oswal Financial Services. “Winners of the stock market are those who use the stop-loss option,” he adds.
One must use ‘trailing stop-loss order’, which helps in gaining the maximum, while limiting the downside. Under the option of trailing stop loss, an investor fixes the stop loss price in percentage terms and not in absolute terms.
Thus, if the price of the particular scrip goes up, the stop loss price also moves up simultaneously. But in case, the price falls the stop loss price doesn’t change and gets triggered once the price touches the stop loss order price.
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