Dussehra tip: Three evils that traders should be wary of



Dinesh Rohira

5nance.com

We Indians love our festivals, don’t we? They bring us rigour and spirit towards new beginnings and allow us to change ourselves for the good.

Every festival teaches us values which get passed on to generations. Few other festivals give us the feelings of joy and prosperity than Dussehra and only a few of us know the very reasons we celebrate it.

We talk about the ‘victory of good over the evil’ as our brave Lord Ram defeated the egoistic evil Raavan. Also, Goddess Durga attained victory over Mahishasur thus bringing peace to mankind.

In lieu of this festival, we, as humans, have got a chance once again to get rid of our evils and emerge victorious towards a glorious future.

In the financial context, this is a day where we need to control our emotions while trading and not fall prey to these sins that many people are easily gullible to.

By tradition, we view Dussehra as the auspicious day to buy gold, property, car and even stocks. But, we tend to buy in the emotional frenzy and overlook certain important aspects especially when it comes to trading.

Let us see our three such evils and what can we do to defeat them.

Number 1: Our biggest enemy is our ego and we need to defeat it. “One may understand the cosmos, but never the ego; the self is more distant than any star.”

Let’s say a trader makes a market call that Nifty is going to reach 10,000 in Dussehra session despite global negative cues. Even when the market is starting to fall, he is looking for self-validation, anticipating a market up move, but it would be quite frustrating for him when he sees his prediction hasn’t materialised.

He doesn’t feel validated anymore. When he seeks prediction, he seeks to lead the tune of the market. It becomes about himself. Instead, if a trading decision is a result of listening and it is not about himself, being wrong doesn’t feel so frustrating anymore.

Being wrong becomes a learning, an information. It tells us we have to listen carefully, harder, differently to what it is hinting. In tune with markets, traders seeking to learn let the market dictate and take hints from the market’s steps. It tells us that we need to keep our ego aside.

Number 2: Another aspect of trading is greed. Imagine if I were to come into a session where I’m certain that everyone is going to be buying and I take up considerable leverage by buying call options, all for quick handsome returns.

Chances are good that I fall flat on my face. This greed could cost me a fortune and even make me bankrupt. Due to greed, people ignore market valuations and fundamentals and follow the herd.

Greed robs us of our stability and calmness which is essential for our mental balance. Greed can take the best of people towards destruction and takes away the good in people. Let greediness not take the best of us and not drive us toward craziness.

Number 3: Lastly, indiscipline is our long-term foe. Let’s say a budding portfolio manager doesn’t fall prey to ego and greed but joins in the buying spree, invests heavily but doesn’t put a stop loss to his trades.

Nifty reaches 10,000 but markets fall sharply the next month due to profit booking. The investor falls prey to indiscipline, his portfolio loses considerable amount and investors decide to liquidate by way of redemption.

Due to just one mistake, the reputation of the manager goes for a toss and scars of this mistake may live forever with him.

This is the reason why great traders and investors always stick to discipline even if it means foregoing temporary gains to save from permanent damages.

Let us not make these mistakes by killing the Raavan of ego, greed, and indiscipline inside us.

Let us vow to change ourselves this Dussehra by not letting emotions take the better of us.

Let the Ram inside us come victorious and grow our hard-earned wealth towards prosperity and happiness for the future.

Disclaimer: The author is Founder & CEO, 5nance.com. The views and investment tips expressed by the investment expert on moneycontrol.com are his own and not that of the website or its management. Moneycontrol.com advises users to check with certified experts before taking any investment decisions.

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