Systematic Investing Workflow

Select the Exchange

There are two primary trading exchanges in the country. BSE and NSE. NSE is preferred exchange to trade. The quality of listed universe is better on NSE and NSE is the primary exchange for derivatives or FnO trading. NSE also has much higher trading volumes, liquidity, better spreads for trading.

Select Broker
I have trading accounts with Zerodha (discount broker) and ICICI Direct (full service broker). Both are good as per my experience. Not much issues compared to what we hear on social media platforms for other brokers. Many customers complain regarding hidden charges, unauthorised liquidation of positions, down time especially in critical market situation when trading volumes spike, unresponsive customer care, manipulative and misguiding advisors selling poor trade advice or schemes with huge charges and leading to heavy losses. So evaluate the track record of your broker properly before opening a new account.

Select Brokerage Plan

Now a days most brokers have two plans. Default plan usually have very high charges like 0.5-1% of traded value and 100-200 Rs per lot in FnO. Then they have subscription based plans which offer much lower charges like 0.05% of traded value and 20 Rs per lot in brokerage. Lower brokerage reduces your breakeven costs and can be a critical aspect of success in trading. With lower brokerage you can take many more trades with smaller profits which can increase your earning velocity substantially. Also for FnO selecting span margin over normal margin plan gives you much higher leverage, enabling you to take larger positions and increase the velocity of your earnings.

Investing vs Trading for a living?

Trading for a living is much different than investing. In investment people market income is secondary and people have a different primary source of income that takes care of their expenses and also funds their investment. Such people can sit on their investments for years and decades until it gives favorable returns. For example RIL was flat for 10 years, then went up 3x in 11th year. Investors who stuck to their investments made zero to negative returns for 10 years and were compensated for their patience in the 11th year. In case of trading for a living you do not have alternate source of income and you need continuous income from stock market to fund your expenses and growth. Here investment model will not work. For this you have to plan differently using FnO, intraday or positional trades that allows you to deploy and withdraw money frequently from the market as per requirement.

Figure Out what you want to do in market

Most people look at others, someone made 10L in intraday, they want to do intraday. Someone made 10L by investing in a penny stock in one month, they want to trade penny stocks and do positional trading. Someone made 10L in 10 years in infosys, they try to do long term. They watch a interview of Rakesh Jhunjhunwala, then they want to invest like Rakesh Jhunjhunwala. Don't do this monkey business in stock market. If Sharukh Khan or Akshay Kumar makes a hit movie, do you try to make a hit movie next day? Similarly it is not easy to just copy and replicate someone's success in stock market. Spend some time to think what you want to do in stock market. You will be competing with the best of the best in the market. Try to think what is your edge. What is your skill. Is it fundamental analysis, news impact analysis, macros, data analysis, quantitative analysis, automation, computing, what will be your weapon of choice in this epic battle? 

How Much To Invest?

Most people come to stock market with dreams of winning a lottery. They want to invest 1 Lakh and make 1 crore. That is not how it works. It is much easier to invest 1 crore and make 1 Lakh. Trying to earn 1 crore with 1 Lakh investment is guaranteed to make the investor lose even the 1 Lakh he has invested instead of making a crore. If you are new to stock market assume 10-15% return and if you are experienced and expert in stock market assume 25-30% return from the market. Based on this calculate the amount of capital you need to invest to achieve your annual earnings goal. Account for tax according to income bracket in your calculations. Think about it, can a baby elephant give birth to mother elephant or can a mother elephant give birth to a baby elephant?

Instrument Selection

There are various instruments to invest Equity, MF, Index funds, ETFs, ULIPs, Debt funds, bonds, derivatives, etc. We will primarily discuss direct equity investments here. Most other instruments are best suited for passive investing approach with 10-20 years time horizon. Derivatives has been covered in other posts in the same blog. Another emerging trend is SmallCase, where expert investors design a basket of stocks that you can invest with one click. These can be based on momentum or fundamentals or other proprietary techniques. Performance and fees depends on the SmallCase manager and in many cases can provide much better returns than those ultra large, ultra diversified funds managed by underqualified and overpaid fund managers.

Stock selection
There are around 4000 listed stocks on NSE and BSE. You can get the full list on NSE site Stock list here However remember that many paper companies are also listed on the exchanges that do not have any legitimate business but are just listed on exchanges to make money through pump and dump schemes. If we exclude all these then the list of investment worthy businesses will be very few.
How to identify genuine companies vs paper companies? Easiest way is to filter out only companies that are enabled in FnO. Since Futures and options is highly leveraged and highly risky business, only companies that meet the highest quality standards in terms of governance, promoters, size, liquidity, financials are enabled for derivatives trading. There will be few bad companies in this list too, but very small number compared to rest of the universe.
Second is to look at stocks that are part of some indices like Nifty, BankNifty, Finnifty, metals index, psu index, IT index, etc. These are reasonably high quality companies and that is the only reason they made it to some index. You can find the list here.

If you still want a wider list of stocks, you can look at stocks who products you use in daily life. For example you watch movies at PVR, eat Pizza at Dominoz, drink Red Label tea, buy westside clothes, shop at DMart, go to apollo hospitals for health issues, booked an apartment with DLF, used Asian paints to color your home, and so on. Nothing is 100% guaranteed though. For example Sintex a super brand in India wiped out all it's investors completely. 

How to study company details

You must analyze the company details from the information available at the exchange site. For example look here
screener is a good site to study company financials.
Key point here is to use only official source of information. Don't rely on news, message forums, social media, whatsapp, random advisors, etc. Most people in this business will ask you to buy stocks they want to sell and ask you to sell stocks they want to buy. That is how the entire ecosystem works. Unfortunate but true.

Stock price vs market cap vs enterprise value
Many people see a 10 Rs stock and think it is cheap. At the same time they see a 1000 Rs stock and conclude that is very expensive. That is not the right way to evaluate stocks. A 10 Rs stock with 100 crore stock units is 10*100 crore = 1000 crore market cap. At the same time a 1000 Rs stock with just 1 crore stock units is again just 1000 crore market cap. So to summarize
Traded unit price = stock price
Total value of all traded stocks = market cap
Market cap + debt = Enterprise value

To figure out whether a stock is cheap or expensive, you need to figure out that for a market cap value of 1000 crore how much revenue, profit and cash flows the company is generating. A 1000 crore market cap company generating 100 crore profit is cheap but a 1000 crore market company generating 10 lakh profit or loss is super expensive even if the stock units are trading at 10 Rs/share
Also if a company has high debt as reflected in the enterprise value then that company will spend most of it's profits in paying of debt and interest leaving nothing to give back to the shareholders. That is why we must look for low debt companies that can re-invest the company profits in future growth or rewarding shareholders with dividends, bonus, and other means.

News, Views, Tips, Technicals, Fundamentals, Data
As discussed above most people in this business will ask you to buy stocks they want to sell and ask you to sell stocks they want to buy. That is how the entire ecosystem works. This includes you favorite tv hosts and business news anchors, your very friendly fund manager, banking relationship manager, your friends and relatives, that very high profile and respected business promoter, that super experienced, highly successful and super rich trillion dollar global fund manager. It is best to not burden yourself with news and views of ever tom, dick and harry on the street. most likely they are all anyways trying to cheat you. Focus on data instead of stories, news and tips.

 
News based information prone to manipulation
News
Analyst and reporter views
Management interviews
Annual reports
Research reports
Relatively reliable data driven information
SEBI Regulatory notes
Credit rating reports
Fundamentals and ratios
Technicals
Historical Data analysis
Market Data
Exchange announcements

Market ping pong games

Earlier life used to be simple. If market or a stock used to fall because of some news or rumor, management would provide clarification on the news on tv and things used to go back to normal. Nowadays same news is used in perpetual ping pong mode to pump & dump market and stocks several times before any clarity emerges. News of some fraud stock crashes, management clarifies stock recovers, next day IT raid on stock, stock crashes, nothing found in IT raid stock recovers, management arrested stock crashes, management released on bail stock recovers, ED enquiry into the company stock crashes and it goes on and on and on .. similar pattern is seen with macro factors like Covid, vaccine efficacy, stimulus bill, election outcome. Everything becomes a never ending pump and dump game with big advantage for insiders. Retail players should stay away from such stocks and market.

Liquidity & volatility

Stick to liquid counters with big daily trading volumes and small daily moves. It might look fancy to see a stock move 20% in a day but trapped on the wrong side, these can cause huge damage. Add to that if the counter is not liquid then you may not get to exit the counter even after huge loss. Add to that illiquid counters usually have huge spreads, so you may find it difficult to get the best price while executing the trades. Also the stock may hit circuit limit with 0 trading volumes for several days. So always look for counters with lots and lots of liquidity to enjoy a smooth trading experience and avoid all the stress of not finding any buyers or sellers for your trades.

Investment vs Trading
Investment is mostly done from a long term plan usually 3 to 10 years to lifetime. Trading is usually done with the intention of exiting within a year. Traders work with much shorter timeframes intraday, BTST, few days, weeks, months. Algorithmic trading works at milliseconds frequency scalping for returns in the market. Investment is relatively relaxed and requires less time and effort can be done part time along with a primary job. Trading requires almost full time dedication. Success rate in trading is very low. Only 1-5% traders succeed and mostly use some kind of edge they develop with experience after years of trading. For top 1-2% traders, it can be a very rewarding profession generating huge returns. On investment side you can expect average returns that most investors will achieve and will range in the 15-25% CAGR over long term period. Taxation is investment friendly. In India trading profits are taxed at highest taxation rates. Stock market has very low entry barrier. Anyone can open an account and start investing or trading hence it is a very competitive field.

Market ecosystem

It is important to understand role of traders and investors in the market. Investors decide value of a particular instrument but traders decide volume or liquidity of an instrument. Market needs both of them and will not function without either of them. 

Intraday Vs Positional trading

Traders who worry about black swan events and don't trust the market in general prefer intraday trading. Also traders who play with their entire capital in all in market mode prefer intraday trading. Traders who only trade with a small percentage of their overall capital prefer positional trades. Here even a major black swan event will not affect their total networth by much since they are usually diversified across multiple assets and have only a small percentage in stock market. So they can easily ride out the black swan event. For "all in" traders a major black swan event can have a substantial impact on their overall networth, hence they prefer not to leave money in the market as much as possible.   

80:20 rule of trading

Market rewards you 80% of the time for trading wrong and punishes you 20% of the time for trading wrong. At the same times market punishes you 80% of the time for trading right and rewards you 20% of the time for trading right. However in 80% category both rewards for trading wrong and punishment for trading right is small and in the 20% category both rewards for trading right and punishment for trading wrong is huge. This is why it is extremely difficult to learn how to trade right and extremely easy to go deep into wrong path in trading.

KISS: Keep it simple stupid

Many times in search of the perfect trading strategy, people tend to overdo it and completely complicate their lives. 

In reality the KISS principle works good in market. Most of the technical indicators are kind of different ways of looking at the same thing. There are two broad category of technical indicators trend indicators like moving average, etc which indicates trend and oscillators like RSI, ADX, etc which indicates strength of the trend. A combination of one each is good enough.

Regulatory Changes

When SEBI introduced peak margin penalty, I lost lakhs in penalties until I fixed my position sizing and margin buffers. When SEBI introduced compulsory physical settlement for stock option, one trader lost 15 Lakhs for just buying 15K worth of stocks because he could not give stocks for physical delivery and had to buy it at much higher price from the auction market. Always keep track of regulatory changes and it's impact on your trading. Especially if you are trading with a large capital, the impact of these small regulatory changes can be huge and disastrous without any exaggeration.

History does not repeat itself in stock market

Many times people do the mistake of taking trades based on past moves. For example say a stock you were tracking fell from 500 to 300 and then bounced back from 300 to 400. Then you start watching it everyday thinking you missed the opportunity to buy at 300. Then it comes back to 300 and you jump in to buy the stock grabbing the opportunity you have been waiting for with both hands. Then the stock falls from 300 to 200. The problem here is that last time it reached 300 it was a different setup, this time it reached 300, price is the same but it is again a different setup. Focus on the setup and not the price.

Murphy's Law in the market

Market has a way of figuring out and playing the worst case scenario for everyone.  Trust me. If you prepare for 99 out of 100 scenarios, chances of the 100th scenario playing out is almost guaranteed. The only thing to keep in mind is that, don't ever bet everything on one trade, no matter what the level of your conviction. It will wipe you out almost always.

All In

In continuation with the above, it is never enough to emphasize, never play the All In game on a single trade. Never. Sure there is a 0.001% chance, you may hit a lifetime jackpot. But there is a 99.999% chance for major loss or complete ruin. Always remember, people on the opposite side of your trade are not stupid. There is ALWAYS a chance your bet can go wrong or even horribly wrong. Even if you are right, there is always a chance that a operator takes you out before the trade goes in your favor. In stock market odds are always stacked up against you unless you are a very big player. 

System, Rule Based vs discretionary strategies
Trading or investment, as long as you are relying on experience, gut feel kind of things to make your trading or investment decisions, you are unlikely to succeed big in this field. You decisions should be data driven and rule based. It should be a set of rules you can write on a piece of paper or code and anyone who has access to it should be able to replicate exactly what you are doing. There should not be a single component of emotion or subjectiveness in your decisions. Once you are able to come up with such rules that work profitably, only then you can succeed big in stock market.

Backtesting

When new to trading you can make up for the lack of experience by doing extensive backtesting. Using data you can run your ideas, strategies over how the stock or market behaved in the last x years in similar situations and get a feel of what to expect. How much up, down, max drawdown phase, etc. Although practical execution will lead to slightly different results due to slippage and execution challenges backtesting will still give you a fair idea about best and worst case and statistically probabilities. You have backtesting software available on sites like stockmock.in

Dangers of averaging losses

Retail traders trade few 100 shares. Institutions hold shares in crores. Many times retail traders try to use the averaging technique i.e they keep accumulating as the stock price keeps falling. Always remember institutions can bring stock price much lower than what you can keep buying and then force you to exit before they take the price back up. It will be foolish to try and play who blinks first kind power games with large institutions. Averaging 1 or 2 times might be ok to optimize the acquisition price but beyond that it is most likely better to try and analyze if your investment thesis itself is wrong instead of continuing the fight 

StopLoss and StopLoss Hunting

Most professional traders and some investors use stop loss to limit the max loss they can incur on any trade or investment. While stop loss protects them from large or complete capital loss, stop loss is also used by large players to kick traders and investors out of good trades using stop loss hunt techniques. Stop loss orders are stored at exchange level and is hence visible in the order flow data to large players. Most often they bring the price of a stock to a level where maximum retailers will get kicked out of the trade and then take the price to where it was originally intended. To avoid stop loss hunt retailers started keeping deeper stop loss but as market adapts large players started deep stop loss hunts. So it is one of the games that traders have to deal with to make money in the market. There are many ways to handle it. Based on your loss bearing capacity you could go for super deep stop losses that are difficult to hunt or you could take the small stop loss hit and re-enter the trade when it turns back in your favor again.  

Take small calculated decisions

When it comes to trading or investment, it is always prudent to take small decisions one by one and step by step using numerical reasoning instead of gut feeling. The moment you take a big decision, you are always making yourself extremely vulnerable to the market. Always think in terms of fine tuning rather than big bang. If you are getting tempted to take a big decision, you should get intuitively alerted that something is wrong or it could be a trap or this looks too good to be true. Small decision allow you to correct your mistakes with minimal damage and readjust on the right side with minimal cost. Longer you stay on the right side more money you will make even with small decisions. Ending up on the wrong side with a big decision is almost certainly game over.

SIP vs bulk investment
SIP is a systematic way of investing. Example I know insurance sector is going to grow for next 10-20 years so I will invest 20K per month in insurance sector. Bulk investment is mostly used for momentum investing. For example I know this company is going to shoot up because it is getting acquired by Google or that pharma company is going to shoot up because of approval for a blockbuster drug with billions of $ market potential, so I make a huge bulk investment to capitalize on immediate opportunity.

Following star investors

There are many investors who have made it big in the stock market because of their stock selection skills. Example Jhunjhunwala, Damani, Vijay Kedia, Dolly Khanna, Monish Pabrai, Ramdeo Agrawal, Porinju, Ashish Kacholia, Akash Prakash of Amansa Capital, Parag Parikh. It is fair to assume that these investors will continue to find good investment stocks. Hence one strategy would be to copy their investment picks and build a long term portfolio with stocks where these big investors are heavily invested. Few pitfalls to consider with this strategy. By the time you get to know the stocks might have already run up. Sometimes big investor ideas also fail. For example Porinju suffered a very shocking failure with his large investment in Lloyd electric or LEEL. For big investor that loss might be insignificant and for you it might be high impact. One way to reduce such risks is to look for stocks where there are multiple big investors instead of just one. Also don't invest blindly on their name. Do your own research also and see if it gives you confidence to invest.

Also understand blindly copying big investors is very risky. Big investors have large loss bearing capacity, insider info, decision and voting power, board influence that drives their success. You don't have the same edge as big investors, so don't try to act like one before you actually become one.   

Political Stocks
Some stocks have heavy political influence and do well when their party is in power and do very poorly when their party loses power. Heritage foods owned by Naidu family, Sun Tv by Marans, Reliance and Adani group are regarded close to BJP and so on. While such stocks offer interesting opportunities, it is always advisable to be very careful with such stocks. Indiabulls group is one example that came under heavy attack by many politically affiliated groups, media and influential people. The stock lost 90% market capital despite hundreds of clarifications by the management and none of the allegations being conclusively proven against the group. Ultimately most of the group companies was sold off, renamed, reshuffled management, business model, etc however the losses investors suffered was irrecoverable.

Activist Investors
Sucheta Dalal of moneylife, Amit Mantri of 2Point2 Capital, Deepak Shenoy of Capitalmind have exposed several scams in stock market. Research case studies of Vakrangee, Yes Bank, Manpasand, DHFL exposed by cobrapost. It is good to follow such people closely. May save you from total capital loss in many cases. Also follow SEBI proceedings here. Besides these attend quarterly result concalls of companies. These are attended by some relatively low profile activist investors and analysts who ask tough and direct questions to company management which gives very nice and valuable information that will not be available anywhere else.

Portfolio building and diversification

What is the biggest advantage of investing a company instead of running a business? You can invest in multiple companies and diversify your risks of failure in any of them. Companies can fail inspite of doing everything right. Like natural calamity, macro factors, govt policy, economic or market cycle, competition, scams, etc. Diversification protects you from a complete wipeout due to such unforeseen events and risks. Investors must use this diversification tool for increasing chances of success in this field. Overdiversification is also bad since it becomes a sum zero game. But investing in 10-15 different instruments is advisable. Diversification should be done sensibly. Investing in two companies with similar line of business is poor diversification. It will protect you from company specific risks but not from sector specific risks. Look for uncorrelated instruments for proper diversification.

Understanding Macros

Macros affect stocks in a big way and can be used to optimize returns. High dollar exchange rate benefit exporters, IT companies, pharma. Interest rate affects stocks with high debt. RBI policy impacts banking stocks, NBFCs, MFIs a lot. Govt policies can make or break any stock or sector. Commodity cycles impact stocks like metals, sugar, etc. Regulatory action like pollution control, competition commission, price regulation can impact many stocks. Global trends affect multinationals and large global companies. Crude price affects everything under the sun from consumer spending power to packaging costs to transport and logistics cost to everything.

Return expectations

People are investing in ITC with the hope that someday it will move from 200 to 400 or 2000. The stock hasn't moved for over over 7 years now and is trading in the same 20-50 point range as people keep accumulating the stock and have their entire money stuck in the stock. Now instead of hoping for 200 to 1800 point move in a stock that has been moving in a 20-50 point range for several years, if investors had targeted 10-20% return in the stock, they had much better chance of success in achieving their goal within reasonable time and moved on to better goals. Now investors stuck in the stock just keep cursing the company, management, operators and haven't earned anything for years but who is really at fault here?

Understanding Market Leverage Concept
One of the most important concepts is how market leverage works. Let's say a company has 1 crore stocks trading at 100 Rs/share. So the company market cap is 100 crore. Now if even 1 stocks trades at say 500 Rs/share for that instant the market cap of the company goes up 5x to 500 crores. So using just 500 Rs you can create 400 crores out of this air. Similarly on the downside. Big players holding large number of shares often exploit this. Now assume that out of 1 crore shares, 90 Lakh is owned by a promoter or a large institutional shareholder. He can easily buy or sell 1 lakh share in the market to pump or dump the value of his entire 90 Lakh shares. Most of the time these large shareholders use this power of leverage to pump up stock valuations before dumping or dump stock valuations before accumulating. This is why big players control the market and small players live on their mercy. Small players have no other option but to figure out what big players are trying to do and stay perfectly aligned to them. This concept should also be used when analyzing events like rights issue, buyback etc. When a company announces buyback say at 20% premium most investors do the mistake of valuing the entire company at 20% premium. That is wrong. We need to look at buyback percentage or acceptance ratio also. If the company is buying back only 4 out of every 10 shares held then the right value to be calculated is CMP*0.6+(CMP + 20% of CMP)*0.4

Compounding Magic

Trading or investing, compounding plays a major role in your success. Instead of looking for one shot, one trade, million dollar opportunity look for small, consistent, reproducible, scalable gains. Compounding will turn these small gains into mega riches once the snowball effect kicks in. This is not a lottery ticket. Always think in terms of repeatable strategies not one time hits. This also means that initial few years are very frustrating in stock market and it feels like you are hardly gaining anything for all the money, time and effort you are putting in. It gets more and more interesting as capital and profits compound with time. Slow at the start and faster and faster with time.

Taxation

Understanding taxation is very important. Short term, long term capital gains, dividends, speculation income, everything is taxable. To avoid getting into trouble with tax authorities, it is best to properly audit and declare all stock market gains and pay full taxes. For speculation and business income from stock market you need to pay advance tax quarterly. For more details consult a professional CA.

Cryptos and other exotic investments

A painting can be junk for someone and worth millions of dollars for someone else. A precious stone like diamond maybe worth a few thousand dollars for someone and a few million dollars for someone else. Similarly for things like antiques, old coins, celebrity signatures, and many other things are traded and valued in ways we don't understand. Cryptos and other exotic investments fall in the same category for me. I don't understand it, I don't play it. If you understand it you can make great money because these are niche segments with less competition. Key here is do you understand it? Note that completely ignoring these is also not good as you risk getting outdated and left behind in the market. You have to make a reasonable and informed decision on whether to explore or ignore these investment opportunities.

Boom Bust

Market cycles, bubbles, busts, micro bubbles. Market keeps going through these cycles. Key point to understand here is that to make money in the market, everything must be properly aligned in your favor. No matter how much research and study you do in selecting a stock for investment, you may still find it hard to make money in a bear market. You may be in a raging bull market, but you will still not make money if you invest in a momentumless stock. Complacency and laziness is always punished in the stock market. You always have to align your investment and trading to market trends.
Also remember that many people, channels constantly try to sell greed and fear to common retail public by constantly saying market is going to boom or bust soon. However these are relatively rare events, happens once in 7-10 years, not every year. News media constantly tries to shake investor confidence or force them into wrong investments by selling them stories about boom or bust in stocks or market as a whole. Market however remains rangebound most of the time. These stories are only used by big players for accumulation distribution by constantly playing with the thoughts of retail investors by constantly feeding them garbage of boom or bust 24*7. Stay away from people who constantly talk about either market crashing or rocketing. You want to approach the market with a cool and calm head not always influenced by greed, fear and panic. Decisions taken in such state of mind will always be wrong and news media tries to keep general public in this state of wrong decision making, which leads them to exiting good investments while holding on to bad one's.

Scams and Traps

Market is full of scams and scamsters. Everyone is involved in market manipulation. Punters, promoters, operators, corporates, regulators, politicians, government, big investors, credit rating agencies, fund managers, dealers, fund marketing professionals, HNIs, fellow traders and investors, news and media, that pretty news anchor, social media influencers, market analysts and researchers, everyone from top to bottom is involved in market manipulation in some way or the other at different levels. Don't have any idealistic expectations and you won't be disappointed. This is something you cannot avoid if you want to survive in the market. You have to learn to sense it and play it. No other option. Insider information trading is one of the biggest and most prevalent scam in the market. If you don't know how to handle these traps, you are destined for eventual and complete ruin in the market

Discounting
Market knows everything and discounts everything in advance. Again a result of epidemic of insider info trading in the market. Stocks are accumulated before the good news is declared to the public and stocks sell off on the announcement. Insiders quietly exit before bad news is declared to the public who are later forced to exit at panic bottoms just before the stock turns around. This is how general public or retail investors are played by insiders and large traders or investors. This is why you must not react in panic on every news. Focus on data instead of news to figure out these games, understand how stock prices fluctuate between oversold and overbought levels and how to time your trades and investments while avoiding such traps. There is a saying in the market, good news is good news, very good news is bad news.. bad news is bad news but very bad news is good news.

Special situation

Mergers, demergers, acquisitions, value unlocking, buyback, delisting, diversification, bonus, stock split, sale of assets, fund raising, rights issue, special dividends, change of promoters, change of business line, expansion, index inclusion are special situation events that can add to the bonanza of investors, provide arbitrage opportunities. These are good opportunities but cannot be played blindly. You need to understand these events properly, do proper analysis and time your play perfectly to gain from such events.

Retirement Investment Planning

Many people build portfolios where their expenses are taken care of by the dividends from the stock they own. Capital appreciation adds to their networth but they don't have to sell their portfolio to meet their expenses and it keeps growing perpetually with the market. Note that you cannot retire with any fixed amount of money no matter how big because of unforseen expenses and inflation. Maybe 1 crore was a big amount for you but what if for some reason you needed a kidney transplant and that took away 50-60 Lakhs from your account. Retirement planning is more about building passive stream of income instead of accumulating a fixed sum of money. If you know how to generate 10000 Rs per month then that is a much better retirement plan that having 1 crore in your account.

Hedging

One of the most efficient ways of hedging is using derivatives. Read about covered call and cash secured put hedging strategies. Other hedging strategies could be related to adding gold or commodities like crude to your portfolio that tends to do well in extreme distress scenarios like government or currency failure, wars, etc. More regular hedging strategies could be like playing with long and short positions, switching between bonds, debts, equities, etc

VIX

VIX is a measure of volatility. Usually low VIX means stable markets and high VIX means volatile and unstable markets. VIX > 30 is usually when max traders lose money and it is advisable to stay out of the market in high VIX environment.  VIX is a very useful early warning tool for investors and traders and should be tracked closely. 

Black Swan Events

India declares war on Pakistan, clashes between Indian and chinese troops along LAC, Fukushima nuclear power plant explodes due to tsunami, Terrorist attack on twin towers, Lehman Brother collapses, Some big scam like Satyam, ILFS. Black swan events can happen anyday anytime and can cause huge losses to market participants. History shows that eventually market recovers from any disaster no matter how big but leveraged traders can lose everything in one down spike. Investors mostly just lose in the sense their goals may get delayed by few years. Smart investors and traders can actually take advantage of such situations and make a huge fortune. Luck and courage plays a huge role in such events.

Investment followups

Quarterly results and concalls
Shareholding Pattern especially promoters and influential investors
Credit Rating
Key Management Personals and Promoters
Auditor reports
Dividend payouts and tangible shareholder rewards
Any legal or regulatory proceeding with SEBI, etc
Investor conference
Annual Reports
Exchange announcements

Changing Investment Styles

Several new age technology platform companies are valued at billions of dollars inspite of being loss making companies. The old Graham or Buffet investing principles are no longer that relevant and cannot be applied to every company. Platform companies cannot be analyzed like soap and biscuit companies. Google offered all products and services for free and made revenue from ads, Amazon offered everything at huge discounts but made money by amassing a huge loyal customer base and operating at thin margins at a very large scale. For many new age companies like facebook, twitter, linkedin more than revenue and profitability what matters is number of active users. Companies like Tesla and SpaceX with revolutionary technologies like EV, hyperloop, boring company, reusable rocket launchers, mars mission are valued at mind boggling 1500 PE not because of their cash flows but because they are doing something that no one else can. Bitcoin is an example of a revolutionary concept trying to re-imagine transactions using block chain and people are ready to pay 30-60K$ for just one digital entry on a secure and reliable digital ledger. Investors and traders need to understand changing investment themes and styles and adopt to them to stay relevant and successful in the field. Buffet achieved most of his riches after age of 50. Today people like Vitalik Buterin of ethereum and Mark Zuckerberg of facebook have made billions in their early 20's by adopting to new age investment and business themes.

Stock Market Astrology, Numerology, Gann, etc

One simple suggestion. Just stay away from these and people offering these services. Don't subscribe even free services, let alone paying for it and investing or trading based on it.

Why no new Infosys, Wipro, RIL, HDFC Bank in market like old times
Earlier Stock market was the only place to raise large amount of money by companies if they could not get enough loan from banks. That is why older investors got stocks like Infosys, Wipro, RIL, HDFC Bank, LT at face value of 10 Rs per share in IPO's and were able to participate in the entire growth trajectory of these companies including the exponential growth phase at the start of these companies. Now-a-days most startups are funded by Private Equity and blown up to sky high valuations trading at billions of dollars in valuation, 100's in PE discounting next 10-20 years of growth in the IPO price itself. By the time general public gets a chance to invest in these companies through IPO, these business have already passed the exponential growth phase and turned into stable mature businesses and have priced in everything good for the next several years. IPO's are now nothing but a scam of subdividing super expensive stocks into small investable units for public and providing exit to PE investors at mindboggling 100-1000 times returns on their investment in few years. Post IPO so much is priced in that the company needs to be perfect for next 10 years. No scope for anything to go wrong. One bad quarter and IPO investors will lose substantially. So stop dreaming about those "how 1000 Rs invested in wipro in 1985 turned into 100 crores in 20 years" kind of stories.

Market Psychology

Market is a place where a billion things are happening every second. You need balls of steel and heart of stone to survive here. For new investors and traders it is very easy to fall into the trap of thinking that market is working against them or targeting them. In case of traders this is most apparent in most of them feeling that their stops get purposefully hunted. In case of investors this is most apparent in most of them feeling stock keeps running up as long as they refuse to invest and wait for correction and as soon as they invest trend reverses and stock starts falling. What is actually happening is that they are getting caught in the randomness of market and trying to make sense out of it which leads to absolute misery. It is best to understand that your stop loss getting taken out was a random event and a stock reversing trend as soon as you put money into it was also a random event. We tend to forget easily when we make easy money but we tend to hold grudge against the market for a long time if we lose money. This is a recipe for disaster and affects the health and psychology of individual trader and investor which can also spill over to his personal life with disastrous consequences. It is best to operate in the market with a "raat gayi baat gayi" mindset.

Is trading a respectable profession?

Many people try to mock or belittle trading profession by equating it to gambling and addiction because they don't realize the importance or complexity of this profession. Let me be very clear, the country cannot function for a day if the stock market shuts down. Stock market is like the bank of the corporates. Imagine what would happen to common people or general public if suddenly all banks are closed. Same thing will happen to the business network and community of the country if stock market closes. Now imagine what happens if suddenly there are no funds anywhere to run any business? The country will collapse in a single day without stock market and it's participants. As far as complexity goes stock market is a place where a million things are happening every millisecond with millions of participants. Some of the smartest people on the planet are here and competing against each other in the most brutal and never ending, never resting competition. You can mock it all you want, not more than 5% succeed in this profession and not more than 1% make it big. 95% fail here. This is practically one of the lowest success and highest failure rate in any profession. So first prove yourself in the market and then we can listen to your opinion. Financial domain is miles ahead in technology than any other domain. Be sure all your skills and knowledge will be tested to the limit in this field.

Developing both investment and trading skills

Most players in the market are either hard core traders or hard core investors and they hate each other. Traders criticize and mock investors and investors criticize and mock traders. Fact of the matter however remains that both traders and investors are critical to market functioning. Market will collapse if either of this group is removed from the market. Investors bring in the money and traders provide liquidity in the market. As market evolves it is actually important to develop both trading and investing skills. A person with combination of both skills can truly achieve super normal success in market. While investment skills help you identify some great companies that can create super wealth over long term, trading provides you access to leverage, hedging, ability to make money in falling or rangebound market. For every Warren Buffet there is a Jim Simons. Investment provides slow and steady wealth generation with minimal time and effort and trading provides velocity of earnings proportional to the time and effort you put in.

Adaptable Strategies for Different Markets

Same strategy cannot work in every type of market. Investors just tend to sit through bad times and make money when there is a bull run in the market. Traders need to continuously adapt to current market situation. There are different strategies for trending market and range bound market. Low volatility and high volatility market. Momentum market vs sluggish markets. Surprise events, results season. Same strategy won't work in every type of market or with every event. You should know how to play it, else market will take you out in some phase and you will have to give back all your hard earned gains. They say it is much more difficult to retain gains in the market than to make gains in the market.

Dreams vs Reality

If you follow social media influencers in the field of finance, you may feel like everyone is printing tons of money. PnL snapshots in lakhs to 10-15Lakhs everyday to crores per week and month is common. Most of it is scam to lure in people for workshop and trainings and increase follower count and earn as a social media influencer. Trainings and workshop costs anywhere between 5k to few lakhs in this field and is much easier way to make money than actually trade and make money from the stock market. Most of these market experts and trainers are basically selling snake oil in the name of guaranteed money making strategies. So be very careful. 

I will leave you with these stats published by the Income Tax department to get some idea on the reality

Toh final kya hai market mein aana hai ya nahin? 

Market is risky and unforgiving. It doesn't care if you are unwell, going through a bad phase, did a mistake, were distracted, etc. If you do something wrong, market will punish you. If you do everything right, market may reward you. If you do 100 things right and 1 small mistake, market may still wipe you out. But like everything else in life, you have to take risk if you want to achieve something in life. There is risk in flying, there is risk in crossing the road, there is risk in climbing down the stairs, there is risk in everything, so there is risk in market also. What you need to understand is that with discipline market is also very rewarding. If you want to achieve this reward , you will have to take this risk. Just remember, you must approach market like Chanakya and not like a cowboy. Last but not the least, remember trading is a profession of the courageous and there will come a time in your trading career when you will remember this, that time and how you act then will decide if you ultimately succeed or fail in this line, if you join the 99% club or the 1% club. 

Market is God

Last but not the least, always remember, Market is God. Doesn't matter which IIT, Harvard, Stanford degree you have and if you are a PHD, Masters, or Ambani, Adani, Thakur, President, Prime Minister, IAS, CBI, RBI, Dawood whatever. Always remember you are nothing in front of the market. Market is God and you will always bow in front of it. You will always yearn to be on the Market's side not fighting it or against it. There is a wise saying Market can remain irrational longer than you can remain solvent. So whatever your research, maths, information, intuition, etc says, If market does not agree to it, then you are wrong and market is always right. Many people have gone bankrupt trying to challenge the market. No one has ever won against the market. You can only win if you are aligned to the market.

Books and learnings
Indian market specific books, authors, channels
elearnmarkets by Vivek Bajaj
Trading Videos by Rayner Teo
Options Trading by Theta Gainers
Thoughtful investor by Basant Maheshwari
Unusual Billionaires by Saurabh Mukherjea
Trading in the Zone by Mark Douglas
Advanced technicals like Market profile, orderflow