Are you into intraday trading and having a job elsewhere? Gautam Shah, one of India's leading equity strategists, has an advice for you. Shah says it is not advisable to get into trading "half-hearted" as it is unlikely to be "fruitful".
"So I think you need to put in 100 percent before you get into anything and given the kind of markets that you have right now, it is definitely not advisable to get into intraday trading and do a job at the same time," says Shah, Founder & Chief Strategist of Goldilocks Premium Research.
With more than two decades of experience in technical research and advisory services, Gautam Shah is one of the most sought out by the best in the business. As his bio reads at Goldilocks, "He is no stranger to the bull and bear cycles and the pitfalls of the stock market."
In an interview with CNBC-TV18, while Shah advised against intraday trading, he said it is okay to do positional trends -- trends that play out over many days and weeks wherein you don’t have to look at the price action the entire day; you can just have a couple of looks during the day and you can study the charts by the end of the day.
"Technical analysis became a very hot subject particularly in 2020, given the fact that so many people have started to use it," he noted, but insisted that "price is everything", implying that one needs to respect the price action.
According to him, one needs to look at the "bigger picture" to do well in the markets. Elaborating on this approach, he says, "I know there are a lot of people in the market who are trying to take singles every day, trying to accumulate returns but if you have to create wealth at the markets, you have to look at the bigger picture... You need to have as many aspects in your favour, at least have five-six triggers in your favour and once you do that, it will be much easier to capture trends."
To create wealth through trading, one needs to ride with winners, says Shah. "Look at the price action of the last couple of months, there are so many stocks where I am very sure a lot of people would have got out with 5-10 percent kind of a return and they have gone on to give 50-100 percent."
For those, who are new into trading, Shah advises that it is important to have a financial target and a technical target. "Financial target is very important because it should tell you as to how much you are comfortable with in terms of making money at the markets and once your financial target on a particular trade is achieved, you can book partial profits and update the stop loss to your cost price."
Shah added that one of the things that 2020 has taught us is that 'buy' and 'hold' investing is becoming more and more redundant. Shah says it is important to not just diversify across asset classes but also across geographies.
"There is a lot of disruption, there are a lot of risks. The fact that you have COVID coming into play and just disrupting our lives so easily, it just tells you that going forward it is very difficult to buy and hold things over three years, five years and ten years," explained Shah.