The Simple but Brilliant Trading Lesson Every Investor Should Know

Apurva Sheth

Can you get trading lessons from long term investors? Sounds like a trick question. But funnily enough, I learned one of my best trading lesson from investors with probably the longest time horizon...the insurance companies.

Insurance companies invest regularly in the Indian stock markets. They hold stocks for periods of...five to ten years...even more. But between 2010 and 2014, that changed.

Last week I told you about a conversation I had with a bank's treasury manager. Banks normally have the shortest time horizons. Their minimum holding period is 3 days. This means they can sell the stock once they get the delivery. Banks are normally the most active traders in the institutional space apart from FII's.

They are the ones most interested in trading ideas. So, I have worked very closely with a lot of these banks. But my interaction with insurance companies was always limited. Until 2013...

I noticed that I was talking to insurance companies, giving them views on the markets, with increasing regularity.

Out of sheer curiosity I asked one of the managers.

'Sir, as an insurance company you have the longest time horizon. I am very happy that we are interacting regularly... but... why? It seems a bit strange that you are more interested in trading than investing. If you don't mind can you share what's the reason behind it?"

What he said shocked me at first, but later proved to be one of the best trading lessons ever for me.

    Markets haven't gone anywhere over the last three years. Nifty is still trading flat three years after topping out in 2010. Nifty is back above the 6,000 mark but that's on the back of just a few stocks. Most Nifty stocks are still trading far below their 2010 highs. Some stocks which were excluded from Nifty have done worse.

    And this is just the Nifty. Look at a stock from the broader market universe, then the situation is terrible. I am sure you know that midcap and smallcap stocks are beaten down badly and some are still near their three-year lows.

    If that's the case, even three years after 2010, then how do we long term investors make money...generating alpha is out of question right now.

    So, we have started looking for trading opportunities in the market. And are more interested in trading rather than investing...for now.

Huh! Okay, but then I wanted to know more so I asked, "Is there a specific strategy you follow while trading...specific stocks you like to trade. If I know that then I can recommend stocks which you may be most interested in."

He shared a strategy, which, for me, was like a "Dimaag Ki Batti Jala De" moment.

It almost felt like he had opened a treasure chest for me. It was so simple, yet so brilliant.

And now I am sharing that strategy, that changed my whole investing life, with you.

Checkout the details over here.

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4 Responses to "The Simple but Brilliant Trading Lesson Every Investor Should Know"
23 Jul, 2019
Only stock investment msg it contains other regular Magee creates confusion.Like (4)
Asok Kumar Chatterjee
04 Nov, 2017
I amm interested to know the best stock which would be booked at this high marketLike (7)
30 Oct, 2017
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30 Oct, 2017
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