Market Mantra

It's been quite some time since I started dabbling with stocks and a what a ride it has already been. I have already witnessed markets scale highs in late 2007 and then hit the bottom in late 2008 and then again rise back to hit yet another high in 2010. I've expiremented a lot in these last three years, have had my share of successes and failures, have made a lot of mistakes but one thing for sure is, I've learnt a lot in these 3 years. It's been a steep learning curve for me and I'm more confident about the decisions I make today in the market, stocks I pick and the trades I make. I would like to share a few things that I feel are really important for every market participant.

1. The most important quality that everyone should have is humility. Everybody here makes mistakes. There's no two ways about it. The person who admits his or her mistakes and learns from the mistakes is the one who succeeds in the long term. There's no point having a sense of false pride in the market. Well don't get me wrong here. What I just said doesn't mean one should not have self belief in one's own decisions. Self belief is really important in markets especially with so much clamour and cacophony that goes on in markets. What I'm saying is more to do with mixing emotions with decisions. How many times have you held on to your trades, stocks just because you didn't want to exit in a loss even though you knew somewhere in your mind that the decision you made was wrong and you should have exited. As easy as it sounds, I'm sure many of us make the same mistake repeatedly and keep hoping and praying that the trade we made would work out well. This is especially true for short term trades in the market. Praying that the bet goes in your favour doesn't take you anywhere. If you believe that you made a mistake, correct it and move on. That's what works in markets.
2. Patience is a virtue that everyone should possess. Don't confuse patience with praying. They are two different things. Simply put, many of enter or exit at the wrong time for the lack of patience. How many times has it happened that you bought something where you truly had conviction but could not hold on to it for the lack of patience and squared off your position and regretted later. How many times has it happened that you entered a trade when you should not have just because everyone else did.
3. Don't get too carried away either by Greed or Fear. Many a times we take our decisions out of Greed or Fear. Don't mix emotions with your decisions.
4. Markets may behave irrationally in the short term. Don't fight with the market.
5. Know what you are doing. Don't blindly follow the herd. The tip culture is widely prevelant in markets.
6. Distinguishing good ideas from so called 'tips'. One should always be open be open to ideas. One always gets varied opinions. Ability to listen to all the varied opinions and being able to arrive at the right judgement is the key. This is my opinion, comes with experience.

What I've said is nothing new and what everyone already knows is true somewhere in the corner of their minds. I just want to reiterate and reinforce these ideas. Whatever I've just said is based on my tryst with the markets in the last few years. Believe me, as easy as it may sound, it is not.