Take advantage of market irrationalities

Every stock has its intrinsic value. Best time to buy is when the market price falls below its intrinsic value and sell when the price is above it.

Market is usually efficient. This means that bargains are hard to find. If there is a thousand ₹ note lying on the street, the chances are that some would have picked it up much before you noticing it.

So how do I make money?

We have to wait for the opportunities when market behaves out of whack. For instance the global turmoil caused by plunging oil prices, China and Greece have hit the Indian market creating a temporary bearish blip of more than 350 points from its recent high. These events have no real significance on the fundamentals of the companies. Rather India is the biggest beneficiary of plunging oil prices as we import most of our oil needs.

This is the time you have to take advantage of this irrationality and buy in to this dip.

90% of the stock trade happens in F & O market where you trade large volumes by paying a little margin. When the bets go against you, the margin calls start coming. Traders usually close their positions to fight another battle tomorrow and this closing triggers the further sell off pushing the prices still lower.

We have to take advantage of this market anomaly to jump in.

3 thoughts on “Take advantage of market irrationalities”

Leave a Reply

Your email address will not be published. Required fields are marked *