As simple as that ….

The stock market is a beautiful place where all can gather and have fun, offering parties, celebrating for some body’s fall is also seen even when the days of mourning were announced at the bourses. This is a common phenomenon that can be tracked across the world. The interested groups gather to enjoy the party when some body made a “Killing” in the market while the Bull move is on. These easy earnings and celebrations throw lots of hope in the individuals who are even called at that particular point as spectators of the “Stock Game”. At this point in time no-body listens -“Stock market game is no child’s play”.

These spectators spread the news of how easy it is to mint lakhs/crores at the bourses that to in weeks/days. These people motivate the sleeping/non-participators to grab the ever-flooding opportunities in the stock market. Slowly but surely the “chain action” will spread the news to streets. The “chain action generated reaction” will increase the activity in the market that propels the prices to higher levels. The money flows and chases the stocks unabated. The crux of the game starts here- the fag end retail investor/new participant think that the up move is real and permanent. This story is not new to the seasoned but they also get trapped as they think/rather advance a bit before the fall starts. So they get trapped twice in the short side and their stop losses get triggered. The new comers will lift the stocks shorted by the seasoned as they think that the move is a “God sent opportunity”.

Now the operators build positions against the up move at the top/plateau, they tend to loose some notional loss as the stock even move higher. The seasoned traders think that the high volume built up at the top is a bottom building exercise for a fresh move. So they tend to go long or wait for confirmation of the long move that keeps them away from shorting or leaving their deliveries. The real crack down will happen at that movement that leads to sharp fall in the market. The new comers and the margin traders get wiped out of the system. The losses put burden on their families and the crying on streets by blaming the “Market” becomes a day of activity for some time. The newspapers mention in their headlines how the Govt. failed to save the retail investor. But very little effort has done to educate the investors. No media tried enough to educate the retailer investor about the over greediness/underling dangers of capital loss or the need for systematic investment plan over a period of time. We all know that the story repeats once again after some time.

The cracks can be seen before a collapse; like that the sprout cracks the ground to emerge. The stock market is no different from nature, do some homework, understand the business cycles and the company prospects before investing. Above all the stock market operation is as simple as that ‘Never build the herd mentality but Follow the Trend”.