Winning technique

Go through this entertaining primer on stock market trading, which lists useful tips and practical pointers for beginners.

Ashok Jainani        Print Edition: January 2011

 

HOW ANYONE CAN MAKE MONEY TRADING SHARES
Price: Rs 296
Pages: 331
Author: Robbie Burns
Publisher: Unicorn Books
QUICK-READ TIP: Beginners should first go through the chapter, 'Is trading right for you?' to find out if they have the mindset to indulge in trading.
LANGUAGE: Easy
STYLE: Illustrative
VISUALS: Graphs, tables
After earning 500,000 pounds in a trading career spanning 10 years, Robbie Burns believes he has garnered ample expertise and investing wisdom to share with the public.

In this endeavour, he is assisted by the enticing cover and title of his latest book, How Anyone can make Money Trading Shares. Both these are effective lures for readers who are easily baffled by the stock markets.

Burns tried to help them earlier, when he published his first book, The Naked Trader, in 2005. Now, he wants to reveal his top 10 secrets, the 'sure-fire' ways to pick good stocks. Burns starts from scratch and takes the reader, simply and savvily, through the steps that are essential to become an investor or a day trader.

A journalist who left his job in 2001 to begin a career as a day trader, Burns claims to have made a profit every year, even during the market downturn. He puts this knowledge to good use and guides the reader through the intricacies of stock-picking in a witty manner.

Burns does not outline any new analytical tool and simply employs well-known concepts and tried-and-tested strategies of successful investors.

He points out how even a layman can utilise these to pick stocks that have the potential to earn profit. The book is brimming over with tips, from 'Things to Think about before Buying' to 'Top Ten Mistakes'.

Some of these, such as the 'Seven Sins', are provocative enough to catch the reader's attention instantly. Burns advises traders to avoid 'lust', that is, not to fall in love with their stocks. He says, "You're not dating shares-think of them as just acquaintances that can be dumped any time without worry."

However, some of the tips are repetitive. For instance, the first winning strategy is how to profit from a company's changing focus, while the fourth strategy is to focus on recovery plays, where the company restructures its products to adapt to the market demand. Aren't both, in a way, one and the same? In the second strategy, 'Find cheap shares', the author cites luck as a major factor in finding a cheap stock. However, relying on fate seems simplistic, especially as trading shares is a skill that needs to be honed. Such frivolous advice is hardly beneficial to readers.

At times, the author contradicts himself. For instance, while explaining the concept of price to earnings (PE) ratio, Burns says that he "does not take an awful lot of notice of them". However, throughout the book, he cites his 'rule of thumb'- the market cap to profit ratio should be about 15 times. This is nothing but PE, the ratio in question.

TRADING TIPS

BE MONEY WISE: To trade in stocks, allot only the amount that you can afford to lose. Don't be tempted to gamble more.
CHECK THE COMPANY: Scrutinise the fundamentals of a company, including its order book and management.
DON'T CHASE THE SHARE PRICE: Analyse why the share price is high or low. Don't buy it because someone says it will double in price.
HAVE A PLAN: When you buy a share, decide when and at what profit you would want to sell it.
DON'T PANIC: The biggest mistake an investor makes is to buy or sell shares in a panic. If the market falls, it will rise again.

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