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Psychology Plays An Important Part In Trading

Monday, July 27, 2015

Nilesh Dedhia is a  Currency and Equity Strategist, as also founder of NTD Trading, which he set up in 1998 as a  proprietary trading firm. Since then the company has grown manifolds as he developed unique scientific strategies for bang on results in dynamic markets. Based on the success achieved with his unique trading techniques, he started currency trading and here too he achieved outstanding results in a very short period of time, which inspired him to offer advisory services to corporate clients. In conversation with Dominic Rebello, this market wizard explains the importance using simple strategies for successful trading

At what point had  you given a thought to making a career in the stock / financial markets?
Finance is already in my blood  as my father Talak Dedhia  is a CA with lots of positive thoughts and energy. So numbers and analysis was part of the family discussions. I started my career as an analyst at a leading Investments magazine, where I got opportunities to interview many top investors as also the methodologies that stood relevant in corporate balance sheet analysis.

How do you pick your trades ?
Basically I use a bunch of mixes of three relevant factors including  technicals, fundamentals  and psychology.

How would you describe your methodology?
Use a decent risk reward assessment for any kind of trade/investment. I do take trades based on risk reward ratios for trading. For investments I see the track record of promoters , the dividend yield , shareholding pattern and prefer companies where the promoters hold a stake more than 60 percent and their business model....  
What appeals to you about trading ?
For trading its more on the short side. For Investments it is medium to long term that appeals to me.

What differentiates you from other traders?
I identify each and every fluctuation of the market which makes me more innovative and helps assess future directional trends.. My belief in the fact that  psychology plays an important part in trading  and gives me an edge.

Is there any applicable lesson to investing?
Just be simple. Use simple theories, don’t  use complicated  methodologies which will  confuse you and make you  an unsuccessful investor. Conviction in any trade or in any investment is more important to me.  

Do you try to anticipate or follow market trends?
Yes absolutely, I always try to follow market trends.  
When you put money on a trade and it goes against you, how do you decide when you're wrong?  
Its all about a game of MTM (MARK To Market). Whenever I go wrong I just try to get out of that trade with minimum losses and wait for another opportunity.

Any positions you ever lost sleep over?  
Look as I earlier stated this is a game of MTM. Nobody wants to lose their hard earned money, but this is a market  and losing  is a part of the game. There are occasions where  I lost sleep over the last twenty years, some of them I don’t  even remember today.    

Of the thousands of investments that you have done, which was your best investment?
A recent one serves as a good example. Last year I invested in a small to medium cap company from the IT sector, also linked with the  Pharma sector, as they are  a major in pharma software, called Take Solutions Ltd at  around Rs 33/35. It now is around Rs130,  after touching an all time high of Rs 187. I am still holding my position in that company.

What was the story there?
The Story was the company's basics (i) Sound Promoters- Promoter is Shriram group which holds more than 68% in the company.(ii) their business module – company  has a  fantastic business model with Life Sciences, Supply Chain & Enterprise Solutions. (iii) Aggressive management – over the last few quarters the management has been  aggressive and  focusing more on the one that business where profit margins are more than 30%(i.e. life Sciences business) which I expect  will ensure a very strong balance sheet as well multi fold profits in the coming years.
Your success mantra?
Be focused, be passionate, about what you are doing and also be simple. Don’t use complicated theories or methods , try to use simple strategies for successful trading. Trading is to earn your  bread and butter, Investment is for capital appreciation.

Do you have a scenario about how the current bull will end? Any number for the Sensex in 2016?
We are already in long term bull market with minor corrections. We are the fastest growing emerging economy in the world and will attract investments from outside  at every level. One thing i want to share is that long term investors need not worry about their investments in quality stocks. No, no numbers I want to share, because I believe that its just a matter of figures, but yes we will see the  Sensex crossing new highs in 2016.

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