Investing for the long term can always be COMBINED with Position trading. However it has no connection with day trading.

Let me explain.

Again let me take examples of companies that I know / deal with / and take examples that I remember.

Most regular readers would know that I have EiD parry shares in my portfolio – and I have gone from 0 to peak holding to zero a few times. In 2012 and for parts of 2013 the share was at 200-240 price range. Strictly speaking it looked like a good buy at that price. However it was a time when it had high interest costs, and the sugar crop was a big bumper one – putting pressure on the price. Now if you had BOUGHT for say 210, the market would have made you LOOK LIKE AN IDIOT when it took the share price to Rs. 109.

Now this going down was caused by the company increasing its interest costs AND THE SUGAR CROP being in excess – and the prices of sugar being soft. However if you had sold at 203, you could have bought it on the way down – say at 150 – and still look wrong.

However if you had stuck around with the stock, you would have received dividends, and recovered your price. Assuming you did not buy on the way DOWN OR UP, you still do not look too wrong.

Ditto for Reliance, just that the numbers are slightly different, and the dates slightly different. I bought a lot of Reliance at 750 – and happily exited all my trading positions at 900-920.

Such trading is called ‘Position based trading’ – where you take a position for a few days to a few months. Here you could have some principles of trading and some principles of investing. For e.g. if you had liked EiD parry, you may have bought more shares at 150, 120 and 110. Or you may have sold at 203, and bought at 109 (best case) or at 159 (still making money).

Position trading – too can be very dangerous and risky- remember I started investing / trading in 1979, maybe many of you were not even born 🙂

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  1. Hi, Do you really think that the advice which some financial ‘experts’ give that for the long term invest in stocks and forget is really valid. What if the stocks you select, no matter how blue chip they are now, come up to be a cropper and then you are left with nothing after 20 years ! If this position based trading is not done regularly and the money not moved to Fixed income we will be throwing ourselves to the mercy of the corporates – whose aim is not to make money for their shareholders rather for their owners. Even MFs and their policies are similarly fickle. I have been investing for the past 10 years trying to follow advise from the experts and buying only if there is a value and prices for some companies drop for apparently only sentiment.

    Thanks for your blog I follow it regularly

  2. Sir,
    Sugar stocks now-a-days looks attractive. Shall I buy Rana Sugar and make some money. Already I have burnt all my fingers in IPO day trading.

    If I purchase Rana Sugar, how many days should I wait to make some money?
    Do reply
    Savithri

  3. Thanks for this post Subra. You answered my query posted in an earlier post a few days ago.

    Basically, identify a good stock (good fundamentals/dividend), and buy.

    When it goes down by a big margin, look at the macro industry, and buy more if you can. This is not a cost-averaging, but making use of the ups and downs of the market.

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