Learn Stock Trading in 10 Hours! - #1

Learn Stock Trading in 10 Hours! - #1

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Hey guys, so one of the most common questions that I get asked since the time I started this channel is this Dude, you're in the wrong lane, and honestly speaking I get it. Why should anyone listen to me talk about money? I have never been, and I will never be qualified to give any advice about money. In fact, if you ever see a comment in one of my videos, ask you to join a WhatsApp group where you can get tips on what stocks and crypto to buy that is not me. Don't ever join these groups, those are run by scammers and spammers and I suspect that during this whole course, there are going to be many of them in the comment section so be aware, and while I do know that I'm definitely not qualified enough to talk about money, I do think that I am qualified enough to be curious, I like to ask stupid questions, and I'm not ashamed of being clueless, and the best way to find a cure for the itch of curiosity for someone as lazy as me, is to find a phenomenal teacher or an expert.

Someone who doesn't just have experience, but the ability to express those experiences through meaningful words. A teacher or an expert who has the skills to articulate and impart wisdom to someone as stupid as me, because I'm just the guy who's very happy to say listen, please teach me in front of everyone. Maybe we'll all learn a little bit together. Be it Sid who taught us about neuroscience or Gaurang and Anshuman who introduced us to the world of money, I'm always on the lookout for great teachers who can help me learn, and in that process have I realized that many of your curiosity is getting ignited, and we all learn.

So a few months ago I realized that many of you want to learn how to trade stocks, you want to learn how to lead chart patterns, buy and sell stocks based on this reading, and so I decided to go and find my next teacher. I wanted to find someone who's an experienced trader, has credibility, but most importantly, someone who's a good teacher, and in that process I found many trading tutorials, many that weren't hopefully, many of them were very expensive and many that just rejected me as a student, but finally I met Prateek. Meet Prateek, he is a professional trader and has been trading since 2007 and outside of trading, he is also the CEO of Learnapp. A one-of-a-kind portal that has some kickass advanced trading courses and once I start talking to Prateek, I realized that not only is he very good at trading, he's also a very very good teacher, so I was shameless enough to just ask him if he and I could team up, and we could create something simpler than an advanced course, something that you and I will understand easily, a kind of course that will cover the basics of trading and help you get started.

A course that helps someone who has never traded in their whole life make there first trade. I wanted this course to be simple, but have depth but most importantly, I wanted this course to be free. I know its lot of work, but to my absolute surprise Prateek agreed. So me and the team at LearnApp we sat for many weeks and we designed this course. It's about 10 episodes long, some episodes going up to 45 minutes each, and at the end of the course, I actually made my first trade. So please try and watch the whole course, and by the end of these episodes, I can promise you that your understanding of trading, reading price charts, understanding price movements in stocks, or in crypto, all of it will grow significantly by the end of this course.

I want to give a huge shout out to the team at LearnApp for sitting with me for weeks to design and make this course happen. Thank you so much guys and you guys if you find this valuable do subscribe and do hit the like button, and send this course to your friends. This course will always be available freely on this YouTube channel. So, let's begin our journey by revisiting one of the calls that I had with Prateek, before we started shooting. Hi, Prateek can you hear me? Hey man, whats up? Dude I am so excited to learn every thing about stock trading from you and LearnApp, ann I just wonna get started. Cool, do you want to do on Zoom? No, I think we should meet in person.

Okay, alright cool... So Tanmay, how much do you earn per month? It’s a little personal, don’t you think? Okay, just give an example. Okay… Rs.1lakh.

And how much do you spend? 50%. Rs.50,000. What do we need to do, right. Firstly, find out how much you're spending every month, right. If you spend Rs.50,000 multiply that by six months — 3 lakhs, correct, you put that on the side, this is your freakin’ emergency fund, lock it away, fixed deposit, liquid fund, that’s separate.

Now what you're left with? If you're left with something, you can put most of it into long term investments, Correct, which I do. Which you do, that's great, and then some portion of that it will be like, okay, let's try something interesting. Let's trade with this small portion.

Like play money. Yeah, actually that is right, because it's highly risky right, so until you don't understand the risks, you will come at a point where you say, hey, I understand how this works and you'll automatically increase but for now, start small. But, like, beginning with small money also means that if my money is going to double in 21 days, then only a small amount of money will get doubled.

So why shouldn’t I start with big money? Because you can lose the big money, okay, which you don't want right, yeah but no one talks about people also potentially losing money. I think the entire industry, right, is built on like this greed that hey, I'll just sell greed, and then people will come in and like you said, double your money in 21 days, that’s a problem. That shouldn’t happen. Yeah, the money doesn’t double basically. I think through this series it will be clear how this actually works.

So, the money doesn’t double in 21 days. No, that can’t happen. Okay then, see you. Bye. Alright! So, your trading fund is separate, emergency fund is separate, and investing fund is separate. Got it, so investing is separate and trading is like, you know, it's something that you're trying something new with, so you go easy on it in the beginning, correct, you don't allocate a bunch of your capital on it.

So cool. So, I should tell my manager to not sell mom’s jewelry as planned earlier. Forget that! We’ll start with less money. That's great, dude people take loans to trade. I know... Yeah! I have heard. That's a problem, right, so. I think the first step is what's the difference between trading and investing.

Correct. Let's talk about that. How much did you start trading with? 50,000 rupees. 50,000 rupees, yeah, but this was in like 1983... Dude I am not so old I am young, it’s not like that. This was 2007, Got it. Right.. Just before the crash actually, right when the market is going up.

Which is interesting. Markets go up, people get interested in markets, and they invest and when it crashes they complain about losing money. Correct. Oh Shit! You didn't understand what was happening, right. Yeah.. So is it fair to say you begin with money that you are okay with losing? Yeah that's a great way to actually think of this right. So, there are two things that can happen. Dad says, there are old pilots but bold pilots, no old bold pilots. So you can't play if you don't have any money to bet or invest with, right.

So it's important to survive. Your first objective should be to survive. Correct. So, lose a little bit, but the rewards, right of trading and investing, is great because it compounds over years and can change generations. So, don't think about changing the next 21 days, think about changing the generation ahead.

Your next decade ahead because it's just such a powerful thing that no one talks about, right. Ohh, this is so interesting, it's almost like investing and trading are different, but both have some similarities, which is, they both compound over time as well. So trading is like a skill that you need to acquire and think of the initial capital as an investment into the skill. Yeah, actually, a bit better analogy is it’s like business.

Oh, yeah, that's good! Angel investment, investing in yourself. But the thing is, you go to work every day, you work every day, but you will earn, like great equity valuations on your startup over like seven-eight years, right. So, imagine if you're trading every day, you’ll probably make wealth over many years. So whether you're trading and investing the wealth will come over years. Over years, got it. It doesn't matter.

If you have to summarize, what's the difference between investing and trading? Okay, so let's start with investing. Okay. I guess people know we're looking over the long term, right? Correct. But what are you looking at? Okay, so let's start with an analogy.

Okay, I have this farmland here, and this is the onion. Now in this case, the onion is the asset, right, this is something that the farmer, who is the investor, and he's investing his time, his energy, plows the field, he'll invest in good seeds, he’ll probably get a tractor and he will do all of that, he’ll do irrigation, there will be expenses for fertilizers and pesticides, right. The farmer, this guy he's investing his time, his energy and money right because he is buying everything from savings, and he's making it possible to produce good onion. Why is he doing it? So that, the produce of the next year will be of good quality, he’ll get the wages, and then earn back his money. It's amazing how this analogy is right, exactly what we're discussing okay, Makes sense. Makes sense.

Yeah, right. So, the investor, what the investor does? He says okay, can I judge the management, quality of a company, do they have a vision, can the company grow? Is it good soil? Is it good soil, right? Yeah. And then he might be, okay, what are the cash flows? Are they able to bring cash flow, reinvest the money into R&D, get better pesticides, or whatever their product is and expand the market? Another thing they could do actually is debt, right. So a lot of companies have a lot of money, but most of it goes back in paying back loans. So, what’s the use of the money? Correct.

So revenue, for example, isn't the only thing you can look at. How much money is left? How are you spending the money? Like the farmer, if he has so much debt, right, and uses it to pay back all that he earned, to loan sharks, then how will he be a profitable farmer? Correct. Right, so you can't just know this by looking at the logo of a company. You need to go deep into the financials, and you'll see a bunch of things and so okay, I think over the next 10 years this company will do well. For example, you might think, dude fossil fuels, petrol, diesel, why invest in them. The future is electric. I think electric cars will do well.

Now, there is no Tesla in India but they're actually manufacturers, so you might conclude that the demand for battery manufacturers will increase in the future. So you'll see, okay, does the founder understand the battery industry? Can he distribute it? Does he have the cash flow to actually build a manufacturing plant? Are there any modes? Etc, etc. Can I spray pesticides on his face? Interesting! So that, is Fundamental Analysis. Got it. This is Fundamental Analysis. Correct.

I've seen people advise people to do fundamental analysis. But it just feels like, it feels too complicated for the average investor right, which is why everyone, you know, retail investors get caught up in the hype of, oh the stock is gathering more, you know, a lot of social media conversations. But this is important. It’s important to analyze. Correct, that is fundamental analysis, and you know, I agree.

The average Joe can't really do so much of analysis. Correct. Think of like, a bank or a hedge fund, they pay these guys like, handsome salaries, they've come out of this amazing places, they do so much of research. Do you really think your research can be better than that? I mean, I'm very confident. I'm guessing the answer is no.

That's right, here is where Technical Analysis comes in, which is another form of analysis. Fundamental Analysis is when you're analyzing the company, in Technical Analysis you're looking at something completely different. Like what? Okay, so I'll remove this away from here. I have nothing else, so I’ll just use this. So, I think like two years ago, Swati and I we went to Bali.

And we were damn hungry. I surfed for the first time, it was great! And I got damn hungry because like, the waves have been slapping me, and I came back craving for food. I went to this food court. I go to this food court, and there are 10 different stalls in 10 different languages.

They were all selling food, it smelled okay. because it's a mix, but I didn't know what they were selling, and I was damn hungry. I needed the food now.. Now, how would I choose which stall to eat from? So one way to do that, and I realized this, in retrospect, is that one stall had a line of people, they were like, white people, they were a bunch of Indians, so the food must be fine there.

So based on demand of the people, of the product, which was the stock, in this case the food, I said I’ll also get in the line, will wait for 2 minutes, the food must be good, people are waiting. And we got the food, and it was nice. It was good.

So, now, drawing an analogy right. Basically, in Technical Analysis, you look at demand and supply. Got it. So, if all these banks are buying a stock, and the price moves up, Technical Analysis can tell you that. So instead of doing all that Fundamental Analysis, you look at just the price, spot the demand, and on that basis, you make your decision. Got it. So Investing is for long-term purpose, right, which is why you have to see in long-term, a company does well or not. But in trading, sorry, in technical analysis you're looking at what is the demand for this right now.

Correct. And so, it's not necessary that you know, the company that you want to invest in, the demand will be consistently high necessarily. It can go through phases. In technical analysis, because you are playing, is it fair to say that in Technical Analysis, we are playing slightly short term too, depending on what stock you're looking at. Yeah, this is interesting, right.

So, people assume trading means short term. Trading is actually, intent to sell. Let me explain this. Before you buy something, you say, I am buying this today, I will sell this today, or in the next 2 weeks, or 3 months, or 1 year.

If there is an intent to sell, wherein you are willing to sell in a certain time, you are trading. Got it. With investing there is lesser intent to sell for a longer period of time. Yeah, because, like you're saying, I believe in batteries, in electric batteries right, so will that happen in two and a half years, or 3.2? No one knows, right! You can say, it may happen in 5-10 years.. So, there is an intent to sell, but you're like, thinking really long term. Long term, yeah.

Here’s what’s interesting with Technical Analysis right Tanmay. All these people who are performing Fundamental Analysis, the smarter guys, like the FIIs, and the banks and the guys that have 1000s of crores. How do you think they'll deploy a billion dollars into a bunch of companies? They'll do their analysis, right? They’ll perform fundamental analysis, they'll say, yeah, XYZ company is very good. Now, do you think they can place that 1000 Crore order in one shot.

No, obviously no. They can't, right. So, do you think they’ll stagger their investment over say, three years and keep checking every quarter to see their results? So what do you think the price would look like over a long period of time? If a lot of these guys have the same conclusion that the company is good and we're going to stagger our investment over the next five years.

The price would keep going up, right. Like sort of consistently. It’s like, giving consistent demand. . Yes, yes! So essentially Technical Analysis is gauging demand or supply. That's it. So in summary, in Fundamental Analysis you're analyzing the company, what the vision is, you're analyzing the sector, you're analyzing, maybe, the GDP, you're analyzing the cash flows, the financial statements, etc, etc. That's Fundamental Analysis.

For Technical Analysis, you're gauging demand and supply by analyzing the price of the stock. So if the price is going up, you're saying okay there is demand, and if the price is going down, you’re saying okay, there is supply. And based on that you make decisions.

And you use the demand and supply information that you have to make profits for yourself. Correct. Understood. So why does the price change? I'm assuming it's because of these two factors, demand and supply, that's what makes the price move. Yeah, correct. But it moves really often right, like when you see price move really quickly.

Correct. Okay, so let's discuss that. So, why do stock prices fluctuate? Okay, so let's think of an example.

This is a plane. Okay got it, right. So these are these people. They're obviously the people who are generating demand. They want to go home, say Delhi, Bombay. So they're buying these tickets.

Now the plane has to fly. The air hostess has to fly right. Her slots are there, the pilots are there, everything’s there. So even if there are less people, they still have to fly.

They will select the most optimal price. Now, here you’re getting normal price for your tickets. Now the interesting thing is, let's say you want to travel in Diwali. God knows why you want to travel in Diwali. Say, boss didn’t give you leave and you have to travel one day before Diwali. Yeah, demand is very high on that day. Basically, there are more people be like I wanting to fly that day.

And all these people are saying that they too want to fly on that particular day, and demand rises. So now, supply is fixed — the seats, they are fixed. But more demand, which are your buyers. So, what will happen with the price of these seats. It will go up.

It's very simple, right. Anything works like that, right. All price is market discovery, based on demand and supply. Everyone wants to buy watermelons, but there are only 4 watermelons.

So, the price of watermelons increase. Rs.7000/kg. Correct, right. So stocks work the same way. Got it. If there is demand, everyone wants it, people will buy it.

The problem with this is herd mentality, which is a different problem altogether. Everyone’s buying, so I’ll buy too. Correct. That's why stock prices move. Got it. It's interesting that you mentioned herd mentality because every time Elon tweets about Bitcoin, everyone's like, oh my god, I should probably go buy bitcoin today, and then you'll see the price of the stock. Exactly, right! Correct.

People see that tweet, and be like, oh man, this billionaire’s interested in Bitcoin, it must be good. It must be good, you know. So, the broad lesson is avoid herd mentality. Yeah, actually you know, herd mentality is not like a 2021 thing, right. Correct. It's just ingrained in bio physiological, psychological, just DNA-ed into humans, and actually, let's go back to the 1600s, there’s an interesting story about this.

Good one! So, basically these tulips right, phool was what, this was a status game. Oh! In Amsterdam, it was the Dutch Golden Era in 1600s. Basically, people used to think, because everyone thought, especially the elite, that if you own this tulip bulb, your status is very high. This tulip? This tulip like a normal tulip bulb.

Okay! And because of this, people would actually sell their land, their homes, everything they owned to buy one tulip, and say, hey! I have tulip. Cool! Oh my God! This is Dogecoin of 1600s. Exactly! Which means that this will happen again and again in the future. Got it! Always, right? Yeah! Now ask the question, why did people think this was valuable? Because other people agreed that this has value. Which is how value works, actually. Yeah. This is interesting. Look at this.

Okay, so, this is real tulips prices in 1600s. This is almost like a few cents, then it goes to like 50. They’re like, dude I made so much x from tulips. They’re like dude it doesn't work. But it went from a few cents to 50. Correct! Yeah, I don't know what currency this is. Now, it moves from 50 to 100. They’re like, I’ve doubled the money.

Umm.. Maybe there’s something. And it’s literally almost in 21 days. 21 days! Exactly, right! Yeah. And it's gone all the way to what, it's yeah, it's like 200 plus, yeah. And at that point, everyone says, dude I’m also going to buy tulips. Mom, sell the jewelry, you know that call that you’d made, that shit. And it goes from 200 to what you see here, a few cents.

Wow! And this is pumping and dumping of the tulips in the 1600s. Absolutely, right! I don't know profited from this, but this is, there's a book called Madness of Markets or Madness of People by a guy called Mackay. He basically talks about all these that have happened through hundreds of years. Right. But it is interesting, there was this, there was a shares of a company, it was a bunch of stuff, we’ve even seen one like 10 years ago, okay, it's called Reliance Power.

It's still very fresh in my head, you probably, have you heard of Reliance Power? Of course! You know what they do? They give you... reliant power. Okay, this was in 2007. Now this company, Reliance Power was 72 times oversubscribed. Which means, there was 1 seat and 72 people willing to pay for that seat.

72 times what was available people bid to buy Reliance Power. Now the interesting thing was, Reliance Power didn’t have any assets. They were a power company, they didn't actually have a power plant. Oh! Yeah.

They actually didn't have any cash flows. It was basically this great marketing book that, hey, we will be able to build it, we just need a little more money to do it. Oh, it’s just a pitch. It’s just a pitch, and people got into that pitch. Why because, you know Reliance, you will trust that name,

and then power, everyone wants power. And then you would look around, even auto drivers would be like, sir did you invest in Reliance Power? I have opened a Demat account. It was literally that. People opened accounts, and if you look at the data, the number of Demat accounts actually increased.

Ohh that's crazy! To just invest in the IPO. So, dude I want to show you what happened with Reliance Power. Okay, I think a price chart is enough. Basically tracking the price of Reliance Power. Okay! Okay, so I'm going to use ticker tape over here.

And I'll go to max, which will give me the entire thing, you see that, right. So, the listing price, I think was around 300 rupees. It listed around 279, you see here. Correct. Oh, this is not 2007, it is 2008 actually, right? And then the market straightaway started falling over a period of time.

Today it's like, about one rupee. Wow... In like 12-13 years tops. Yeah, so it never went up, right. So why did so many people oversubscribed because herd mentality, like if you just ask this one simple question, why are you investing in this company, I think it will grow in the future. Okay. Does it have a solid business today? The answer will be no, right.

So, like, herd mentality is something that will happen again and again in different forms. Yeah, it happens all the time. And now I think because of social media and just, you know, content, the chances of this happening is a lot more now. Correct! So I think the first thing you should know is that you should learn either Fundamental Analysis or Technical Analysis and at that point, once you understood this, only then should you like fly the plane, I like to say right. So if you want to be a pilot, like, don't be like, which button should I press? Actually learn something and then fly the plane, right. Yeah. Okay, got it. But the question I have is, did you also invest in Reliance Power.

Why are you asking this, dude? The truth is, I started trading then. So I applied, I got 5000 rupees worth of shares. Thank God it was only 5000. And you know, why? I got an SMS from someone saying, your money will triple, invest in R Power. Oh wow! And those are stock tips.

Yeah, I've seen those. You've seen those. Check your phone. I've seen those and I have also acted on some of them myself, right. But thankfully it wasn't large, a large amount. Yeah. How do you guard yourself against something like this? Like this happens all the time. Like, either it's on SMS or some YouTube video that you watch, yes, or it's a friend who tells you saying, bro I’ve invested in this stock.

Yeah, what do you do in that moment, when you feel FOMO that I might miss out on this. I mean, so, the basic is if someone tells you to buy something just don't buy it, right. The first is like we said, like you learn something, but I think it's interesting to know how tips work. Okay, let me explain this.

So this SMS tips right is an entire industry. Now the way they function is basically there'll be a website or like you said a YouTube video or a Twitter handle or something where they push and say hey, I'm this analyst I can help you earn money. This is a free service, I’ll give you free tips with 99% accuracy, 100% accuracy or 95% accuracy. Okay, so I’ll just tell you what stock to buy. I know analysis, you just buy, and it’s free. So, you’d sign up right, it’s free. Correct.

What do I have to lose? And, 99% accuracy. What else do you need, right? Yeah. So imagine this tip guy sends a buy to 100 people. So, he has 100 people who have subscribed to his free service.

Okay 50, he says buy, and to other 50, he says sell. Interesting, right? Okay, now the market can do two things, go up or go down or be the same. So if it goes up, he says, see, I told you.

These 50 guys, now are like, yeah, the first tip worked. Now, among these 50 people, to half he’ll say buy, to other half he’ll say sell. Market will do, either. He’ll say, see, I told you so! Market went up.

Now we have 25 guys, you know what's gonna happen next. Yeah! There's gonna be one guy who gets no advice, 12 & 12. There’s one guy in the middle. Oh shit, man! You leave. Now the market will go sideways. This is crazy. This is like, this is modern day scam.

Yeah, so, 10 or 12 of these guys will be like, dude all 4 predictions were correct, so I’ll subscribe, and they'll pay a massive amount to this guy. I’ll make crores by taking schemes for Rs.50,000 or Rs.1 lakhs, and they’ll just rinse, repeat. Clearly, because these guys didn't focus on educating themselves. So bottom line being, don't just fall for tips, don't just go buy something that you heard or someone said, like do your own research, understand, you know what, understand what you're doing in depth, which is why we’re here today.

That's right! Okay, so why don't we summarize this entire episode. Okay. I'll ask you a bunch of questions. Okay.

And why don't like, you tell me how to do some stuff. Okay, cool. So I've written here so I'll just read it.

Okay, so we've seen all these various deals happening in Reliance lately, right? You keep hearing in the news about various news. Correct. What should be the effect on Reliance's price when all these investors are trying to get a stake into Reliance? Investor is trying to get a stake in Reliance means demand is going up which means that price will go up. Correct. Yeah, that's correct? Yeah, absolutely. So how many marks? It's 10 on 10, it’s a simple question, though.

Okay 10 marks is a lot, but cool. Okay, the next time you get an SMS or you read a news report, or you watch TV or you watch Twitter, read Twitter, and someone says, hey, this stock is really nice, I’ve analyzed it. Buy it. What’s gonna be your reaction dude? I will not impulsively act on it. I will go on Ticker Tape and research more, and then I will call you saying, Prateek is he telling the truth? Also, if you are an investor or a trader, what factors does an investor look at and what factors does a trader look at? Investor looks at fundamental analysis of a company which is you know, over the long term do I believe in this, do I believe this company will be successful. Whereas, a trader, looks at the demand and supply factors before considering something that he wants to trade.

He is looking at the price factor. Correct. Only price, actually. Only price. And what is he getting from prices? What do you mean? What is he analyzing from price? Ohh when he looks at the price he’s actually analyzing the demand and supply that's available for the stock. Perfect, that's it. Got it, cool. Awesome. So, don’t take tips, don’t be greedy, don’t watch Twitter, don’t pay attention to news, don’t talk to friends. Right.

So, how do I actually make money? Perfect, right. So here’s what most people don’t know. The way to make money is by following a trading system. A trading system.

Okay. A trading system is basically a set of predefined rules that tells you, you don’t have to do analysis right, the system will tell you what stock to pick okay, based on maths, okay, based on tests that you've done over a long period of time, it will tell you what stocks to pick, when to enter them, when to exit them, what your stop loss is, what your profit target is, it will even tell you what kind of returns you may generate based on historical averages. Got it. So you know what you can do on a week on week, month on month basis if you follow a trading system, And you're going to teach me how to find a trading system that works.

Yeah let's learn one trading system throughout these episodes that we do. Amazing. That sounds great. Start from the Basics of Trading, so Technical Analysis Options, Equity Strategies, all the way to building your own trading system, and if you're just starting out, take the Personal Finance course and Basics of Trading course. Check out LearnApp in the pinned comments and get 2 months extra access for free. And you can analysis you stock fundamentals and history in depth thanks to Tiker Tape, and before you begin trading one must a D-mat account, so open your owen D-mat account for free with the link in he pinned comment. All thanks to me, and Prateek.

A’right I'm excited, I'm excited. Thank you. I feel like I'm already ready to get started. Yeah, I'm excited. I feel like I know the basics now so in the next episode we're gonna get into it.

Yeah, I think we should get decently technical and actually like learn something of it. Alright, so I will see you guys in the next episode. Coming up next, 2 things you need you need a trading account so you can trade and you need a D-mat account. Now what is systematic trading, Okay so trading is of 2 types, okay, right kind you show me what a backtest looks like, and this is actual system that we will see, okay going forward here, here look on your right your of stats and here what stats I am looking at.

It means when you win you a large amount and when you lose you lose small amont. Cool, I mean that's done right...

2021-06-12 01:20

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