Please read strategies and preparation for stock market crash to understand this post better.

One of The Best Ways to be Well Prepared For Stock Market Crash Is To Diversify

I offer a course in which all instruments of investments opportunities in India are written. It covers all like stocks, mutual funds, even government securities investments and allocations of where to invest what. You can read about the invest well course here.

This will help you a lot to decide how not to keep all eggs in one basket and the best places to invest your hard earned money. With the help of the course you will be able to chose the best stocks, mutual funds and other opportunities to invest. If your money is well diversified, one stock market crash will not make you poor.

Another Way To Be Prepare For Stock Market Crash Is To Invest Geographically

Geographically also you can invest in many countries, but it is way too complicated to decide in which country to invest and where to invest etc. There are mutual funds in India that invest in many countries, but I have found that Indian mutual funds investing in India over a long period of time perform better than foreign country investing mutual funds, so its better you stick to mutual funds investing in Indian companies. How to chose the best mutual funds is written in the invest well to retire with crores course.

Keeping some cash handy is also a good idea

As soon as markets crash, just get in when everyone is selling. There will be huge liquidity for buyers.

During a crash, whatever the buyers bid for, the sellers accept and reduce their ask price.

When the markets are going up, “ask” is stronger than the “bid” prices.
When the markets are going down, “bid” is stronger than the “ask” prices.

Stock Market Crash Is A Great Opportunity To Save Taxes

Exit from not so good stocks from you portfolio and take a short term loss that can be carried forward for 8 years and enter a better looking stock. You then save your taxes and also get a better return over the long term.

Carry Forward of Short Term and Long Term Losses

You may not be able to take benefit of your entire short term or long term loss in the same year. In that case you may show your short and long term loss in capital loss section and carry it forward for next 8 assessment years immediately following the assessment year in which the loss was first computed.

During a Bad Stock Market Crash Patience is Important

Total crash time of the 2008-09 crash was almost 17 months. But see after than the recovery was less than 12 months. Within 12 months stock markets were back to what they were in January 2008.

Read the example of HDFC Bank return given in hedge is the best way to avoid huge losses in a stock market crash.

You will know why buying during a crash is very important. But it is very important to chose a good stock to buy. You do this course to know how to chose a good stock to buy.

Learn what to do before and after stock market crash and how to take benefit of market crashes.

Stock Market Crash is of Two Types:

1. Sudden Bad News Overnight Market Crash
2. Good or Bad News and Long Time Market Crash or Up Move

I hope the way I have named it, the meaning is quite clear and obvious. The first one is any Terror Attack e.g. 9/11 attacks, Natural Calamity e.g. Tsunami or Major Earth Quake, Financial Corruption in a Big Company, e.g. Lehman Brothers Company Bankruptcy crashed stock markets all over the world for more than one year, and brought one of the biggest financial crisis & recession period in the whole world for 1 and half years.

Here is the link for more details on Lehman Brothers Company Bankruptcy: https://en.wikipedia.org/wiki/Bankruptcy_of_Lehman_Brothers

On September 15, 2008, Lehman Brothers filed for bankruptcy. With $639 billion in assets and $619 billion in debt, Lehman’s bankruptcy filing was the largest in history, as its assets far surpassed those of previous bankrupt giants such as WorldCom and Enron. Lehman was the fourth-largest U.S. investment bank at the time of its collapse, with 25,000 employees worldwide.

Lehman’s demise also made it the largest victim of the U.S. subprime mortgage-induced financial crisis that swept through global financial markets in 2008. Lehman’s collapse was a seminal event that greatly intensified the 2008 crisis and contributed to the erosion of close to $10 trillion in market capitalization from global equity markets in October 2008, the biggest monthly decline on record at the time.

Source: http://www.investopedia.com/articles/economics/09/lehman-brothers-collapse.asp

Another example is from India which I think many generations will remember – The Satyam Crash. Read this: Satyam’s fall: From Rs 542 per share to Rs 58

Read Full story of the Satyam Crash: http://www.financialexpress.com/india-news/satyam-computer-the-rise-and-fall-of-ramalinga-raju/62281/

The Lehman Brothers & Satyam Crash falls in the first and the second category both. Overnight the markets will crash and keep the crash continuing for a long time.

But natural calamity and terror attacks fall under the first category. Stock markets will open big gap down and then from next day onward start to recover.

News like some party election win like recently in UP, and good performance by major companies may push up or down 200-300 points the stock markets and they markets will stabilize. These fall under the first category.

The first category id not a big issue and can be managed with well planned hedged strategies, but the second one is where lot of planning is required.

Continue reading on stock market crash more on how to be well prepared for stock market crash.

Learn why hedging trades is the best way to avoid huge losses from stock market crash as it protects your losses to a large extend and helps you save money.

Date: 06-April-2017

Market Crash is nothing new or unknown. Once in every three years on an average market crashes and then recovers.

Huge crashes are once in a decade. Remember the crash of 2008-09? For one year stock markets all over the world crashed from January, till March 2009. This was almost a 50% crash, and then it took one year to recover.

As far as I remember, it was one of the worst crash in the history of stock markets. Smaller crashes also do come but not every year. Still here is where many traders and investors lose a lot of money which they earned in last 4-5 years of trading.

So how do you prepare yourself from avoiding crash losses?

It is 9 years now since the biggest crash took place, it is important you must be prepared. I am not saying markets are going to crash now, but I know even if they do I am well prepared.

Point is markets crashes or not, what is wrong in being prepared for a crash?

When markets crashed in 2008-09 I had no knowledge of hedging, Today I have.

Hedging is a kind of insurance which protects your capital to a large extend

For some traders who keep shorting stocks – a crash is heavenly sent. These kinds of traders are rare, but they do exist.

Any new trader who enters the market knows only one thing – first buy then sell. They forget that when they buy something, someone out there is selling them the same. It is a different matter that we never know with who sold us the trade or when we sold, who bought it. In fact we will never know as its everyone’s markets and the job of the exchange is to oversee that, our job is to trade.

Unfortunately even traders who short, if they do not hedge their position when markets keep going up they lose money. That is the reason whether you are a buyer or seller you must learn to hedge your positions.

Benefits of Stock Market Crash:

1. Stock Market Crash is the Best Time To Buy Stocks.

Meltdown of 2008. What if someone bought a few shares of HDFC Bank – a well known non-speculative stock on 13-Mar-2009:

HDFC BANK Ltd. 13-MAR-2009

He would have bought it for Rs.166.85 per share. Let say he invested Rs.100,110.00:

Rs.1,00,110/166.85 = Bought 600 shares of HDFC Bank Ltd.

Let see whats today’s price:

HDFC BANK Ltd. 6-APR-2017

It is Rs.1430.00 per share. Let us see his profits:

1430*600 = Rs. 8,58,000.00

Rs. 1 Lakh, 110 coverts to Rs. 8,58,000.00 in 8 years.

800% returns in 8 years.

A Fixed deposit almost doubles the money in same time – 8 years.

Here money multiplied by 8 times in eight years.

Disclosure: Stock markets investments are subject to market risk, please invest after researching well. There is no future guarantee that the above mentioned stock will perform the same in future.

That’s the benefit of a stock market crash, but how may investors actually took that trade? I mean bought HDFC Bank at 166.85 and sold at 1430? None.

Here is where the benefit of stock market crash is never ever seen by anyone. In fact going by the data, not many people bought stocks during that time, else why would markets keep falling for more than one year. The data tells the real story.

Stock Market Crash Is An Opportunity To Buy

Photo-credit: Moneycontrol

A few days back I got this email.

Subject: SALE OF SHARES BY THE STOCK BROKER THAT ARE KEPT UNDER “SHARES AS MARGIN”

Email:

Dear Sir,

Kindly advice and educate me as to the SHARES DEPOSITED UNDER ‘SHARES AS MARGIN’ – CAN BE SOLD by the stock broker for the reason “To meet Pay-in Shortfall” – and reduce the Margin
Limit before the date of settlement/expiry.

Example:

I have a Margin Limit of Rs.10,000/- by deposit of 100 shares of Rs.10/- each.

I bought 50 Call Option of AB company for a premium of 100/- each totalling Rs.5000/- today.

I continue to hold position till expiry which is 20 days away.

On the 2nd day, whether the broker can SELL my 50 shares and adjust the same to my trade amount of 5000/- for the reason – “To meet pay-in short fall”, and reduce my margin limit to 5000/-?

Whether broker is right in doing so?

Please advise me sir.

Regards
VSKumar

This is one thing that is not clear in a lot of traders mind.

Lets us go back to the simple question.

What is Collateral Margin?

Collateral is either shares or property or mutual funds, anything that has monitory value. For example when you take a home or mortgage loan, your home becomes a collateral for the loan.

If you default paying loan EMI for any reason the lender has the right to sell your property and recover his money.

I hope you now understand the meaning of Collateral.

The same law is applied in almost all brokerage firms.

This is known as Collateral Margin.

For example you have bought a few shares totaling Rs. 1 lakh and you do not have any more money in your trading account. For some reason you want to do equity intraday, options and futures trading, but how can you do if you do not have money in your account?

You can ask for “Collateral Margin” from your broker.

Basically you are keeping your shares as a “Collateral” with him to take a loan from him and do derivative trading.

Please note: Collateral Margin percentage differs from stock to stock and broker to broker. Since there are thousands of brokers in India it is impossible to list Collateral Margin given by each broker. Please consult your broker for exact Collateral Margin you will get from the stocks you hold in your demat share trading account.

MAJOR AND IMPORTANT READ THIS CAREFULLY:

1. You cannot buy shares to hold for the long term using Collateral Margin. You can do only equity intraday day trading on any stock allowed for day trading.

2. You can do intraday or positional trading using Collateral Margin in Options and Futures on any stock or Index.

3. If you are losing money in MTM (Mark To Market) at the end of the day, your broker has the right to sell a portion of any stock in your demat account/portfolio to clear the risk of the losses he may face. Note that only that much is sold where the risk becomes zero for the broker.

If MTM losses increases the next day he/she may sell more of your stocks to reduce the risk. They have a limitation of the risk. If the losses exceeds a certain percentage of Collateral Margin given to you, they may sell stock and close your option or future trading to stop the losses from increasing.

In some cases the brokers inform their clients, in some cases, actually most cases, all this is done automatically. The system or trading software takes care of selling the stocks and reduce the risk of losses and send email to the client.

According to the Terms of Collateral Margin, brokers have the right to sell the stocks without informing their clients to reduce the risk as they cannot risk money on their clients behalf.

Date: 30-Mar-2017

Today is expiry day of Mar 2017 options. If anyone is trading March 2017 options or futures please close all positions before 3.15 pm today, do not let it expire In The Money – close it.

If your options expire in the money you will pay a heavy fees.

Read the article here:
Close Futures And Options Before Expiry Day to Save Securities Transaction Tax STT

Look what even novice traders tell about my course:

Course 1 – For those who trade options and futures:
https://www.theoptioncourse.com/learn-how-to-trade-options-for-monthly-income/

Your Results May Vary

Course 2 – For those who are or want to be long term investors:
https://www.theoptioncourse.com/how-to-invest-well-and-retire-rich/

There are a lot of reasons I do not give tips and you should also not take tips in stock trading. When you pay for tips you have no idea who is generating these calls so why pay? I still fee traders just want tips because there is no hard work involved.

Which person on this Earth has ever made a lot of money taking tips in stock markets or any other business? No one.

Then why do you think you will prove everyone wrong by taking tips, make a lot of money and create history?

I am surprised by the number of queries I get on giving tips, even after writing many times in my site that please avoid taking tips.

Actually in my case it is exactly opposite.

Tips providers send unsolicited SMS and emails to get tips. And sometimes they call also. Almost every day, they send me SMS and call me, even though my number is FUL DND (Do Not Disturb). I do not know from where they get stock traders numbers. It is obvious once they call, I do not talk to them but do not cut the phone connection. After a few minutes of talking they keep saying Hello, Hello, and when they see that I am not responding they keep the phone down.

On top of that, I have quite a lot of time received emails to buy database of 10,000+ traders for mere 250 rupees which I politely deny.

That’s why I say my case is different. In other cases companies call traders, in my case traders call me. Feels good but sorry I do not give tips.

Let me make things clear. From day 1 this website started, I have given a promise to myself that I WILL NEVER DO ANY ILLEGAL activity to make money from the site. I have a clear disclaimer saying that I do not provide tips.

If you compare my site to others you will not find a single genuine testimonial in their site. Anyone can type something, write a name and a city and show it as testimonial. If you see my testimonials page you will see that these are either emails from my clients or it’s a WhatsApp message. I hide their numbers and email to keep their privacy intact, else my customers will fear sending me an email or chatting me on WhatsApp.

There are a lot of people who told me if I can give them a few numbers of my clients living in their city they will pay me. I say sorry not possible. If you do not trust me even after reading my blog then please do not pay. Those who took the course are happy today.

I have been approached by many firms to buy my database of free and paid subscribers for a fee. As soon as I read that email I mark it as SPAM and delete.

Even if someone pays me one lakh rupees to get that database I would do the same, just mark the email as SPAM and delete.

Through this website I have tried hard to stop people from taking tips as even I lost close to 7 lakhs or more taking tips, but unfortunately I do not think many listen to me.

Here is one person who wanted tips. Got this message today:

I DO NOT GIVE TIPS

Here is an email from a person who lost more than a lakh taking tips from a reputed company. Name of the company withheld for obvious reasons.

Here is my reply:

Here is the email of Mr. Manas:

Sir,

I am going to disclose you regarding my bitter experience in trading. It may be a case study for you. I have been trading since 2015. At first I was doing trading with my own effort and booked only loss. Then I took help of one advisory company i.e (Name Withheld) with paying Rs.10,000/ for three months. After this my loss increased instead of profit. Till now I have lost almost 1,50,000/-(more than one lakh and fifty thousand). Still I am trading with option for an expectation of recovery of my lost money.

I have already gone through your Five days free course. Still I need your sincere guidance in this regard.

Sir, you can feel my position after going through the above said bitter experience. So can I expect your course will be helpful for me to lift from the drowning situation. I also expect one day this writing of me would be posted in your site after becoming a successful trader.

With high expectation of your sincere and timely guidance.

Yours faithfully
Manas

Here is my reply to him:

Hi Manas,

You are luckier than me. I lost 7 lakhs trading with my own knowledge-less, speculative trading, and tips providers then turned to research.

What you will get is well researched strategies. It has been working well since 2015, so please do not worry.

I do not give tips at all as I am against it.

I think you must have seen the testimonials in my site, not a single one is fake.

So do not worry and do my course. I hope you are making money in your job due to education not tips so please think the same in stock markets.

Best Regards,
Dilip Shaw
Learn Conservative Strategies at Your Home and Trade Peacefully:
http://www.theoptioncourse.com/learn-how-to-trade-options-for-monthly-income/
Please Like my website’s FaceBook Page:
https://www.facebook.com/theoptioncourse
Follow me on Twitter:
https://twitter.com/theoptioncourse
Thank You

Conclusion

When you take tips you lose money, you do not learn anything, you waste time, and you get frustrated.

In view of the above avoid taking tips.

This one question does rounds in every traders mind especially those who do not have much money to trade. They keep reading everywhere traders making huge money trading and they get inspired and want to make the same amount of money.

In fact a lot of traders have asked me this question a lot of times. Sir, can I take a loan and trade your strategies.

My answer is always NO. Then they ask why? My answer is pretty simple. Do not look at the profits you will make, more important than that is will you be able to trade in peace of mind?

But here is one of customers who did the course recently saw the profit potential and took a loan of Rs. 2 lakh and is trading the non-directional strategy.

Your Results May Vary

This is the power of properly hedged non-directional trading. Though I must have told him not to take a loan as it increases stress this person saw the benefits and took a loan.

Most people do not know or forget that stock trading is a business, it is not a job or just another way to make money. It is pure business where buy and sell takes place. Stock market investments are subject to market risk also just like any other business, only difference is that the entry level to this business is pretty easy. Anyone above the age of 18 can enter this business. Now days you can open a free Demat trading account in a lot of companies. In fact we keep seeing these ads everywhere.

The real reason why I am against taking a loan and trading is that you have an obligation. I see that in Mar 2017 personal loan interest rates currently is anywhere from 12% a year to 20% a year. This is where you will trade in panic and I do not like trading in panic. I want to trade in peace of mind.

So if you are making more than the interest on the loan you have taken its a personal decision to take a loan to trade or not. But be very sure that you are making more than the loan interest rate every year from trading. If you are not making more than the interest rate on the loan do not take a loan and trade. If you make more than the interest rate on the loan, then the decision is entirely yours.

You must include the stress you will get to pay back the monthly installment of the loan. If you can conquer stress and make more than the interest rate on the loan then you may decide to take a loan and trade, but do not take too much loan.

But if you cannot trade in stress and are not making more than 15% in trading every year then please avoid taking a loan to trade.

I am very happy that my customers are doing very well in trading. They are making much more than they have paid which is very good.

If you want to pay for the conservative options and hedged future course please pay here.

Learn what hedge can do in this post. Mainly it reduces losses to a large extend and keeps the trader at peace without worrying much about the movement.

The benefits of hedging properly is immense if you are a trader, especially a future or option trader.
It kicks in when the traders is suppose to make a huge loss. See this how this traders loss was reduced by 50% when the trade went wrong.

Your Results May Vary

However sometimes even if wrong the directional trades makes a profit.

Your Results May Vary

This is how the conservative trading course will benefit you. You not only learn strategies but you learn some great hedging techniques to save your principal money. This will make you a better trader for life.

You can pay for the course here.

Learn how to make top rules of stock investing which great investors followed. These rules will help you to become good investor in the long term. Here I will discuss some important rules that the top investors like Warren Buffett followed to make huge income from stock markets. I offer a course on long term investing to retie rich, it is obvious nothing from the course is written here.

Make A Set Of Rules After Experience And Stick To Them

If you do research on successful investors you will find that they made a set of rules and followed them for the rest of their lives. They never deviated from the set of rules whatever happened to markets. These rules were made after a thorough research for years spending thousands of dollars not just sitting in an AC room and looking at charts.

People like Buffet never looked at charts but they looked at current valuations of the stock vs the probability of future valuations. If they were attractive he bought the stocks. Charts do not and cannot predict future valuations, therefore he never bothered about what the charts said.

How to make the rules?

Your initial blunder investing and mistakes you did in investing teaches you a lot. These mistakes thought a lot about setting rules of trading and investing to me too.

You jumped in stock markets trading as soon as your demat trading account was opened, dreaming big. It’s obvious you did a lot of mistakes initially. Make a set of rules on what worked and what did not work, when you traded.

Then do some more research on the set of rules before finalizing them.

Another way to define set of trading rules to ask people who are successful trading and follow them. Some of them give courses as well. Before doing any course you must see testimonials of real clients who have done their course and are doing well or not. If they have a website, their website itself is a good proof of the knowledge they have and their capabilities as a trader.

There is nothing wrong in paying a course provider to do a good course. It takes their time to help you that’s why there is a charge. But the course fee should be affordable and reasonable. Or you can do research yourself. A course saves your time and money to do research.

It took me more than 2 years and 3 lakhs to make this conservative strategies course. Since its your money I leave it to you if you want to do my course or not. You can see testimonials and decide yourself.

Patience Is Important

When I was a intraday day trader I was very impatient. As soon as the trade got completed, I used to keep looking at the trade to see whether it was making a profit or not. If it was not making a profit I used to take a stop loss within 5 minutes.
The above is not trading, its gambling. There is less than 1 percent chance that a gambler makes money. Obviously I too lost money.

If you are an impatient trader you will never make money.

Dennis Gartman, a very successful investor once said, “Be patient with winning trades, be enormously impatient with losing trades. Remember it is quite possible to make large sums trading/investing if we are ‘right’ only 30% of the time, as long as our losses are small and our profits are large“.

If you are impatient it is better to hedge your trades. Hedging makes sure your losses are capped, as a result over a period of time your profits exceed losses. My course has strategies which are fully hedged to cap losses.

Read what he said carefully, there is a high chance that you too do the same mistake in your trading career therefore you lose money. 95% investors make this mistake and lose money.

Let wining trades run. Do not sell as soon as you see profits coming. On the other hand br very strict with your stop loss.
Whatever stop loss you have set, be impatient as soon as the stop loss is hit and exit the trade.

Good traders are ok with losing some money but are not at all ok with losing a lot of money in a single trade.

The money you make in winning trader must far exceed the losing trade loses

Warren Buffett – The Legendry Investor of All Times Said This – “It’s Far Better to Buy a Wonderful Company at a Fair Price than a Fair Company at a Wonderful Price“.

I personally follow this since the day I read it. Another great thing he said was:

“Buy When Everyone is Selling and Sell When Everyone Is Buying“.

I follow this as well.

Mr. Buffett talks, world markets move based on his words. In fact governments appointed persons managing finances of a country leave everything aside to listen to what Warren Buffett says. His words are so powerful.

The letter to his investors are included in college finance classes in the largest and most prestigious universities in US and many other countries.

His basic principles of Investing is:

1. When evaluating a company, look at the quality of the company and the price. He mostly used to see the company’s balance sheets, listen to conference calls and the way management worked. After this he used to evaluate the price of the stock.

If the company looked good, he bought it. Price for him was secondary.
If the company looked bad, he never bought it even if the price of the stock was cheap.

Bill Gross a Fund Manager says, if you like a stock do not put more than 10% of your investment capital on it.

However here is where I differ slightly explain in my invest well course.

Diversification is Good, but too much diversification is not.

Some of your chosen stocks give great opportunities to buy. Always keep some money on hold to invest in these stocks as soon as you get the opportunity.

Prince Alwaleed Bin Talal – an investor from Saudi Arabia and founder of Kingdom Holding Company once said, “We’re getting hurt, but I’m a long-term investor“.

How true is that. Let us go back to 2008 when recession stuck stock markets all over the world and 99% people backed out of stock markets making huge losses. I was too one of them.

But just imagine people such as Prince Alwaleed Bin Talal, he am sure may not have taken out all his investments, in fact would have bought more especially those companies that were high in quality. Today he must be making millions of profits.

Most of the investors who lost a lost of money in that period must have still not received their money back. He has a lot of real estate investments in India as well. Not sure how his real estate business is doing.

Carl Icahn, a big investor in companies such as Time Warner, Yahoo never listens to his friends or brokers or tip providers. He once said, “You learn in this business, if you want a friend, get a dog.”

Indirectly he is saying do not listen to your friends as far as investing is concerned. Its is not a personal thing. It is good to have friends for social gatherings and fun but it is better to avoid their advice on investing.

Carlos Slim, also a great investor looked for investing in companies with a great growth potential in future. Like what Warren Buffett did with Coca Cola – his biggest investment till date.

No one was willing to buy Coca Cola, but Buffett bought and made millions.

Carlos Slim says that do not look what is happening now, instead try to figure out what may happen in the future to this company.

Basically he used to invest in mid-cap and small-cap companies.

Conclusion:

It is always good to follow legendary investors.

After a lot of research I have made a course on long term investing and financial management. You can read about the course here.