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STOCK MARKETS FROM

THE EYE OF AN
ENGINEER!!!

READY TO USE GUIDELINES

BY
Mehboob Jindani

(Version 1)

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Will keep it very simple and honest.

Let us get started! Stock markets are
remarkably simple and powerful tool to invest
and earn.
Below points will make an average professional
engineer aware about what an engineer needs
to do while saving and investing.
i. Just check which are the available
brokers, most of the banks are doing
brokerage business and there are several
famous discount brokers like zerodha,
etc.
ii. Stocks are generally shares of any
company.
iii. Stocks can also be ‘rights’ of a company
that is slightly less than an actual stock.
iv. There are shell companies in which pro
peoples takes the prices up and down

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and earn lots of money, try not to fall into

that.
v. Keep the process very simple.
vi. Do not follow the advices given on live tv,
just think, instead of telling you to buy at
100 and wait to sell at 120, they
themselves could have sold their houses
and jewelleries and bought all the shares
at 100 and sold at 120.
vii. Nobody will give you easy money.
viii. Do not think that the cheap stocks are
good buy because they ‘were’ a good
company.
ix. There is always a reason why a company
is being sold at such cheap prices.
x. Always figure out ‘value’ in the shares
and try to match it with ‘momentum’.
xi. Value can be in terms of book value,
earnings(P/E), price to book value(P/B)
for one stock as compared to the industry
average price to book value (IndP/B).

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xii. You cannot compare P/B of a company of

one industry, say, automobiles to another
company of, say, banking sector.
xiii. Each industry works in a different way
and has different asset and debt
requirements and different future
projections.
xiv. Make sure the stock is traded properly
i.e. daily and weekly turnover of that
stock is atleast 1cr INR or more.
xv. Do not do bottom fishing i.e. lets say, you
have x number of a company at 100rs
price per share, now it is trading at 50rs.
xvi. Seems like a favourable price to buy few
more? Not at all.
xvii. Do not average down a price, you can
empty your bank account while doing
that.
xviii. Just remember, you do not have
unlimited sum of money.

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xix. If you have 1000 rs and you manage to

double it to 2000 rs, you will get chance
to make it zero.
xx. But once you are on zero, can you make
zero to 1000 again?? You cannot
compound zero, right!
xxi. Make sure to be very defensive on your
money and do not give it easily.
xxii. There are lots of screeners available, just
filters out companies based on the above
parameters.
xxiii. Now the question is how and when to
enter and exit.
xxiv. You can have minimum of 8 stocks and
maximum of 20 stocks, at any time, to
have a proper diversified portfolio and
not taking any adventurous risks.
xxv. Check ATR i.e. average true range of a
stock for a particular amount of time, i.e.
it generally moves 8% in a month from
lowest price to highest price, 20% in 3
months and so on.
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xxvi. Average true range gives you the amount

of volatility that a stock has.
xxvii. A very slow moving or very fast moving,
both kind of stocks are not good for the
portfolio.
xxviii. Quarterly results of companies are out
every 3 months, hence, 3 months is an
appropriate time to refresh few stocks of
your portfolio.
xxix. Do not trade excessively as that is what
the brokers would want – brokerage,
which can slowly eat up your account.
xxx. Buy silently, hold on peacefully, treat
stock investment trading as a business.
xxxi. So you would like to become a trader or
investor? Not necessary to put yourself in
a bracket, if a stock out of portfolio is very
quick in movement, it can hit target or
stop loss quickly and you move on to your
next buy.
xxxii. When you are new to the markets, be too
conservative, instead of being aggressive.
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xxxiii. There is a saying that markets take fees,

in the form of losses, from you initially to
make you learn and then you ‘may’ earn
it back. Do not agree to this.
xxxiv. Never give your money to the markets in
terms of losses or heavy brokerages.
xxxv. Here’s how the mathematics goes, you
can at max. loose 1-2% of your total
money that you want to involve for stock
business.
xxxvi. Now if you have 1000 rs. and you decide
to have 8 stocks at a time, each stock will
cost you 125 rs. and you put a stop loss of
16% i.e. (16/100) x 125 = 20 rs., which is
20/1000 x 100 = 2% of your overall
portfolio.
xxxvii. If your stop loss is 16%, then keep your
target as 32%, that is twice, which is
called as risk-reward ratio. Simple.
xxxviii. Another math, you have two stocks, both
bought at 100 rs. each, one increases 5%
every day, another loses 5% everyday in
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the market for 15 straight sessions, you

win-lose same, right? Wrong. You are at
254 rs., i.e. 27% gross profit.
xxxix. How does that happen? Compounding.
xl. First stock 100x1.0515 = 208 rs., 2nd stock
100x0.9515 = 46, so after 15 sessions, you
have 208+46 = 254 rs.
xli. Don’t keep your profits unrealised after
your set targets, take them out.
xlii. Start fresh from thereon, once again.
xliii. Do not get into the worlds of futures and
options unless you have lots of money
and skills.
xliv. Futures and options were never made for
direct trading, those instruments are for
hedging i.e. to restrict your losses on
heavy portfolio or to earn fixed income
on a huge portfolio.
xlv. Just imagine, if you have bought stocks of
few thousands or lakhs rs., you can hit the
stop loss and sell off and move on, if there
is sufficient volume traded.
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xlvi. But if you have a stock worth few crore rs.

you cannot just sell it one go even when
your stop loss is hit. For this reason, you
need to hedge your portfolio by
buying/selling options or futures.
xlvii. If you do not have such heavy portfolio,
then stay away from future options, as it
is the easiest way to blow up portfolio
quickly.
xlviii. For currency and commodities, you can
buy/sell futures which is future dated
expiry, if you have your main business
involving dollar currency/silver metal,
etc.
xlix. Lets say you have industrial
manufacturing business which needs
silver metal in a fixed huge quantity, and
you cannot afford silver prices going
against you.
l. In that scenario, you can simply buy
future representing the same quantity,
you do need to give the full amount, just
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the ‘margin’, and at the end of that

period, lets say, 3 months, you can get
the actual quantity from the open market
and sell the futures.
li. Don’t just speculate the prices of such
futures/options instruments, what may
happen is, for example, you have 100 rs.,
you put that as margin, and you buy
futures worth 1000 rs., now that future
instrument goes down 10% i.e. 100 rs.,
your account is wiped out.
lii. When you open one of the top broker’s
page, you see the warning, 9 out of 10
individual traders in equity Futures and
Options Segment, incurred net losses.
liii. On an average, loss makers registered net
trading loss close to ₹50,000.
liv. Over and above the net trading losses
incurred, loss makers expended an
additional 28% of net trading losses as
transaction costs.

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lv. Those making net trading profits,

incurred between 15% to 50% of such
profits as transaction cost.
lvi. Source: SEBI study dated January 25,
2023 on “Analysis of Profit and Loss of
Individual Traders dealing in equity
Futures and Options (F&O) Segment”,
wherein Aggregate Level findings are
based on annual Profit/Loss incurred by
individual traders in equity F&O during FY
2021-22.
lvii. Be wise, treat this as business, do not
wildly speculate, it is your hard-earned
money.
lviii. Having said that, we need more
participation in the stock markets from
the people, when we compare it to a
developed country like US.
lix. When you are involved in the stock
markets, you get to know everything
about businesses, how they start, how
they do IPO (Initial Public Offering), how
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they release balance statement, what

affects the prices in the long-term.
lx. Closing line, go for stocks, go for long-
term, all tools available, start small, start
conservative and go big and aggressive
when the tide is in your side and you have
found your mojo.

Let me know your feedback or if you want me

to add some more information about the
subject in this document. If you have any
questions or want to go deep into the details,
feel free to connect!

Cheers!

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