ziesizare Moneycontrol. com Print This P Reading his way to riches: Journey of a printer salesman to a successful trader and investor when author George RR Martin of Game of Thrones fame saidA a reader lives a thousand lives before he dies, he probably had Nishant Arora in mind. A computer engineer with an MBA in marketingA Arora has Iterally read his way up in ife going through various professions. lauiting a hign paying multinational ob within three months because it was not challenging enough A Arora plunged head fist into the corporate sale of printers. Though inital rejections were discouraging they were overcome through persvasion and gaining Henowledge by reading by everything about tho product he was selling. Within two years,A Arora was confident of selling anything [This confidence resulted in him venturing on an entrepreneurial spree.A Arora turned into a serial entrepreneur, starting businesses ranging {rom dealership of multiple consumer companies and an event management firm, During this time Arora continued with his reading and taught himself to play the guitar, piano and mouth organ by reading about them. in one such reading spree,A he came across books on investing and trading. AroraA felt he had found his moo and dug |deep. Before long, he was successfully investing and trading. His journey to becoming a successful trader and an investor was just as arduous as most others. But unlike other successful ltaders and investors,A Arora wanted to shorten the learning curve for others who were struggling to turn successful. He started a Facebook community for traders and investars who want to learn the A€-howa€™ behind the process of trading rather than Ja€ what to tradese™: In an interview with Moneycontrolg€™'s Shishir Asthana,A Arora talks about his journey, his process and the investing Jcommunity that is growing up in size just like his portfolio.A Below is the transcript of the interview. |@: Before we get into the details of your trading, can you tell us about Techno-Funda Society. JA: Ihave been in the market for nearly a decade. | started by investing and then moved to trading. Over the last few years, | have realised that resources needed for trading and investingA are not easily available. Eltrer they are very basic or very advanced, There was a clear disconnect between what was needed and what was available. |Thatae™'s when | decided to start a Facebook group under the name Techno-Funda Society (TFS). Withind six months, hweA touched a membership of around 7,000. What we do not do in TFS is discuss specific stocks or what to buy or sell, We discuss the 4€ howa€™ of investing and trading |We were pleasantly surprised at the success of the group. The general perception is that most participants in the market look for ios, but wnat we found out was contrary to that. | have also been writing a blog for the last five month on the process of trading land investing, lone of the frst things that we come across is the misconception between trading and investing. The general perception is if we ltcke @ position and sellit in a short time its trading and if we hold it for @long time itis investing, Time of holding is perceived to be the difference between investing and trading, JQ: Letae™s now talk about your journey to an investor, trader and educator. JA: do not have an educational background in commerce. I did my computer engineering and an MBA in marketing and IT. After |completing my education, | worked for a reputed MNC company. I soon realised that | was just one of the 40,000 employees and there was not much to leam in a big company. Within three months, | quit my job and worked for a small dealer of computer products at one-fourth the salary This was a hard-core sales job where | was required to sell printers and computers to corporates. In the first 6-7 months, there |was nothing to show for my efforts. was sent back from the gate. it was depressing given my educational background. | did not lose hope and with persuasion and product knowledge | hitt big in a year&€™s time. |All along I had the entrepreneurial spirit and wanted to branch aut an my awn. After two years in the job, I started aut an my own. | |set up a series of businesses. | ventured into the distributorship of a number of personal care and food product companies. We then forayed into event management and exported consumer products to south-east Asia. Post that, we ventured into medical tourism by bringing patients into the country | am also a voracious reader and continued with my reading while these businesses were running. On one such reading spree, | landed up reading up a book on Warren Butfett. When you are introduced to Buffett, you end setting everything aside. | gravitated between Warren Buffett, Charlie Munger, Benjamin Graham, among others. {rhs was a completely new word and journey for me. Using learnings trom these books, managed to pick up some mul saggers, In Warren Buffetta€™s type of investing, | realised that he was the main tigger for valve unlocking. Not only his name ladded value but he was in a positon to cctate how the company should run. In my case, this was not going to happen. For me it was going fo buy and wail. There was a small chance that investing would have become a fulltime profession unless 'hadA a fuuge capital [That got me thinking. I cannot be a trigger, what else can | do to generate capital? While | was running other businesses and investing, | came across a book called Market Wizards by Jack Schwager, in which he had interviewed successful traders. |Schwager opened the doorsA to a new and exciting world, |As Ileamt and improved my trading, | found that though it was consuming a major portion of my time, it was rewarding at the Jsame time.A Hence, | started trading fulltime and decided to shut my other businesses. Even now, | use the profs that | generate hhtp:iivinw maneycontralcom/indiainewsartile!news_prntphp?autona=1056402 18st + 12iesizare Moneycontrol. com trom trading and plough it into investing, For me, trading helps build my proft and loss accountA while investing builds my balance sheet, |@: Can you tell us in detail how you invest and trade? Leta€™s start with investing |A: While investing, | follow three conventional methodologies. First, look for value plays. Two, for stocks that areA positive growth| stories, and fnaly the workouts. InA value, I look for companies trading at a fair valuation based on discounted cash flows. Here too, there are badly managed lcompanies or those that are in a bad sector which are at tes available at distress valuations. In those that do not have any Jeamings to discount, look for asset valuation. {Take the case ofA theA MTNL trade I undertook in 2013-14. It was a badly run company which was running into huge losses. Though there was nothing in the P&L account,A it hasA vastA assets. In 2013-14, | was available at Rs 9 par share when | bought it, Within eight to nine months, it was trading at Rs 35 per share, These are the type of companies where one has lo be ready to sacrifice quality provided they are cheaply valued. Finally, there are workouts.A These are basically event based such as mergers, acquisitions or spinofis. They offer positive shor. to medium-term value-unlocking opportunities JQ: And your trading strategies? lA: 1am an opportunist trader. | trade various strategies. | have trades going on for a few days to a few minutes. | have swing ltades running in the background, while | look for day-rading opportunities. lam basically a technical trader but not the lconventional type. |The general perception is that a technical analyst is a tea leaf reader who sees patterns and decides which side the market is Jgoing to move. However, | feel technical analysis isa study of people who are buying and selling. The market is about people and not about patterns. IMy study is about people. Here | try to study the battle between the bulls and the bears. The fiercest battles are fought near the lareas of support and resistance. Ho look it at in anothor way, a stock price rises to seduce sellers and falls to attract Buyers. they do venture in, weA find support land resistance, ifnot, we get trends. If price rises and seers do not get seduced to sel, then we get a breakout and i they get [seduces to sell we gota rasistanco, I try to view the psychology of traders a these various stages |Q: Were you always a price action trader or did you try other trading strateglesA before closing in on the current form? |What has been your Eureka moment in trading? A: | started like everyone else by going through the grind. Thankfully, | found out quickly that this type of trading does not work. Trading is not scienttically driven. Price cannot go up, then correct to 38.2 percent and rebound each time as some Fibonacci traders think. HTraders are not diven by science but by emotions. Behind every technical pattem, there are emotions of people Involved. It took ImeA six to seven months to realise this. My Eureka moment occurred in my frst year of trading while I was trying to win on every trade like everyone else, Here, one lassumes each trade will tun out to be a winner. However, ifthe trade does not move on desired lines, one gets dejected. Trading in this mind-set leads to losses. This was the time | read books by Mark Douglas which changed my life as a trader. In it was a wonderful concept which states that what matters is not about the number of times you win, but about the amount you win when you are right. | began reading books on position sizing, risk management, and trade management. | learned that in trading even being right 50 percent of the time is a high number. Your strategy has to be such that you should be making money even if you right 30 percent of the time. {This realisation changed my life. You cannot win every trade. Every beginner, including me, trades on a trade-to-trade basis. His Jomotions are attached to every trade and he takes them personally. Rathar than analysing every single trade, you should analyse la block of trades. Every trade is just a dala point in the distribution curve of your trading career, so why give it so much emphasis. [The realisation ofthis fundamental thought was the Eureka moment for me. I you consider my trading record over the last five years, | have had winning trades only 47 percent ofthe time, Sut my win trades |wore 4.5 times bigger than my losing trades. la: How do you identify which stocks to trade? la: | trade only in large capitalisation stocks and that too only in the futures market. | pick my stacks by going through the NSE. lwebsite. ! do not use any screeners or software. What | am looking for isthe list of gainers and losers, stacks which have seen a lvolume spike or where open interast has shot up. | look at anywhere around 100-150 stocks and each stock on three different timeframes. then prepare three ists of stock, The fists the urgent ls, where the stock sin trading terttory. Here, | willbe placing the order immediately at market open. The second is the waiting lst where the chart IooksA posive but the pice isnot inthe area which wil ofer aA positive risk reward, Third the no trading list, A stock from the urgent ist willbe a day trading stock if ere is a [volume and open interest spike. hhtp:iivinw maneycontralcom/indiainewsartile!news_prntphp?autona=1056402 18st + 282iesizare Moneycontrol. com |a: How do you decide your exits? JA: There are two ways in which I exit from my position. One, if there is price deterioration and second, when my trailing stop-loss is hit. |AA lot of people in the TFS community talk oftheir stop losses being hit on a regular basis. This is because most keep a stop-ioss based on affordabilly. For instance, one says | can afford to lose Rs 5,000 on a trade. So, they keep a stop-loss based on ItheA capital they are wiling to lose and not on any technical parameter. I feetA there are three conditions that need to be satisfied while placing a stop loss. Firs, it should be a technical point, either a pivot or support or resistance. Second, the distance from my entry point to the stop-loss should not be more thanA two percent of the capital. Third, the minimum earning potential should be two times the risk. f even one of these are not satisfied | will not undertake the trade. |O:A You mentioned about looking at three -timeframes while selecting a stock, can you elaborate on that. A: In any form of trading, be it swing trading or day-trading, | rade through three timeframes. Lel€™s take swing trade, where the hourly chart willbe my primary timeframe. The higher timeframe will be the daily chart. | will only rade ifthe trend of both these charts is the same. | look for an entry on a pullback in the lower timeframe, which will be the 15-minute chart. | walt forthe price to corracton lower volumes in the 16-minute chart while seeking an enty. | enter, build upon my positon and scale out rom myA positon on tis lower timeframe. | use the primary timeframe for setting up stop losses and potential exit points, while the higher timeframe is used for trend lseeking. There Is a proportion of timeframes that I use. | prefer the same to be in the four to six range. If the trading timeframe Is 15 minutes, then the primary timeframe will be an hourly chart and the higher timeframe will be the daily chart which is bult after over Hive hours of trading ina day. In my intraday chart, |use the 3 minute as trading, 15 minutes as a primary and hourly chart as higher timeframes, la: What advice will you give to a retall trader? |: First, know what type of participant you are &€” a trader or an invastor. Two, read books accordingly. There are many mentors land teachers who compare trading to swimming, saying youl cannot leam swimming by reading books. | differ. | believe trading is like a brain surgery which cannot be performed without getting your basics right JQ: But how does one know whether he Is capable of being a trader or an investor. |A: There are two types of personalities: Type A and Type B. Trading need reflexes and investing needs intellect. f you are an intellectual who does not lke action, then you are best sulted for investing. Those who may of may not be intellectual but stil kes laction are best suited for trading. The best part about technical analysis is that itis not dificult to learn, While fundamentals require a commerce background and a lot of patient learning, not many people are willing to putin the hours. la: Since you have been interacting with alot of beginners, how importantA is strategy and technical analysis in the loverall scheme of things. JA: To be a successful trader you need a balance of three things - method, mind management and money management. Ona [scale ofA one to 100, strategy will have the minimum allocation of around 20. The other two will be 40 each Ina trade, irrespective of the strategy, you will never know the outcome. Analysis needs to be good, but a lot of beginners while trading or investing lose out due to analysis paralysis. There is a big difference between an analyst and an investor. Similarly, there is a difference between a technical analyst and a trader. [A trader while beginning generally enters a market thinking its a lottery and that he will make it big. Bul when he loses, he is Ishakon. He thon thinks he should loam a strategy to give him an edge, but after a fow losses, ho is again disilusioned. Ho thon looks at the chart more closely. The problem with over researching is you discover new things every time. I you are look at the |clouds for long enough, you might think that the cloud isin the shape of an elephant or a dog. Same isthe thing with tachnical lanalysis, you end up discovering patterns which are not obvious. |Analysis or method or strategy is the smallest contributor to a traders’ success. Mind management plays an important role. In real lfe, suppose someone is a sad person. When his trade moves into positive territory, he will book profits soon as he is happy when the trade isin profit and does not wants to miss out. If someone is angry, Ihe would get upset ifa trade goes against him and will blame the market for taking away his capital Most people talk about greed and fear being the dominating emotions in trading. | think the other two emotions should be revenge land recovery. Most people get in revenge mode as if the market owes them something. Beginners get into recovery mode as Ithougn the market knows they have lost money and deserve it back. [There are innumerable examples of very inteligent people losing money in the market. Itis not because their analysis was bad but it was their mind management and risk management that lel them down, hhtp:iiviww maneycontralcomdindiainewsartile!news_print php ?autona=1056402 18st + 308