‘There is a method to the madness in the stock market’

City-based corporate lawyer-turned-equity technical analyst and author Meghana Malkan initially thought the stocks were all about gambling. But having studied the market for a decade, she speaks to The Hindu about how one can create wealth through a systematic method of trading, the need to educate oneself about the field, and how women make better traders than men. Edited excerpts.

How was the transition from corporate lawyer to teaching stock trading and preaching equity culture?

I was completely in love with law before, but when I was about to transition into this profession, my husband was a stock trader. Initially, I hated what he was doing. But then I began learning from basic to advanced trading just to know why he was doing what he was doing, just to understand his profession. I got a sense that maybe there is some method to this madness of the stock market. So my initial belief that [stocks are] a gamble changed to one that there is a systemic way to trade and make money. And that motivated me to give up my job as a corporate lawyer working in a company in Nariman Point and take up this as a full-time profession. So that is the journey from a lawyer to a stock trader. From being the stock trader to the stock trainer was again an interesting [journey], because [it was] a person like me who initially believed that this was a gamble and had no clue [how to] do it. If a person like me could do it, I thought, then a lot of others who have this belief can also do it. That was in 2008.

Since then, how has the journey been?

Initially, it was with the intention of taking this as a pure business. But over the years, as we kept doing it, it struck me that a lot of people live with this fear of not investing in the stock market because of maybe losing it all or it being too risky and too volatile. Also, there were not many books that could help people trade cautiously. That motivated me to help people … understand if you do it systematically like a business, you can make it a success.

Most people I know have lost rather than made money in the stock market. Since there are more cases of losing money, people do not have confidence in the stock market. How can you assure people that someone trading scientifically will definitely make money?

A systematic pursuit is supposed to reward you. We always give this example that when trading, you must treat it as a business. One makes money in business because there are systems and processes in place. What I mean is that your input is the same every time, your process is the same every time to give you the same output which is a profitable business. But what happens in stock markets is that people use different inputs all the time. So there is no fixed way to make money because they don’t feel the need to get educated and then trade. So on an average, of the five trades that they [undertake], the first could be on recommendation, the next on one’s gut feeling, the third because maybe you thought you got some insider information. So all these are different inputs and how can you get the same output? So to get the same output which is profit in your trading, you will have to have the same input which is maybe a system or a method which is to study the stock market first and then to trade. One more aspect to this is that when you want to make money, you want to make this a profit-making business. But how much time are you giving to this profession? Everybody wants to trade. A person who is into business wants to trade, a professional wants to trade, but you have to invest years of study and money.

What should one do to be a successful trader and how much wealth can one create?

To be a successful trader, the basic thing is to keep yourself educated first, understand the risk involved. The basic difference between people who are not making money in the stock market and those who are is the risk aspect. The successful know when to do it and how to do it because they have educated themselves well in the field. There are a lot of people who have done it and are making a living out of trading in the stock markets.

How can more women get into trading so that it can supplement their income and make them self-reliant?

In 2008, when we started, less than 5% of the people [who showed interest in stock market] were women. But things have changed in the past decade. Now, up to 30% women are in a room when I do workshops. It is changing, but not to the level as in the West, the reason being the predominant thinking that taking care of investments is the man’s domain. Due to years of conditioning, women prefer not to participate. There is nothing better than women taking control of their portfolios. They have complete freedom of time and location. Over the years, I have realised that women make better traders because they have more of a disciplined approach. We have seen women doing much better in this field. It is my mission to make more and more women aware of this opportunity. Then there is a possibility that they can take charge.

Geographically where are more people trading in equities? Is there any way how people can make a reasonable amount of money safely?

Maharashtra, Gujarat and Rajasthan are the areas where majority of traders come from. In tier II cities, it is not happening in a formalised structure. There are many States in India from where very negligible investment comes. It will take years of efforts to change this mindset.

Is stock trading gambling?

I believed [it to be] gambling a decade ago. But now I believe it is a business and a full-time profession. In my journey as a trader, I first lost money before making money. The path for a successful trader starts with lots of losses. But these losses help you take the right decisions. The system makes money for you, but what differs is the person and the mindset. What goes in your personal life also impacts your trading as well.

Who can be a trader?

One can do it along with one’s job. But when you are studying about the market, that is when your efforts are required. Since you have systematised the whole process, you need not to be required to remain present for trading. All you need to do is develop a system, and the system will make money for you. But there are people who have left their jobs after realising the freedom in this business.

How to get started?

First of all, one has to inspire oneself by reading how people have done it and what they have done. There are lot of books that can tell you what to do and how to start. So get yourself educated first. And take it [seriously] as a business.

What are the methods that can make an ordinary person a reasonable trader?

There are four basic pillars to trading. The first is to put your belief system in place. No system can help you make money if you believe that the stock market is a gamble and you can make money by sitting idle and working for an hour a day. The second is to work on your risk. Whatever the market, your only goal is to limit your risk, then the rest can be taken care of. The third is to understand the right tools. The last is to get the system and processes in place. Then you are set to start.

Why is it so important to have equities?

I believe that investing in equity is always good as in bank savings there are always issues like a certain interest rate you get. Similarly, there is always a cap when you invest in gold. But when you invest in equity, you can multiply your returns. There is always an argument that the risk is also [multiplied] and that is where the education part comes in. There are studies that show that a typical investor who keeps investing regularly as per trends makes much more money than her/his compounded bank savings and gold investment savings.

You live in Mumbai. What does the government need to do to make your life here better?

Once the existing infrastructure projects are ready, there will be much relief. I believe if people can go all out, they can herald a much bigger change in the way the city is functioning. In the West, people work along with the government to bring about the change and we must do that.

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Printable version | Nov 26, 2021 8:44:13 PM |

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