In this blog, we’ll try to understand the trading and investing strategies of one of India’s most successful traders and investors, Mr. Rakesh Jhunjhunwala. So, how does Mr. Rakesh J who has made huge money through trading, actually trade in the market? Does he use technical analysis while trading in the market? Can technical analysis help in earning profits in the market? What strategy does Mr. Rakesh J adopt while trading? Let us understand all of this in our blog.
Once a conference was going on, where a discussion was taking place on topics such as trading & investing. Here, a person came up and said, "let’s not talk about trading, who earns through trading? Let us discuss investing. You can earn by way of only investing and not trading." Just as Mr. Rakesh J heard this, he slammed the person by saying, “I came in the market with just Rs. 5000. Initially, I got my capital through trading only and if you say that one cannot earn through trading then who gave me the money, your father or mine. Because, in the beginning, I have earned huge money through trading only.”
Rakesh J is not just an investor but he is an ace trader too. In his early days, he earned a lot of money through trading and he then invested that money for the long-term. Later, this money worked wonders for him. Simply, it means that the money he had invested, gave him great returns later on.
Mr. Rakesh J has two brains one is an investing brain and the other being a trading brain. Whenever, Rakesh J invests he uses his investing brain, follows the investment rules. Cash flow statement, balance sheet, fundamental analysis, etc. are to be followed while investing. He knows this very well and hence, follows it too. Similarly, whenever, he trades he uses his trading brain and follows the trading rules. Trend analysis, chart analysis, technical analysis, etc. are to be followed while trading and he does it all while trading.
To date all the conferences, interviews, TV shows, parties, etc. that have taken place, Rakesh J has mentioned his successful trading mantra always, everywhere, each time. And that trading mantra is, “Vadhaare vadhaare levanu, ghataare ghataare bechvanu.” When translated it means, buy when the share is in uptrend and sell only when the share goes in the downtrend.
During an interview with Ramesh Damani, an ace investor as well as a TV show presenter. Mr. Damani asked Mr. Rakesh J, “How you carry out your trading? What trading strategy do you follow? What is your secret formula for trading and what is this vadhaare vadhaare levanu, ghataare ghataare bechvanu? What is the first thing you see, while trading? Tell us about it.” To this, Rakesh J replied by saying that “The first thing he sees while trading is the broad direction of the market and for that one does not need to sit in front of the screen all the while. So, vadhaare vadhaare levanu means that opting for i.e. buying such a share which is in uptrend and ghataare ghataare bechvanu means selling a share when it seems to be going in the downtrend.”
Now, Mr. Rakesh J was asked that you say vadhaare vadhaare levanu that means you suggest buying such an expensive share? To this, Mr. Rakesh J replied, “Why not. Who said that the share is expensive? Because if that share continues to be in an uptrend then, later on, you’ll see that the price for which you had bought it was not at all expensive. This is one such rule which most of the traders don’t follow and hence, only 100 traders make money out of the 10 lakh traders out there in the market.”
Rakesh J believes that if he makes about 100 trades, only 40 of them might turn out in his favor. He says that whenever he goes wrong in a trade, he accepts his loss immediately and gets himself out of the trade. He believes, as a good trader, we must know when to exit the wrong trade. Rakesh Jhunjhunwala says if he bought a share for Rs. 100 and he has determined Rs. 90 as the level of stop-loss. Then he makes sure to exit the trade if the stop-loss is hit in that trade. If he didn’t exit the trade, he might not be able to sleep peacefully. Here the funny thing is that Rakesh J believes that if he makes about 100 trades, only 40 of them might prove right, whereas in the market there are such traders who want their 100/ 100 trades to be right.
We also come across such traders in the market who buy shares when the price goes down and buy more shares when the price declines further. And when asked upon why are you doing this? They reply saying that they are ‘averaging’. Rakesh J when asked whether if your trade goes in loss, do you average your trades? To this, he replied, “I never-ever average.” The lesson that we learn here is that, while trading, determine in advance the level where you’ll exit the trade in-case your trade goes wrong.
When Rakesh J was asked when you buy a share while trading and that trade goes into profit then when do you exit such a trade? What is the target that you set? To this, he laughed off saying Target? What is the target? I also see on TV shows, people giving target values for shares. How can anyone predict such a thing or for that matter how can anyone predict anything? So he answered the question by saying, “Whenever he buys a share and that trade goes into profit, he makes sure to hold that share till it is in the uptrend. He said, he holds the share till the share does not indicate that it is going in the downtrend i.e. till there is some technical weakness found in that share or till the time the chart indicates a sell signal there.”
This means that while trading, if our prediction goes wrong then we should exit the trade at the right time and while we are in a profitable trade we should hold on to that trade till the time the share is in the uptrend. But most of the traders do exactly the opposite. When they are in loss, they wait there patiently and while they make some profit in some trade, they immediately take the profit and leave instead of holding onto that profitable trade. This leads to the mounting of losses and no profits as such.
Understanding the fact that stock market trading is a risky business and Mr. Rakesh J is very well aware of it. There were such years in his life where he didn’t make a good amount of money from the market. But he knew that whenever the market rises/ moves from low valuation towards an uptrend and if we invest accordingly, then we are bound to make good money. And he has proved it by doing it several times earlier. As the saying goes, “Strike when the iron is hot.” So if the share is in the uptrend the momentum is also in uptrend and you get a buy signal again for the second time then Rakesh J starts pyramiding there i.e. he starts accumulating the shares there.
Aryaamoney’s ‘Smart Investor Program’ is based on such case studies be it of Rakesh J or Nicolas Darvas, etc. the method that we have charted out to carry out Technical analysis and which we use, based on these and many more case studies is taught in the Smart Investor program. In the year 2016, in the Advisory Championship Competition organized by CNBC, the method which our mentor Mr. Bhuushan Godbole used there to win that championship, as well as the technique that he uses for the past 14 years, is been taught in the Smart Investor Program.
So, do not forget to subscribe to our ‘Smart Investor’ training program which is there in the Aryaamoney app. The app is available on both Google Play Store as well as the iOS App Store. Hurry now & Subscribe to the Smart Investor Program!!!!
Until the next blog…
Happy Trading, Happy Investing!!!
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