Stock Market Day Trading –
What the Advisory firms don’t tell you!!
Blame game in our country is at an all-time
high based on the stock market tips given/received from Advisory firms/amateur day
traders. Sometimes, both are to be equally applauded for the skills and
commitment they showcase but most of the time must also be held responsible for
promising and believing in quick profits.
Competition is intense and ‘it has become a rat race’ is an
understatement. The average pay for individuals has increased many folds when
compared to earlier times enabling them to look out for better liquid
investments. Therefore stock market takes spot among one of the top
investing/trading destinations. Therefore, everyone wants a piece of this large
cake. Sometimes, among the unwelcomed guests could be a Stock Market Advisory Firm.
Let’s take an example of a Stock market advisory
firm named – SureShotTIPS Advisory Services (SST) (Name made up for
illustration purpose).
SST is the firm containing different teams
such as customer service, HR and Analysis. Their main objective is to attract
and retain customers though their Stock Market TIPS on various shares in BSE
& NSE.
·
Objective: To acquire clients and retain them
·
Procedure: Provide tips on share movements of
various companies and gain profitability on the same
·
Result: Either the client makes profit/loss. If
profit is made, it acts as an added advantage for the advisory firm to sell
their services. If the client makes loss, they lose out on them
In order to accomplish their objective,
they start contacting customers and provide them with tips. But not all the
customers are aware of the following incident which may take place.
Let us assume there is a good level of technical
support for State bank of India (SBIN) share at 330. The SST calls 100
customers to provide their view on SBIN. Out of which, they call up 50
customers and ask them to buy the Shares of SBIN as it has a strong technical
support at 330 and remaining 50 customers are asked to go short (Sell) at 330.
Let us look at the two cases which could emerge:
Case
1: If there is a rise in share price of SBIN
Looking at the above statement, it is given
that those who bought the shares are sitting on nice profit and would also like
to liquidate their positions, which means they will be selling and booking
profit. Once this is done, they will be called again and SST makes sure to sell
their services with an advisory fee of 3000 per month. Let us assume even if
20% of these clients get converted, they make an amount of 30,000/- per month. Those
who shorted the stock are making losses and will never be getting a call.
Case
2: If there is a fall in share price of SBIN
If this happens, it is a vice-versa of the
above explanation. Those who shorted are in profits and those who went long
(BUY) are in losses who will not be hearing from the SST again.
The most important factor here is not if
someone made profits/losses, but how the advisory firm is conducting its
business. They say they have a great team of research, if this is true, why did
the other half lose? This can happen with anyone who has a smart phone with a
little hope of making an extra amount.
Therefore, one has to have at least a basic
understanding of technical analysis such as support/resistance before they even
hear to any advisory firm ending up losing their hard earned money. Hope this article
helps! Do let me know your thoughts on this and sharing this might help our
fellow aspiring retail traders. 
