IMPORTANT FOR ALL: My Pipavav trading...as an example

My recent trade in Pipavav will serve as an example to those stuck at high prices in a stock. Read carefully, since no other analyst or investment advisor will show you this technique, with examples:

 

Pipavav fell badly, almost downhill...but at 78-79, its fall became slower, as if it was a bit tired to fall further. I watched its price movement for 2 days and on Monday I had picked up just 200...yesterday I picked up 1800 more and brought down my average price to 76.3. Today I sold off at 84.50, making a profit of Rs 16400 in just 2-3 days.

 

But hold on, this is not the point (my profit in Pipavav) that I want to make. I want to explain a technique that I developed called book-profit-averaging...Imagining that I was stuck at 100 on Pipavav and then I would have done the same thing (as mentioned in blue font above)....essentially buy at a much lower price, from where the stock is poised to bounce back and then BOOK PROFIT ON 2ND LOT at an optimum point, after the bounce back happens...you have to time it by giving suitable buy or sell calls on the system.

 

Remember that booking profits (as against just plain averaging) on the 2nd quantity bought, especially for a weak stock is very important because it serves 2 purposes:

 

1. It brings down my buying price for that bunch of shares I bought at high price and I am stuck with. If I had bought 800 Pipavav at 100 and then had made this profit of Rs 16400 on the same stock, my average buying price on the first stock would come down by Rs 20.5 and my buying price would have become Rs 79.5 from 100....see what I mean..if you would not have sold and booked profits the 2nd time, you have the big risk that the script comes down again and you do not get the same benefit or worse, that you get stuck with both lots of shares.

 

2. The 2nd advantage of book-profit-averaging is that you can do it again 2nd or 3rd time and thus continue to bring down the high buying price for the first lot...and thus allow you to free up your money much faster.

 

I had successfully applied this technique earlier, when I was stuck with TATA STEEL and had to do book-profit-averaging (as I describe above) 5-6 times to finally exit with marginal profits after 1 month of effort.