How to Avoid Stock Market Losses
- Rohit Musale, CFA
- Jan 15
- 2 min read
I have developed a robust system to avoid unnecessary losses in stocks.
Learn this.
Example:
This is the daly time frame chart of HEG.
They make graphite electrodes.
I have no idea what that is.
Anyways,
On 31 Dec 2025, the stock entered its buy zone with high volume.
I said pass.
I rejected HEG.
In less than 8 days, the stock entered its stop-loss range.
Easily avoided the loss.
The question is:
Why did I reject HEG ?
Its easy.
Did not meet my fundamental criteria.
Too many violations.
Here they are:
1) Latest quarter sales growth < 25%
2) Latest quarter EPS growth < Previous quarter EPS growth
3) ROE < 17%
4) Earnings Stability > 25
5) Annual EPS is not at all-time high
6) Average Annual EPS growth rate is negative
7) Annual EPS has decelerated since past 3 years
8) Margin has decelerated since past 3 years
9) Margin is not at an all-time high
9 violations is too much.
Even with 6 violations, I am out.
I came up with my own fundamental criteria based on what I studied from William O' Neil and Mark Minervini.
I have 100% clarity on what I am looking for.
Clarity allows me to say no to stocks that are not worth my time, money, ideas, energy and attention.
Just because MarketSmith draws a beautiful buy range on the chart, does not mean I will put my money on the line.
I will do my own due diligence.
I will follow my own independent judgement.
The stock breakout failed in this case.
It was a nice cup-with-handle early stage base.
Base 1.
That too with blue dots on the RS line.
Very enticing.
Atleast for a swing trade.
I chose to stay away.
In overall weak market, I prefer to stick to the fundamentally strong stocks.
Clarity allows decisions to become absolute no-brainers.
Why should I spend time studying the technicals of a stock whose fundamentals are poor ?
That too in a weak market.
Regards,
Rohit Musale, CFA
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