Sunday, January 31, 2010

How to trade Gap Opening...

Gap openings in the morning can occur due to global market pressures, overnight global or local developments, sectoral or company based news, etc.

Gap openings are of 4 types:-

1) Gap-up opening during short-term uptrend

2) Gap-down opening during short-term uptrend

3) Gap-up opening during short-term downtrend

4) Gap-down opening during short-term downtrend

EXCEPT IN THE END OF THE SHORT-TERM TREND the first and forth are unlikely to be filled. The second and third are likely to be substantially faded or completely (even over).

So the second can be bought, the third can be shorted.

It is assumed that there is no major fundamental-changing development, otherwise gaps are unlikely to be faded or filled.

Positions should be squared off when the gap is filled. Also, larger the opening gap in second and third case, safer the trade.

Half of the gap should be taken as stop loss.

Trading Lessons from Cricket...!

“ Play with a straight bat ”
Learn the trading before trading (seems simple but how many follow it?). Be technically strong.It is important to do the right things rightly, otherwise u "loose ur wicket".

“ Stay at the crease ”
Have patience. You will have ample correct opportunities. don't do a stupid trade and loose so much of ur capital that ur career is finished before starting!

“ Running between the wickets “
Do efficiently what has to be done. don't be slow in encashing oppotunities.

“ Footwork ” -
Take risk, Use your talent. No Risk, No Reward

“ Concentrate on line and length ” -
Consistency is crucial. Discipline in stock trading is boring but is the difference between the Pros and Amateurs...Stick ruthlessly to your trading rules. No questions asked. Enter when there is an Enter signal as per the system. Exit when there is an Exit signal as per the System. Have a Stop loss as per the System. Period.

“ Keep the scoreboard ticking. 1’s and 2’s are also important“ -
Don't miss small profits.they add up big, too!
Tendulkar's century has 60% contribution from 1's and 2's.

“ Save 25-50 runs in fielding ” -
Save brokerage, Earn those extra bits by using bids and limit orders.
Money saved is money earned. It’s compounding effect is huge!”

“ Helmet, Guards, Pads, Gloves” -
Use stop loss. Play with only that much of capital that won't break your back in case something seriously goes wrong (they sometimes do in stock market). Safety net in life is important! Trade sensibly.

“ Don’t get hit-wicket ” -
Beware of stupid, careless and suicidal trading decisions.

“ Build the foundation of innings” -
Concentrate on investing in foundation of ur trading career.
You have to learn to walk before you run and take off

“Rotate the strike“ -
Take small breaks from "Trade batting". Give opportunity to other aspects of life too. Take a breather. this will keep u mentally fit and sharp.

“ Build partnerships ” -
What clicks, keep clicking. Stick to ur tried and tested winning method.

Saturday, January 30, 2010

The Truth behind Technical Indicators...

...I have been using Technical Analyses (TA) to trade since long like all of u. I have found them very useful.

They form the basis as well as reference point for any analyses. They are the scale against which we measure, judge and understand stock and market movements...........

But i have realised that Technical Indicators move because market moves, and not the other way round that 'Markets or stocks move because technical indicators indicate so'. I have seen that Market and Stock movements don't obey Technicals in strict sense.

............So many times i have seen that technical indicators suggest that market or a particular stock should fall. but it doesn't. so far so, that it doesn't fall for a long long time after that also. it keeps on climbing in leaps and bounds even after the technical indicators keep "yelling" behind!!! Technical Indicators keep on running BEHIND the stock price or market movement.

They explain the broad state of affairs but nothing more. They don't command the market. They can explain everything in the market but not dictate it.

Technical Indicators should be called Technical Followers as they indicate less and follow more.

I have written this all to caution all new comers who depend heavily on Technical Indicators to trade and often get mauled.

After losing money they start blaming themselves rather than questioning the TA basis of their decisions.


In Late 2009 and early 2010 rally Technicals couldn't tell when the sugar company stocks would stop rising - THEY ROSE AND ROSE AND ROSE...........,

technicals couldn't explain when the metal stocks would stop rising - THEY ROSE AND ROSE AND ROSE WITH FALLING DOLLAR,..........,

MOVING AVERAGES CROSS OVER WHEN THE STOCK OR MARKET PRICE CHANGES AND NOT THE OTHER WAY AROUND................I have seen people predict the fall at the SMA cross-over only to find it cross over again....making everyone feel like a big fool.............

there are hundreds of examples to prove that technical indicators only hint but don't "indicate" specifics......

they only follow and not lead the price movement.

If u blindly follow technicals, u may get into trouble. Rather, I know many who get into trouble very often. Don't follow technicals blindly.

I AM NOT SAYING STOP FOLLOWING OR LEARNING TECHNICALS. All I am saying is 'Learn to give importance to fundamentals and trend and sentiments and liquidity and mood of the market'................

Start to look beyond TA......if u want to protect ur capital and earn.

The Sun is not revolving around the Earth, it is the other way around!

A secret library at my home...confession of a trader!

I have a big weight on my heart.....a hard-held secret in my heart that wants to come out.....

I want to share with everybody that i have a secret library at my home which i have rarely shared with anyone. today i am revealing it to you all.

this library is different from normal libraries.

It doesn't have books in it but........mistakes. this secret library is full of the mistakes i have committed in stock market in the last 6 years. big and small, stupid and intelligent, novice and professional, knowingly unknowingly,.......

i have preserved all of these with care and love and affection.

i have arranged them all chronologically.

None of them were gifted to me. none came free. i "earned" these all my-self.

Some came cheap, some very costly. I have a collection ranging from Rs.100 to some worth half a lac. But i love them all.

All are international best-sellers as hundreds and thousands in the world have committed them over and over again!

Some of these mistakes have simple story behind them while others had complex storyline which i could grasp only after reading (committing) them a few times!

Some are paper-back (less weighty when they fell on me) while others are hard-bound (which hit me very hard when they fell upon me).

Whenever i pass in front of this secret library, i always stop for a moment, have a long look at my collection and tell myself 'What a collection!! But I must not "buy" the same titles again and waste my hard earned money. Only new ones are welcome, preferably paper-back.'

I am proud of my secret library. I have earned each of the "book" in it. I treasure these for what they have taught me....

Newton's 3 laws in Stock Trading...

Newton's Ist Law of Motion :
An object at rest or motion will remain so unless acted on by an external force.

Application for Stock Trading :

Newton's IInd Law of Motion :
Acceleration is produced when a force acts on a mass.

Application for Stock Trading :

Newton's IIIrd Law of Motion :
For every action there is an equal and opposite reaction.

Application for Stock Trading :

Trading Lesson from James Bond...

What the market IS doing is more important than what it is GOING TO DO.

I have experienced that in stock market, it is safer to assume that the on-going trend is going to continue THAN assuming that it is going to reverse, till it actually reverses...............

Similarly, it is safer to assume that the trend has not started till it actually has. so-many times it has happened that u have taken a reverse position expecting a trend reversal only to discover that it hasn't.

Although u may be right that reversal may be round the corner but it may happen after some time and by that time ur losses may be substantial.

Besides, there are enough signals before the reversal starts.....................

Have mountains of patience before u jump. jump off the sinking ship like James Bond the last second...and sometimes after 1-2 harm in losing peanuts of profit in favour of jumping in the right time!

Even the stop loss becomes in-effective without mastering the art of picking the stock at the extreme and at the edge. Thus, to decide a correct stop-loss u must wait for the exact extreme signal of reversal.

And what better signal of reversal than reversal itself!

Remember...What the market IS doing is more important than what it is GOING TO DO!!!

Friday, January 29, 2010

Traffic Lights of Stock Trading

If Stock Market market is a highway, these are its 3 signal lights:-

1) Green (Entry signal) = Don't enter till u see this signal

2) Yellow (Exit signal) = Don't stop till u see this signal

3) Red (Stop Loss) = Stop when you see this signal

How u decide when & which of these signal lights-up depends upon the trading system u follow. (I hope u have one. not having one is stock trading's no.1 mistake). e.g. rsi cutting 30 from below can be the green signal, it cutting the 70 from above can be the yellow signal.

Similarly, any other technical indicator can serve as these signals.

These lights are important because we enter the trade at wrong time and book profit too early. Also, we don't obey stop loss RED light.

Drive safely...Obey traffic rules.....

Simple & Effective basic method for Day Trading for new players

Take a position in Nifty Futures (or miniNifty, for new comers)
WHEN the risk is minimum,
ON THE SIDE where risk is minimum

Book profit anytime when u r happy with the profit.
Play with only that much money which u won't mind losing.

Follow this method like a machine, NO QUESTIONS ASKED, zero emotions..................

I have seen this simple technique work 7-8 out of 10 times.......................

Remember, the risk is minimum when
a) with the trend or
b) opposite to the antitrend-stretch

Using this technique all new comers can use to wet and set their feet in the stock market.

Starting with stocks in DT is dangerous than starting with nifty. because nifty is average of all and evens out the shocks.

Keep improving this technique as per ur own style, learning and experience....

don't keep changing the method too often or at the drop of the hat.....

Have courage to lose it you want to profit.....Remember, there is always 50% chance of winning..

Treat loss as the fees u pay to learn and master the technique. i have seen people pay 50 lacs for MBA!!!

Bottom Switching Technique to profit even when u r stuck with bad long positions in a falling market

I have noticed that quite a few of fellow traders are stuck up in long positions in this severely falling market.

I can understand their feelings as I have gone thru this phase earlier. The fear of further slide must be creating panic waves in them.

For them, I share my technique here to reduce this pain.

I call this technique "Bottom Switching".

I have successfully used this technique many times in the past. However, to fully grasp the finer points. I request ur full attention and participation for clarifications, if any.

Pl note: this technique will not give you money profit (immediately) but will give you stock profit almost immediately, even in the falling market and even when u r stuck with bad long positions.

Before I share the technique, pl first read this article (which i posted recently):-

Title: gaining money v/s gaining stock

When u r in the market, u gain profit, and when u r out of the market u gain stocks. e.g. If u bought 1000 suzlon in 95 for Rs.95000/- and if it were to go up to 125 u gain Rs.30000/-. On the contrary if u can anticipate the fall and get out at 95, u could buy 1266 suzlon shares in the same Rs. 95000/- at CMP 75, thus earning 266 shares (26.6% return). So, if u r sitting on cash don't be in a tearing hurry to buy. because u are still gaining - stocks!!!

Now for the explanation of "Bottom Switching":

Suppose u opened long positions at Rs.100 in a stock A of sector S1 before the markets started falling from Nifty level 5280.

Lets say that stock has fallen 7% to 93 when the market has fallen 5% to 4850. Lets suppose the markets are likely to fall more (say 4550) and so will your stock A.

Obviously you have 2 options, first to stay fastened to the stock belt and go down with the sinking Submarine hoping to come up later in good times. this may get ur money stuck for medium to long term.....

Now here is the third option of "bottom Switching" =

Look for stock B or C or D or E...etc. from the same sector S1 which have fallen more in terms of percentage from the day u bought stock A. e.g. lets assume that stock B (which belongs to the same sector S1 to which stock A belongs), has fallen 12% from (say) 100 to 88 (rememeber, A fell 7% from 100 to 93 in the same period).

As per this "bottom Switching" technique, sell A at 93 and with that money buy B at 88. If u sell 1000 of A at 93, you can buy 1056 of B at 99 with same money, therby earning 5.6% even when the market is falling and even when u r stuck with bad long positions.

After this, u look for another stock out of C,D,E,F...etc. to do "Bottom Switching". Don't worry about fundamentals.

I did this switch from Maruti to Tata Motors last year when fundamentals of Tata Motors were very poor as compared to Maruti. I gained heaven's lot due to this "Bottom Switching".

This technique is based on technicals and not fundamentals. After a series of Bottom Switchings, u will end up gaining a huge percentage of stocks.

These will get converted into money as the market turns around. This way, you earn not just when the market is going up but also when market is going down (even when u r stuck in bad losing long positions).

All, u have to do is 1)change ur mental setup where u look only for money gain, to when stock gain is equally important. e.g. u leave home in the morning with 100 rs in your pocket and 100 shares in ur bag. Wouldn't it be equally profitable day if you come home with 100 rs and 115 (equivalent) shares!

Thursday, January 28, 2010

4 mental states of a trader

There are 4 (psychological) kinds of stock traders:-

1) Those who make profit and are happy,

2) those who make profit but are still unhappy,

3) those who lose and are unhappy,

4) those who lose but are still happy.

The first and third ones are Amateurish, second ones are Sadistic while the forth ones are "likely-to-be professionals".

Profit from method is a one way phenomenon. It comes and rarely goes. Profit from Luck is a 2-way phenomenon.

Importance of risk taking in stock trading

stock market risks are of 4 types:-

1) blind, with stop loss
2) studied risk at extreme point, without stop loss
3) studied risk at extreme point, with stop loss
4) blind, without stop loss

the first is Immaturish, the second is Amateurish, the third is Professional, while the forth is outright Suicidal.

risk is always there but at a certain point it is the least. that is the point where risk should be taken, and must be taken.

Without taking risk u can never win big. rather u can hardly even win. when the risk is zero, everyone is noticing that. Even punters are! It is a trap!!! Profit is maximum when risk is there and so is uncertainty.

4 types of trader-psychology in a relief rally

There are 4 camps of trader-psychologies in a relief rally:-

1) One is of the opinion that the market correction is over and hence they will start taking long positions,

2) Second camp (those who were trapped in the market with long positions) is of the opinion that they have got a chance to get out of the falling market in this relief rally with lesser losses,

3) Third camp (brothers of Second camp) is of the opinion that although their losses will get reduced due to this relief rally but they will not get out with the hope of recovering all their losses,

4) Forth camp is of the opinion that they have got a chance to again short the market at high points of this technical dead cat bounceback, anticipating the continuation of the falling trend.......

Finally there will be a punters' camp which will be watching every other camp and try to win by trapping everyone.

Punters don't react to the market but react to the reactions of others in the market.....

none of the 4 camps discussed above are wrong, because no one is sure about the future.....

so whatever u do in the dead cat bounce or relief rally in falling trend, do it with full awareness. Do it with full safety precautions.

Wednesday, January 27, 2010

4 kinds of stock market "experts"

there are 4 kinds of stock market "experts" :-

1) those who have explanation of everything BEFORE the things have happened but are WRONG,

2) those who have explanation of everything BEFORE the things have happened and are RIGHT,

3) those who have explanation of everything AFTER the things have happened but are still WRONG,

4) those who have explanation of everything AFTER the things have happened and are RIGHT!

While the first types are honest Amateur "experts", the second types are Mature "experts", the third types are Immature "experts", the forth ones are plain fakes!

4 kinds of opportunities

There are 4 kinds of opportunities:-

1) The one you missed but would have resulted in loss,

2) the one you caught and resulted in loss,

3) the one you missed and would have resulted in profit,

4) the one you caught and resulted in profit.

While the first one is 'being fortunate', the second and third one is 'being unfortunate', and the forth one is arrongant unsettling "stroke of a genious".

Neither of these four are worth a penny if they don't yield a lesson or method or experience; but ALL four are worth a fortune if they do!

4 kinds of winners and losers

There are 4 kinds of winners and losers in the stock market:-

1) those who profit in the stock market but are not sure about the real repeatable reason,

2) those who lose but are not sure about the real stoppable reason,

3) those who proft and know the real repeatable reason, and

4) those who lose and know the real stoppable reason.

While the first and second ones are Amateurs, the third and forth ones are Matures.

4 kinds of trader reactions in shaky markets

I have noticed that there are 4 kinds of traders on the basis of their reactions in very shaky markets:-

1) Those who don't accept what is happening in front of their eyes (are in self-denial mode), but stay calm,

2) those who accept the reality (are not in the self-denial mode) and stay calm,

3) those who accept the reality but are still impatient, and

4) those who don't accept what is happening in front of their eyes and are impatient.

While the first ones are Immatures, the second ones are Matures, the third ones are Amateurs and the forth ones are plain Foolish.

4 kinds of followers

I have notices that there are 4 kinds of traders depending upon who and how they follow others:-

1) those who pick and choose whom to follow on the basis of some criteria, and then apply their own brains too,

2) those who follow the one whom they see many others are following but then apply their own brain also,

3) those who pick and choose whom to follow on the basis of some criteria and then follow them blindly,

4) those who follow the one whom they see many others are following and then follow them blindly.

While the first are Mature ones, the second are Amateurs, the third ones are Immatures and the forth ones are plain Foolish.

4 kinds of traders in crumbling markets

I have notice that there are 4 types of traders in the market in these troubled waters:-

1) those who don't know what is happening and are staying aside,

2) those who know what is happening and are staying aside,

3) those who know what is happening but still trying to do "something",

4) those who don't know what is happening and still trying to do "something".

The first ones are Amateurs, the second ones are Matures, the third ones are Immatures and the forth ones are plain Foolish.

gaining money v/s gaining stock

When u r in the market, u gain profit, and when u r out of the market u gain stocks. e.g. If u bought 1000 suzlon shares in 95 for Rs.95000/- and if the share price were to go up to 125 u gain Rs.30000/-. On the contrary if u anticipate the fall and get out at 95, u could buy 1266 suzlon shares in the same Rs. 95000/- at Rs.75, thus earning 266 shares (26.6% return).

So, if u r sitting on cash don't be in a tearing hurry to buy. because u are still gaining - stocks.

Tuesday, January 26, 2010

Why does the stock price move up or down?

when the buyer is more desperate to buy the stock and the seller is not too excited at the price being offered, the buyer ups the offer and hence the price goes up.

similarly, when the seller is more desperate to sell and get out of the stock and the buyer is not interested in the stock at that price, the seller downs the offer-price and hence the price comes down.

for every buyer there is a seller and vice-versa.

difference of opinion between people in the stock market on whether the stock price will go up or come down is a blessing. Otherwise, few will want to buy the stock if everyone believed it is going to go down; and few would want to sell the stock if everyone believed it is going to go up.

this is the reason that whenever there is division of opinion, the trend continues, and whenever their is unanimous opinion of reversal, reversal happens.

those who believe stock price is going to go up (and hence they stand in the buyers' queue) are known as bulls (bull attacks by horns resulting in upthrow), while those who believe that stock price is going to go down (and hence they stand in the sellers queue) are called bears (bear attacks by bringing the victim down).

markets never move in a straight line except in extreme situations. otherwise there is always a tussle going on between bulls and bears.

A trader can be a bull and bear at the same time. e.g. u may believe that stock ABC will move up and XYZ will move down. bulls and bear are always present in the market. they keep on having the upper hand turn by turn. when amongst the bulls, be a bull; and when amongst the bears, be a bear.

Go with the trend. Don't be a bull-fighter or a bear-wrestler...

Sunday, January 24, 2010

"Step Down Bluff" Day Trading Technique

1) Select any High volume stock (or Nifty Futures)

2) Which makes a sharp (not too small fall) pencil heel v-shaped pointed low anytime before 11.30am but not before 9.25am (Lets call this point L)

3) And starts to rise after making that sharp pointed low.

4) This stock (or Nifty Futures, as the case may be) will always retrace to atleast that lowest point L

5) So you can short that stock at any "substantially" high point. you can try this out on any stock on intraday chart in back date ( is good chart site) before actually applying this. (Pl read the detailed explanation / discussion below to understand the finer points of the technique).

* This point L has to be substantially lower than the day's opening.

* About entry point = Enter in steps after (say) every 0.3%.

I have noticed that (as an extension of this technique) if the LOWEST sharp pencil heel base/foot is formed after 11:30am (later the better), it is a reasonably safe point to go intraday long.

Why this technique works =

1)If there is a SHARP & STRONG selling pressure in the early part of the trading day AND the stock starts to rise on a single pencil heel base, the rally is just a technical unsustainable rally.

This rally is basically due to many many traders (rather prematurely) jumping in to "buy at dips/support". Seeing these early buyers, others jump in too....later the rally becomes unsustainable and hence a sell-off.

In his technique, that stock should be avoided which is very strong in those days.
The reason is simple = these stocks might have seen strong and sharp morning sell-off due to weakness in the index but are intrinsically strong enough . Their morning sell-off is, therefore, unsustainable and hence no surprise if these fly away even on a single pencil heel v-shaped foot. Other not-so-strong and weak stocks WILL follow this technique.

One of my friend's sister is pilot with Kingfisher. He said = my sister tells me that the most crucial time for a pilot is "a few minutes of take-off and a few minutes of landing". These are CRITICAL. Rest is a simple routine affair.

Similarly, in this technique, the most crucial and decisive part is at the "take-off".

So, Check...

1)whether there is a sharp and strong sell selling pressure in the early part of the trading day?.....

2)whether it is well within the time boundaries (otherwise the false rise rally is not that false).....

3)whether the stock chosen has intrinsic strength....

4)whether it is a clear, well defined single pencil-heel v-shaped foot base?....

Unlike aeroplanes, in this technique (while shorting), crash landing is desirable and highly profitable...and only take-off is critical....not difficult, though.

Also, unlike aeroplane, in this technique u enter the plane after the takeoff, at a "sufficiently" high (preferably highest point). The only thing to be taken care of is to enter only in the RIGHT plane which has taken-off AS PER THE RULES of the technique.

Is shorting unethical?

price can be realistic only when both sellers and buyers are forceful. look at what is happening to sugar price. Shorters of sugar futures could have brought the prices down...Shorters are necessary. They look like villain but they are not. Rather they are savers. Look at steel/commodity stock prices...somebody needs to short it....Japanese are bit relieved as people started shorting yen against dollar......shorting is critical to maintain balance.....u don't know what one sided bulls can do to our lives....harshad's and ketan's.........

root cause of killer emotions (trader's no.2 enemy?)

the no.1 enemy being "Lack of a fixed Trading System which u follow day-in and day-out without asking any questions".

but here, let's have a look at the root cause of emotions:-





peer pressure

mental accounting

fear of loss

denial of reality


memories and experiences

criticism, fear of criticism

appreciation, yearning of appreciation

poor self-image


news, news channels


...beware of all these

"Individuals who cannot master their emotions are ill-suited to profit from the investment process" - Benjamin Graham

"Investors should remember that excitement and expenses are their enemies." - Mark J. Perry

Fear paralyses you and Greed pushes you in the trap. It is critical to keep both these pet hounds locked in the other room when you are trading.Traders should be emotionless machines trading on the decisions taken as per some algorithm (system).

emotions don't let yout take the RIGHT decision.

There is always 50% chance of winning in share trading. Because it will either go up or go down, no third direction. So why is it that people lose more than 50%? Why do people profit small and lose big? -- It is because of emotions. We are our biggest friends as well as foes. your emotions got you into this trade, that's all, don't take these inside.Prayers and Emotions have no place inside stock market.

holy lessons in share trading...

* Trend is your friend - Not just a friend but wife...go against her and your peace is gone!!!

* Only have that much of money on the table which you can afford to lose - better become rich a bit late than never!

* Stop loss- when things go wrong beyond your expectations, there is something wrong which you don't know...losing big on the stop loss side is not cool! Stop loss is like a life jacket...wear it and swim the trade fearlessly.

* Keep emotions out- just keep emotions out.

* Think as if u are trading for someone else - u have to give reasons to him for every trade u made. This will encourage u more to follow ur trading plan

* Maintain a diary wherein "write 2 lines about why u r buying (or shorting)every stock u buy (or short)"..... just 2 lines (because if you can't explain in 2 lines, the reason is likely to be lousy. the reasons can be anything - like 1)it is in the oversold territory , or 2) it has been recommended by so and so reputed analyst, etc. etc.........................this will help in 2 ways...first, u won't buy just on hunch/gut feeling...u will buy for a solid reason...when u r writing the reason, u might see the flaw in the trade..........secondly, you will trade more confidently....i got this idea from an interview i saw on bloomberg utv.

* Buy on Support, Sell at Resistance; Buy the sun, Sell the rain! Buy at cannons, sell on trumpets! Buy on rumours, Sell on news!

* The longer a pattern takes to form, the longer the new trend is likely to last. Previous trend is in force until proven otherwise.

* Biggest winners are those who take the risks (studied risks with strict stop losses).

* Have a trading system/rules, implement them blindly and ruthlessly and without questions or emotions, cut loss small, increase profit to max, keep positions small, keep improving your method

* It's not about money, honey! = more than the money gained or lost, what's important is the victory or loss of the method you used in that trade

* Price has memory. What happened the last time a stock hit a certain level? Chances are it will happen again.

* Profit and discomfort stand side by side. Find the setup that scares you the most. That’s the one you need to trade. Don’t expect it to feel good until you take your profit. If it did, everyone else would be trading it. Wisdom from the East: What at first brings pleasure in the end gives only pain, but what at first causes pain ends up in great pleasure. One word of caution : use strict but intelligent stop loss.

* Stand apart from the crowd at all times. Trade ahead, behind or contrary to the crowd. Be the first in and out of the profit door. Your job is to take their money before they take yours. Be ready to pounce on ill-advised decisions, poor judgment and bad timing. Your success depends on the misfortune of others.

* Buy the first pullback from a new high. Sell the first pullback from a new low. Trends often test the last support/resistance before taking off. Trade with the crowd that missed the boat the first time around.

* Short rallies, not sell-offs.

* Control risk before seeking reward. Attention to profit is a sign of immaturity, while attention to loss is a sign of experience. The markets have no intention of offering money to those who do not earn it.

* Big losses rarely come without warning.

* Bulls live above the 200-day moving average, bears live below.

* Perfect patterns carry the greatest risk for failure. Market mechanics work to defeat the majority when everyone sees the same thing at the same time. When perfection appears, look for the failure signal. the obvious is obviously wrong.

* Trends rarely turn on a dime. Reversals build slowly. Investors are as stubborn as mules and take a lot of pain before they admit defeat.

* Have a life outside the market- you know what i mean! Market is not everything. There is life outside the market also. Markets are for life not the reverse...

how i first started nifty futures trading...

1) first, learn nifty futures trading with mini nifty, where u need 10000-12000 hold, net leveraged amount is around 1 lac. don't start with full nifty lot or multiple thereof straightaway till you are reasonably "expert" and can afford that much risk.

2) one way to trade is to buy mininifty at support and sell at resistance. support and resistance level can be had from the several discussions on mudraa and all business tv channels....

3) alternatively buy mininifty on "higher lows" and sell on "lower highs". (Higher lows generally indicate that the price is going higher and lower highs indicate that price is most likely going down). book profit at 0.5% to 1.5% as per your comfort level.(This rule to be followed only as long as you are "expert" and have other ideas). Remember: Immediately square off and book small loss if your stop loss is hit or when u get the first feeling that the things are not going your desired way. typically, stop loss should be 0.25% (till you are "expert"). 2 out of 5 times you may have to book small loss. rest 3 times you are likely to get medium to big profit. I call "stop loss" as tripper. Trade like a machine. no emotions pl. Ruthlessly emotionless!!!

4) alternatively, you may buy mininifty on rising triangle and sell on falling triangle. learn about this from net by searching for these terminologies in google. this is a very reliable method.

5) you must trade with spare money which if lost all, will not drive you to crisis.

6) Golden rule; Take risk. No risk, no profit. Take studied risk, if it goes wrong, cover fast, if it goes right, dare to win big till what u r gaining is "big" for you. you never go broke by booking profit. play small till you are "expert". be "expert" but dont be overconfident.

Trends and Ranges

Mercifully, sensex and stocks have only 2 dimensional space to move. At any given time, it can either go up or down. Also, it can't move up or down without trends.

Trends can be shortlived or long but trends have to be there. Sensex can't move up or down more than 1-2% while consolidating or ranging.

So, the obvious lesson is to avoid the rangings and wait till the trends surface AND THEN RIDE THEM.

In a bull run, +ive trend continues from 7 to 3 months depending upon the stage of the bull run (later the faster) while corrections can continue from 1 month to 15 days depending upon the stage of the overall bull run (later the slower).

Similarly, in a bear rally, falls continue for around 2-2.5 months while pull-up relief rallies from 1-1.5 months.

The pity is majority retail traders are hyper active in rangings and late entrants in trends. Actually, they burn their fingers deeply in rangings so much so that they don't notice or enter the trend because of fear.

Advance RSI interpretation

1) When Price is flat, RSI is going down = Price will go down if RSI is in middle of (0-100) range and go up if RSI is down.

2) When Price is going up and RSI is flat = Price will be range bound if RSI is in the upper band, Price will consolidate or go up if RSI is in the middle range, Price will go up if RSI is in the low range.

3) If Price is flat and RSI going up = Price will go down if RSI is in the upper zone and remain range bound if RSI is in the middle range.

4) If Price is going down and RSI is flat = Price will go down if RSI is in the upper zone, Price will go down or consolidate if RSI is in the middle range, Price will go up if RSI is in the lower band.

5) If price and rsi are going in the opposite direction, trend reversal may be there.

6) If price and rsi are both flat, trend reversal may be there.

7) If both price and rsi are either rising or both are falling, the trend is likely to be strengthened.

During Bull rallies, RSI boundaries should be taken as 80-40, 60-20 during Bear rallies and 70-30 during range-bound times.

Saturday, January 23, 2010

Favourite Quotes

Warren Buffet
“You only have to do a very few things right in your life so long as you don't do too many things wrong.”

It's not about the amount, its about %age

There is always 50% chance of winning…!

Warren Buffet
“Two rules:
1. Preserve the principal
2. When in doubt see Rule #1”

Warren Buffet
“I don't look to jump over 7-foot bars: I look around for 1-foot bars that I can step over.”

Warren Buffet
“You do things when the opportunities come along. I've had periods in my life when I've had a bundle of ideas come along, and I've had long dry spells. If I get an idea next week, I'll do something. If not, I won't do a damn thing.”

Benjamin Graham
Individuals who cannot master their emotions are ill-suited to profit from the investment process

Benjamin Graham
Many sceptics, it is true, are inclined to dismiss the whole procedure [chart reading] as akin to astrology or necromancy; but the sheer weight of its importance in Wall Street requires that its pretensions be examined with some degree of care.

Peter Lynch
Just because the price goes up doesn't mean you're right. Just because it goes down doesn't mean you're wrong. Stock prices often move in opposite directions from the fundamentals but long term the direction and sustainability of profits will prevail.

Marc Faber
A bear market is a financial cancer that spreads. Intermediate rallies (occasionally very strong ones) keep the hopes of investors alive. Furthermore, by continuously publishing bullish reports, brokers and economists, like good nurses, keep the flame of hope from burning out. But after 18 to 36 months of continued losses, total capitulation usually sets in and a major low occurs.

Marc Faber
A mania is a mania, and the experts are caught in it just as the public is.

Peter Lynch
The person that turns over the most rocks wins the game. And that's always been my philosophy

Peter Lynch
When stocks are attractive, you buy them. Sure, they can go lower. I've bought stocks at $12 that went to $2, but then they later went to $30. You just don't know when you can find the bottom.”

Warren Buffet
Most people get interested in stocks when everyone else is. The time to get interested is when no one else is. You can't buy what is popular and do well.

Warren Buffet
Diversification may preserve wealth, but concentration builds wealth.

Warren Buffet
As far as I am concerned, the stock market doesn't exist. It is only there as a reference to see if anybody is offering to do anything foolish.

Warren Buffet
John Maynard Keynes essentially said, don't try and figure out what the market is doing. Figure out a business you understand, and concentrate.

Warren Buffet
All there is to investing is picking good stocks at good times and staying with them as long as they remain good companies.

Warren Buffet
When management with a reputation for brilliance tackles a business with a reputation for poor fundamentals, it is the reputation of the business that remains intact.

Warren Buffet
Diversification is a protection against ignorance. It makes very little sense for those who know what they're doing.

Warren Buffet
If you aren't willing to own a stock for ten years, don't even think about owning it for ten minutes.

Warren Buffet
A pin lies in wait for every bubble and when the two eventually meet, a new wave of investors learns some very old lessons.

Ralph Wanger
Small is good, micro is not. For the littlest companies, it's like auditioning for the chorus line: one misstep and you're out.

John Maynard
To carry one's eggs in a great number of baskets without having the time or opportunity to discover how many have holes in the bottom, is the surest way of increasing risk and loss.

David Dreman
Psychology is probably the most important factor in the market – and one that is least understood.

John Templeton
Invest at the point of maximum pessimism

Thomas Rowe
It is better to be early than too late in recognizing the passing of one era, the waning of old investment favorites and the advent of a new era affording new opportunities for the investor

Thomas Rowe
No one can see ahead three years, let alone five or ten. Competition, new inventions - all kinds of things - can change the situation in twelve months

John Neff
I've never bought a stock unless, in my view, it was on sale

Bill Miller
100% of the information you have about a company represents the past, and 100% of a stock's valuation depends on the future

Bill Miller
Usually the markets are too pessimistic when it's bad, and too optimistic when it's good.

Bill Miller
What we try to do is take advantage of errors others make, usually because they are too short-term oriented, or they react to dramatic events, or they overestimate the impact of events, and so on

Rakesh Jhunjhunwala
Traders should go against human nature.

Rakesh Jhunjhunwala
Greedy investors will never make money in stock markets. Book profits after reaching your target price.

Trend is your friend.

You not only make money when u r in the market but also when u r out!

Bernard Baruch
Even being right three or four times out of 10 should yield a person a fortune if they have the sense to cut losses quickly.

Jesse Livermore
Throughout all my years of investing I've found that the big money was never made in the buying or the selling. The big money was made in the waiting.

Gradual Climbs and Shifts are sustainable. Spikes aren't and will be reversed.

The more certain the crowd is, the surer it is to be wrong.

Warren Buffet
Occasionally, successful investing requires inactivity.

Warren Buffet
In this game, the market has to keep pitching, but you don't have to swing. You can stand there with the bat on your shoulder until you get a fat pitch.

Warren Buffet
I will tell you the secret of getting rich on Wall Street. You try to be greedy when others are fearful, and you try to be very fearful when others are greedy.

Don Warden
Price is king, but volume is the power behind the price.

Peter Lynch
Just because the price goes up doesn't mean you're right; just because the price goes down doesn't mean you're wrong.

Warren Buffet
Only buy something that you'd be perfectly happy to hold if the market shut down for ten years.

Donald Trump
Experience taught me a few things. One is to listen to your gut, no matter how good something sounds on paper.

Donald Trump
The second is that you're generally better off sticking with what you know.

Donald Trump
And the third is that sometimes your best investments are the ones you don't make.

A bull market is one that can shake off bad news.

A bear market is one that cannot rise even on good news.

Buy to the sleeping point. [If you are troubled about making an investment but still feel the need to make it, make the smallest possible investment that leaves you feeling like you've 'dealt' with the need and can calmly sleep at night.

Catch a falling knife -- something you don't want to do. The idea is that if something is falling you could get hurt trying to catch it in mid-flight. Better to let it stop falling and pick it up safely.

Cash is king -- implies that the downside risk with bonds or stocks or commodities is excessive.

Paul Sameulson
Economists are good at predicting recessions. They've predicted eight of the last three.

If the stock can double in 3 months, you still have got 25% pm!!!

Ned Davis
Sell in May and buy them back in November

When even a good stock dips unexpectedly, 'convert' it into an FD / ELSS / SIP

Warren Buffet
I never try to predict the market.

Peter Lynch
I deal in facts, not forecasting the future. That's crystal ball stuff. That doesn't work.

Peter Lynch
The person that turns over the most rocks wins the game.

Peter Lynch
People spend an unbelievable amount of mental energy trying to pick what the market's going to do, what time of the year to buy it. It's just not worth it.

Can you imagine India without Mobile phones? 3G hasn't come here as yet neither has convergence! And these will open the Pandora's box!!

Share prices depend on Fundamentals, Sentiments and Demand & Supply. Have faith in fundamentals and exploit the sentiments, demand & Supply!!!

Wu-Wei; Don't fight, don't crib; Take advantage

Rene Rivkin
When buying shares, ask yourself, would you buy the whole company?

Safety is more important than Multiplication. You may not figure in the top 100 earners but you won't figure in the negative list ever as well! You'll have the

last laugh. Slow and steady will win the race in leaps in bounds!! Rags to Riches to Rags to Pauper is a horrible strategy! The growth has to be impressive but

with total absolute safety. The power of compounding will make even small gains of a safe and steady player big! Stunts without safety is stupidity. Longetivity is the key!

Warren Buffet
Only buy something that you'd be perfectly happy to hold if the market shut down for 10 years.

Peter Lynch
I spend about 15 minutes a year on economic analysis... I also spend 15 minutes a year on where the stock market is going.

John Bogle
We investors as a group get precisely what we don’t pay for. So if we pay nothing, we get everything (on the advantages of minimizing expenses).

Enjoy the game. Play with a straight bat. Have good running between the wickets. Punish the bad ball….Forget about the profits. They will come automatically and in abundance.

Pick any stock. And you can make money if you just buy on dips and sell on tops. Provided you have the skill to spot them. Keep that stock milking. Don't panic. Don't book loss. Have patience & play out the complete cycle.

The indomitable rush to get rich super fast leads to the madness like Day Trading and excessive trading. It's like the mongoose-snake fight or like trying to catch a hen! It is counter productive. It raises a lot of dust but the end result is not worth it!

Warren Buffet
There seems to be some perverse human characteristic that likes to make easy things difficult. It is not necessary to do extraordinary things to get extraordinary results!

Warren Buffet
The business schools reward difficult complex behaviour more than simple behaviour, but simple behaviour is more effective.

Warren Buffet
Never invest in a business you cannot understand.

Warren Buffet
Remember that the stock market is manic depressive.

In stock market, less action and good timing are decisive qualities!

Warren Buffet
Buy a business, don't rent stocks!

Warren Buffet
Stop trying to predict the direction of the stock market, the economy, interest rates, or elections.

Warren Buffet
I never attempt to make money on the stock market. I buy on the assumption that they could close the market the next day and not reopen it for five years.

Warren Buffet
As far as you are concerned, the stock market does not exist. Ignore it.

Warren Buffet
The ability to say 'no' is a tremendous advantage for an investor.

Warren Buffet
Most people get interested in stocks when everyone else is. The time to get interested is when no one else is. You can't buy what is popular and do well.

A little progress everyday, adds upto big results!

Always remember the compunding effect!!!

Warren Buffet
Our favourite holding period is forever.

Warren Buffet
Your premium brand had better be delivering something special, or it's not going to get the business.

Warren Buffet
Unless you can watch your stock holding decline by 50% without becoming panic-stricken, you should not be in the stock market.

Warren Buffet
The critical investment factor is determining the intrinsic value of a business and paying a fair or bargain price.

Warren Buffet
Risk can be greatly reduced by concentrating on only a few holdings.

Warren Buffet
Much success can be attributed to inactivity. Most investors cannot resist the temptation to constantly buy and sell.

Warren Buffet
Lethargy, bordering on sloth should remain the cornerstone of an investment style.

Warren Buffet
An investor should act as though he had a lifetime decision card with just twenty punches on it.

Warren Buffet
It is more important to say 'no' to an opportunity, than to say 'yes'.

Warren Buffet
It's far better to buy a wonderful company at a fair price than a fair company at a wonderful price.

Warren Buffet
Look at market fluctuations as your friend rather than your enemy; profit from folly rather than participate in it.

Warren Buffet
Great investment opportunities come around when excellent companies are surrounded by unusual circumstances that cause the stock to be misappraised.

Warren Buffet
When the stock is going down it is the best time to buy it; and when the stock is moving up, that's what you wanted!

Peter Lynch
The investor’s chief problem-and even his woarst enemy is likely to be himself.

Charles D Ellis
Market Timing is a wicked idea. Don’t try it ever.

John Maynard
Markets can remain irrational longer than you can remain solvent

French Proverb
Buy on the cannons, sell on the trumpets.

Robert D. Arnott
Design a portfolio you are not likely to trade… akin to premarital counseling advice; try to build a portfolio that you can live with for a long, long time.

Don Hays
Emotions are your worst enemy in the stock market.

Today the company is in problem. So it's fundamentals are strained, stock demand is far less than supply and the sentiment is down. Since the management is competitive it will fix the problem in due course and then fundamentals, demand as well as sentiment all will be up and so will be the stock price. In first situation, the stock is available at discount while in the second case, the stock is available at premium. The best time to buy a stock is in the first situation.

Robert Wibbelsmen
The problem with the person who thinks he’s a long-term investor and imperivous to short-term gyrations is that the emotion of fear and pain will eventually make him sell badly.

Mark J.Perry
You pay a very high price in the stock market for a cheery consensus. Uncertainty is the friend of the buyer of long-term values.

Mark J.Perry
The most common cause of low prices is pessimism. We want to do business in such an environment, not because we like pessimism but because we like the prices it produces.

Mark J.Perry
It's optimism that is the enemy of the rational buyer.

Mark J.Perry
Most people get interested in stocks when everyone else is. The time to get interested is when no one else is. You can't buy what is popular and do well.

Mark J.Perry
Investors should remember that excitement and expenses are their enemies.

Mark J.Perry
The stock market is designed to transfer money from the active to the patient.

Mark J.Perry
If you don't feel comfortable owning something for 10 years, then don't own it for 10 minutes.

The obvious is obviously wrong.

Market has the uncanny ability of doing the exact opposite of what the majority of investors expect of it.

If a good company in bad times can bounce back, no investment like it!!!

George Soros
Markets are constantly in a state of uncertainty and flux and money is made by discounting the obvious and betting on the unexpected.

George Soros
Stock market bubbles don't grow out of thin air. They have a solid basis in reality, but reality as distorted by a misconception.

John Templeton
The time of maximum pessimism is the best time to buy and the time of maximum optimism is the best time to sell.

I am surprised people are happily willing to wait for 1 year in FD, 3 year in ELSS etc. but not in equity!

Warren Buffet
Newton's Fourth Law of Motion: For investors as a whole, returns decrease as motion increases.”

Bulls and bears may make money, but hogs just get slaughtered!

Don't marry your stocks

Warren Buffet
It's only when the tide goes out that you learn who's been swimming naked.

Ralph Seger
One way to end up with $1 million is to start with $2 million and use technical analysis.

Sell in May and buy back in November.

The stock market will always do whatever makes the greatest number of people look foolish.

Warren Buffet
Wall Street makes its money on activity. You make your money on inactivity.

Peter Lynch
Thousands of experts study overbought indicators, oversold indicators, head-and-shoulder patterns, put-call ratios, the Fed's policy on money supply, foreign investment, the movement of the constellations through the heavens, and the moss on oak trees, and they can't predict markets with any useful consistency.

Philip Fisher
I have owned one stock since 1969, two since 1988 and one I started buying in 1986 or so. That's my portfolio. Six stocks. I once owned 17, but that was way too much.

Christopher Browne
Value stocks are about as exciting as watching grass grow. But have you ever noticed just how much your grass grows in a week?

David Dreman
Investors repeatedly jump ship on a good strategy just because it hasn't worked so well lately, and, almost invariably, abandon it at precisely the wrong time.

Philip Fisher
If the job has been correctly done when a common stock is purchased, the time to sell it is almost never.

Warren Buffet
Investing is simple, but not easy.

Warren Buffet
Price is what you pay, and value is what you get.

Warren Buffet
Investors making purchases in an overheated market need to recognize that it may often take an extended period for the value of even an outstanding company to catch up with the price they paid.

Warren Buffet
Never count on making a good sale. Have the purchase price be so attractive that even a mediocre sale gives good results.

Warren Buffet
If you're an investor, you're looking on what the asset is going to do, if you're a speculator, you're commonly focusing on what the price of the object is going to do, and that's not our game.

Warren Buffet
We will reject interesting opportunities rather than over-leverage our balance sheet.

Warren Buffet
If you expect to be a net saver during the next 5 years, should you hope for a higher or lower stock market during that period?"Many investors get this one wrong. Even though they are going to be net buyers of stocks for many years to come, they are elated when stock prices rise and depressed when they fall."This reaction makes no sense. Only those who will be sellers of equities in the near future should be happy at seeing stocks rise. Prospective purchasers should much prefer sinking prices.

Warren Buffet
I call investing the greatest business in the world because you never have to swing. You stand at the plate, the pitcher throws you General Motors at 47! U.S. Steel at 39! and nobody calls a strike on you. There's no penalty except opportunity lost. All day you wait for the pitch you like; then when the fielders are asleep, you step up and hit it."

Warren Buffet
Diversification is a protection against ignorance. It makes very little sense for those who know what they're doing.

Warren Buffet
When a management with a reputation for brilliance tackles a business with a reputation for bad economics, it is usually the reputation of the business that remains intact.

Warren Buffet
Risk comes from not knowing what you're doing.

Warren Buffet
If a business does well, the stock eventually follows.

Warren Buffet
The most important quality for an investor is temperament, not intellect... You need a temperament that neither derives great pleasure from being with the crowd or against the crowd.

Warren Buffet
I never buy anything unless I can fill out on a piece of paper my reasons. I may be wrong, but I would know the answer to that. “I’m paying $32 billion today for the Coca Cola Company because...” If you can’t answer that question, you shouldn’t buy it. If you can answer that question, and you do it a few times, you’ll make a lot of money.

Warren Buffet
Someone's sitting in the shade today because someone planted a tree a long time ago.

Warren Buffet
Successful investors will never follow herds and go against tide

U can't be a winner in stock market without this tool

= SL (Stop loss)..........Because, u can't make profit without trading; u can't trade without taking risk (nothing is 100% sure); u can't (and shouldn't) take risk without SL (Stop loss).

It is such a simple tool and so much discussed that the poor fellow gets buried down in the discussion. Everyone talks of technical indicators but no one gives the hero's position to Mr.Stop loss.

Stop loss is to trading what ejection button is to the fighter pilots. Stop loss is like a fire extinguisher, like a hand brake, like a safety net in circus, like safety valve in pressure cookers, like airbags in cars.....

Remember, there is always 50% chance of winning (why - because the stock can either go up, or go down, there is no third way, it can't pop out of the screen). All u have to do is try and increase that %age by ur knowledge/indicators/analyses. Even without analyses, a person will be 50% right in the long run.

Stop loss can be very very useful. I have seen people who enter any trade with tight and small stop loss. if it goes their way, they profit. if it doesn't stop loss gets triggered with minor loss. (I am not asking u to do that, but just wanted to discuss the utility of stop loss)

Stop loss is like a gun. If u have one in ur pocket, u don't feel scared walking thru the streets at 12 in the night.......So, friends, use stop loss and trade freely...without fear....

Stop loss may be decided in the following ways :-

1) 50% (maximum; and that to if u don't know any other method) of the target (but on the opposite side). e.g. if the CMP of stock is 100 and ur best judgement of the target is 110, then 95 can be a stop loss (assuming u don't know any other method of deciding stop loss). This will give u 1:2 risk reward ration.

2) Another way to calculate stop loss is the nearest value in the opposite direction which, according to ur technical analyses, can't be broken under the circumstances, and which, if broken, would mean that factors beyond ur understanding are active in the market and hence the need to trigger stop loss, e.g. in the above example, if ur technical analyses suggests that price can't go below 97 in any case, then 97 can be the stop loss,

3) Another way to calculate stop loss is by 10 DMA (Day moving average), 20DMA, 50DMA, 200DMA etc. depending upon whether u r trading for immediate or short or medium or long term,

4) Important / nearest support and resistance levels can also be taken as a stop loss,

5) A psychological way of deciding a stop loss is by asking urself = below which level i will not be comfortable in the trade......remember - stop loss shouldn't be so near that there is no room for the normal dance/vibration of the stock and shouldn't be so wide that it is as good as not having any stop loss.

Stop Loss is like a life jacket...strap it around and swim the trades without will not let u drown...however, with confidence of Stop loss strapped around u, u will one day master the swimming...

When a stock has given u a big run up and u don't know when to sell, when on one side u dont want to miss out more profit, if any, and on the other hand are also afraid to lose the huge profit already earned, use 'trailing stop loss' which is a percentage of the value and not a fixed value. a trailing stop loss keeps on shifting up as the stock moves up, thus locking in the incremental profit.

A stop loss allows decision making to be free from any emotional influences.

You can think of Stop Loss as a free insurance policy.

Investors may avoid stop loss if they are DAMN sure about what they are doing. But I still think Stop loss would be a good idea even for them. Everyone knows Rakesh Jhunjhunwala has been holding Praj Industries since it was above 200. He is an investor in Praj. It would have been wise had he sold Praj on a stop loss and reentered at 50!!! Ofcourse, u miss out on dividend and income tax exemption (all more than 1 year holdings are exmpted under long term capital gains tax rulings, i think). but still u wouldn't have to pay 300% profit (which praj would give when it again touches 200 from a low of 50?). Stop loss for investors is, no doubt wider than those for swing traders or day traders. Secondly, swing traders must have a stop loss too. strings of swings can get broken...

How to tell u have entered the right trade?

symptoms = ur blood pressure doesn't rise or drop, ur heartbeat is normal, u don't feel anxiety, u don't feel like looking at the price of the stock every now and then, thoughts of doubt don't come to ur mind, u r least bothered once u have bought or shorted the stock, u r so sure of the trade (ultimately) going in the direction u have anticipated that u smile with confidence when the stock teases u by going in the opposite direction, u feel that buoyancy feeling - that proud feeling of having got into the trade at that price, u have a efforltessly sound sleep...............!......a tiny voice inside u always knows the answer............never bully it..............................if these calming symptoms are not there, either u have entered a wrong trade or u have committed more money than u should have.

Stock Trading (Pareto Analyses)

* 80% of the profits come from 20% of the trades (Know what makes these trades click and make more of these).

* 80% of the losses results from 20% of the trades (Know what makes these trades result in loss & avoid).

* 80% of the stock movement happens in 20% of the time (Use this fact and make max use of time).

* 80% of the profit is lopped up by 20% of the traders (Aim to be in this list).

* 80% of the losses are suffered by 20% of the bottom traders (avoid this list).

* 80% of the profits come due to 20% of good habits (Know these habits and follow them religiously).

* 80% of the losses come due to 20% of bad habits (Know these habits and avoid them).

* 80% of the patience is displayed by 20% of the investors (that is why they win big)

* 80% of the traded volume is in 20% of the stocks (traders better concentrate here),

* 80% of the stocks move considerably just 20% of the time (traders better concentrate on the rest)and 20% of the stocks move 80% of the time (like suzlon)

* 80% of the luck happens in 20% of the trades (inference = u can't always depend on luck while trading, merit of the trade is crucial)

* 80% of the fall happens in 20% of the time. (But 80% chase the fall for the balance 20% and suffer.)

* 80% of the "Experts" agree with each other only 20% of the time. (Inference = if u blindly follow the "experts", God be ur saver!

lost the profit earned?

Profit - big or small - should be considered as profit only as long as u know why it came. otherwise, it is just like thin air which will go away the way it came. u should not grief over the vanished profit because of the above mentioned reason. it will come back (much much more) when u know the reason of its coming. and then it will not go away and be loyal to you. profit comes to the innocent when they keep the door open but the trouble is that it goes out when he/she doesn't remember to close the door. "Method" is that "door". Every new student-trader should learn the "methods" and worry less about the profit or loss. any loss should be considered only as a fees of learning. Once method comes, profits will come in leaps and bounds, and won't go away.

Fundamentals or Technicals?

1) For trading technical analyses is more accurate and reasonably predictable. Fundamentals can be overshot in the short term due to momentum and sentiments and liquidity. Finally, however, stock or market has to return to the fundamental status.

2) After you arrive at a decision using technicals, don't invoke fundamentals. Fundamentals are built in the chart patterns and anomalies. When you arrive at a decision using fundamentals, don't be disturbed by technicals and charts. a line can turn 180 degrees in a flash! however, if both fundamentals and technicals are complementing each other, nothing like it!

3) Technicals can't predict fundamental shifts whereas fundamental shifts can bulldoze and drag technicals. Technicals, therefore, are useful only in the short term.

4) Fundamentals demand patience and reward fantastically. Also, they are stress-free. Technicals demand accuracy rather than patience but is not stress-free.

5) Technicals can't predict rise in volumes and coming to life of lifeless scrips. Fundamentals can.

6) If i see an apple falling, i expect it to reach the ground. i can even estimate the approximate point where it may fall and rollover. that is technical analyses. till the fundamentals change (like a monkey catching the apple midair) the apple will fall as per a pattern.

.........................................................................Choose wisely!

Advantages and Disadvantages of Futures & Day Trading

1) Leverage = you can trade upto 3-10 times the money you have in your pocket thus increasing the chance of earning by 3-10 times. (On the flip side, the chances of losing are also increased by that much. So, if you are "expert" you may make money very fast, otherwise you are destined to get badly mauled. Also, Even "experts" can be unlucky)

2) Low Cost = DayTrading and F&O have 10 times lower costs than delivery based trading. (On the flip side, the income tax on delivery based trading is 0-10% v/s 30% (depending upon your income slab)

3) Peace of mind = For the duration you are holding a position in DayTrading or Futures your stress levels are high. You tend to be nervous and insecure. you are unable to focus on life and its various facets (unless u r a PRO and you are fulltime into trading - which most of us are not). You tend to get sticked to TV (CNBC,BloombergUTV,ZeeBusiness,ETnow etc.) all the time, even after Indian market timings to see what is happening in the world markets.Quality of life is severely compromised. You start becoming short tempered and easily irritable. The time you give to your family gets compromised in quantity and quality. On the other hand, while you are invested, you are least bothered by day-to-day, week-to-week gyrations. You have a sound sleep

4) Risk = Risk in Futures (& Day Trading) are huge - often unlimited. If any big unfavourable news comes which suddenly shakes the market in the direction opposite to your position, you can be in serious trouble. Typical situations are when the stock or market catches the CIRCUIT. I remember, a lot of people who had aggressively shorted nifty futures went broke the day Congress returned to power in May09. Also, I remember a lot of people who were short on Tech Mahindra went broke the day it caught upper circuit. On the contrary, even those who had INVESTED in Satyam which plunged from 226 to 6 (yes 6) and held on, recovered to 126 last month. Very soon they will get back to 226 and even more. no investor os Satyam (who waited) went bankrupt

5) Returns = If you pick a stock (delivery based) at the right time when it is about to shoot / breakout , which many are doing successfully in Mudraa, then you can make more than what amateur Day Traders or Futures players make. On an average I have seen that amateur Day Traders and F&O players win 12 out of 20 trading days a month while 2 times out of remaining 8 non-profit days they lose big. They move 5 steps ahead and 3-4 steps back, at times even more. On the contrary, if you position trade or invest in a good stock at the right time and wait for 1-2-3-4 weeks, you are likely to make huge returns. In DAy Trading we often miss out on the big overnight moves which otherwise are lopped up in positional swing trading and investing

I seem to be in exces favour of Investing and Positional trading and against Futures and Day Trading and I must admit that. Only Professionally trained or exceptionally gifted fulltime talents should do speculation. Remember, if you know driving a car is a blessing, otherwise it is deadly for you and others.

Not making money in the market? Only losing?

Check if you are committing any of the sins mentioned below:-

1) Going against the trend...........................................................................................................................

2) Buying when people are about to sell, and selling when people are about to buy. In other words, buying at resistance and selling at support...........................................................................................................................................................

3) Not trading as a "machine" on the basis of a tried and tested fixed "system".Remember there are more than one ,rather dozens if not hundreds of tested ways which make money in the stock market just like all chess and cricket and football players have their unique style. You can't follow every trick and system in the name of greed. Rather that will be suicidal. Its better to be expert in 1 or max 2 tested techniques rather than a half cooked amateur of multiple techniques. All new comers in the market should try their hands on all techniques without money (paper trading) or with low amounts. Only after learning (by doing and by studying thru net and books) can one find out which technique suits your nature and gives you profit consistently. then stick to it and keep on refining and mastering it. Thereafter, just keep on trading like a machine. No questions asked. no arguments over what your trading system is saying. If it says sell, then sell. If it says buy, then buy. If it says stay away or wait, then do so, like an army commando follows the order of his comander. No questions asked.........................................................................................................................

3) some of the tried and tested techniques are Wedges and triangles (my damn favourites, Sell at Resistance-Buy at Support, RSI (only for swing trading or investing, fundamental fishing, waiting for opportunities when sheep behaviour results in over selling or over buying a stock, following trends, BTST (Buy today Sell tomorrow)...etc......................................................................................................

4) Not having patience. Expecting apples from the seed in one day or on ehour or lesser.......................................................................................................................

5) Too much of trading. Remember, 80% of the profits come from just 20% of the trades...................................................................................................................

6) Trading with money you can't afford to loose?...............................................................................................................................................

7) Want to become rich overnight. Putting too much of pressure on self. Expecting too much from the market too soon. Expecting to undue the setbacks in life too fast from the poor holy cow called market................................................................................................................................................................................

8) picking stocks on hear-say and not own understanding without Stop loss and target and without understnading why you expect it to go up/down...............................

9) Indecision whether to be a Day Trader, or Positional Trader or Investor. Switching at the drop of the hat.

Remember, " Nothing in this world is to be feared but to be understood" (Marie Curie); "knowledge is power"

Why is Stock Trading the best business in the world?

for the following reasons..........

1) anytime, flexible timing (no 9-6 job, no 6am-10pm business complusions)

2) from anywhere (can even trade from mt.everest or from antartica)

3) no or minimal investment (a pc with internet connectivity, a demat account and a good head)

4) minimal amount to start (Can buy even a single stock; even for a tea and samosa stall u need a shop etc worth a few lac rupees; for other businesses u need a crore or more with no guarantee of profits and recovery of investment)

5) no office / shop / infra / furniture / ACs etc.(just need enough space to place ur bum or plant ur 2 feet, how many other businesses permit u that luxury?)

6) no employees - not even a chawkidar or a labour law hassles

7) no overheads - like electricity, water and phone bills, rent, transportation etc.

8) no stocks, no stockyard, no deadstock

9) no sales tax / excise tax etc. headaches

10) no account keeping (ur brokerage does it for u)

11) no inspector/permit hassles

12) no boss

13) no tension of getting out of job, being sacked, recession

14) no "buri nazar" and "hafta" (always out of public glare, unless u have a habit of flaunting money and its side-effects)

15) one of the best returns on investment (many getting 10-15% per month or even more)

16) can pack up ur bag and retire at any time if u wish (how many other businesses allow u to wind up? it is said that - u don't own a business - the business owns u - and won't leave u that easily)

17) national development; people participate by contributing towards new startups which generate employment, yield tax, earn foreign currency, generate weakth and bring social prosperity.

and last, but not the least...

18) no customers....!!!