Sunday, February 28, 2010

A blessing for the educated unemployed,underemployed & the exploited...

There are millions who are educated but unemployed!

There are millions who are underemployed their entire lives!

There are millions who are underpaid and harrassed!

Business is not in everyone's comfort zone or reach.

Also, just imagine the capital required for even small businesses!

Self-employment is nothing less frustrating than a business!

This causes great stress levels which gets rubbed off in the families and the country.

The divide between the have's and have not's is getting wider!

People are living miserable lives for lack of good financial position.

When every other avenue seems like a dream or stroke of misfortune, stock trading appears like God's blessing!

Do it anywhere, anytime.

No qualification-bar, no age-sex-caste-region-IQ-class-familybackground-race bar!!!

Anyone can do it if he/she has around 20000/- capital, a demat account and a net-ready PC.

All this requires less than 40000/-.

(mini-nifty requires around 10000/- margin to trade 1,00,000 in nifty. Rest 10000 is for back-up buffer. And around 20000/- for a net-ready PC. )

A 1,00,000/- nifty trade can yield 500*20=10000/- returns

in a trading month of 20 days @0.5% per day average!)

Do it full time, part time, spare time!

All you need to achieve this is

A COMMANDO TRAINING IN TRADING BEFORE YOU ACTUALLY TRADE WITH PRECIOUS MONEY U HAVE.

A SMALL STEP BY YOU CAN TURN OUT TO BE A GIANT LEAP TO FREEDOM.

OF YOU AND YOUR FAMILY!!!

Trading Brahmaastra! (Level III)

Lets now take the Trading Brahmaastra to level III,

The brave hearts can and should wait till the base line (in case of up-move) or the top line (in case of down-move) turns horizontal.

There is almost always a bounce once the horizontal level is achieved.

And thereafter, the price starts moving in its original direction.

From here onwards, the price is in the "bluff" zone.

The cream of the profit is in this bluff. This bluff too obeys the topline-bottomline "wait till horizontal" principal.

Book profits and exit (rather take reverse position) when the top/bottom line turns horizontal in the bluff zone!

If in rare case, the top/bottom line overshoots the horizontal, it is almost always a case where an outer topline or base line exists and takes over if it hasn't hit horizontal as yet.

If, however, you feel there is no possibility of an outer base/top line, don't wait to square off before horizontal is achieved!

I have never seen a stock violate this till there is a World War like scenario!

Trading Brahmaastra! (Level II)

To take the Trading Brahmaastra one step up to level II,

remember that the first higher low (in case of upmove)OR lower high (in case of down move) (and hence the trading signal) generally appears:-

1) near highs and lows of the day OR

2) when breaking a dull range OR

3) to reverse from support and resistances OR

4) to break support and resistances OR

5) while breaking a trendline (EMA 50/10) OR

6) at sharp pencil-heel v-shaped support pillars after sharp falls.

--------------

A) so be ready when near highs and lows of the day OR

B) be ready when in a dull range OR

C) be ready when near support and resistance, OR

D) be ready when the support and resistance is broken OR

5) be ready when a trend has extended too long (EMA 50/10) OR

6) be ready when there is a pencil-heel v-shaped sharp fall.

Saturday, February 27, 2010

Trading Brahmaastra!

Buy any higher low and hold till

a) the base line is threatening to be horizontal, OR

b) too much too long sudden up-spike

-------------------

Short any lower high and hold till

a) the top line is threatening to be horizontal, OR

b) too much too long sudden down-spike

-------------------

What do I mean with "Top line"?

= Line joining the mt.everests of intraday price graph.

What do I mean by "Bottom line"?

= Line joining the feet of intraday price graph.

"Is the immediate higher low or lower high the only entry point?"

Actually, there are many false starts upside or downside.

To know that the movement is not false and will atleast go some distance, the fastest and most reliable method is higher low (for upside) and lower high (for downside).

Buying or selling on the first retracement is the smartest and wisest thing to do.

The trade should be triggered just when a tiny tick appears upward in a higher low and downward in a lower high.

Otherwise, although you will not miss the big move, but you will waste a lot of money in trade-expenses of the false moves (which are many in a day) besides exhausting you.

----------------

Wait like a Lion to attack at the right time.

No opportunity, no trade.

Also, remember, this Brahmaastra applies equally well in Day-Trading as well as Swing Trading!

Friday, February 26, 2010

How to make double money...(Part 2)

I am going to share one advise (from someone I admire) which helped me almost double my returns from Stock Market!

One day I was trading in front of him.

He saw me quickly enter a trade where I longed one lot Nifty futures.

The timing was perfect and I was elated for having done that in front of my mentor!

He too was proud of his student (me)!

Nifty rose and rose.

My mentor was closely observing my next move!

I patiently waited even when the nifty threatened to fall!

I knew from my method that the exact Exit-signal of the end of the rally had not appeared.

Finally it did! And I squared off.

The profit was good. But more important was that it all happened before my senior, my teacher!

I felt sooooooooooo good!!!

I looked at him and was surprised to see him blank...

I went to kitchen, made a cup of coffee for him and myself and came back.

I looked at the graph and nifty had fallen!!!

"I was right!" I said.

"Why didn't you short also?" he asked me!!!

I was shocked!!!

He was right.

If I was so sure of the rally ending, why did't I short after long-unwinding?????

I had missed the second bus by getting excited like an amateur!

I turned towards him and he saw in my eyes that I had learnt an important lesson!

He smiled...and I was relieved!

Then he gave me this advise I am sharing with you:-

"A correct long-unwinding time is also the correct time to go short!

A correct short-covering time is also the correct time to go long!!"

How to make double money...(Part I)

One of my friends in Mudraa shared his dilemma with me.

He said, "Since last 6 months nifty would have given me just 1500 points with my best method.

That would have been much less than my expectation and not enough reason for me to continue with trading."

I asked him, "How much points would have made you happy in this period?"

"Atleast 3000", he said.

"How many lots do you buy per trade?" I asked.

"One!", he replied.

"Are you sure about your method?" I asked

"Yes, yes!" he said. "I have been following it successfully since a long time"

"So, why don't you start buying 2 lots instead of 1" I suggested.

"This way, you will make 3000 points instead of 1500 for the same effort!"

This is my simple and basic suggestion for all.

First ensure you have an almost fool-proof, fail-proof secure method and then all you have to do is increase the bet.

This way you will not have to worry about the potential of earning even in small movements!

Just ensure you have enough buffer funds and a strict stop loss.

It is not about money, honey!

Would you dare catching an alive snake without training?
Would you dare to fly a jet without mastering how to fly and land it?
Would you assist a doctor in surgery without you getting an MBBS?
Would you climb a mountain without training?
Would you join a bomb disposal squad without mastering how to diffuse a bomb?

Then why trade big without mastering atleast one method of trading?

Trading is like catching an alive snake
like taking off and landing a jet
like performing a surgery
like climbing a mountain
like diffusing a bomb!

How many of us in our trading career done all this with confidence?

Every day I see traders being
bitten by the snake
crash landing or ejecting from the jet
leaving the patient to die on the operation table
falling off the mountain cliff
cutting the wrong wire of the bomb!!!

---------

All think that winning in stock trading is about money!
Seems true but isn't!

Many say that it is about earning points!
Again a trap!!

In reality, it is all about "learning" and "mastering"

If you know the method, it is a child's play!
If you don't, it will be enough to tire and retire you!!

We must learn to stand before we walk, and walk before we run.
On the contrary, many are "running" before they have mastered even "walking"!!!

When things go wrong they say "what happened?" "why did it happen?"

First learn one or two sure-shot tried-and-tested methods and master and stick to them!

We all are in a tearing hurry to become rich!
And that is the precise reason why we are getting delayed in becoming rich!

As Dr.Philip says in his classic book "Life Strategies"
"Crack the code otherwise your fate is sealed"
"Do what works, Do what matters!"

It's not about money, honey!.....

It is about "knowing".

Thursday, February 25, 2010

16 Basic etiquettes of stock trading!...

The following are the basic etiquettes in Stock Trading!!!

How to say "Thank you!" in stock market?
=Book Profit

-----

How to say "I am sorry!"
=Stop Loss

-----

How to say "May I?"
=Put a Bid

-----

How to say "I hope you don't mind!"
=Short it

-----

How to say "You are welcome!"
=Be calm during Fluctuations

-----

How to say "Please!"
=Place an order

-----

How to say "Excuse me!"
=Square off the deal which is not going anywhere politely.

-----

How to say "How do you do!"
=Go long!

-----

How to say "Good morning!"
=Play the Gap-up or Gap-down opening!

-----

How to say "So kind of you!"
=Lock your profit with trailing stop loss!

-----

How to say "It was my mistake!"
=Book Loss

-----

How to say "See you tomorow!"
=Take a BTST Call

-----

How to say "Take your time!"
=Have Patience

-----

How to say "I will always be with you"
=Stick to the method

-----

How to say "Let me guess"
=Do a thorough Technical Analyses

-----

How to say "After you!"
=Go with the trend

-----

Trading Strategies for big events like Budget!

There are three possible strategies:-

1) "Prediction-Prediction" game
You predict and take a position!


2) "Wait for the Ride" Surfer's strategy
You don't take a position but are ready to ride (at the blink of the eye) any wave that comes while budget is being read!


3) "Wait and Catch-on-the-wrong-foot" Hawk Strategy
You don't opt for 1st or 2nd strategy but wait for the over reaction in either direction when budget is unfurled and then take the reverse position!


4) You opt for 2nd and 3rd strategies one by one, i.e. first you ride the tide and when the tide has been serious overdone, you take the reverse position.

-------
The first strategy is dangerous. It is a high risk high reward strategy.

The second or third strategies are low risk medium but assured returns strategy.

The forth strategy gives you the best of 2nd and 3rd strategy.

-------
Lacs of crores of rupees are ready to pounce when the budget is being released.

There has to be a short-term overreaction, whatever way.

Remember, punters are watching the money heaps retail investors have kept for tomorrow. Budget or other policy announcement "Earthquake" days are the D-days for the big pockets!

Go against the trend or get carried away this day or play without stop loss, and this day may turn out to be a memorable day in your life...in the negative sense, ofcourse.

On a better note, just remember - Rakesh Jhunjhunwala made his "first crore" while the 1991 budget was being read by the then Finance Minister Dr.Manmohan Singh!!!

Wednesday, February 24, 2010

Pay Cheque mentality!

Many traders are or have been in jobs in their lives.

They work every month and in the end get their monthly pay.

The monthly packet they get is fixed.

Both in terms of amount as well as the date!

Over the years, this becomes a habit.

And habit gets programmed into mindset.

We develop the habit of expecting regular income at regular intervals.

And then we bring along that habit from the world of job into the world of stock trading.

We want returns from stocks at regular intervals.

We want a fixed return from stocks every month.

We start getting nervous when returns don't come on the "fixed" date!

We start getting anxious when the amount starts to fluctuate!

We start panicking when instead of profits, loss starts!

We are uncomfortable when we have to shell out expenses of trade!

We are uncomfortable when we are asked to wait!

We start getting restless when we are asked not to book profits so early!

We don't expect extraordinary huge returns as we are not used to seeing those big amounts in salaried job!

We rush into unnecessary activity resulting into overtrade just because we are not used to sitting idle in job!

We can't avoid trading in unfavourable conditions because we are in the habit of fearing "no work no pay" rule in job!

We don't hold on to temporary adverse positions just because we believe in ending the day on that day itself!

We force day trading because we want "that" day's "pay"!

All this results into wrong decisions and indecisions!
.....

This paycheck mentality is the one of the main reason of not becoming successful in trading!

What works in Stock Market is the businessman mentality.

Businessmen make money for the entire month or year or life in one or two or some trades.

They acknowledge the expenses.

They are willing to risk, are willing to wait, willing to dream big.....

Beware of the paycheque mentality in Stock Trading!

3 Secret Trading Lessons...!

Once God was very pleased by a stock trader.

He gave him "darshan" and asked him to ask for 3 "things"

"Any 3!!!"

That trader was very wise and non-greedy!

He said, "God! pl give me those 3 secret lessons which will make me the best trader in the world."

God, as usual, tested his disciple shrewdly.

He said, "Son! I am very happy with you. Ask for something big!"

The trader was shrewd as well.

He didn't want something from the treasure. He wanted the password of the treasure!

God too was adament. He tried a few times to convince the disciple to ask for something else.

But the disciple didn't move.

Finally, the God had to relent!

He gave him the 3 secret lessons which made the trader a great trader, the best in the world!!!
Those 3 secrets were:-

1) There is nothing called free lunch!

2) Knowledge is power!

3) Money speaks!

Many interpretations are possible and all have profound implications in stock trading!

1) There is nothing called free lunch!

= No gain without pain!

= Nothing ventured nothing gained!

= No profit without loss!

= No results without efforts!

= No trade without risk!

2) Knowledge is power!

= More info you have about fundamentals better estimate you can make!

= More Technical Analyses you learn better you can estimate!

= Confidence comes from knowledge & experience

= Patience comes from knowledge & experience

3) Money speaks!

= If you don't have margin, you can't trade futures!

= More principal you have to invest, more you can earn with same % profit!

= The more buffer funds you have , bigger and more risks you can take!

"The 8th wonder of the world" (Js)

Do you know Einstein called the compounding effect "the 8th wonder of the world"!!!

No doubt it is.

e.g. if you invest Rs. 1 lac with 20% pa returns for 20 years
you will get Rs.38,33,760/-
even if you adjust the inflation rise @ 7% pa average, your 1 lac will become 11 lac!!!
an INFLATION-FREE earning of Rs.4583pm for 20 years!!!

------

In stock market, if you are talented and can get 50% pa regularly for 20 years
Your 1 lac will become 33 crore 25 lacs
even if you adjust the inflation rise @ 7% pa average, your 1 lac/- will become Rs.12crore78lac
an INFLATION-FREE earning of Rs.5.32 LACS pm for 20 years!!!

------

Einstein was right! This is nothing less than a "wonder of the world"

So, why don't people go for it?

Simple,

first, they don't BELIEVE this. they reject it outrightly. they are not used to dreaming.

second, they don't have a METHOD so that they can get the desired returns consistently.

third, they don't have DISCIPLINE to stick to the method

fourth, they don't have the STAMINA and character for that much of time!

Money freedom is always within our reach. We just don't believe it!

Shadow of the Bull/Bear

Long ago when I entered the stock market I had a habit of keep sitting in front of two things during trading hours:-

1) TV (esp. CNBC for the sheer quantity and quality of graphs they keep showing)

2) Computer (online)

I used to keep the TV mute as this way I was spared of the noise pollution.
Those days I used to follow only one stock - Mr.Suzlon.

Only and only him!

The graph of Suzlon was always open in front of me. Minute by minute, Second by second the graph kept inching forward and oscillating.

Below the graph I always kept the volumes graph open.

Those small small volume bars looked like grass growing under the price graph above.

In those days I was not so proficient in predicting the rise or fall of a stock.

Whenever I saw the price of suzlon rise, I used to jump onto the train. But many times I was
late in boarding it! Many times i missed the train as well.

Suddenly one day I noticed a very strange but unmistakable phenomenon!

The Suzlon graph jumped up when in the "grass ground" of volume bars below, a very tall bamboo appeared!!!

First day I couldn't make much out of it!

Next day too, the suzlon graph jumped up when the "Bamboo of the day" appeared below!

I was shocked! and excited !!

I back tested the suzlon daily graph for last 20 sessions and was shell shocked!

Every time that "tall man" came in the volumes graph, the price either shot up like a rocket or dropped like the Newton's apple!

That day i came to understand that there was some correlation between that tall man or bamboo and the price!

Some big operator was coming in or exiting when that tall line appeared in volumes chart!

I couldn't see the operator, nor did I know the name of him, but I had the indirect signal of him when he came or exited! Like Mr.India!

I started calling this tall line as "shadow of the bull/bear"

That day onwards, I always waited for that the "shadow".

It never disappointed me. Whenever it used to de delayed I felt restless as people feel when their girlfriend or boyfriend is late!

In those days, I was a novice in the stock market. I didn't know why the "shadow" came at the time it came.

But I thought, I need not know. Let me silently follow "him".

The only trouble was I didn't know whether the price will shoot up or down when the "shadow" came!

But generally I predicted that much right.

So, when to enter was decided by that mysterious shadow and whether to enter on the long side or the short side was decided by me!

Such extraordinary shadows can seen in the "photographs" of many stock graphs daily. Hunt them, follow them!

Tuesday, February 23, 2010

How to estimate price graph of the next day?

"Everyday is a new day" goes a saying.

This is not exactly true in stock market!

Every morning appears to be a fresh day but it is not so in reality.

In reality, it is the contiuation of the painting it was drawing the previous day, rather, since last few days.

The overnight global happenings only distort the picture with temporary hikes or dips.
.....

Just imagine you draw a long up and down snake on a paper from left to right end.

Now draw four vertical lines from top to bottom at equal distance on the paper, dividing it in 5 equal parts.

Each of this section represents one day's graphical movement.

The graph of every new day seems to be continuing more or less from where it had left yesterday!

The new day's graph is like another piece of the bigger jigsaw puzzle being added.

5-day intraday graph is the best tool to predict or estimate the likely movement of the price today!

Go to (http://www.google.com/finance?q=NSE:.NSEI), click on 5d and you will see what i am talking about.

Just remember, all price movements happen like waves, like a ball moves bouncing forward.

Just like the bouncing ball touches the ground at single point after some distance, each wave has to move on pencil heal bases! Expect and anticipate these pencil heal bases.

The continuation pattern of 5-day chart alongwith the anticipated touch-down points can estimate the price movement beautifully!

The price movement in the first 1-2 hours of the new day further confirms the estimation.

Also, increase the time period of the graph gradually from 5day to 1 month to 3 month to 6 month....and you will see the amazing continuity.

Deadly combination of 34 and 8

This is the next version of EMA crossover strategy.

Pl. note that this is not for Day Trading but amazingly effective for short-to-medium term trading.

The difference in this strategy w.r.t the EMA crossover technique discussed earlier is that here there are 3 characters instead of two.

1) EMA 34 line

2) EMA 8 line

3) Priceline

EMA 34 is effectively 1 month weighted average

EMA 8 is effectively 1 week weighted average

A) When price cuts EMA 34 from below, Buy.
Square off when it cuts EMA 8 from above.
If it again goes above EMA 8 , buy again.
.....

B) If the price cuts EMA 34 from above, Short.
Square off when it cuts EMA 8 from below.
If it again dips below EMA 8, short again.

The buy or sell has to be decided near market close so that it is confirmed that "the cut" has decidedly taken place.

Also EMA strategies work even better in trending markets. No harm in waiting till range bound movement.

However, I prefer doing it without bothering whether it is trending or ranging, otherwise you may miss a sudden big move.

Also, if 34ema and 8ema, both are very close to each other, a sharp movement of 8 ema and hence that of the price is likely in the next few sessions.

A strict stop loss of 8ema is advisable.

When 8ema and 34ema are these close, it is not unwise to wait a bit, but not compulsary if stop loss in place.

Your job is a stock!!!

This is for my trader friends who are doing a job while trading.

Sometimes, especially in bull markets, you start profiting from stock trading effortlessly.

Sometimes the profit is exceptionally high.

You start feeling invincible.

You start getting that feeling that you can't lose!

The memories of having lost start fading.

Suddenly thoughts start coming to your mind about going for trading full-time!

You seem to feel that you are wasting your time in job.

You start moving towards that trigger called "Resignation"

That is the most dangerous situation. You are literally floating in a psychologically inflated state.

That is a bubble!

While full-time trading is not bad, you have to be triple sure that the time is right and you are ready for it!

A few questions and hard-look should be enough to prick that bubble:-

1) How many months of salary-cash do you have as a backup besides the principal amount you have?

2) Do you have the experience of making money in the bear-run?

3) What is your experience of trading during recession times?

4) What is your experience of trading during highly volatile times?

5) What is your experience of trading during extended period of illogical price movements?

6) How will you handle situations like adverse circuits?

7) How long can you stay liquid in times of crisis?

8) What was your performance in times of very high stress?

9) Remember the Murphy's Law - 'Whatever can go wrong, will go wrong!"

Remember, if you are drawing Rs.20,000/- pm salary, then your job is like a stock which is giving you Rs.20,000/- returns every month! And that too...assured!

Stock trading is a deceptively simple business!

Stock Market is like a sea where watching a sunset can be one of the most beautiful moments of ones life.

But it is also the same sea where a High Tide or a Psunami can change many a lives in a flash!

Think before you sell that stock called "Job" from your portfolio called "Happy Life".

Sunday, February 21, 2010

Nifty @ 6600 this year?

Sensex is roughly doubling every 4 years since 1979
1979=100
1983=200
1987=400
1991=800
1995=1600
1999=3200
2003=6400
2007=12800
2011=25600 (Expected)
If you break the 2007-2011, the estimated mean would be as below:-
2008=15000
2009=18000
2010=22000

Equivalent nifty figure is 6600 (37% from current values).

Markets have recovered from the global earthquake of 2008.

Stage is set for the grand bull-work!!!

A grand business proposal for myself from myself

A grand business proposal for myself from myself (Js)

This is a medium term trading proposal. The assumptions and basic calculations are given below:-

1) Nifty likely to go to 6600 in 1 year or so (discussed in an adjacent post)

2) Maximum logical nifty downside risk = 4000 (chances very remote)

3) Maximum illogical nifty downside risk = 3400 (chances very very remote)

4) Capital required = Rs.10,00,000/-

5) Nifty futures lots to be bought = 10

6) Total value = Rs.25,00,000/-

7) Margin Required = Rs.3,00,000/- (approx)

8) Buffer backup fund left = Rs.7,00,000/-

For nifty to go from 4800 to 6600 in 1 year (37%)

Return = 25,00,000 x 37% = Rs.9,25,000/- in around 1 year


Assuming max catastrophic risk of nifty going down to 4000 (17% from current levels),

max risk = Rs.25,00,000 x 17% = Rs. 4,25,000/- (less than the buffer of Rs.7,00,000/-)


In fact I have backup buffer till 3400 nifty.


All I need to check is whether I have a brave and mature heart and head to conquer this Mt.Everest in approx. 1 year!

Trading lessons from Elephants...

Here are some trading lessons from one of the most amazing and gentle animals on our planet:-

1. Stability
Fact : Despite huge size, an elephant is amazingly stable.
Trading Lesson : Remain stable and calm in the market despite heavy stakes.

2. Moves in Herds
Fact : An elephant herd can have 5-1,000 individuals and it is led by an old female.
Trading Lesson : Go with the trend started by "elders" (big players).

3. Long trunk poking places
Fact : Elephant keeps looking for "things" by poking his long nose.
Trading Lesson : Keep looking for trading opportunities by turning more and more stock graphs.

4. Throwing mud on self after bathing
Fact : Elephants curiously throw mud over thamselves after having a bath.
Trading Lesson : Don't be too happy when you profit. Take it easy. Move forward.

5. Crows on the body
Fact : Crows riding the elephants keep pricking them and cawing in their ears. But elephants don't seemed to be bothered much.
Trading Lesson : Don't bother too much about the experts on your back. --------

6. Make move silently and quickly
Fact : Because the elephant foot has underside soft cushions, elephants can walk almost noiselessly. Also, they can run with a speed of 25mph (40 kmph),faster than the most rapid human athletes, despite their huge size.
Trading Lesson : Make quick and silent trades!

7. Read between the lines
Fact : Besides the trumpeting, elephants also communicate through infrasounds with a frequency of 14-24 Hz.
Trading lesson : Catch the unspoken silent but clear signals in the market of the approaching trend reversals and big moves.

8. Mammoth Size
Fact : Elephants are the biggest creatures on land.
Trading Lesson : Think big

9. Tusks and Teeth
Fact : Elephants have two tusks to show and teeth inside to chew.
Trading Lesson : Good traders have backup plans inside them if the need arises! They have more than what they reveal!

10. Elephants can swim
Fact : It is amazing to see such a heavy animal swimming effortlessly!
Trading Lesson : Be nimble, swift, quick, flexible and responsive in responding to situation despite heavy positions!

11. No fear of the lions
Fact : Everyone fears the ferocious lions except the elephants
Trading Lesson : Don't fear the punters, take advantage!

12. Food
Fact : An elephant daily eats 150-300 kg of food and drinks 80 litres of water.
Trading Lesson : Keep learning (food for mind)

13. Fears the ants
Fact : Elephant knows even an ant in the trunk can kill it!
Trading Lesson : Be alert to the smallest threat.

14. Tiny tail
Fact : Elephants have proporationately very small tails
Trading Lesson : Keep trading expenses minimum

15. Big Ears
Fact : Elephants have fan-like big ears
Trading Lesson : Listen to every opinion that matters

16. Loves bathing in rivers and lakes
Fact : Elephants love sitting and playing in water for hours!
Trading Lesson : Keep your cool and enjoy life outside trading

17. Thick skin
Fact : Elephants have very thick and stretchable skin!
Trading Lesson : Take mistakes and lessons in your stride. Have a "thick skin". Bear the blows and move on!!!

Trading technique only for the frustrated,dejected & rejected!

This technique flashed in my head a few years ago when i was new in the market.

I was a sincere student of Technical Analysis (TA).

I was learning fast and well.

But I was losing.

Fast and Big.

I should have won some award for the consistency of losing!

If I bought a stock or nifty, it will go down! When I booked loss, it started coming up!!

If I sold a stock or nifty, it will go up! If I booked loss, it started going down!!

It was thoroughly frustrating and demoralising, to say the least!

I was dejected, felt rejected and almost ejected out of the market! I almost quit when suddenly one small amusing thought came to my head -

"If loss was to be considered profit and profit considered as loss, my success rate was almost 100%.

I felt like a genious (although in the opposite direction)!"

I was very very very consistent in losing.

That meant that all I had to do was do just the opposite of what I had been doing!!!

Since, I was already frustrated while everywhere around me people were minting money I gathered the guts to try this crazy technique for 1

week with an amount I was prepared to sacrifice!

Monday came, the markets opened and I asked myself

"what does your head say after seeing the market?" I had to be brutally honest, I told myself.

"Buy!", replied my head!

So I Sold!

And there you were!!

It started to fall!!!

Then I asked myself

"what does your head say now?"

"it is going to reverse now. I should book profit" my head honestly replied.

So I waited!!!

And it continued to fall!

That day I made a huge profit, for the first time ever!

That single event changed my life.

It occured to me that the fundamental reason for our loss is "our psychology, our thoughts"

I continued that strategy for over a week and I made handsome money.

At times I lost too! but that made me happier as my head was proved right!

That started injecting confidence into me!

So, I was either gaining money or gaining confidence!
...

...

Moral of the "real" story:-

1. when totally frustrated, try this "sanjeevni"

2. market drivers make the markets go opposite to what you think.

3. a trend continues till proven otherwise.

4. go with the trend.

5. never buy at support and sell at resistance till breakout or breakdown.

6. we are in the habit of believing what we want to believe. market won't reverse just because we want to book profit because that profit means a lot to us and we fear losing that profit!

7. our minds dance a bit too much!

8. don't believe too much in logic! learn to go with the magic!

What's in my left pocket, What's in my right pocket?

Whenever I go for (e-)trading, I secretly keep two different things in both the pockets of my trousers.

In my left pocket, I secretly carry my understanding of what and why the market may do today!

I keep top secret what is in this pocket.

In my right pocket, I carry the 'sealed' opinion of the "market" - what the market (and not me) wants to do.
I am not allowed to put my hand in this right pocket till the market starts.

Once the market starts, I take out what's inside this right pocket.

If it is similar to what is in my left pocket, it puts a big smile on my face and I trade very boldly!

If it is different, then I forget the left pocket and go with the opinion of the market.

In an interview, noted trader George Angell had said, "every day I go in without an opinion ... and I let the market tell me where it wants to go ... opinions are what get you in trouble."

Saturday, February 20, 2010

PESCo PESRIIICO...(Fundamentals of Fundamentals)

Fundamentals are fundamental,

Liquidity and Sentiments are secondary and feast on the fundamentals!

To be a profitable trader we must be a well-informed trader.
And to be a well-informed trader, we must understand the following factors which make the "fundamentals" we daily talk about!
...

...

P=Country's Political State-of-affairs

E=Country's Macro-Economy

S=The concerned sector's state-of-affairs

Co=Company's state-of-affairs (Topline, Bottomline growth,EPS,ROI,PE ratio, etc.)

P=Global Political Environment

E=Global Economic Environment

S=Global state-of-affairs of the said sector

R=Rate of Interest

I=Global Market Indices

I=Institutional Investors (FIIs,DIIs)

I=Inflation

C=Currency (Dollar v/s other currencies)

O=Oil (Crude)
...

...

...

Daily, before the market hours, write a '+' or '-' in front of each of this factor.

And in the end, cancel every '+' with '-' and see what is left in the end.

This will give you a fair idea of the "hidden fundamental pressures" in the market for that day!

You can take a technical call more confidently now!

The birds are free...!!! (Trading Strategy)

Every stock rises till it hits the resistance ceiling above! At that point it reverses direction!

Every stock falls till it hits the support floor below! At that point it rebounds!

One of the most popular strategies of traders is =

"Buy at support and Sell at Resistance."

This works!

Because everyone thinks that way...together!

There is another logic behind this happening.

Stock movements are like pendulum; they overshoot due to sentiments and momentum.

Owing to this tendency, near "Resistance" the stock is generally overbought and near "Support" the stock is generally oversold.
If you buy at support and sell at resistance and do all this with strict stop loss you can, make decent living from stock trading!

Now, take this technique a little forward...

What happens if the stock breaks the Resistance ?!!!

The next resistance is some distance away.

The resistance just broken becomes the nearest support.

Everyone sees this logic and smells money.

What happens thereafter is nothing less than the launch of a rocket!

And rockets take time to stop.

The stock rises like there is a mad dog after it!

(Similar thing happens when a stock breaks the support.)

So, here is the technique-

Keep looking for the rising and falling stocks everyday after trading hours.

and shortlist the ones which have just broken the resistance or support or are about to break!!!

And the moment "it" happens just jump on the train for a great ride!

The birds have broken free from the cage...ready to soar!

Friday, February 19, 2010

Do you want to learn more ?

http://bollinger-trader.blogspot.com/

http://futurescorner.blogspot.com/

http://ripetrade.blogspot.com/

http://bruneifx.blogspot.com/

http://quicktrades.blogspot.com/

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http://stockmode.com/markets/

http://thebestbusinessintheworld.blogspot.com/

http://yoel-stockpredictions.blogspot.com/

http://stocks-broker.blogspot.com/

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http://chrispycrunch.blogspot.com/

+1-1 trading strategy

I hereby share a very strange strategy.

I have played it many times and found that it works 80%+ times!

I call it "+1-1 strategy"!

It is simple.

80% of the time, nifty doesn't change direction after just one day.

e.g. if nifty was rising since 3 days and today it has gone down, there is more than 80% chance that it will not rise tomorrow.

This rule is broken only in case of long and strong trends where one day dead cat bounce occurs!

Also, if this rule is broken other than the condition mentioned above, you will see that if you hold your position, you will recover the next day!

Back test this technique and you will be smiling!

Now, though i have other techniques to play, i use this technique for verificati

Catapult Day Trading Technique...

Have you ever played with a catapult ("gulel") when you were a kid!

When you load a small stone in it and stretch the band, the stone shoots like a bullet! It is because it was being stretched against its wish and got away at the first opportunity!

This same concept works very fine in stock market as well!

Here Nifty is the catapult and the stock is a stone!

When Nifty is falling , almost every stock falls with it. Even those which rise, rise less.

So, when nifty stops falling and starts rising

The ones which were falling less than the nifty was falling, and the ones which were rising (though slowly) when nifty was falling will rise much more than the nifty will rise!

You can use this fact by keeping an eye on the stocks which are defying the dictat of the nifty.

So, Buy an A category stock which is refusing to fall with nifty (or atleast as much as the nifty is falling).

e.g If nifty has fallen 1%, then look specifically for stocks which have fallen much less than that, say 0.2% or rather has risen around 0 to 1%!

Avoid stock that has moved more than 1% while nifty is going down.

The logic behind this is pretty simple : Had the nifty not fallen as much as it has, these stocks would have risen much more! Nifty , while falling, is holding these stocks from moving up.

Now, only thing left to be decided is when to buy! That I leave upto you to decide.

It is a matter of practice and judgement.

If you find it difficult to locate the point of entry, you can use hedging as below:-

Sell one lot nifty and buy one lot of that stock!

The entire method discussed above is for falling nifty. Reverse is also true for rising nifty.

Paper trade this technique for minimum 10 days to master and fine-tune this technique before applying!

Thursday, February 18, 2010

What do they do when...?

What does Anil Ambani do when the share price of Reliance Communication is going down?

What does Mukesh Ambani do when the share price of Reliance Industries is going down?

What does Sunil Mittal do when the share price of Bharti Airtel is going down?

What does Anand Mahindra do when the share price of Mahindra & Mahindra is going down?

What do the Munjals do when the share price of Hero Honda is going down?

What do the Bajajs do when the share price of Bajaj Auto is going down?

What does Dr.Kiran Mazumdar Shaw do when the share price of Biotech is going down?

What does Rattan Tata / Tata Sons do when the share price of Tata Motors is going down?

What does M.V.Kamath do when the share price of ICICI Bank is going down?

What does Pronoy Roy do when the share price of NDTV Ltd. is going down?

...?

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...?

They (or somebody on their behalf) are silently buying them!

You also hold the shares of these companies.

What are you doing?

Wednesday, February 17, 2010

"bewafa" nifty..

A trader with limited funds shorted nifty.

He was sure that nifty will come down.

It started going up!

He held on, because he was sure of the fall!!

He waited calmly.

But the nifty inched up making him uncomfortable.

He immediately revised his homework and found that he was right.

There was every reason for the nifty to fall and none for it to rise!

It was already severely overbought.

So, he waited.

But the Nifty was adament. It continued to rise.

The trader got really tense now.

His buffer was almost exhausted.

Any more rise and he would be forced to wind up his losing position!

Nifty paused and entered into a very narrow range at that height!

It started to tease the poor trader by neither falling nor decisively killing him by rising more.

5 minutes passed.

then 10,

then 15...

the wait became unbearable...

He couldn't take the tension anymore!

He was still sure that the nifty will fall

but

the fear of losing got the better of him!

he decided to square-off!

as he was squaring off he was reminded of his favourite ghazal

"(nifty tujhe) muhabbat karne wale kam na honge,

teri mehfil mein lekin hum na honge..."

1 minute after the square-off after the tense drama,

the "bewafa" nifty started to fall

....madly!!!

The Story of Mr.Smart & Mr.Wise...

This is a story of one Mr.Smart and one Mr.Wise.


Trader A = Mr.Smart

Daily buys one lot Nifty futures (total value Rs.250000).

Daily he makes 0.5% (assumption).

(In reality he will be gaining and losing different percentages everyday as per the market conditions. On an average 0.5% every day can be assumed fairly.)

There are (on an average) 20 trading days in a month.

Thus he makes Rs.250000 x 0.5% x 20 days = Rs.25000/- pm per lot of nifty.

Brokerage (@0.15% per day including security transaction tax) = Rs.250000 x 0.15% x 20days = Rs.7500/-

Earning after brokerage = Rs.17500/-

He has to pay 30% income tax on Net Earning (Earning-Brokerage)=Rs.17500 x 30% = Rs.5250

Net Monthly Earning of Mr.Smart= Rs.17500 - Rs.5250 = Rs.12250/-

----------------------------------------------------------------

Trader B = Mr.Wise

Selects and buys 2500 shares of a stock XYZ @ Rs.100/- per share at the start of the month = Rs.250000/-

Stock goes up 10% in the month = Rs.25000/-

Minus Brokerage @1.5% (including securities transaction tax) = Rs.3750/-

Earning after brokerage = Rs.21250/-

Pays 10% Short Term Capital Gains Tax on this = Rs.2125/-

Net Monthly Earning of Mr.Wise= Rs.21250/- minus Rs.2125/- = Rs.19,100/-

----------------------------------------------------------------

Monthly Earning of Mr.Wise was 56% more than that of Mr.Smart.

Plus

Zero Stress, Peace of mind

No Leverage, No Risk of circuit and disaters

Time Freedom, more time for self and family

----------------------------------------------------------------
Mr.Smart was hurt to read this.


He decided the following "smart"strategy to beat Mr.Wise hands down -


"I also have Rs.250000/- with me. Why do I spend only Rs.30000/- as margin?

I can easily buy 4 lots of Nifty with Rs.120000 (Rs.130000 will still be left as buffer)

This way my net earning will be Rs.50000/- instead of Rs.12250/- (much more than Rs.19100) of Mr.Wise!"

----------------------------------------------------------------
Everything went well for a few months. Almost as per Mr.Smart's plan.


But after 4 months, a terrible adverse news plunged the market by 20% and Mr.Smart was in trouble.


He went to Mr.Wise who gladly helped him.


Both became friends and remained happily thereafter!

A "different" technical indicator !

Everyone uses RSI, Bollinger Bands, Stochastics, MACD, EMA, SMA etc. etc.

I know someone who uses a strange "technical" indicator which very few use.

The way he uses it is almost unique but very effective.

This gentleman doesn't trade nifty.

He is a short to medium term technical delivery-based trader.

He has a very simple way of when to buy and when to sell stocks.

For this, he uses ONLY ONE indicator!

"Nifty!!!"

When this "technical indicator NIFTY" stops falling and starts to reverse he buys his favourite trading stocks that have fallen a lot!

Once he has bought these, he never bothers about "Overbought" or "Moving Average Divergence" or any other traditional indicator!

All he carefully follows is "Nifty"

He never sells the stocks till the nifty starts to fall.

This he takes as the "sell signal" and sells all stocks he is holding.

Then he waits till his "favourite technical indicator NIFTY" gives a "buy signal".

This way he has been consistently beating the market since he started trading!

The surest way to lose...!

One of the greatest chess players in the history of the game was Anatoly Karpov.

Those who love chess will agree when i say that Karpov's battles with Gary Kasparov are legendary!

Karpov was known for his unpenetrable defence. He used to frustrate players with his armoured defence and then beat them by attacking at their weakness.

Since he was a master of defence, he was also by default master of spotting weakness in the defence of opponents.

Only Kasparov was able to beat him sometimes because of his extraordinary ability to come out with new and brilliant disguised attacking moves and make Karpov falter in his defence.

Karpov, at times, was criticised for being too defensive. It seemed to experts that he was less interested in winning and more in not losing.

He strongly rejected this criticism by saying the following immortal words:-

"The surest way to lose is to play for a draw !!!"

This is equally true for Stock Markets!

If "draw" is your aim, you will hesitate to take risk. Without risk there is no reward!

If "draw" is your aim, you will miss the opportunities of winning!

If "draw" is your aim, you will play with scared money! You will lack confidence and will be nervous most of the time.

This is a sure-shot recipe for panic impulsive decisions.

Thus the loss!

You have to be brave and take risk with a smile!

You anyhow, have the security of "Stop loss".

The best time to take risk is when the uncertainty is there and you have butterflies in your stomach.

Don't ever play for the "draw". Play for the "Win" but keep your defence strong!

Monday, February 15, 2010

Informers, Advisors & Body Guards (My Trading Method)

Having a trading model is the no.1 rule for any stock trader.

I have one too which I follow like a religion, no questions asked!
...

...

I hereby, share the same with all my trader friends...

(The main idea is not to discuss the exact method but the concept of the method.)

It comprises of three parts.

A) To enter the market, i wait for a signal from

INFORMERS (Trade Trigger Tools)

= Spike

= Step-up till re-entry

= Step-down bluff

= Opening Gap

= BTST Strength

= Kneel & Jack

= Outer Circle Bluff


(These are my favourite informers, i have learnt and practiced these hard and will continue to master them)

(I concentrate on the opportunities thrown by the above mentioned triggers only)

(If i get the signal I trade, if I don't get the signal I don't trade, simple.)

(These informers not only tell me when to enter a trade but also when to exit!)

---------------------------------------------------

B) If I have any doubt in the trade i am going to initiate, i take help of:-

ADVISORS (Trade Confirmation Tools)

= EMA crossover

= RSI

---------------------------------------------------

C) To trade with confidence and to minimise loss I use

BODY GUARDS (Capital Safety Tools)

= Stop Loss

= Hedge

---------------------------------------------------

You may find this method different from your trading method.

Every trader's trading method may be different!

No question of one method being better than the other.

What may be effective for you may be not so effective for me. All that is important is that one should have a system, a method, a model, a set of rules to follow.

These should be decided after thorough study and trials.

But once decided, these should not be changed that easily.
---------------------------------------------------

I suggest all trader friends to have such written trading model and follow it ruthlessly!

Sunday, February 14, 2010

which trading technique should you use...

Just like there are so many mobile phones to choose from, there are numerous trading techniques at your disposal.

Unfortunately, many traders blindly follow all the techniques that come their way or they keep on changing the techniques almost every other day!

Remember, some techniques are tailor-made for you depending upon your psychological and financial realities and others are simply misfit!

Primarily, the trading techniques are of 4 types:-

1) strategy that suits your emotional make-up & makes sense to you

= perfect! practice it, improve it, master it.

Most of all, stick to it, religiously! You are on the way to your dreams.

No harm in keep learning more techniques, but don't change this one so easily!

2) strategy that suits your emotional make-up but the strategy doesn't make sense to you

= learn it. spend some time to understand it till it makes sense to you.
Don't miss the technique.

Finding a trading technique which suits your emotional make-up is rare. Don't miss it just because you don't presently understand it.

3) strategy that doesn't suit your emotional make-up though the strategy makes sense to you

= avoid the strategy, better options will be available which will suit your emotional setup!
You may benefit occasionally or even more frequently, but you will not be comfortable with the strategy.

Your ability to deal with unforeseen situations will be limited.

You will not grow with the technique, the technique will not grow with you.

4) strategy that doesn't suit your emotional make-up & it doesn't make sense to you

= drop it like a hot cake and forget about it. It is likely to be full of land-mines for you.

Saturday, February 13, 2010

BTST at its rawest !!!

This is a powerful

High Success-rate

High return

High risk (Only for the brave hearts)

High Stress

Extremely Quick

BTST trading technique.

...

...
"Buy at 03.29pm one (or multiples thereof) futures lot of the stock
which satisfies the following conditions:-

1) is 1.5% to 3% in the plus,

2) ahead of nifty by atleast 1%

e.g. if nifty is 0.3% in the green, the stock should atleast be 1.3% in the green.
the technique works quite well even if nifty is in the red, but risk increases.

3) the sector (in which this stock falls) is atleast in the positive.

(preferably belongs to the best performing sector of the day which has shown day-long strength.)

4) the sector (in which this stock falls) is not showing a dead-cat-bounce

and sell in the first 60 seconds of opening of the market the next day!!!"

If it opens low due to "kneeling" of the stock by nifty, hold on as the stock most likely will fill the gap and bounce in the green. Keep stop loss at 1% of previous day closing....

...
If any of the above mentioned 4 conditions is violated, find the next stock in the waiting list which satisfies all of these conditions.

If none of the stock qualifies, don't trade that day.

Caution:-

Overnight disaster/unfavourable news in the local or world market may result into big gap opening which may result into substantial loss.

Such disasters happen rarely, but may happen.

Last time it happened was when Congress returned to power in May09 shocking everyone, trapping many who were short!

To overcome such a situation, I always ensure that I don't leverage much. Also, that I have enough funds at my disposal to hold on to such losing situations for long.

I never play with the money which I can't afford to lose in case of disasters.

Except for this eventuality or the error in picking the stock, I have found this technique more than 90% accurate.

It has helped me and many of my friends overcome huge loss backlogs.

Many have made huge huge money using this technique.

Many use this technique full-time.

This technique is very effective for those who are flush with funds and have huge backup (no doubt money attracts money!).

I must admit, whenever I use this technique, my stress level is rarely zero. Although I can't do anything (majority of the times I don't need to) but i can't help being glued to TV for latest news in the world markets. Sometimes, I have restless sleep.

The consolation is that the returns are shockingly high and quick.

The beauty of this technique is that

there is no monitoring required,

you are in the market for less than 90 seconds,

patience is not required (it is forced; u can't do anything till the markets open the next day!)

there is no stop loss.

it works in rising as well as falling market conditions!

This is BTST at its rawest!

when everything else fails, try this trading technique...

I have seen many people try many trading methods.

Ofcourse, I know many who trade without any method but i don't consider them as serious traders).
Some of them are very successful but many are not.

It is these majority for whom i write this post.

If nothing else is working for you (due to ABC reason), try this basic but powerful trading technique.

I call it "EMA Crossover Switching"

I learnt the details of this long time ago but somehow in the rush of learning more and "better" and more "flamboyant" techniques, i somehow forgot to use this tried and tested effective technique.

Early this week, one of my friends in Mudraa (Dr.Ravi) asked for my opinion for this technique which he had been using since long. It was then that i remembered this brilliant technique.

This technique is very simple.

"Buy when the faster EMA (Exponential Moving Average) cuts the slower EMA from BELOW and sell when the faster EMA cuts the slower EMA from ABOVE."

If you know just this one technique and STICK to it, you won't need any other technique in life, take my word for it! It will make for you any amount of money you can wish!

This technique is very safe.

The beauty of this technique is that it has in-built Stop-Loss!

Also, amazingly, "patience" is also in-built!

Only condition, and this condition is a matter of life and death (of profit), that use switch on/off very fast the moment faster EMA crosses the slower EMA (by switch on/off, I mean changing your position from being long to being short.

This is a full time strategy. Don't use this as a stepny technique. You may crosscheck your decision of going for the trade according to this EMA crossover technique with max 1 or 2 more logics (be it RSI or Support-Resistance etc.).

Also, while using this technique, don't leave the table with open position.

Sometimes, you will feel that you have had to do the switching too often too much. Don't worry. Such condition will come for a small time during range bound movement of nifty.

This is an emotion-free technique.

Don't ever be defensive or complacent about the simplicity of this technique. All deadly strategies are deceptively simple.

Just follow it. No questions asked. Like the army people. Do or die, don't say why.

Just a few suggestions:

Keep on experimenting with ema combinations.

For day trading 3 & 15 or 3& 10 is preferable.

For medium term swing trading (1month to 3 month) 3 & 5 or 2 & 5 look good.

Remember, ema lags the actual price movement.

It should neither be too tight that it vibrates like an ECG, neither should it be so wide that by the time you get onto the train the train has almost reached the destination.

Also, as an advancement to this technique:

You can prematurely buy even before the faster EMA cuts the slower one from below WHEN you see that the faster one has started to turn up whereas the slower one is still moving in the same direction.

Similarly, you can prematurely short even before the faster EMA cuts the slower one from above WHEN you see that the faster one has started to turn down whereas the slower one is still moving in the same direction.

Once in a while , this advanced step can be a bluff, but generally, i have found it to be right.

This Technique is deadly, all u need to adjust or experiment is the ema combination.

This technique can't fail. Back test this technique thoroughly before applying. One of the good sites where it can be tested on almost live graphs is (http://www.google.com/finance?q=NSE:.NSEI)

If ever you lose more than a small amount, the problem will be in your execution and not with the technique.

I have thoroughly revisited the strategy.

It is the most effcient and fail-proof technique.

It works best for nifty. In high-beta stocks, the response time has to be damn fast!

No doubt people may say it is not glamourous (but i find it glamourous).

Stick to it. We are in the money-business, not glamour-world!

This technique is so shamelessly consistent that it brings tears of joy in my eyes when i see the profits trickle-down effortlessly and endlessly!

laughing all the way to bank...

One of my friends in Chandigarh put his spare Rs.1 lac in Tata Motors on Dec12'08 (645 shares @ 155/-).

He sold these 645 shares for Rs.5 lacs on 30th Jan'10 (@777)(all tax free).

He is planning to reward himself by spending 1 lac on self & invest 4 lac back in 4 stocks for next 1-2 years!

The shocking part is that he is a dentist and knows NOTHING about nuances of stock trading!!!

Friday, February 12, 2010

13 earthquakes of Stock Market...

Earthquakes keep on hitting the great island country of Japan almost on daily basis. But the Japanese have learnt to live with them. They are always prepared for it. They expect these and are, therefore, well safeguarded against them.

Earthquakes are frequent in stock markets as well.

Some are unforseen and unprecedented and we can do little about these.

But many are regular earthquakes with mild intensity on the Rich(ter)-scale.
Here are some of them.

Identify and understand them, expect them at expected times.
Be prepared to not only safeguard yourself but also benefit from them!

1) Profit taking
= inevitable earthquake at the extremes of the rallies

2) Expiry
= lot of shake-up happens at expiry cross-overs

3) 3'o clock mild earthquake
= day traders start squaring off around and after this time. all auto-square offs of Day Trading positions are generally set at 3pm.

4) Short buildup in Open Interest
= if you can anticipate this quake, you can make a lot of money or atleast save a lot!

5) Longs buildup in Open Interest
= same about this one

6) Short covering
= when shorts are unwound at the end of a full or partial bear rally, it rebounds like a boomerang!

7) Long unwinding
= when longs get unwound at the end of a full or partial bull rally, it can bury you like an avalanche!

8) Quarterly Results
= This one is a big and unpredictable quake. hits the markets once every 3 months.

9) RBI policy announcement
= This one also comes once a quarter or during emergencies, but gives you time to pause trading!

10) US data release
= This one is an almost daily affair. Right from the jobless data to the housing data to the data on cats and dogs....every damn data in US creates ripple effect in Asia. Can't do much about these as we are sleeping when these mini-quakes come.

11) US Federal Bank policy announcement
= This quake is notorious for its negative tendencies!

12) Important events
= If you see a steam roller coming towards you, pl get aside.

13) Europian markets opening
= This quake comes around noon in India. Everyone is sniffed by the snake around that time. so, beware!

Thursday, February 11, 2010

I admire your patience...

Each one of us is daily bombarded by our inner self

"Why are you always impatient?"

"Why did you book profit so early?"

"Why couldn't you wait before booking loss so early?"

"Why didn't u wait......bla bla bla...!!!"

We punish our poor soul for this illusive "patience".

Every time we feel like a stupid who didn't have the nerves to wait!

I admire your patience...of bearing this emotional atyachaar!

I want to console all such injured souls who have been mercilessly tortured.

One of my psychologist friend (who trades as well) helped me in understanding why we poor chaps have so less patience!

He told me that

Patience in trading depends on

1) the amount of the bet

= the more the size of the bet in proportion to your net worth, the lesser the patience.

2) the confidence of the trader

= experts have better understanding of what is happening and what is going to happen.

3) the risk reward ratio

= lesser the risk as compared to the possible reward, more the patience!

4) the fierceness of the dog behind your car!

(i.e. the reason of the urgency of earning)

= the smaller the reason, more the patience!

for example, is it the borrowed money you are trading with?

are you trading to make up for the financial mess you are in?

are you trading to become rich fast?

are you trading to recover your losses?

are you trading after having inflated your ego with the previous profits and think you have become King Khan of the market?

5) the distance and size of the exit door

= a stop loss increases the patience

Do you hate the punters?...don't !

Majority of us hate the punter.

Why?

Because we believe that the punter is responsible for our losses?

This is true as well as false.

True, because it is a punter's job to snatch and win away your money.
Anything stupid or timid you do and he runs away with your money.
Also, even when you don't make a mistake, he is like that fast bowler who will tempt you to commit the mistake.

False, because he never forces you to make a move.
He cannot.
Your move is finally in your hand.

A punter is a punter because he has the power of money dancing to the tune of his "holy dirty" tricks.
He is punter because he is an expert in laying traps.
Punter is the driver and we are the followers.

Successful puntering is anticipating the anticipation of others.

A punter keeps a hawk eye on the movement of the price...
He knows that millions of retail trader are looking at the same rsi which is pointing towards the scrip being in the oversold or overbought zone...
He knows that everyone is looking at the same support or resistance...
He can sense the mood of the people from the volumes and the price movement...
He is also aware of the noise the channels are making...
He brings in volatility when things are stable, and stability when everyone is expecting the volatility to continue.
He will make u follow him if it suits his scheme of things.
He will go against you if it suits his scheme of things.

It is not a punters job to respect the fundamentals. Rather, he wants a mob which respects the fundamentals.
This gives him more fertile ground to trap you again and again and make money.

He will start a trend and make the maximum number of people follow him.
He will fuel the trend beyond the sane limits
He will bring in volatility on the way to maximise his gains
He will turn the tide when least number of people are expecting it
He will do the thing that will make maximum number of people look foolish and trapped


So, what do we do?

1) Go with the trend, Go with the Punter
a punter always respects the trend;
rather, the trend is as per his scheme of things;
only thing, beware of the volatility he may bring, the extremes he may drive the price to and the surprise reversal he may throw in at the most uncomfortable time)

2) Beware of the obvious and expect the unexpected!
(surprise is a punter's no.1 tool)

You don't make a lot of money by anticipating the market.

You don't make a lot of money by anticipating the anticipation of the mob.

You make a lot of money by anticipating the anticipation of the anticipator of anticipations!

Make punter your friend rather than hating him!

---------------------------------------------------------------------------------------

Warren Buffet

"Successful investors will never follow herds and go against tide"

Annonymous

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

Annonymous

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

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."

Annonymous

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

Menschel

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

Annonymous

The obvious is obviously wrong

Do u play with white or black?

I remember when i and my childhood friend Ashish Dewett (working with a multinational Pharma giant) sit down to play chess, one of us asks the other "will u play with white or black?"

The idea is that the one who would choose to play with white pieces would make the first move and the one with the black pieces would be forced to defend.

The moves of the black pieces would be in reaction to the moves of the white pieces.

Black is always counter-playing and reacting to the moves and traps of the white.

Similarly, if stock trading is chess, the two opponents are - the market and you (the trader).

Like in chess, you can chose to pick either white or black.

meaning - you can choose whether you will decide your move first (whether you will take long position or short position before the market moves up or down, or, whether you will take black and move only after seeing the movement of the market).

Playing with white in stock market is

predicting the market movement on the basis of a logic and taking position, preferably with a stop loss.

Playing with black in stock market is

-
waiting patiently for the market to make its move, rather waiting for the market to make any wrong move and catching it on the wrong foot.

It all depends upon the trader's style of playing.

Some feel comfortable playing with white while others with black.

To play with white, your technical analyses or understanding of the market has to be very good.

Use of stop loss can cover up for any lack in your excellence in Technical Analyses but the results are dramatically tamed.

To play with black, all you need to master is - catching the bluff of the market.

The market bluffs in so many ways - like rising too fast too much, bluffing out of a trend line, kneel and jack, etc.

Till the market is not making any mistake, the trader playing with "the black piece strategy keeps waiting".

Just like a lion keeps waiting till the time is perfect to attack.

Any premature move can result into slipping of the opportunity out of the lion's hands resulting into a prolonged hunger for him.

Stock trading is , therefore, similar to chess as well as hunting.

But, unlike chess or hunting, you can play both sides.

I have seen many traders first play with "white" till the market has gone far enough on the wrong foot.

At that time, these traders quickly shift to the opposite side and start playing with the "black" pieces.

So, what is your style?

Do u play with white or black?

Wednesday, February 10, 2010

Climb, Spike and Shift (Day Trading Technique)

This is a Trading technique which i developed on the basis of my observation of price movements in the past few years.

The success rate is mouthwatering enough to make me use it again and again.

I call this technique

"Climb, Shift and Spike"

A gradual slow rise (22degree)in the price graph is a "climb".


A sharp rise is a "spike" (45 degree or more)


A very sharp (almost vertical) rise is a "shift"

All shifts and climbs are solid and sustainable, whereas all spikes are unsustainable "bluffs" and are generally reversed till the rise is a climb.

The reason behind spikes is liquidity or sentiment or puntering and hence unsustainable. Gradually, the steam runs out.

On the contrary, the reason behind climbs and shifts is fundamental and hence sustainable.

So, all spikes (not shifts or climbs) can be shorted when the graph has gone "too far".

The exact entry point is a matter of judgement and can be mastered with practice.

RSI or some other technicals can also help you identify the preferred entry point.

The only thing to be taken care of is that entry point has to be at the point when the graph has gone too far in the bluff, and not when the bluff has just started.

The exit point should be the time when the spike becomes a climb.

Kneel and Jack (Day Trading Technique)

Here is another simple Day Trading technique i have been using since long with high success rate.

Many people use this technique consciously / subconsciously in part or full.

Although people use different names for it, I call this technique as

"Kneel and Jack"

Before explaining this simple technique, let me share what i mean with 'kneel' and 'jack'.

Have you seen a slave kneel before his master?....now u know the 'kneel'.

Have used a jack to change the car tyre?....now u know the 'jack'.

Now i share this 'kneel and jack' technique.

...

...
Lets assume the nifty had started an unmistakable up-trend yesterday.

It was, therefore, expected to continue to rise today.

But,

due to temporary news-based weakness in global markets, it opens with gap-down!

in other words, the slave 'nifty' has been "kneeled" by the master 'global markets'.

Buy nifty on opening under this situation.

...

...
Similarly,

Lets assume the nifty had started an unmistakable down-trend yesterday.

It was, therefore, expected to continue to decline today also.

But,

due to temporary news-based strength in global markets, it opens with gap-up!

in other words, the slave 'nifty' has been "jacked" by the master 'global markets'.

Short nifty on opening under this situation.

Tuesday, February 9, 2010

Are you sure?

Very often we jump in a trade at the drop of the hat! The temptation is irresistible.

Very often it turns out to be an impulsive decision which results in loss or a lot of stress.

There is an easy way to avoid this.

There are 4 possible situations:-

1) When you are sure of the result and say "Yes" to the trade

= You have done the right thing and you are going great! (Don't forget to put the stop loss still.)

2) When you are sure of the result and say "No" to the trade

= You lack confidence. Timidity and Risk-aversion is not good in trading. You missed the opportunity. You should have gone ahead with the trade. What is the 'Stop Loss" for?

3) When you are NOT sure of the result and say "Yes" to the trade

= You have taken a risk. If with Stop Loss, it is OK to take such risk. Otherwise, it can be damaging.

4) When you are NOT sure of the result and say "No" to the trade

= You have done the wise thing. Sometimes, though stop loss will stop the loss to minimum but your confidence is shaken.

Monday, February 8, 2010

4 options when your stock is going down...

Option 1

you trigger stop loss though you had enough buffer funds to safely hold on to losing position to any depth

Option 2

you trigger stop loss knowing that u didn't have enough buffer funds

Option 3

you don't trigger stop loss and have enough buffer funds to safely hold on to losing position to any depth

Option 4

you don't trigger stop loss despite knowing very well that u don't have enough buffer funds to hold on to losing position for long
..

...

If you opt for the first option you are professional day trader who doesn't believe in wasting time by getting stuck in positions, though you can very well afford to.

If you opt for the second option, you are risk taking wise trader who will make money despite your back against the wall.

If you opt for the third option, you are a casual amateur trader who is complacent because of comfortable fund position.

If you opt for the forth position, you are a gambler but not "the great gambler". You might not be around for long.

Sunday, February 7, 2010

Last 75 minutes of an injured trader & the dying declaration.....

A trader puts X amount in a stock (buy).

The stock starts going down...

The following statements pop out of his/her mouth turn by turn

After 5 min : "It is just marginally down"

The stock starts falling.

After 9 min : "It is just bluffing"

the stock falls more.

After 12 min : "It is going to turn up"

the stock doesn't.it slips further.

After 14 min : "It will turn up"

it doesn't, is falling...

After 19 min : "Why is it not turning"

the stock doesn't listen...it keeps falling

After 23 min : "When will it turn up"

no reply...falls more

After 28 min : "It is too much down now. I can't book loss. I must wait till it turns up"

the stock's speed of fall slows

After 34 min : "It can't go down more now. It is going to bounce back any time now"

it doesn't....starts falling again.

After 41 min : "The loss is growing. What do I do?"

stock is teasing...still falling.

After 44 min : "I should have put stop loss"

stock is not impressed.

After 46 min : "I should not day trade"

After 52 min : "I will not day trade"

After 53 min : "I will not trade"

After 54 min : "This is not my fault. The market is behaving irrationally"

After 55 min : "Next time I am going to be more careful. If only this time it goes up. God...please!"

the stock slows its fall.

After 59 min : "Someone help me, what should i do now?"

After 63 min : "Nothing can be done. I should book loss."

After 64 min : "I will book loss the moment it goes up slightly"

The stock starts falling more..

After 74 min : "Why is it going down more?"

After 75 min : "I book loss"

The loss is booked.

...and the stock starts moving up!!!

Dying declaration of the "innocent" trader : "I should have gone with the trend. I should have shorted!"

Saturday, February 6, 2010

Post Dated Cheque in your name...

I know someone in Shimla whom we call the grand old stock trader of Shimla.

He is around 70, is a chain smoker and a stock market addict. Wears spectacles, puts his eyes at 3inches distance from the terminal monitor, is always very relaxed and happy, speaks very less and minds his own business.....

The brokerage house keeps one exclusive terminal and attendant for him.

He entered share market with Rs.10000/- around 15 years ago and today has over a 1.5 crore out of that investment!

The other day i was sitting with him. He was in a very good mood.

I asked him for a sure shot investment method from him, his secret.

What he told me was very simple and very interesting. I felt, i must share with you what he told me.

He said "I pick any good company which is substantially down from its 52 week high and write myself a 'Post Dated Cheque'.

He then explained it -

"See, Suzlon made a 52-week high of 136 on 4 June09. I bought 10000 shares at Rs.64 on 10th Nov'09 for Rs.6,40,000/-.

I have written myself a post dated cheque of Rs.13,60,000/- (10000 shares multiplied by the 52 week high rate of 136).

I have not put the exact date but it is a PDC crossed cheque for me.

I put all these cheques in my study drawer. Whenever i have any anxiety, I just go to the drawer, open it and have a look at that real cheque.

I know Suzlon will go back to 136 sooner or later.

Exact date i don't know. But it won't take ages, that much i am sure. I will sell it when it reaches 136."

I was awe struck with the simple method backed by that PDC trick!

This way, this gentleman has multiplied his wealth 1500 times in less than 15 years!

Not surprising considering that he would make 112% on his investment in Suzlon in less than a year (most probably).

This gentleman knows no graph reading, knows no computers, knows nothing about RSI, Moving Averages, Stochastics,......nothing.

He doesn't do day trading, he doesn't trade futures, he knows nothing about options. He doesn't listen to experts neither does he watch TV except for gossiping!

This man pays no income tax (investment returns more than 365 days qualify for long term capital gains tax exemption, i think).

He is happy when the market is going up and happier when they are going down.