Thursday, September 30, 2010

Future of Automobile Sector - I

* Those without vehicles will be buying motorcycles or entry-level cars

* Every motorcycle owner will want to upgrade to car

* Every car owner will want to upgrade to higher segment car

* Every 3-6 year old car and bike will need to be replaced with new one

* Every affluent household will want to keep more than one car. Rather, every individual would want to have his/her own car.

* Old cars market will become huge

* More and more authorised service stations will be needed

* Auto parts companies will thrive

* Auto finance companies will thrive

* Export of cars and bikes and components to other countries (including developed, developing and under-developed ones) will increase.

* Niche car segments will become stronger and larger.


We haven't yet talked about trucks, buses etc.

This much as far as the quantitative changes are concerned.

The qualitative changes that will happen are mind bogling!

Only those companies which can adapt will survive.

Keep an eye on small and midcap companies adding value to the frontline companies.


Wednesday, September 29, 2010

Bidding for Diana!

Mulla Nasruddin went to a mela.

He saw a crowd in a corner.

"50000 Dinars!"


"65000 dinars!"


He was perplexed to hear the loud voices.

It didn't take his inquisitive mind long to figure out that traders were participating in an auction.

"70000 dinars!"


"75000 dinars!"

"What is the auction for?" Mulla asked!

"I don't know exactly" replies an onlooker.

Mulla went to the person who was one of the traders putting the bids.

"What is the thing being auctioned?"

"Probably it has got something to do with a horse!" the trader replied.

"You are bidding and you don't even know that?" Mulla ridiculed the trader!

"Why should I bother? I came here to make money. I saw people bidding so competitively. I am sure it must be something precious they all are after!" the trader justified.

Another trader standing nearby heard the two's conversation and said

"I just came here. Somebody told me that the auction was related to the famous racing horse Diana! When I saw so many merchants so feverishly putting the bids I was sure that Diana must be precious!" replied the trader.

"Where is the Diana?" Mulla asked further.

"Don't know? Haven't seen!" the trader replied, visibly upset at the disturbing Mulla.

Mulla too wanted to bid for Diana.

He had a small bag full of gold coins he had won as prize from the sheikh in the previous town.

But he wanted to have a look at the Diana first.

He asked other traders but nobody had even a clue about Diana!

Then finally one trader said "Diana is probably hidden in that tent!"

Mulla saw a guarded tent at a distance.

He stealthily went to the rear of the tent and peeped inside.

He saw a goat inside!

A guard caught Mulla peeping inside.

"What are you doing here?" the guard asked.

"I am looking for Diana!" Mulla asked.

"Diana is not here!" the guard shot back.

"But the trader there said the auction was related to Diana-the racing horse!"

"Yeah! It is!" the guard nodded.

"But this is a goat!"

"This famous goat's milk is supplied by my master Sheikh Abdul for the consumption of Diana! My master hired the royal agents to auction the goat!"

Are you a rebel?

Are you a rebel by nature?

Do you mostly take a contrarian stand in any forum?

Are your views often different from the crowd?

Are you a non-traditionalist?

Are you a loner?

Are you "different" from the crowd?

Do you feel uncomfortable when amongst a herd of people?

Are you more of a leader and less of a follower?

Are you the one who doesn't take things on their face value, but stand up and question?

Do you feel uncomfortable with the status-quo and challenge the state-of-affairs?

Are you a believer of reversal of fortune during bad times?

Are you a believer of change?

Have you been a struggler in your life who believes that good times don't last long?

Are you a suspecting person?

Are you one who doesn't believe things before eyes easily?

Do you get fed up fast with bad times?

Do you also fear excess good fortune due to the pain associated with the ending of good times?


If the above statements are true for you


you are probably having difficult time in trading

which is primarily

go-with-the-broader-trend game

where the majority is right even when they are wrong!

and it pays not to be a loner!

it pays not to suspect the trend before the eyes

not to fear the excess good fortune

not to be a rebel

not to take a contrarian stand

not to bother about your views till you know the view of the crowd


where it pays to be one out of the crowd

to be comfortable only when amongst a herd of people

to be more of a follower than a leader

to not to question too much till others don't!

feel comfortable with the status-quo!

believe in the maxim that too much of a good thing is great!!!

Monday, September 27, 2010

7 secrets about 'RSI' experts don't want U to know!

RSI is the most referred, famous and discussed technical indicator.
You will find RSI's mention in almost every trade talk!
Every website, every channel, every forum refers to RSI every now or then.
Whenever anyone talks about RSI, all they have in mind is the 70/30 boundary!
Above 70 they take the stock or market as overbought
and below 30 they they take them as oversold!
That is all!
At best this 70/30 line is replaced with a 80/20 line!
Everyone starts waiting for the price to fall when rsi crosses above upper line
And they start waiting for the price to rise when rsi crosses below the lower line!
I don't know when or how it happened
but RSI 70/30 overbought/oversold myth has become a monster by now.
A wrong impression has been created.
Almost every trader has started looking for the wrong thing while using RSI.
They feel secure to short above 80 or 70 rsi and long below 30 or 20 rsi....
...and get trapped!
Given below are the 7 facts about RSI which are much more important than the 70/30 or 80/20 important that I look only at these rather than 70/30 lines!
1. Failure Swing Point
= If you must learn only one thing about RSI, this is it.
2. Retreat
= Just check how much the price has retreated versus the retreat of the rsi. This holds vital info.
3. Rally v/s Ranging
= RSI trigger points change depending upon whether the markets are trending or ranging.
4. Pro v/s Anti-Rally
= RSI effectiveness changes depending upon whether we are trading pro the trend or anti the trend!
5. RSI v/s William%R
= Like a Pizza with Cola, RSI's best friend is William % R. These two indicators make terrific company. You just can't mistake the signal when two are together!
6. Divergence
= This is the point where RSI rocket starts its reverse counting at the end of the rally (and not the 70 or 80 line!)
7. Outer RSI
= It matters less where the rsi stands. What matters more is where the outer RSI stands. e.g. RSI 14/1day on 3 month chart is the outer RSI of RSI 14/30min on 1 month chart!

Sunday, September 26, 2010

Abraham Maslow Hierarchy of trader's needs

Level I:

Physiological need

= I must survive the market!


Level II:

Safety need

= I must not lose!


Level III:

Social need

= I should be among the profitable traders!


Level IV:

Esteem need

= People should know that I am a profitable trader!


Level V:

Self-realisation need

= Could I have been a better trader?


Saturday, September 25, 2010

Seeds of loss-II

An average person can speak at 150 words per minute

and listen and think at 1000 words per minute.

When an advice is typically given at speech rate

and listened and pondered at 1000 words per minute

what fills the gap?

- our own fears and anticipations!

Seeds of loss are watered by ourselves!!!

Seeds of loss

7% fear of trading comes from
what we are thinking

38% fear of trading comes from
how we are feeling

55% fear of trading comes from
what we are expecting

The seeds of loss are always inside us!

Making of a professional trader!

Long ago I had read somewhere that "there is no real advancement without a crisis"

An amateur trader becomes a professional trader passing thru various stages each separated by a crisis!


Nothing explains these stages as beautifully as the Greiner's postulates

which I have adapted below to the stock market to understand a trader's evolution :


A curious passerby comes to the stock market.

Doesn't know what to do, how to do.

Either he exits due to ignorance or successfully overcomes the first barrier with ideas to trade!

(Growth thru creativity : Phase I)


This growth phase continues till their is a 'crisis of leadership'

He feels the need for some specific idea to steer him further.

Either he quits or successfully overcomes this barrier with a method!

(Growth thru direction : Phase II)


The growth continues further till their is a 'crisis of autonomy'

He feels that the method is somehow not working.

Either he fails to find a solution to this and quits, or successfully overcomes the dilemma by letting the method guide his trades completely and not poking emotions and opinions in its signals!

(Growth thru delegation : Phase III)


The growth moves still higher till their is a 'crisis of control'

The trader finds that method can't be followed blindly in varying situations of the markets.

It needs to be continuously adapted to the situation.

Either he surrenders or successfully learns to adapt.

(Growth thru coordination : Phase IV)


After this the trader grows very fast till their is a 'crisis of red tape'

He finds that he has lost the fun of trading on the way and is becoming very mechanical!

Either he re-infuses excitement in trading and commits a blunder or

learns to co-exist with the reality!

(Growth thru Collaboration : Phase V )


Is not that there are no more crises in a trader's life after this stage.

But by now he has mastered the art of overcoming the crises

and has become a professional.

Choose right, sit tight!

Market goes up and market goes down.

Only one of these two things that the market does is right.

But it never lets u be sure of it till it is too late.

Even then all u r sure about is the move behind u and not ahead of u.

As they say - "Markets always do teh obvious in the least obvious way!"

Stock markets are designed to keep vibrating.

Even a straight distance is covered by the market in zig zag manner.

It seems like the walk of a drunkered

but is actually the walk of a master deceptor!

Traders mistake every turn of the market as the turn of the trend!

And it just turns out to be a "Oops, Sorry!" step by the market!

But many book loss or board the wrong bus due that mischievious "Sorry!"

"Follow the trend becomes a trap!"

Vibration is a normal walk of the market.

Market doesn't like participation of people who don't vibrate along...

who don't respond to its lures and threats...

Like Casinos, markets love only those players who lose more than they win.

Casinos and markets are operated by those who are not exactly social workers.

They don't like dull boring unemotional poker-faced duds who come with peanuts in pockets and leave with sack-full of money.

Market doesn't like winners.

Markets love losers and can go to any extent to make them comfortable, be friends with them and occasionally let them taste profit...

Have the guts to call market's bluff.

The trick is to choose the right direction and do nothing more!

...thereafter all you need to do is - drift. the boat which is driven by the wind.

The more you "do something" the more you take the hit.

Choose right, Sit tight!

Wednesday, September 22, 2010

"Holy Gambling"

I met Rishant after a long time. (Those who read my earlier posts might remember him as the one who had perfected the art of BTST!)

He came to my office in a gleaming brand new Ford Icon!

And after the initial exchange of pleasantries I was struck with awe to know that he had just bought this car in cash (no loan) from the returns entirely from the "holy gambling"!

"Holy gambling" is the code word we had given to "gambling" he used to do with options once every month.

Once every month he used to buy "deep out of money" 2-3 months away call or put options of a stock which his technical analysis predicted was set for drastically shooting up or down!

He typically used to put at stake 2500 bucks per game per month.

This money he used to "spare and forget" out of his monthly fat salary.

"I assume that I have blown this much less or saved this much extra during the month!" he used to share with me.

"This gives me tremendous entertainment besides often resulting in 5 to 20 times returns in a month depending upon market conditions and my technical extrapolation."

"This is not gambling in real sense. it is the ultimate testing of my technical abilities. Calling it Holy Gambling is just a fun way of branding this low-risk high-returns trade."

Road to Heaven!

A trader was chatting with God.

"God! I want to go to Heaven, please show me the way!" he typed and entered.

"Can you bear Hell?" God typed back.

"Why, God! I want to know the road to heaven, not hell!"

"...because the road to Heaven, my dear child, goes thru hell!"

"But why is it important to be a able to bear the hell?"

"...because if you can't bear it, you will deboard the tram right in the hell and sent back on foot. You will never reach the heaven!"

"and what if I can't or don't want to bear the hell?"

"then, my child, the place you are presently in is not that bad either, is it?"

"but why did u got the road to heaven built thru hell?"

"so that u know the difference, my child and not make hell out of heaven when u reach there!"

Tuesday, September 21, 2010

Tandoor and the Knife!

'Never catch a falling knife' they said!

But they never warned against hastily putting hand inside the Tandoor (Indian clay oven fired with charcoal)

Long after the chapattis (North Indian bread) have been baked in the tandoor

long after the fresh fuel is abandoned

the Tandoor remains hot inside!

Red hot!

Simmering smokeless ambers deceptively cold but fully alive inside!

Just like a Tandoor can maintain high cooking temperature for long periods, a bull run can remain simmering for extended periods!

A Tandoor, traditionally, is left to cool-off overnight before the ash is removed.

A bull trend should be allowed to cool-off before putting hands into it!

4 advance mistakes traders commit

1. Wait for lows but once it comes, they chicken out and don't buy!

2. Don't hold the position firmly and sit tight. Get thrown-off the bull's (and bear's) back at the first jerk!

3. Trade ranges and trends in the same way.

4. Underestimate the trend and prematurely assume its reversal.

Are you a boat or a ship?

More boats capsize in the sea than ships every year!

One reason is that boats are more in number and not that safe in troubled waters.

There is, however, another reason.

Ships have many ballast tanks (hollow compartments) in their basement each separated from each other by strong partitions.

Even if a ship were to collide with something (like an iceberg or another ship), only a particular chamber will get filled with water. Rest chambers will be intact and the ship will stay afloat.

A boat doesn't have this luxury.

Even a hole can sink it pretty soon!

A professional trader should be like a ship.

He should divide his total money in 2 or 3 airtight separate compartments.

One portion for trading,

another for family,

and yet another for some other crucial need...and so on...

so that even if the trading compartment is struck

the other sections are intact

and the ship stays afloat.

The damaged compartment can always be repaired in the due course of time!

He should be strict in not turning towards the other money compartments to borrow money in case he loses in the stock market.

This safety feature gives the stock trader peace of mind which shows in the results!

Licking the wounds!

Whose words are these =

"I always knew Nifty was going to go to 6000.

But still I missed it.

See, it has come all the way from 5300 to 6000 right before me!

All along it kept creating an impression that it would fall.

It moved 700 points and I didn't even get a chance to hold it !!?

What a paradox!!! What a paradox!!!

Whenever I bought it, it threatened to fall and I sold it and even went short!

Just then it lured with a rise and I looked like a damn fool!

It kept playing with my emotions and blood pressure!

At every step it guarded its intentions as a secret.

Now it seems so logical and possible, but all along the way it seemed impossible that Nifty could come this high and this fast!

It never gave a slightest hint!

Everyone thought whatever they wished!

The market gave enough rope for everyone to hang himself!

Cunning, real cunning!!!

Who has emerged victorious?

The one who chose right and sat tight, giving a damn to the theatricals on the way!

The one who bought in the severely oversold valley and held on till the overbought peak!"


If these are your words, best of luck next time.

Markets are notorious in repeating the same tricks again and again and again!


Sunday, September 19, 2010

A crash course in Day Trading!

A young farmer went to city to learn futures trading in wheat.

But there, he saw everyone day trading.

"Who knows what will happen overnight? Day trading is better." he heard.

"One bird in hand (intraday profits) is worth two, even 10 in the bush (swing trading or investing)" someone said.

"Only day trading can ensure sound sleep at the night irrespective of what is happening in Europe or US in the meantime!" he overheard.

"If all of them are doing day trading it must be the better thing!" he thought.

So he decided to learn day trading instead of futures swing trading his father had asked him to.

"I will surprise my father when I go back. He will be pleased." he thought!

For the next 5 days he learnt the "smart tactics" from the pit traders in the fish market terminal room.

On Saturday he went home with his neck held high!

"My entire village should be proud of me" he was sure!

When he reached home he found that his father had gone to his relatives in adjacent village for 2 days!

"I have 2 days to show results!" he thought.

Next morning he went to his fields.

Small wheat shoots had come out of the seeds planted a few weeks back.

The sun was shining and the sky was clear!

A good crop was on the cards.

He then went to his friend's house and had a nice time for the rest of the day.

Next morning when he woke up, he saw the sky overcast....

Dark thick clouds everywhere.

He checked weather forecast on TV.

"Severe Thunderstorms!!!" they announced.

He went to his fields.

It started to drizzle.

Clouds roared in the sky above.

Lightening flashed.

It was all too scary!

"Bearish signal!" his trained trader mind whispered!

"This is going to destroy the crop"

"I must prematurely book whatsoever crop profit I am getting. Greed of any more profit may leave our family with nothing."

He went to the garage, took out his combine harvester and razed the half baked crop in just half an hour.

He was happy at his trading skills!

"Now I am assured of good night's sleep despite whatever happens in US or Europe overnight!" he proudly said to himself.

"...a bird in hand is worth 10 in the bush!" he was reminded!

He went home and found that his dad had returned home as well.

He proudly narrated his "achievement"!

"I am proud of you my son!" his dad said.

"With your day trading skills, you have surely harvested enough food for our cattle for the rest of the season! Now take me to the city tomorrow morning to learn day trading. For I have no other way left to feed my family after your achievement!"

The son was shocked!!!

He remained silent for what seemed like ages!

He realised his foolhardiness!

He went out and saw the clouds receding!

The lightening had stopped flashing.

The drizzling had stopped.

"My son! Never worry about Clouds whether in market or fields. Never worry about lightening. There will be many every other day! Never worry about thuderstorms. Never worry about what they predict in the forecast on TV. If you have faith in the crop, wait patiently! The sky is not falling and neither is the world going to end tonight whether here in India or Europe or US! This is what I learn from my father - your grandfather, and this is what he had learnt from his father!"

Friday, September 17, 2010

punishment for forgetting it...


"They are after you mind, buddy"

"The market fooled us"

"The market caught us on the wrong foot"

"The market is supreme!"

"No one can beat the market..."


Familiar lines...

But, we never trade against the market.

There is no one called "market"

Market is nothing but we traders ourselves.

So, we are not pitched against the market

We are trading against each other!

The losers are among us

The winners are also among us.

Big or small, they all are from within the traders in the market!

Some trader out of "us" beat and take the money of the rest!

These "us" can be divided into 3 groups

1) small pocket - weak players

2) small pocket - sharp players

3) big pocket - sharp players

(There is nothing called big pockets-weak players!)

This write-up is for the small pocket - weak players.

Why do weak players almost always find themselves on the wrong side?

Why are the sharp power players almost always on the right side?

Are the weak players always wrong?

If not, then why is it that they have to lose majority of the times?

Or is it that the there is no right no wrong side in the market

- but only small pocket side and big pocket side!!!

Is it that the big pockets

-have the power to turn any position of small pocket-weak players as wrong side!

-have the power to shoo way the small pocket-weak players in one direction and then turn the tide in the opposite direction by sheer buying or selling power!

Might, they say, is right!

True in stock market as well!

Trading is a dodging game.

Sharp players are playing against weak players

constantly winning their money.

Their modus operandi is simple-

1) Make the weak players go up and themselves go down

2) Make them go down and themselves go up.

They do all this without going against the overall trend warranted by the fundamentals otherwise they will themselves risk getting checkmated!

Small pockets just can't synchronize with the bluff moves of the big pockets.

The big pocket-sharp players have got the money and hence no fear.

They can hold their position longer than you can stay liquid

So a small player just can't win in this zig-zag kho-kho game!

Fortunately there is hope for the small pocket players!

There is one way small players can save themselves from getting ejected from this prey predator game!

By neutralising the strength of the strong players!!!

By making their modus operandi ineffective!!!


Lets see...

What's your weakness that is exploited by them!

- Fear or Greed!!

They dangle a carrot and you move along!

They scare you with hysteria and you run away, leaving behind your stock!!

Can't you see, buddy!

Their are after your mind!!!!!!!!!

Switch off your mind, will you!!!

Play with the method, not with the mind!!!

Courageously stay with the overall trend!

That way, the dodge tactics of big pockets simply won't work!

They try to shoo you away, but fail...

They try to lure you in, but you don't...

They try to wear you out, but they fail...

They know they too can't go against the overall trend against the fundamentals...

this way they will get trapped in their own net....

If they try to hammer the price down artificially, you take their money, say 'thank you' but still don't go short but re-enter long again!

If they try to fuel the price up artificially, you take their money, say 'thank you' but still don't go long but stay re-enter short again!

As they say

'Be a sucker to catch a sucker!!!'

Wednesday, September 15, 2010

Languages I know

I know the following languages

- Hindi

- English

- Punjabi

And I am learning two more

- Body Language


In the words of Dr.Elder Alexander

"Learning to use indicators is like learning a foreign language. You have to immerse yourself in them, make typical beginners’ mistakes, and keep practicing until you rise to the level of proficiency and competence."

Tuesday, September 14, 2010

16 types of knives for a trader

Boning Knife -

4-5 inch blade.

for separating meat from the bone


Bread Knife -

9 inch blade

to cut bread without squashing the loaf.


Chef's Knife -

4-12 inch blade

for chopping and dicing


Cleaver -

6 inch blade

to chop through the bones


Fish Filet -

7 inch blade

to fillet fish.


Fork knife -

8 inch blade

a carving knife's assistant, used to hold meat in place while slicing


Ham Slicer -

10 inch bladet

for slicing through the unique texture of ham.


Oriental Cleaver -

7 inch blade knife

a fine chopper and dicer of vegetables, herbs, meats and fruits


Paring Knife -

3½-4 inch blade.

preferred for hand-held tasks, providing utmost control


Birds Beak Knife -

type of a paring knife

for peeling small round fruits and vegetables.


Salmon Slicer -

12 inch blade knife

for slicing smoked salmon.


Slicer/Carver -

8-10 inch blade

for carving paper-thin slices of meats, fruits and vegetables


Steak Knife -

5 inch blade

cuts through thick steaks and chops


Tomato/Bagel Knife -

5 inch blade

for cutting something that's soft on the inside and tough on the outside


Utility Knife -

6 inch blade

a cross between a paring and chef's knife

an all-purpose knife



0.25% blade

for cutting loss when used

for cutting bank balance when not used

A stop loss that fights back!

One of the real reasons behind our hesitation to trigger stop loss is the pain we have to bear in booking the loss.


We let our account bleed...

You don't need any other weakness to seal your fate in trading if you have this one.

Is there any solution to this which works?

For any solution to work it has to satisfy two conditions -

1) it has to be simple yet effective

2) it should have potential to recover the loss

If the trader in losing position sees the way to recover the loss, his focus will shift from the pain of booking loss to the hope of recovering the loss.

That way his fingers will be much lighter in clicking the stop loss button.

Before we find out such a method, let us have a close look at what we do after we book loss?

We feel a lump in our throat,

our blood pressure is low,

our mood is bad,

we are frustrated.....

We shut down the computer

and go out of the room!!!

That, dear friends, is the key mistake.

We treat booking loss as full and final.

We come out of the room

the stock retrieves

but we are not there!!!

Herein lies the solution.

When the stop loss is hit

honour it BUT

don't turn off the computer

don't leave....

just stay there!

The fightback opportunity comes just after booking the loss!!!

Cordon-off the area into a zone.

Mark 2 lines, one above the stop loss, one below the stop loss

(how much above or below - you decide as per your judgement; generally it should be a support and resistance level)

if the price rises above the upper line, go long

if the price falls below the lower line, go short

the entry point acts as a strict stop loss again.

and mind you, this street fight doesn't end with the day

carry it forward to the next day if required!

This way your stop loss becomes a temporary booking of the loss.

You not only ensure that you STOP any further loss

you ensure that you have a fair chance of recovering the loss (and who knows - a respectable profit)!

Not my money

Yesterday, one of my friends, a fellow trader shared this brilliant psycho-strategy to bulldoze any hesitation to pull the stop loss trigger.

He shared it with me while sipping hot coffee in the historic Indian Coffee house on the famous Mall Road of Shimla.

"I love my two children a lot! I want to ensure that they don't have to go thru all the hardships I had to go thru in my childhood due to lack of money!

I have been learning technical analyses since past 4 months and have started to trade.

My success ratio as of now is sufficient to encourage me to keep taking a career in trading seriously.

Still I do have my share of trades not going my way.

Sometimes I profit big, sometimes small....

But my losses so far have always been really small....

Right from day one I had devised a simple method to guarantee myself that I don't lose except small.

I always keep the photograph of my smiling kids in front of my trading terminal.

Whenever the price of the stock or index touches my pre-decided stoploss

I simply tell my self -

'This is not my money. This money belongs to my kids. I am the custodian of their money. I must protect this capital. Otherwise what will I tell them when I face them in the evening when they return from the school?'

These thoughts are sufficient to make me trigger the stop-loss in a flash!"

Monday, September 13, 2010

Power of Negative Thinking

Since childhood we have been repeatedly told

"Think Positive"

"Don't think negative"

It is easy to understand why one should "Think Positive"

But why are we told "Don't think negative"?

Because it is assumed that if we think negative, we will attract negative results.

We will not be able to harness our hidden energies!

We will be frustrated and therefore, fail!

But we all think negative once in a while.

Rather many a times!

Since childhood we are programmed to hate 'Negative Thinking'

Is 'Negative Thinking' really bad?

Is it really a villain?

or Are the results of our actions resulting into negative thinking the villain?

Why do we think negative?

When do we think negative?

We think negative when we fear something!

We think negative when we have committed a mistake and are regretting it!

We think negative when we acknowledge that the task in front of us is extremely difficult!

We think negative when we are severely short of resources required to be successful!

We think negative when our confidence is low!

We think negative when we are frustrated!

It is not a crime to be frustrated. We must respect our own sentiments!

We think negative when our training is weak!

We think negative when our exposure and experience is lacking!

We think negative when there are deep seated worries somewhere in our head!

We think negative when we don't want to do it!

I repeat, when we "don't WANT" to do it!

It is a question of injured will-power!!!

Is it, therefore, wrong to think negative?

Negative thinking releases the accumulated negative energy in us.

All we are left with thereafter is = positive energy!

When we choke the negative energy inside us from escaping

we are not allowing ourselves to be cleansed.

We remain clogged with frustrations, failures and fears!

We must let our hidden lava be released!

There is nothing to fear from being negative!

There is a limit to how much negative we can get!

because there is a limit to the negative energies inside us!

Once we have hit the rock bottom

we are sure to bounce back

whether in trade or in life!

We are sure to fight back once we are cleansed

We are sure to get back on our feet again!

But for that we must first drain all our negative energies....

We must let our mind think negative - as much as it wants to...

We must allow this natural phenomenon....

We must hit our rock!

And strike back!!

That is the power of Negative Thinking!!!

We must think positive about negative thinking.

Apples of Himachal !

Himachal is famous for Apples!

Wherever you are, whenever you eat an apple, there is a good chance that it has come from the high altitude orchards of Himachal (whether from Shimla, Kinnaur or Kullu distt.).

Each box of apple contains 90 to 175 crisp, juicy and nutricious apples (depending upon the size of apples)!

Last year Himachal produced 1.5 Crore boxes of apples.

And it was considered a bad yield!

You must be thinking that the orchardist must have regretted the poor output!

On the contrary, they laughed all the way to the bank. Tax free!

Since the supply was drastically reduced from the previous year, a box of apple which normally fetches Rs.800-1000 fetched upto Rs.2500!

Supply and demand at work!

This year the crop is bumper!

Estimated 4.5 crore boxes!!!

Should the orchardists be partying?!!!

Think again.

The bumper crop has resulted in the fall in the prices!

The price has dropped to 800 per box!

You think the quality of the apple in the 800/- box was poor!

You are grossly mistaken.

As per my first hand information from a young orchardist Ravi, it was painful for him and his family to get 800 per box for 'A' grade mouthwatering export-quality apples whereas last year even 'B' grade apples fetched 1700 per box!

Fundamental quality of apple crushed by the supply and demand market forces!

Hail fundamentals!!!

Saturday, September 11, 2010

Story of a Prince!

Many tadpoles (novice traders) enter the wet land (stock market)!

Majority don't survive. Are eaten by other water animals (big traders)!

After about five weeks (trades), the tadpole (novice trader) begins to change.

It starts to grow hind legs (defence),

which are soon followed with forelegs (aggression).

Their tails (stop loss) become smaller

Lungs (method) begin to develop,

preparing the frog for its life on land (long term stay in the market).

Now and then, they wiggle to the surface to breathe in air (dencent profitable trades)

They eat plants (easy trading opportunities) and decaying animal matter (share of tougher trades)

Some tadpoles eat frogs eggs and other tadpoles (sign of a budding professional).

Eleven weeks (of consistent trading) after the egg was laid,

a fully developed frog (seasoned mature trader) with lungs (method), legs (guts), and no tail (crisp stop losses) emerges from the water.

This frog will live mostly on land (openly contested stock markets) with occasional swims.

Thereafter, the frog progresses in leaps and bounds!

One in a thousand trader frogs is kissed by a princess (lady luck) and becomes a handsome prince!

That's you!!!

Hard boiled !

Which came first, the chicken or the egg?

Although we still don't have a definitive answer to this dilemma

one thing is for sure

there is always an egg before the chicken and always an egg after the chicken!

The first one produces the chicken

then the chicken produces the second egg!

While the first egg is the principal amount

the second one is the profit!

This second egg acts as the principal amount for the next chicken!

This way an entire poultry farm gets created!


What if the very first egg gets broken?

There will be no chicken and no second egg?

Rather, there will be no further unending chain of chickens and eggs!!

So, it is not as important to know which came first - the chicken or the egg!

What's really important is whether the first egg remains safe.

And since every egg produced by the chicken in the chain is a principal amount for the subsequent chain of chickens and eggs, all the eggs need to be safe-guarded.


Majority of the new traders in the market are reckless with the egg(s) in their hand!

They underestimate the market

overestimate their skills

and start trading big bets without getting seasoned in the markets.

This is like juggling with the eggs in the dark while running backwards on a slippery floor with eyes closed !!!

Inevitably they end up with eggs on their face!!

hopes on the floor

and the future out of the window!


Trade small till your practice eggs are hard boiled in the market!

Friday, September 10, 2010

liars on the dalal street

"30% festival off!"

"upto 50% off!!!"

"50+30% discount"

"Buy 1, Get 1 free"

"Buy 2, Get 3 free"

"upto 90% off!"

These are some of the funniest and most amusing lines I see in the markets!

Everyone asks for discount before buying!

Every shop worth his trade ensures that he gives discount after some tantrums!

Before even that he ensures that he has changed 400 price label with 500!!

Abraham Lincoln was probably wrong when he said - "You can fool some of the people all of the time, and all of the people some of the time, but you can not fool all of the people all of the time...."

Discount culture has been fooling all of the people all of the time!

Or, put it differently, all of the people have being deliberately yearning to be befooled all of the time.

In still other words, all of the people have been befooling themselves all of the time!

It is a mirage we all know but we all love to ignore!

Afterall, what does a 30% or 50% or 80% discount mean?

Why should anyone expect a discount and why should one give a discount?

Why not price it fairly?

A discount can mean one of the five things:-

1) Either you were being overcharged earlier, or

2) There is a problem with the product or service being sold now, or

3) They have jacked up the price before window dressing it with "discount" or

4) They are selling it now at a loss, or

5) It is a distress sale.

Distress sale doesn't happen everyday, everywhere and with every product or service!

Also, obviously, nobody sells at loss unless it is a distress sale!

So, the truth lies somewhere in the first 3 lines.


The same logic applies to stock prices

1) Either it was earlier overpriced, or

2) There is some fundamental problem with the company or sector or economy, or

3) The "insider" brokers along with the "friendly" media create an impression of a "discount" after a jacked-up price!


An aware trader or investor should be sharp to spot the reason and call the bluff!

Majority of the trades in the market are bluffs

Learn to know the real worth of a stock, catch every liar on the dalal street!

"This Technical Indicator is faulty!"

A trader went to super market and ordered for a technical indicator.

The shopkeeper took out a brand new one, wrapped it nicely and handed it over to the trader.

The trader happily took it home.

After one week the trader came back to the shop and angrily put the indicator on the table

"Here! I want to return this....It is faulty!", he complained!

"How, Sir!" the shopkeeper politely asked!

"First, it is not telling me what I want to hear! It always gives opinions counter to what I want it to! Even my pet is more loyal!!!" the trader started to register his complaints.

"Secondly, it gives half-hearted signals of profitable trade opportunities!"

"Let me get it checked, Sir!" the shopkeeper consoled him.

The shopkeeper asked his technician to have a look.

After half an hour the technician came back and handed over his report to the shopkeeper.

The report said

"The technical indicator is working fine. This insensitive trader expects the technical indicator to speak only what he wants to listen. He listens to the potentially profitable advice of the indicator half-heartedly and later complains that it was the indicator which gave the advice half-heartedly! This cruel trader keeps the indicator starving. Doesn't serve him even a glassfull of attention in an entire day! He listens to his wife and this poor indicator only when he is in trouble! When he is in profit he remains intoxicated in his brilliance for the entire day!"

The shopkeeper showed the report to the trader.

The trader got furious!

"Your technician is blatantly wrong!"

The shopkeeper calmed him down.

"OK! OK, Sir! I will replace this with a better one!"

He took the indicator to the store room and came back with another one.

"Here you have it, Sir! This one will work perfectly fine!"

"It will even lick your face when you profit."

"It is Alsatian Shepalute breed, the best!"

Thursday, September 9, 2010

Business on a rainy day!

"How can I sell the stock when I don't have any?"

asked one of my friends, reacting to the concept of Short Selling (or Shorting).

The same was my reaction when I first came to know about this concept!

It was confusing and difficult to digest.

It was easy to understand buying and then selling something

but selling something which you don't have and then buying it back later was perplexing!

This seemed like a wonder in stock trading to me!


Let us understand short selling with the following example...

Assume that you sell umbrellas in your shop.

Also, assume that one fine day you run out of stock of umbrellas.

Unfortunately, it starts raining that morning!

"I would have made decent profit today had I got umbrellas in my stock!" you would have regretted!

"The 100 bucks umbrella would have sold for neat 150 bucks when it is raining like this!"

Pure demand and supply equation!

"Even if I place an emergency order on the umbrella supplier, the supply will not come till the evening!

If it stops raining by then, which it is likely to, demand and hence price of umbrellas will drop to 100 again!

Who knows even less than 100!"

Just then, you come across an idea.

You go to the neighbouring shop and ask for 2 dozen umbrellas on credit with a promise that you will return those in the evening!

You bring those umbrellas and sell them at 150 bucks each.

By the evening, the rain stops and the demand and hence the price of the umbrella falls to 100 per piece!

You buy 2 dozen umbrellas (same colour, brand and model) for 100 bucks each and return them to your neighbouring shop-owner!

This way you made a cool 50 buck on each of the 2 dozen umbrellas you never had in the first place!

You were "short" on supply and you still "sold" them!

You just "short-sold" them!

Similar thing happens in stock market when

expecting the stock price to fall

we place an order on our broker to short-sell x number of shares!

The broker borrows those stocks (from "someone" who has the stock but is unlikely to sell them for some time)

and sells them!

In the evening or whenever you ask your broker to cover your short positions,

the broker buys back the stock (hopefully at lower rate)

and returns them to the actual owner!

In this process, you earn the difference between the selling price of stock and its buy-back price

while your broker earns the brokerage!

"Paid to be right!"

In his classic "Come into my trading room", Dr.Elder Alexander says

"Experts on TV are paid to be right."

Pl read the above statement again!

"Experts on TV are paid to be right."

He didn't say they are paid to be profitable.

There is a big difference!

To be profitable you have to take risk.

To risk is to risk being wrong!

To risk being wrong is risking your TV commercial value.

Who will want to listen to an expert who is proved wrong!

Which channel will want to feature such an expert!

So, experts are under tremendous pressure to be right!

Don't get me wrong -

Experts, from their experience and knowledge, have stronger opinions than us.....

but they also know that they don't know it all,

they know what all they don't know,

they know the missing links in their theories,

they know the lacunas in their predictions!

Experts too have their doubts!

But they also know that they have to act and speak confidently in front of their audience and prospective clients.

They have to give the impression that they know what you think that they know!

Since millions watch and listen to them, they share their safest opinions and not their ambitious ones!

That's why they use a lot of "If", "But", "Provided", "In case", "Then", "When" their talk.

Their talk is more like the predictions of an astrologer - full of intelligently worded general statements with disguised alibis, escape routes, scape goats and justifications if things don't turn their way!

Beware of the expert talk!

Own the responsibility of your trading decisions!!!

How & when I use options!

I trade options

-only when I have to take a position for maximum 3-4 days

-when expiry is atleast a week away

-when I want to minimise risk against overnight disaster

-when i want to leverage more with same capital

I don't use options for hedging or spreading or straddling.

I don't write (i.e. sell) option calls because I consider it defensive play for the mischievous or those who use big money to swallow the adventurous traders.

Call options are wonderful tools in the right hands, rather right minds!

Walk alone!

According to Dr.Elder Alexander, one of the finest trading minds, in predicting stock market moves the "majority" is wrong majority of the times and should be ignored.

Big players devise traps to trap the majority of the herd.

No doubt we get a lot of confidence when we see a lot many traders echoing our views about the market's next move!

But, unfortunately, trading is not an election where the majority wins.

Walk alone, trade on your own.

Obvious is obviously wrong!

RSI-SMA Doubletrap technique (II)

1) Buy when priceline cuts the SMA 34 line from below after bullish divergence between RSI 14/30min and priceline on 1 month chart (Bullish divergence = When price is going down and rsi going up).

Hold till priceline cuts SMA 34 line from above.

2) Short when priceline cuts the SMA 34 line from above after there is bearish divergence between RSI 14/30min and priceline on 1 month chart. (Bearish Divergence = when price is going up and rsi is going down).

Hold till priceline cuts SMA 34 line from below.

how to tell how long will the rally continue?

An up rally will continue till the priceline cuts the SMA 34 line in 1 month chart from above.

A down rally will continue till the priceline cuts the SMA 34 line in 1 month chart from below.

After that, the priceline may again cross back the SMA 34 line but the bulk of the rally is done. Also, the rally is definitely not over till SMA 34 line is cut!

Monday, September 6, 2010

56 and counting...

In 2004 Bollywood hit "Ab Tak Chhappan (56 and counting)"

Mumbai Police Inspector ("Encounter Specialist") Sadhu Agashe (played by Nana Patekar) says

"When we have information, we kill criminals

When we don't have information, we kill time!"

I have made this my trading credo line

"When we have got signal, we make the killing (proverb for profiting)

When we don't have signal, we kill time!"

Sunday, September 5, 2010

Who's a smart trader?

The trader who knows everything but is still losing

is a smart trader!

His "smartness" is preventing him from implementing what he has learnt.

His longing for being "smart" influences his decisions.

His craving for being acknowledged as "smart" forces him to keep looking for "smart" trades even when none is there.

His enjoyment of the title of "smart" trader results into subconscious pressures.

"Experts" are always humbled and punished in stock market.

The moment a trader feels he knows it all and can out"smart" the market, market puts him in place!

There is nothing called "smart-trader" or "wise-trader" or "genious-trader" etc.

These are mere phrases of appreciation or acknowledgement by lesser traders of the last good trade by the traders on the public screen!

But these adjectives create reputations which are death-knell for traders.

Being a "trader" is in itself a complement.

A trader doesn't want any title

or prize

or appreciation

or recognition certificate

or trophy!

There is nothing called "Profit of the previous trade" in a trader's vocabulary.

Neither is anything called "Profit of the next trade".

"Trade in hand" is everything to a trader!

A true trader doesn't want to be on the public radar.

He doesn't want anything to distract him.

Vegetable and Fruit traders of Azadpur, Delhi

Marwaris of Rajasthan

Banias of Gujarat,

Komati of Andhra Pradesh,

Suds of Punjab,

Chettiar of Tamil Nadu.....

....and many more are great examples of true traders

who are not smart

only profitable

without trumpets!