Monday, November 29, 2010

coaching a champion!

many people ask me

"if you know this much about trading how come u r not a millionaire urself?"

"u teach stock trading thru technical indicators but u urself don't have a proven history of stock market success."

i always knew that i knew a few things which i could train others on.

but the above logic given by the critics was always somewhere in my mind

till i got the answer which gave words to what i always believed.

here it is...


Günther Bosch is a Romanian-German former tennis player.

He played tennis in the Romanian Davis Cup team.

He was the Romanian "number three"

always in the shadow of Ilie Nastase and Ion Tiriac .

So, are these credentials sufficient to secure him a place in tennis history?

Probably not?

hold you thoughts....


My second example is of a cricketer who had a brief first-class career with Queensland in 1978-79

in which he played in 7 matches and hit 160 runs.

He also played league cricket in England.

He never played at the test level.

Does this stand him any chance to have a place in cricket history?

Probably not?


Now for some reality check.

Günther Bosch shot to fame when he coached Boris Becker in becoming the first unseeded player and the youngest to win at the Wimbledon in 1985 at the age of 17!!!

He today holds a thesis on "psychology in tennis"!

The cricketer mentioned above is non other than John Buchanan who was appointed the coach of Australian Cricket team in 1999 and who propelled the team to unprecedented success.

At one stage his record was 15 wins from 15 games played.

I also have reverse example of champions (whom i don't wish to name) who proved to be disasterous coaches....!!!


While i don't intend to say that i am a Gunther or Buchanan by any stretch of imagination

neither do i intend to say that i am a great trading coach

all i want to say is that

i strongly felt that i had a few important things to tell the budding traders

and that i need not be a trading champion myself to make champions out of you!

a coach can be successful without being a champion himself or herself

but a champion generally doesn't become a champion without a coach!

Saturday, November 27, 2010

weapons of mass destruction


= Sorrow available in instalments

Credit Cards

= Sorrow for "free"

Debit Cards

= Sorrow for "money"

Social and peer pressure

= competition for sorrow


= sorrow of 'lack of sorrow'


= Sorrow glorified


= Sorrow standardized


= Sorrow enmass'


= Festivals of sorrow

Friday, November 26, 2010

interpreting change in open interest

when a stock falls on increase in open interest, go short

when a stock rises on increase in open interest, go long

when a stock falls on decrease in open interest, unwind long but wait for shorting

when a stock rises on decrease in open interest, cover shorts but wait for going long

if you couple this information with put/call ratio, the results can be amazing!

interpreting put-call ratio

During up-move

1. put-call ratio much higher than 1.0

= continuation of the up-trend till the ratio comes down

2. put-call ratio slightly higher than 1.0

= approaching reversal

3. put-call ratio much lower than 1.0

= slowdown of up-trend or reversal on the cards

4. put-call ratio slightly lower than 1.0

= continuation of the up-trend till the ratio comes down or rises further.


During down-move

1. put-call ratio much higher than 1.0

= a panic situation. not sustainable for long. slowdown of down-trend or reversal on the cards

2. put-call ratio slightly higher than 1.0

= continuation of the down-trend till the ratio comes down or goes up

3. put-call ratio much lower than 1.0

= continuation of the down-trend till the ratio goes up.

4. put-call ratio slightly lower than 1.0

= approaching reversal

if you couple this information with change in open interest, the results can be amazing!

Wednesday, November 24, 2010

understanding crowd - IV

"Strength of the crowd is in its numbers"

As a corollary, when two crowds of differing opinions come face to face, the bigger crowd decides the resultant!

As another corollary, the larger the crowd the longer it survives before getting scuttled!

A rally is nothing but crowd behaviour at its finest!

So, applying the above logic to a rally

the bull camp is the defending crowd

the bear camp is the offensive crowd

when both these crowds come face to face

1) the bigger crowd decides the direction of the market

2) the larger the following (volumes) of the winner crowd, the longer the rally sustains

Also, the speed of a correction is directly proportional to the speed of dispersing of the tired crowd and the speed of increase in the following of the challenger crowd.




(jointly written with Ashish Dewett)


(to be continued)

understanding crowd - III

A full century ago

French social psychologist Gustave Le Bon had said

"A crowd can never accomplish acts demanding a high degree of intelligence"

Crowd behaviour is utter mediocrity at its extreme hype!

All crowds are destined to disperse after the binding force - the influence, fades!

A crowd movement is like a tide that washes ashore all rubbish alongwith pearls and seashells!

Crowd behaviour is stupidity and mass-hypnotism at its high!

Nobody knows why but everyone is running because he sees everyone running.

It is easy to establish the presence of such a contagion, but not easy to explain.

Proof (of what is happening) becomes more sanctimonious than the Reason (of why it is happening)!

World is full of approval-seeking people ever-so-willing to be labelled as "right"

and there is no way they can be right except being with the crowd!!

Hence, there is no dearth of followers in a crowd!!!

Beyond a critical mass level, crowd is a self-growing self-fuelling monster

200 years ago, the great French thinker Victor Hugo had said

"Nothing can stop an idea whose time has come"

It must have been said in context with the crowd behavior.

It can be safely presumed that 'nothing can stop a crowd whose trigger has been pulled'.

Traders seeking sense and logic in rallies are as misplaced

as is the science looking for logic in art!

Little wonder the "crowd" rallies are big

and inevitably followed by big correction.



(to be continued)

understanding crowd - II

As already mentioned (in part-I)

a crowd is not a crowd in psychology till it has certain characteristics.

In psychology,

Group + Influence = Crowd

So the important factor is


Who influences?

What influences?

Is it the politics?


A group of sheep never goes anywhere!

So, the influence on the group is rarely from inside.

It has to come from outside!

Political or Economical developments are definitely among the influences!

But these have small effects.

Sheep traders, who are majority in number but minority in value

don't move much immediately in the wake of any political or economical happening!

they just wait for secondary triggers - initial outcome of the original happenings.

so, who decides those secondary triggers?

who is behind those thick dark veils in the market ?

who actually influences the stock market crowd?

It is "the big money"

it constitutes FIIs, DIIs, Funds, Banks, and alike.

the big surplus money flow in the world comes in handy in such adventures!

These big pockets can kneel down an elephant what to talk of overbought RSI

and jack up the blue-whale what to talk of severely oversold SMA

They can bulldoze the logic

and create severe ripples of sentiments...




(to be continued)

understanding crowd - I

a crowd is not considered a crowd in psychology till

- it turns in a particular direction

- personality of individuals is lost in it

- it is driven by reasons but is not conscious about it

- logic goes to sleep and impulse takes the driver's seat

- intelligence goes on leave, wisdom is scared away

- there is overwhelming dominance by sentiments


so when caught in a crowd

just run

in its direction.

when out of a crowd

look for one!

And for heavens sake

never stand against it!!


And when does the crowd turn?

not so early

not so easily...

atleast never mistaken its slowing down as its reversal

look for typical symptoms of its reversal including its tiring out.

it falls, like every demon, only after a prolonged effort and gyrations!!!

Monday, November 22, 2010

availability and affordability of hell

2500 years ago

Buddha pointed towards "desire" as the root cause of "sorrow".

the truth hasn't changed much in these 2500 years

except for one word....


the word "desire" in the above statement has been replaced by "consumption"

Today, "consumption" is the root cause of "sorrow".

we consume what we outrightly don't need

we consume what we don't really need

we consume more than we need

we consume costlier and higher than we need

we consume what we already have

we consume what is not good for us

....our lives are littered with criminal wastage!

resulting into unending unjustified misery!


Sorrow, which used to be a supply-side despair

has turned into a demand-side curse!

availability and affordability of hell

has become an irresistable invitation

in the absence of a real agenda!


Sunday, November 21, 2010

give me a chance!

a man trekked all the way up

to the top of the mountain

and shouted on top of his voice

"if by chance

i get a chance

i'll be successfullllllllllll.....!

i want to be successful

pleeeeeeeeeeeease help me with a chance around!!!"


his shriek echoed in the valley below

"if by chance

i SEE a chance

i'll be successfullllllllllll.....!

i want to be successful

pleeeeeeeeeeeease help me SEE the chance around!!!"


the man was confused to hear what he heard!

"what's the matter son?" the lone tree on the mountain top whispered...

"my echo is not exactly what i said?" asked the perplexed man

"this is a valley of enlightenment, son!" the tree replied

"it wants to tell u that

the unlucky souls are not short of luck

they just have weak or cursed eyesight!

they are unable to see the chance as a chance!

chances are always around....

it is only that we don't recognise a chance in the chance!

rather, there is nothing called chance....

mind has the ability to convert anything or everything into a chance!"


"so don't ask for a chance, son

ask for a better eyesight

or better still

ask for a better mindsight

to recognise the chances

all around...


Me and my 11 friends

i want to do it

i always wanted to do it

i asked my friends for their opinion

my self doubt said

"you can't"

my ego said

"you shouldn't"

my self-control said


my self-worth said

"can you?"

my self-conscience said

"you may"

my self-consciousness said

"you haven't ever"

my self-image said

"you just can't"

my self-esteem said

"you should have already"

my self-respect said

"atleast try, now!"

my self-confidence said

"you can"

my character said

"you must"

I thanked them all and said

"come, let's start!"


Friday, November 19, 2010

discovering the purpose of my life

I googled for "purpose of life"

and the first result led me to the following webpage


I followed it honestly and came out with the following list of mine.

This is not the final one , i am sure, and not necessarily in the order of importance.

Also, I didn't cry in the end as mentioned in the webpage but definitely became numb.

Here is the list:-

. have a house, bank balance and fully-satisfied life?

. see my kids become "something"?

. become a great writer?

. enjoy tourism around India and the globe?

. relax and enjoy everyday of life?

. read as much as possible of wisdom and knowledge about various aspects of life that has been written since thousands of years?

. inspire and awaken people?

. to spend years as an excellent simple efficient effective GM?

. to experience time freedom and money freedom?

. live a cosmic life; the one that is in unison with the universe?

. become an amazingly successful trader with amazing techniques?

. want to look at life in a different way and discover the real one?

. want to reach the age of 90 (be around till that time)?

. want to drink life in the cups of music, writings, paintings, food, visuals, experiences, explorations...?

. want to be happy all life?


Tuesday, November 16, 2010

Don't overpay!

One of the best nifty options to buy is

the option which is 200 points (3-4%) "out-of-money"

in the direction suggested by the rsi!

But what should you pay for it?

From my experience, I feel that 15 is a good price to buy!

If it is much more, it is costly.

If it is cheaper, it is a steal!

e.g. the spot (underlying) nifty price after today's close is 5988.

RSI is suggesting imminent upmove.

6200 CE (around 200 out-of-money) is available at 12.

This is a mouth-watering bargain.

Any trader buying this is likely to double, tripple or quadruple (even more) his investment in a few sessions.

Only two cautions:

1. the option you buy should be favourable to rsi's stance.

2. expiry should be atleast 5 days away.

Monday, November 15, 2010

Trading with Memory!

Traders are humans.

And all humans have three kinds of memory.

1) sensory memory

2) working memory

3) reference memory

Much of what we see or hear in the market is crap.

Our sensory memory rightly discards much of it hence saving our decision system from overheating or overloading.

Only whatever is noteworthy is passed on by the sensory memory to the working memory "for a closer look".

This includes things which can be potentially threatening or rewarding!

If your working memory "is not impressed" with this shortlisted information, it is dropped.

Otherwise, it is double-checked with the reference memory.

So,what is the use of this all theory?


First, Keep your sensory memory free from all clutter.

Don't overload it with a flood of irrelevant market news being pumped by the business channels etc.

Otherwise there is every chance that this highly sensitive and important memory will malfunction.

Important information will either be missed or crap will be passed on to the inner echelons.

Als, too much of hyperactive information flood can create illusion for this sensory barrier resulting in over-reaction or under-reaction.

Second, Keep your Reference memory well stacked with rich knowledge and experience.

This will help it give the right decision and consultation whenever the working memory throws any qualified question!

And in between these two memories (sensory and reference memories) lies the thankless job of the working memory which has to segregate diamonds out of the shortlisted piece of glasses!

Keep it fresh and sincere!

Moral of the story :

Trading is fun but not funny!

Gone with the wind!

Option trading is like a sailboat!

You don't need to move it.

You don't need to do something.

You don't need to do anything.

All it expects from you is

predict when the wind will flow

and in which direction!

Till then just sit and enjoy the sun!

Winds do move.

And when they move, they don't change direction too frequently!

So,just raise the sail

turn its face in the line of the wind

lock the sail

and enjoy fishing!

Sunday, November 14, 2010

4 steps to become a legendary trader!

While reading Gurcharan Das's masterpiece

"The Difficulty of Being Good" (Penguin Books)

I have been reminded of a beautiful life philosophy we read in school only to forget on reaching the college!

This may sound old-fashioned

but is a fine life-technology

written by a great mind,

sage Manu

in 100AD

in his immortal treatise, Manu-Smriti.

As prescribed by the great sage, the human life span is divided into four stages known as ‘ashrams’ (shelter).

The Vedas define a specific purpose for each ashram and offer specific instructions to be followed in each ashram.

I. The first ashram, Brahmacharya, is the student phase of life when the person is supposed to immerse himself or herself to learn the art of life and that of making a living.

II. The second ashram, Grahasta (meaning householder) ashram is the stage of family life. It constitutes raising a family, earning a living through the skills acquired during Brahmacharya ashram. It encourages the enjoyment of material life.

III. The third ashram, Vanaprastha (Retreat to Forest) indicates living in a withdrawn manner. People in this ashram play the role of mentors.

IV. The final stage is Sanyasa or renunciation. The person wthdraws from society to spend the remaining part of his or her life in meditation and solitude.


I found it interesting as well as scary!

Scary because of seeming impossible implementation of ashrams in today's social setup.

Interestingly, i found it very useful for anyone who wants to prepare for trading.

Stage I:

Brahmacharya = Student phase to learn trading and technical analyses, refraining from trading!

True to expectations - this "Brahmacharya" is impossible for the debonair traders!

Stage II:

Grahasta = Making-a-living-by-trading phase

True to anticipation, ill-trained traders (who skipped the first ashram) fail in this stage except 'enjoying the material life' at the expense of the principal amount!

Stage III:

Vanaprastha = Retreat to forest (of investing)

This stage never comes! One can't be a good mentor if he hasn't been a good student!

Stage IV:

Sanyasa = True to the Inevitability, the dejected and rejected non-trader gets ejected from the market to spend his or her remaining life in meditation and solitude.

Strangely, this lost trader takes up the Brahmacharya (student phase) after the pain and humiliation of the Sanyasa!

In this second innings, Grahasta phase (making a living and enjoying the worldly pleasures) comes but with the spirit of Vanaprastha, courtesy the bitter experience of the first innings!


"Who runs the World?"

Heard aloud

outside Airforce One

at 2300hrs GMT

10000 ft. above ground

while crossing the Atlantic

in pitch dark

"Who runs the World?

- God or America?"

after 70 seconds of pin drop silence

came the reply


One hour passed....

before the volcano erupted again

"Whooooooooo runs Americaaaaaaaaa?

- God or Me?"

again 100 seconds passed

before the reply


One hour passed again.....

before a somber voice whispered

"How do I do it?"

this time there was silence for full 600 seconds

before the shriekkkkkk...

"I don't knowwwwwwww...................!!!"

"It is the trend boys! The trend is our friend!"

"And who will change the trend - God or Me?"

and then there was a deafening silence till the dawn

when came the reply



The real horses in the race!

A horse came into the stable and went straight to his buddy horse!

"I am very angry with you!"

"Why, dear?"

"The Mayor in the party was telling his friend that he is going to bet on you in the Sunday race on the tip of your jockey! Your jockey is a dishonest man!"

"But the jockey is bluffing!"


"Because I never told him that I am gonna win on Sunday!"


"Because I don't know it myself! And even if I knew about my fate, i don't know the fate of you fellow friends who will race with me! And even if I knew that, I don't know human language and my jockey doesn't know mine!"

"Oh, I see! But then why is your jockey lying?"

"Well, he says the same thing - that I am going to win the next Sunday race - to every new customer every week! He knows that someday I will. Either that will happen by law of averages, or I will have to do it lest I be shot! The client, on the other hand, is always dying to believe some story just before the race, courtesy his warm pocket!"

"But doesn't your jockey lose face whenever you don't win?"

"Well, the jockey blames it all on me. And the client can't say anything to me as I never gave the tip to him that I am going to win!"


"And that is not all. All jockeys are saying the same things to their clients. No horse minds that. The horses are getting good stuff to eat, jockeys are getting paid, brokers are making money......."

"Poor clients! These fat betters have got the bucks and want to throw them. We just give them a nice joyous way! They are the real horses in the race whom the brokers are betting big on!"

"Cheers! Neigh......Neighhhh..........."

"Cheers! Neigh......Neigh.....Neighhhh..........."

Clear Hai!

God and Advertisements are everywhere.

Nothing moves without them!

And anything moves with them!!!

Ads are of 6 types:

1. Logical

Ads which appeal to your left brain!

= Like the ads of LIC, Water purifiers, Tata Sky, Dettol

2. Emotional

Ads which want to "set" your Attitude in the right brain!

= Like the ads of Fevicol, Raymonds

3. Abstract

Ads which want to "set" your Ego

= Like the ad of Scorpio, Bournville' !

4. Demostrative

Ads which know they have to "prove it" to "win it"

= Like the ads of Harpic, Dove, Fair & Lovely!

5. Endorsement

Ads directed at the sheep inside every human

= All ads by celebrities!

6. Experiential

Ads which make you feel "it"

= Like the ads of Old Spice, Axe, D-cold, Maggi,


Stock markets trap you by using these 6 kinds of ad methods!

1. Logical

e.g. " It is severely oversold. Can't go down any further. "

2. Emotional

e.g. by fuelling the panic & greed,

by fanning the left-out feeling....

3. Abstract

symbols of prosperity and powerplays before your eyes

4. Demostrative

trader interviews and success stories

5. Endorsement

all expert opinions and recommendations

6. Experiential

every accidental profit traps your mind for a larger fall!


To protect myself from all this

I always keep 'Sprite' in my refrigerator!

Clear Hai !!!


Why do we Gamble - I

Trading is not Gambling.......

But it's first cousin!


Money won is twice as sweet as money earned! (from the movie "The Color of Money")

According to Thomas Zentall, professor of psychology at University of Kentucky in Lexington

"....there may be a fundamental biological reason for gambling rather than..........the idea that gambling is practiced because it is enjoyable and entertaining."

We don't know those "biological" reasons but are relieved to know that there exist some!

We can therefore, continue trading without feeling guilty (or atleast without being conscious) that we are doing something which tastes like gambling but has a different and better name!


But the interesting question is why do we gamble (or trade)?

Basically, those who gamble (less or more) broadly fall into six types.

1) First types are those who "know" they have been "left behind in life" and it hurts!

So, they want to "get it all"!

Such traders are hardworking restless traders who lose faster and are think seriously only while dressing their wounds!

("In a bet there is a fool and a thief. - Proverb")

2) Second types are those who "think" they have been left behind in life and it hurts but not that much!

So, they try hard and more

but not outright gamble!

Such traders have casual approach towards trading!

Occasionally they win, quite a few times they lose, but majority times they stay out due to fear!

3) Third types are those who "feel" that they have been "probably" left "out" in life

but it "doesn't seem to be hurting" them.

So, they keep doing their own sweet thing!

These are the people who irritate amateur traders by outperforming them thru mutual funds or long-term seemingly-dumb but highly profitable investments

despite not knowing anything beyond ABC of trading!

These third types tease the first two types to try harder and hence.............lose even more!

4) There is a strange fourth type who don't bother whether they have been "left behind" or "moved ahead".

They don't even acknowledge that any race is taking place!

They simply stay out of "everything".

Do they become extinct?


Do they become out-dated?



5 & 6) If you think only the left-behinds gamble, then hold your thoughts.

Even those who have "zoomed ahead" also gamble

(whereas even a laid-back approach would have rained them enough money to use it even as fuel for their chimneys!)

These fifth ones gamble to get entertainment.

And the sixth ones gamble due to bouts of carelessness!

The examples of the sixth ones are the Tatas who bought Land Rover - Jaguar as well as Chorus at ridiculous price!

or the L&T which bought big chunks of the crumbling Satyam like a child in a hurry!

They remind me of a famous saying by VP Pappy

"If you ain't just a little scared when you enter a casino, you are either very rich or you haven't studied the games enough."


Moral of the story?

If you can't avoid it, atleast understand it!

If you must play, decide upon three things at the start: the rules of the game, the stakes, and the quitting time. - Chinese Proverb

Saturday, November 13, 2010

5 M's of trading

Trading is a one man industry!

Like any industry there are 5 crucial M's



there is only one!

and that is you!!

Employ, train and manage a good "you"

Fire the bad "you" before it "fires" you!



the principal amount

must have enough to deploy

must have enough in reserve

safeguard it

but use it



margin amount and opportunity are the material of trading industry!

together, they are the raw material for the finished product

- profit!

both are important - alone none is of any use!

don't waste these materials which are in short supply and very costly!

also, in this industry, no re-work is permitted on the finished product!



Yes, method is a must in this industry also

no method = all rubbish



The trade is the machine in this industry

Till you put the material in this machine

nothing will come out!

so, overcome your fear and take that trade!


"5s" of a trading mind

Everything in the world is created twice!
First in the mind, then in reality!!
A trader's dream success also obeys this rule.
And for this to happen a trader's workplace and his mind must be organised!
"5s" is the way for this!
"5s", invented in Japan, stands for five (5) Japanese words that start with the letter 'S':
"Throw away all rubbish"
= a trader should forget about all the jargon, trade simple and remember just the key lessons that matter!
"Set everything in proper place for quick retrieval and storage"
= all important lessons and checkpoints should be listed and available easily for quick reference when required!
"Clean the workplace"
= a trader should maintain neat and clean body, mind, bank account, computer, net connection, trading room and intentions!
"Standardize the way of maintaining cleanliness"
= a trader must have a method
"Practice 5s daily - make it a way of life"
= a trader must follow the method!

Prepaid Trading - IV

Life, they say, is the art of possibilities!

If that is so,

Trading with options is nothing less than the dance of possibilities!

And when you know that buying an option guarantees

"unlimited profit, limited loss"

then why not dance this dance!

My friend Rishant is real good at this!

In his words

"In life as well as trading, it is not what 'IS' that is exciting!

What's really thrilling is the thought of what 'CAN' be!"

Every month he sets aside a few thousand bucks for this "thrilling gamble".

He doesn't smoke, he doesn't drink, he is not a spendthrift either.....

but he does spare some money for this!

He calls it "lottery in the dalaal street"

Every month he buys this "lottery ticket"

He buys a cheap stock option for the next month series

of a good-stock-in-the-pit

(on the basis of technical analyses of 1 year chart)

of a strike value "what CAN be" instead of "what is"!!!

He bets for the seemingly impossible!

He bets for the opposite!!

Amazingly, more often than not, the opposite is what that has been happening

(albeit to different degrees!)

and over the months, he has surely become the artist of possibilities!!!

Prepaid Trading - III

Here is a clever trading tactic used by one of my friends who is an Army Major just retired from short-service commission.

He calls this Reconnaissance Ambush Trading!

This he does with a team of Options and Futures.

Whenever his TA (Technical Analyses) suggests that the market is going to make a big move

he gets ready but doesn't deploy his "futures" straightaway!

Instead, he "sends in a reconnaisance team of commandos" to "test the waters"!

He buys an "out-of-money" call or put option (as the case may be)

and waits....

This option is like a reconnaissance mission which is used to determine the enemy forces disposition, intention, composition and capabilities without exposing the troops to danger.

He uses option as "cover" for his main "cash" troops!

If the option goes in his favour, that's what his TA predicted and that's what he wanted!

He is in a profitable position and all he needs to decide now is whether he should reinforce his winning position to make it big or just let the option run alone as far as possible.

If the option goes against his TA

he doesn't mind it!

This is precisely the reason he sent in his "options" before his massive "cash" troops!

There is a strong chance that market is bluffing and will give him more juicy position to deploy his big backup cash reserve!

Since he has an "out-of-money" option position, the loss is much lesser and limited as compared to the adverse movement in the market.

e.g. a 100 point fall results in a 25 point option bleeding. But a full recovery with futures or bigger option will result in net 75 point profit!

So, he patiently waits till the tide turns

and then he goes all out on the offensive either with bigger "in-the-money" option or with futures!

In his words

"When I get the signal, I send in the option squad. On the basis of information I get from this core team, I decide whether and when to send my entire company in the battlefield! Many a times, these Option commandos are enough for the assignment!"

Friday, November 12, 2010

Prepaid Trading - II

1) u have just 5000 in ur pocket

2) u don't want to take big risk

3) u want to make big money

4) u want to do this fast!


I m possible!

Trust prepaid (options) trading!

Step I :

put 4000 out of 5000 back in the chester.

Step II :

learn 2 technical indicators thoroughly.

Step III :

when your TA (technical analysis) indicates that the market is about to move up or down buy one lot call or put (whatever be the case) which is available at around 20 bucks. This will cost you around 1000.

if your TA is right the call/put (as the case may be) will zoom to 40 bucks in a few sessions.

book profit.

(even if your TA was wrong, all you would have lost is 1000. in that case, take another 1000 from your chester and take another shot. you have 5 such chances with the 5000 you started. but for the time being, i am sure ur TA would be correct!)

after step III, you now have 2000 in your pocket (besides 4000 in the chester)

Step IV :

when your TA (technical analysis) again indicates that the market is about to move up or down buy TWO lots of call or put (whatever be the case) which is available at around 20 bucks. This will cost you around 2000.

if your TA is right the call/put (as the case may be) will zoom to 40 bucks in a few sessions.

book profit.

now you have doubled your wealth again.

now you have 4000 in hand.

so far, you have doubled twice.

Now, divide your wealth again in two parts.

put 2000 in the chester (now your chester has 4000+2000=6000).

you now are left with 2000 in hand.


repeat Step IV with this 2000 and buy double the lots you bought last time!

and double it to 4000.

repeat Step IV again with 4000.

and double it to 8000.

Now you have doubled twice again.

divide it in two parts. put 4000 in the chester (now your chester has 4000+2000+4000=10000).

you now are left with 4000 in hand.


repeat Step IV with this 4000 and buy double the lots you bought last time!

and double it to 8000.

repeat Step IV again with 8000.

and double it to 16000.

Now you have doubled twice again.

so, divide your wealth-in-hand again in two parts.

put 8000 in the chester (now your chester has 4000+2000+4000+8000=18000).

you now are left with 8000 in hand.


repeat Step IV with this 8000 and buy double the lots you bought last time!

and double it to 16000.

repeat Step IV again with 16000.

and double it to 32000.

Now you have doubled twice again.

so, divide your wealth-in-hand again in two parts.

put 16000 in the chester (now your chester has 4000+2000+4000+8000+16000=34000).

you now are left with 16000 in hand.


repeat Step IV with this 16000 and buy double the lots you bought last time!

and double it to 32000.

repeat Step IV again with 32000.

and double it to 64000.

Now you have doubled twice again.

so, divide your wealth-in-hand again in two parts.

put 32000 in the chester (now your chester has 4000+2000+4000+8000+16000+32000=66000).

you now are left with 32000 in hand.


This way you keep doubling your fortune.

You keep increasing your chester money.

starting with minimum money.

without taking big risk (considering the backup money in your chester)

God forbid, if your TA goes wrong at any time, you can start with a lower step from a portion from the chester.

Have patience for the initial few steps. the compounding rise will take you higher than you can imagine faster than you can think!


all the best!!!


Prepaid Trading - I

They say "Option trading is for the experienced traders only."

They say "Never trade naked options!"

The above statements are true lies!

True, because Options are more difficult to understand as compared to futures or Cash trading.

Lie, because these are more useful to inexperienced traders than experienced ones!

True, because naked options used recklessly are the fastest road to bankruptcy.

Lie, because hedged options are slow poison, and naked options, if used with caution, can be the shortest road to prosperity!

By not opting for the option of options

a new trader may miss out on the best feature of the option....

..........unlimited profit, limited loss!

Options became untouchables

when people who didn't read the "operational manual" of Options

started playing with it recklessly

and lost heavily!

They started saying

"my loss was 100% of my premium!"

Onlookers believed all this over and above their perception that options were difficult to understand.

Thus, one of the most powerful and safe tools of trading became

"Only For Us"

for the select few!

Options are truely "unlimited profit, limited loss" provided you have read their "operational manual" (the do's and don'ts).

Those who have read it, know that trading with options is

....pre-paid trading, just like a pre-paid mobile!

Benefit of pre-paid mobile over post-paid is that in pre-paid you can control and limit your cost.

Similarly, option trading is a pre-paid trading wherein you can control and limit your loss


Your technical indicators tell you that something is likely to happen in a particular direction.

You want to take the chance

but fear that your analyses may be wrong and you may lose money


you may be reasonably sure but fear of losing may simply make you a stone

like Arjun in Mahabharta!

Consequently, you opt out of the trade

only to see the trade eventually go your way....

....sans you!

On the other hand, if you knew options trading

you can buy a cheap "out-of-money" option and enter the trade!

If the trade goes the way suggested by your technical analyses

then you will double, tripple, quadruple your amount the fastest!

Otherwise, you lose a part of your small investment.

How much you lose depends upon how wrong your analyses went!

The loss because of analyses gone wrong, anyway, will be much lesser than when you would have invested in futures!

A naked option is the best way to learn with least money!

And it is also the fastest way to make a fortune!

You think you can't make a fortune by cheap "out-of-money" options?

I shall be sharing a few simple methods in the sequel to this article!

Keep watching this space!!!

Tuesday, November 9, 2010

and the winner is.....

3 years ago I started a monthly SIP (Sytematic Investment Plan) with SBI Mutual Fund's Magnum Tax Gain'93.

I started it not because of my prudence

but because of

a) repeated edging by one Mr.Vijay (a real gentleman financial advisor whom I now trust utmost) and

b) the reason that I wanted to save some tax under section 80C but in a way which gives more return than traditional life insurance

(I believe that one should buy term insurance for life insurance and mutual fund with or without SIP for savings!) (the above mentioned fund gives 80C benefit besides market investment returns)

Frankly speaking, when i started the SIP with a small monthly contribution I was least excited!


"It will take ages before the monthly systematic investment will becaome a fortune!" I thought.

Still, I did start with the SIP and gave 12 cheques to Vijay.

Every month it was an irritant to part with the instalment.

Many times I decided to stop the SIP after the committed 12 instalments.

But after around 8 months, one day I was pleasantly surprised to receive a dividend cheque from the MF.

It was a decent amount but it appeared many times bigger due to the surprise element!

Besides, my corpus had grown!

So, I continued with the MF after the first year as well.

Here, I wish to share that I started the SIP when the Sensex was above 20000 just before the crash!

But because of it being monthly SIP, my instalments kept entering the market at every stair in the staircase.

My SIP instalment went into the market at 20000 as well as 7500, 15000 as well as 9000, 12000 as well as 10000......

....and it is still continuing........

The annual dividends I get fund my kids annual fees automatically! Alternately, it leaves me with a handsome amount to do anything I wish to! Last year we had a grand annual family vacation in Kullu & Manali!

And the beauty is that the corpus is growing..... compounded fashion just like the prize money in Kaun Banega Karorpati (Who wants to be Millionaire).......

What was an irritant every month is today a monthly reminder of the assured and growing prosperity!

Every month I thank Vijay hearts of hearts for somehow forcing me into this equity-linked savings.

Jokingly, I have been playing a race between my savings in this MF and the growth in my self-trading earnings.

I have no hesitation in admitting that I have been left gasping behind the MF especially after this recent bull spurt!

Why I shared this story with you?

Two reasons.

First, to recommend SIP based Mutual Fund investing to everyone!

Second, to share a strange phenomenon mentioned below.

I have

never ever

never ever

never ever

thought of selling my SIP savings!

I just think of investing more and more......

I just think of topping it up whenever market is in oversold state!

whereas I rarely survive the itch to book profit in my trades!!!

What fantastic paradoxical opposite faces of my same self!!!

One is willing to not only hold all investments forever but keep adding to it! (The fund manager keeps rotating the investment into sectors and stocks as per the situation)

The other is dying to run away with the pennies after every round!

One full of stress!

One full of pleasure!!

I have least doubt who will win this race.

It will surely be the tortoise this time as well!

Sunday, November 7, 2010

the grand picnic called life!

life is like an onion...

seems bitter...

yet so necessary for the curry of joy!

But there is more to it which symbolises life.

Keep it peeling layer after layer in search of the real thing

and you will find nothing!

The layers are the real thing!

This the reason I call my life a grand picnic!

Layer after layer, year after year, achievement after achievement

we keep searching for the real thing

and we find nothing

which completes our search,

quenches our thirst

and pacifies our quest!


The layers are the real thing....!

The journey is the destination.

We all have already arrived!

There is no more destinations to arrive at! Period.

Only joys to enjoy!

Lots of things to do on this grand picnic!

The following is my list of joys which keep me occupied 25 hours of the day (and night)!

* movies

= if I were to view all the great movies of the world cinema I would be needing a few hundred more lives!

* food

= if god is surely there on this earth, it is definitely there in the food!

* valleys and mountains and nature

= if I were to spend just one night at every Dak Bungalow on this planet I will be requiring a few hundred lives more!

* blogs, netsearch, net surf

= enough food for my mind for a few hundred lives in the virtual world

* radio, internet radio, you-tube, podcasts, television

= who has the time to die!

* books, audiobooks, e-books

= enough for a few hundred lives more! By that time there would be enough new ones for a few hundred lives more!

* twitpic, photography, photopainting

= unquenchable thirst for the thousand eyes of my mind!

* music, songs and ghazals

= enough to keep me intoxicated for a thousand lives!

* stock markets

= the best game I love even to lose!

Who has the time to "die"!

Who has the time to "live"!!

when there is so limited time to picnic!!!

"Let's play a game!"

"Let's play a game" market said to the trader.

"What game?" the trader asked

"I will either go up or go down. You have to guess my move and catch me!" the market explained the game.

"But you will see what I do and will never get caught!" the trader quipped.

"Ok! I will be blind folded all along and will not come to know whether you have taken long or short position." the market assured!

"That's fair." sighed the trader.

"But that will leave you at a disadvantage to me in the game!" the trader said to the market after some thought. "Both of us should have equal opportunity!"

"Yeah, you are right! If I am blind-folded you will catch me everytime." the market agreed.

The market started to think and then said

"Ok....! To make it fair, I will also be bluffing and excessively vibrating to dodge and confuse you!"

"Wao! It will be a great game now!!!" said the trader.

Several years have passed and the trader has been losing miserably!

All this while the market has been blind-folded

and kept the promise to move only up or down (no third direction)!

But its bluffs and vibrations have proved to be too much for the trader to bear!

"Can we change the rules a bit again!" the trader whispers!

i m possible

If u wanted to be wealthy in stock market but so far have misearbly failed in this aim

then I want to ask you a question.

Have u ever profited in atleast one trade? with method? with confidence?

Did u make profit atleast once? without fluke? with surety?

If your answer is "No" then your problem is 'method' or 'knowledge'.

But if your answer is "Yes"

then what if you had taken 10 times bigger position you had taken in that profitable trade?


your first problem is the size of the trade and the factors which are stopping you from doing so!

and, what if you had been successful in repeating that profitable trick again and again?


your second real problem is the inability to repeat what you know or can!

In a nut shell,

your problem is not the lack of knowledge

but lack of repetition and inability to take bigger position.

consistency and size of trade!

You are nearer to the professional success in trading than u think!

Saturday, November 6, 2010

my nifty outlook (6nov'10)

as on 06th Nov 2010 (nifty at 6312)

Long term (1 year+) = Bullish

Medium term (6 months) = Bullish (6700-6000)

Short term (1-2 months) = Bullish (6500-6100)

Immediate term (2 weeks) = Rangebound (6400-6150)

(Strongly think that we are not going to see 59xx again)

"You will never miss an appointment, Child"

What is common link between a cow standing near Kandaghat (a place near solan in HP), a bus near Chandigarh and a boy standing at Bus Stand, Kalka?

Well, the bus was crossing Chandigarh on its way to Shimla via Kalka and Kandaghat. The boy boarded the bus at Kalka and sat in the front seat and saw the bus hit the cow at 08.17pm near Kandaghat when she was grazing near the highway.

All three - the bus, the boy and the cow - had an appointment at the fixed time on the fixed date at the fixed place....

....and none missed the appointment! Not even for a second!!!

Everything in our lives is happening with clockwork precision.

Your life is full of millions of such appointments.

Rather life is nothing but a chain of appointments, one after another after another...

When were you born

to what parents

which school u went to

what friends u made

whom u married

which children were born to you

who all u met and where and when

what u ate and where

where all u have been

what all happened to u and how?

everything happened with clockwork precision

you always honoured the appointment

every appointment

and didn't miss it even for a second....didn't you?

So, Why worry for any good or bad that is happening or will happen?

Keep moving or sleeping or eating or living or working or......

with a heart full of assurance

full of satisfaction

and peace!!!

Because you have God's promise

"You will never miss an appointment, Child"

back to the life's shelf


when I was helping my wife in the kitchen,

while washing a hard plastic plate

it slipped from my hand and fell!

My instant flash reaction was

"It's gonna break!!!"

My instant reaction was based on my experience.

I had broken a few in this way in the past!

But this time, surprisingly, it didn't break.

I was relieved as well as amazed!

what could be the reason!

The height from which it had fallen was same.

It was hard plastic and should have got broken the way others before her had!

Perhaps the reason was that it had fallen not perpendicularly to the ground but in a slanting position.

It didn't fall vertically on its edge

but at an angle!

The impact was largely reduced.

the angle surely saved the plate!

I picked up the "lucky" plate, washed it and put it back on the shelf.

Same thing happens to we humans.

we often slip from the hands of good fortune and fall down.

Many of us often get broken!

Rather, all of us get broken once in a while (if not often)!

What breaks us is not the height from which we fall or slip!

What breaks us is the "angle" with which we fall!

Majority of us, majority of the time fall perpendicular to the life's harsh realities

on the edge of our fragile mental strength and sensitivities!

The solution?

whenever we fall (fortunately or unfortunately?)

lets make it a point to fall at an angle, like the plate

lets try to make the fall light!

lets absorb it on our vast resilience reservoir

rather than on our egdes!

For those of us

who have unfortunately got broken in the hard falls

stand up

pick a quick fix

apply it on self

and get back to the life's shelf after a nice wash!

Tuesday, November 2, 2010

Trading stocks in a Casino?

Day trading (or extremely short term trading) is less of trading and more of casino poker - the grand bluff game!

Various versions of poker are there but the general rule is to bet on the basis of cards you get. A player may get good cards or bad cards in the deal. He may continue to play or fold depending upon his mood, the cards he has got, the expressions and body language of his opponents or as part of a strategy.

If it were as simple as folding when you have bad cards and staying put if you have good cards, poker would be a dumb boring game. Fortunately, it is not! In reality, a good player with bad cards can play the bluff game well and win while a bad player with good cards can spoil the pot with his tactless expose' and win peanuts or even lose!

Everyone on the table is bluffing. So much so that for the onlookers, nobody seems to be bluffing. Bluff seems to be the reality! Sometimes even the tactless straight play is also a bluff!

Such poker play can be seen everywhere in the stock market everyday!

A stock which "should" go up generally goes down and stock which "should" go down generally goes up. Obvious thing never happens till it is not so obvious. The point is to bluff in a way that the big pockets trap the maximum possible numbers of small pockets. Had this been not so, there would be almost no money in short-term trading!

But ultimately even the big pockets know that they would be fools to drive a stock too much away from the fair value. Even the fair value is highly subjective and subject to perception manipulation, thus giving enough space for the poker play!

Day-traders or short-term traders who think they are trading are sadly mistaken. In effect, they are playing poker with trading rules and hence highly disadvantaged against those who are trading with poker rules.

So it is not important how well you can judge the oversold or overbought position of a stock or the market. What's really important is how well you can judge the poker bluff being played on the stock or the market.

If you are nimble professional you can go with the bluff otherwise you should wait till the bluff has gone too far and then bet for the collapse of the bluff.

However, if you are a medium to long term player no need to worry about the bluff. Bluff missiles don't have that much range. Contrary to the popular belief, it is easier to predict the market in the long term than in the very near future.