Saturday, December 31, 2011

gtalk between China and Russia

CHINA: Good Morning RUSSIA

RUSSIA: Good morning
so, what’s the plan for new year bash ?

CHINA: with home tonight.......on the famous mall road tomorrow!!!
and urs

RUSSIA: very much at Home

CHINA: i was just spending some time to understand what

RUSSIA: I never venture anything on the 31st night. often keep myself in the quite mood.

CHINA: nifty might do this year!


CHINA: that's good! same here...

RUSSIA: so, what does your study says?

CHINA: nifty around 3200 is a possibility which can't be ruled out

RUSSIA: that scares me

CHINA: i am looking at 10 yr nifty chart


CHINA: atleast 55% chance....
and that is hell of a chance

RUSSIA: 3200 nifty means my portfolio will be just 10% of the value invested

CHINA: i forgot that
u r an investor too

RUSSIA: very very much

CHINA: don't panic, just don't ignore that

RUSSIA: sure,

CHINA: besides, it will not drop the apple on newton's head
it will happen so slowly

RUSSIA: what my main concern is to know, what went fundamentally So wrong that, everyone on the street is so bearish.

CHINA: that nobody will feel it much!

RUSSIA: also, I was watching an interview yesterday

CHINA: there is hell hell hell lot of liquidity in the world....pumped to avoid default after default after default without any gdp growth........
see i didn't watch any interview.....
i just opened the 10yr chart
with a mood to analyze this aspect
and look what has just sneaked in my head

RUSSIA: wherein, motilal oswal guy was stating that, market often makes bottom when 99% people believe that market is heading even lower and start to sell their portfolios in Losses assuming that, they will enter at lower levels
could be
I don’t say it would not.. go down from here

CHINA: motilal oswal is a big big name. i agree with him

RUSSIA: but wondering what will be the spare of Indian economy after such down falls

CHINA: but a lot lot people are looking for upside as well
if we analyze indian economy, we may be shocked!

RUSSIA: yar, there are always 2 sides of a coin, people are bullish & bearish
what shocks you after analysis ?

CHINA: local economy mess coupled with global meltdown can cause this

RUSSIA: I agree, but still 6% GDP is better than 2% of the west economy

CHINA: govt can't take any political decision. no reforms (much needed) possible till feb elections.
see, the premium indian markets command is because of 8% growth rate not 6

RUSSIA: veer ji, I am of a camp, that nifty may go till about 4000 and make a reasonable ground to invite FIIs to invest for the next 10 years

CHINA: ultimately, fundamentals decide where market goes after all drama

RUSSIA: 3200 is bit too much of Pessimism

CHINA: just take the market to 4000, don't need any more pessimism to take it down to 3200

RUSSIA: correct

CHINA: let’s ask ourselves a basic question

RUSSIA: which amount to about 10% down from here

CHINA: i repeat - today


CHINA: are we seeing economy improving?
i ask a few qs
interest rate going down?
not as of now
not today

RUSSIA: true

CHINA: 2. fresh capacity building taking place in various sectors?
3. is rupee ok


any chance of 1991 like policy boost?
this govt is crippled
what's happening globally? is the worst over?
the worst hasn't yet started
all europe, china and US are busy
since 1 year now
to stop the avalanche
mindless liquidity pumping
where has the money gone? is out there

RUSSIA: all above is true on the face of the mirror

CHINA: has the economic activity picked up to engage that money
forget all this
let us
just try to list pro's
in favour of rise
pl help me
just because it has fallen so much and
just because indicators are enough oversold
is no reason for nifty to go to 6000 and beyond!

RUSSIA: agree

CHINA: nifty can't go that up without fii's

RUSSIA: very true

CHINA: fii's are not jerks to put their money in india...looking at our state of affairs
fii's would like to keep liquidity to face any eventuality in europe
see. one thing i always believe in
no real turnaround comes
in ;life as well as economy
till real real trouble
no jerk wakes up till real crisis
just look at the 10 yr graph


CHINA: we are slipping since nov 2010
earlier it looked like some correction
now it looks like slippage
2003 to 2007 was different

RUSSIA: but, we haven’t reach a level... where our economy has to see the graveyard
in such times only, smart money is invested... check what major investors like Jhunjunwala did in the past

CHINA: there was no graveyard situation in 2008 as well
conditions got created

RUSSIA: but veer ji, Guys invested in 2008 have made money even till now
let me prove it
pls allow me
TCS was below 600 now 1155
pls note Kotak was 280. I bought touched 900 before split and even now 455
SBI / TATA STEEL / even mid caps were dam cheap except the infra sector
almost all stocks bought in 2008 gave good returns
I will share an excel sheet with you
right away
I am not saying by any mean that, WE ARE NOT IN MESS

CHINA: times change
and we are at one of these historic turning points

RUSSIA: agree.. but cannot rule out the turnaround could be for positive even ..
one thing I have learnt

CHINA: yes, it can be. we should indentify the trend

RUSSIA: Stock market world wide

CHINA: courtesy u
i have been
pushed to start looking at swings

RUSSIA: discounts all what is to happen ( Future)

CHINA: i disagree with this a bit
this is spread by big money
big money knows it is going to do what it is.
goldman sachhs knew that subprime collapse was coming
infact they had betted heavily on it

RUSSIA: before a company starts to performs, you will see the stock jumping up with the next quarter results

CHINA: only they and players like that knew it

RUSSIA: i am no where denying it

CHINA: u know the difference between halaal and jhatka!
fii's believe in halaal termination
by that definition they are................

RUSSIA: all I am saying is... we may well be close to bottom as well and things may start to change now... I remember my early days of speaking with you, where in you yourself mentioned... that, In your views...
Market has either entered or about to enter for a long bullish trend

CHINA: RUSSIA even i am learning,

RUSSIA: we all for that matter
in punjabi there is a proverb..

CHINA: as a trader i like up as well as down equally.....u as an investor + trader naturally need to be worried

RUSSIA: Ghar Pakki vekh ke kachi ni thahi di
I invested by mistake at the peak of 2007. and saw meltdown in 2008/2009

CHINA: i'm sure u and i will atleast be cautious after this

RUSSIA: with bank going out of business ... us market being killed
yet , they are much better than any of us
today our problem is in 2 areas
1) Inflation which directly results in interest rate
2) Govt need to get up to do something on policy
Milesh shah is the best tech guy I respect the most in the stock market
The Guy behind ICICI prudentional
now with AXIS BANK a fund manager
as Fund manager

CHINA: yes, but govt is presently in minority. unable to get anything passed....just see fdi in retail.....opposition will want to kill the deeply injured govt 1991 for another year.
what does milesh say?

RUSSIA: He did say.. that FIIs are so smart that, while they sell they also make market so lazy and Tired that, Investor lose interest and in suicidal thoughts, often kill their portfolio by jumping in the well

CHINA: well, has such a scenario come?

RUSSIA: and FIIs buy

CHINA: if not yet, it is on the cards?

RUSSIA: to be honest.. I don’t know
But one thing I know
for sure
Investor never lose money
trader does
u may have to wait for some time
But lf one is investor
3 year down the line

CHINA: pl add a few words in that line "Investor never loose money" so that i agree

RUSSIA: the same money gives you atleast 2 times

CHINA: Investor never lose money IN FUTURE-SECURE BUSINESSES

RUSSIA: See, the definition of an investor is not, That you invest today and keep your neck again and again on the screen
I have something to share here
Milesh said once

CHINA: yesterday, ;looked at suzlon after a long time. i had last bought it at 110 and sold at 123. yday, it was 18

RUSSIA: That, Even when u plant a seed of mango tree... you got to wait for 12 years to get mangos..
I know brother
some sector never saw the sunshine in last 2 years
I will tell you something
There was stock call Raj infra or something like that... was available for just 60 paisa in 1990
to 1992
nobody bought
some did
stock now is 125
another example
HUL ... darling company
agree ?

CHINA: i agree.....

RUSSIA: do you agree ?
did not do anything in the last 10 years
stock was below 150
for all this while
now 425
what I am trying to say is... A specific sector
does great stuff in a particular time

CHINA: RUSSIA, why not act as a "fund manager" instead of an "investor"

RUSSIA: one has to identify
not my cup

CHINA: 150 in bank would have become 600 in 8 yrs
no no, u got me wrong
what i mean with "acting like a fund manager" is
that we should not be emotional with specific stocks
and be cunning like a bania

RUSSIA: correct
that’s ryt
veer ji, you must notice one thing

CHINA: put money where rokra is

RUSSIA: get this very clearly

CHINA: RUSSIA, life is short. need to see money multiply
i also agree that surplus ,money can be invested..
should be invested

RUSSIA: what happen when RBI is on the run to increase the interest rate
market often get in the same mode as we witness today
i have something to share with you
let me call you

Tuesday, December 27, 2011

importance of volume in trading - I

many traders give a lot of importance to volume.

i always paid minimal attention to volume.

my attitude towards this important parameter got a shot in the arm when i heard an interview of a veteran successful trader who too, like me, didn't give importance to volume.

still, hearts of hearts, i was not comfortable avoiding looking in the eyes of

today, i finally decided to bite the bullet.
i spent some good hours studying the phenomenon called

and here is the synopsis of what all i read or thought or discussed with my core circle.


if price is rising and you simultanousy see rise in volume

it doesn't mean that buyers are more than the sellers.

rather, for 10 trades, there have to be exactly 10 buyers and 10 sellers....always!

infact, as you know, rise in price means that the desperate buyers have found reluctant sellers......resulting in rise in price.

and rise in volume means that more buyers were bitten by the desperation at that price point.

as martin pring says, volume and price are two independent entities.

price can move with or without rise in volume.

lets take an example.

these days bananas cost 40 rupee a dozen in shimla.

not too long ago, they cost 20 rupees a dozen.

if today 2500 dozen bananas got transacted in the fruit market when price was 40/- a dozen

what would trade volume you expect the next day if the price falls to 35? 30? (assuming other factors remaining constant and desperation of banana comsumers remaining the same.)

well, obviously, you will expect more banana fans to be interested in buying at lesser rate.

what if the rate tomorrow falls to 25? 20?

well, the volume will shoot up!

it might shoot up to the same trade level as it was when the price was 20 a few days back!

afterall, 20 rupee was the latest "support" price of banana.

so, does this rise in price really indicate that the bottom fishing is taking place and the price of banana will rise from hereon?

not really, in my opinion.

trade volumes of banana rose at 20 because 20 rupee per dozen was the latest support price for the fruit.

in other words, the volume of desperate banana lovers just shot up at a perceived bargain price!

price can still fall and fall big!

having said that, volume still signifies some crucial things

1. the price-value perception of public.

2. expected behaviour of buyers at support and resistance

does volume shoot up indicate fii/dii/big player position change?

yes and no.

yes, because generally fii's/dii's trade big volumes.

no, because fii's are known to accumulate or distribute, not "buy" or "Sell".

the difference being the manner in which they sell or buy....the stealth!

the sudden spike may just be a big deal which had reached a "target" price.

fii's buy when it doesn't show.

fii's sell when it doesn't show.

the best time to sell or buy may be when the volume is low......

(to be continued in part 2)

never ask the age of a trader, guess it!

eve babitz had once said
"by the time i'd grown up, i naturally supposed that i'd be grown up"


satchel paige, the famous american baseball player had once said
"how old would you be if you didn't know how old you are?"


the above two quotations hit every struggling trader hard!

every "trader" who has spent time in the market, "naturally" starts supposing that he has become a "grown up" trader!

but the real challenge is, how "old" or "mature" a trader would be if he didn't "know" how old or mature a trader he is!!!

myths about self kill a trader more than the hits of operators!

operators are only standing knives against which
violently shaking carrots slice themselves everyday!!!

think before you feel

horace walpole had said
"life is a tragedy for those who feel, but a comedy to those who think"
how true for trading as well!
"trading is a tragedy for those who feel, but a comedy to those who think"
should traders feel what they are thinking?
or think what they are feeling??
or feel what they are feeling???
if you ask me - none of the above
traders should only think what they are thinking.
don't feel it, just think it.

never trade without having lunch

when i learnt to play chess seriously around 20 yrs ago

one of the first things i learnt was

that a chess game can be broadly divided into three phases

1. opening game

= opening game generally lasts around 15-20 moves. as the name suggests, this is the opening phase when positions are taken and army is deployed. the first move previlege lies with the white camp. the black camp just responds to the opening moves of the white pieces. the white camp is the decider and attacker, black camp is the responder and defender. how the middle game will proceed, what colour the war will take depends on what shape the opening battle takes. since there are dozens (if not hundreds) of opening moves possible, there can be so many number of opening scenarios. the white camp tries to create a battlefield scenario of its choice. the purpose is to lure and trap the enemy in a situation decided by the first mover! it is rare to see the white to attack the black camp in the opening game or vice versa. particularly if the opponent is not a walkover. even kasparov didn't dare that (except rarely) against karpov. any attack without porperly unfolding and readying the defense can be suicidal especially against a strong opponent. so, all in all, opening game is to open and deploy the defence as well as offence.

2. middle game

= middle game takes over from opening game. it typically last for 20-30 moves after the opening game. once the army is deployed and the specific position-for-the-day has been taken, the real battle starts! all tactics, strategems and killings are made in this part. the real loss or gain or manoeuvring happens here. how well, the opponents had read each other and prepared in the opening game shows up here.

3. end game

= the game is all but over by the end of the middle game. though one opponent would have did a collateral damage to the other in the middle game, the game still needs to be won comprehensively. no battle is over till the king is captured or killed or check-mated. some smart warrior kings escape daringly even even from seemingly hopeless positions! an end game generally lasts 10-20 moves but much lesser time.


day-trading setup is also like a chess game.

one prominent difference = retail traders always play with black and can only react and respond to what the white camp, the operators do.

another difference = retail traders start attacking the white camp, the operators right in the opening game.

third difference = here the kasparovs or the karpovs or the anands play against novices!

a trading day can be divided into three phases

1. opening phase

=  opening phase is the one when the operators set the battlefield for the day. everyday, they come up with a different trap. everyday, the setting and situation is different. in the opening phase, operators butcher the retail traders who come charging without waiting.....just swept in the rush of blood. opening game is the phase which is often deceptively contra to the trend. this is the time when dreams are sold by the operators. mirages and expectations and desires of retail traders are treachorously fanned and fuelled by the white camp. and when the trapping is complete, the middle game is a one sided affair. when the operators just trap the early blind moths desperate to enter the fire!  

this opening phase of trading typically lasts till the midpoint of the session - the lunch time!

2. middle phase

= once the drama, the bluff, the trap, the volatility, the contra-dream, the lure is over in the morning session, the operators are left with no option but to do what sanity and trend and fundamentals allow. they swifty start doing what they should be doing.

3. end phase

= like a chess game, the trading end game is just a small tail.....more of a formality......sometimes to dress the wounds of the loser....sometimes to kill him decisively. mostly it happens after in the last half hour or so.


big moves happen mostly in the afternoon. what happens in the forenoon session are not big moves but bluffs and whipsaws.

you will rarely see direction changing (except once at most) in the afternoon session.

you will always see big move after lunch whereas you will notice that forenoons are mostly dull or indecisive or rangebound.


amateurs mostly trade in the opening phase, professionals mostly trade in the middle phase.


whipsaws are aplenty before lunch and rare after lunch.

avoid trading without lunch, before lunch.

Monday, December 26, 2011

anything to lose!

want to be successful in trading?
here is a simple way.
"make mistakes!"
but you won't.
so i hereby, change my wording
"stick to your convictions of a trade"
only 2 things are possible
- either ur conviction will be proved right
- or ur system's chinks will be exposed, hence paving way for improvement.
in his masterpiece
"6 success forces"
 joseph sugarman had included one success force as
"do anything to fail"
if , however
you don't believe in admitting the mistake
and don't believe in improving your trading system
don't have a trading system in first place
i have only one advice
"don't make mistakes at all!"
there is only one way of doing that
don't trade.


do what u fear doing in the market

"Don’t look for easy trades and setups at all times. 
Test yourself by working challenging trades and difficult markets 
in order to test and improve your skills. 

For example, if you’re uncomfortable and not skilled in trading options, 
spend a month just trading options. 
If you’re uncomfortable with shorting stocks, 
spend a month just shorting stocks. 

We only have the opportunity to improve if we constantly test ourselves 
and work on things we find most difficult. 
If you don’t learn to work on your weaknesses, 
sooner or later they will catch up to you when it will hurt the most."

Dr.Bob Rotella

market loves to kill giant egos

"Those who learn how to minimize the damage when they are wrong
and who readily own up to the mistakes they make
will do far better over the long haul.
Making mistakes is a part of this game,
but knowing how to handle them is everything.
Likewise, if you attach your ego to your portfolio’s performance
you are destined for failure.
The market absolutely loves to kill those with big giant egos
and who look for the markets as a place to prove how smart they are.
Markets chew and spit out these folks routinely for good reason
and they will continue to do so at every available opportunity."

- Charles Kirk 

Friday, December 16, 2011

secret of day trading success

which of the following trading scenario would you prefer
A. (total 375 points profit in 7 trades) + (total 95 points loss in 8 trades)
B. (280 points profit in 7 trades with no loss)
(*brokerage adjusted profit and loss)
well, on the face of it
both the above scenario look same.
rather, scenario B looks better than scenario A which looks scary!
but, the reality is
1. scenario B is just a doesn;t happen pratically.
2. scenario A is not only practical but is the best way to be successful in trading.
3. even scenario A doesn't happen
instead scenario C happens as below
C.  (total 175 points profit in 7 trades) + (total 375 points loss in 8 trades)
cutting winning trades early
and cutting losing trades late!
there is nothing called opportunity without risk.
and where risk is there, there has to be loss.
"cutting loss early, letting profit go on till max possible and trying to increase percentage winner trades"
is the secret of trading success.

in the above example (scenario A) which is close to reality, you will notice that trade success ratio isless than 50% but the net result is good! this fact speaks volumes. traders are so scared of loss as well as losing trades that they miss the real thing....the net profit!
same thing happens in life. we are so obsessed with the hardships and troubles that we miss the real things.........!!! 


Tuesday, December 13, 2011

how about winning?

do u play games?

when was the last time u played cricket?
are you a batsman or bowler or alrounder or "jonty" fielder?

and when was the last time u played football?
are you a center forward or anyone-play-anywhere?

did you play well?
did you enjoy playing?

what else do you play?

computer games?

which ones?

and do you play games with people?
at office?
in society?
life in general?

how well do you play?
do you enjoy playing?
do you play consciously or has it become a second nature?

and here is the most important question
do you use indicators to play all of the games i talked above?
charts? software? tips?


i think you got what i want to say...

games are games are games....
they are to be played with head and hands and legs.....
mental and physical skills are developed......
talent and enjoyment are the bedrock of being a champion in any game
hardwork does the rest.

and by the way
do you play stock trading?

well, you read it right
i said "play" stock trading?

obviously not.
you "do" stock trading.

and that is why
you use software, charts, indicators, etc. etc.

except mental and physical skills
without enjoyment!

why not play stock trading?
why not take it as a game?

because money is involved??
well, money is involved in cricket and soccer and other sports as well?
do they make a move as per charts and indicators?

if sony was to introduce a trading game for its playstation
would you play it with charts and indicators?
chances are that you would
given the habits!

but what if you play it like you play other games?
what if you first play a few times understanding
the "controls"
the "levels"
the "rules"
the "curves and diffculties and challenges"?

what if you lose some times
then taste your first success
then win more often
then develop the habit of winning
and then become a professional?

the fact is
that indicators and technicals and charts and bla bla
have taken the fun out of the "game"
the biggest realtime game of all times!

and fun is not just "fun" that has gone
alongwith has gone the sub-conscious "learning"!

millions and millions of "trader" minds have been locked for sub-conscious game-programming.
rather, they have become a game for the big pockets!
they have become a "pokemon" in the games operators are playing!

how about learning the game of trading?
how about playing it?
how about becoming a kid once again?

how about winning?

Sunday, December 11, 2011

a view from the 15th floor

imagine you are standing on the 15th floor
of a skyscapper
in the heart of the city.

you are standing in the balcony
with a cup of coffee in you hand
looking at everything below.

you see a few people going from right to left.
and then you see one man going from left to right.
nothing special about it.
then you see 12 more going from right to left.
followed by 27, again going from right to left.
gradually the number increases
groups of 50, 65, 47 move like a swamp of bees
from right to left.
gradually the number starts dropping

you keep standing there.

you call your friend
whom you are visiting
and whose flat it is
and share what you just saw.

he laughs
and tells you
that the 11am movie show has just started
that gaussian wave of people was nothing
but the flow of audience for the show!

"when the show will be over
you will see all of them returning in the reverse direction
but not in the same increasing-peaking-decreasing fashion
but big rush initially followed by a tail of laggards.
end of a rally is faster than the start of the rally!"
your trader friend tells you.

"o i see!" you say.

next morning you are standing in the gallery again
but at 9am.

suddenly you see a group of over 200 people
running from right to left!

you rush inside
drag your friend out
and ask
"has the movie show advanced?
or is this mad rush for the "dirty picture"?

"no, no! something is wrong
movie show is 2 hours away
and i heard that it is all sold out!"

both of you wait
and then you know the cause
when you hear the sirens of firebrigade trucks
rushing from right to left.

you keep standing for an hour
and notice the fire trucks returning after dousing the fire
followed by the same group of 200 idle onlookers
returning from left to right.

your trader friend smiles
and says

"a panic sell-off or hoax rallies happen and end like that only!"


you return home the next day
and resume your trading
without indicators....

just watching the number of people going right to left
and left to right
and the speed and size of the group.

for a change
you stop losing money
and make 3 consistent profitable trades
first time in 2 years!


Saturday, December 10, 2011

understanding and avoiding whipsaws - II

how do you coem down from 5th floor to the ground floor?
do you use a slide (like the one in the kids playgrounds)
or do you use stairs?
obviously, stairs.
isn;t it surprising that in stock markets
we have both
- slides, as well as
- stairs
for the prices to come down or go up!
rather there is one more way
- the drop!
but the good news is
that their is no fourth way!
so, in other words
if you can train your eye to spot the three formations in a price chart
and understand when which one is used
you can foresee the presence or absence of whipsaws!
e.g. a slide typically happens when the trend is about to start.
a staircase if used when the trend has started and is continuing and about to continue.
a drop generally, happens when there is a sudden panic sell-off or sudden change in the fundamentals.
these, three are just examples and are neither absolute nor exhaustive!
all i have realised and want to say is
that these three ways are the only ones which i see liberally spread in every chart that i open.
i have realised that if the price is coming down or gong up using a staircase,
then i should expect and anticipate a rangebound consolidation or contraction
after the spike marking the vertical axis of a stair....
we can understand and anticipate the presence or absence of whipsaws
by focusing on the need for the same.


understanding and avoiding whipsaws

every trader fears whipsaws.
so much so that he or she keeps the fear switched on all 24 hours
even after the market hours.

marie curie had said
"nothing is this world is to be feared
but to be understood."

going by this
let's try to understand whipsaw
and cut the fear to a realistic size.

whipsaw doesn't happen all the time.

in actual, 4 types of situations can emerge whipsaw, big move
= dream outcome a trader dreams of. whipsaw, small net move
= no-trade day

3.whipsaws, followed by big move
= if you survive the shake-up and still manage to be awake and in the trade in the right

direction, you will forgive the nightmare.

4.whipsaws, almost no net move.
= the nightmare!

so, as you see
you need not fear all the time.
rather, you should try and find ways to anticipate and expect the stage
and avoid the bad setups
and trade the good ones.

how to identify?
after pro-trend big moves, expect whipsaws called consolidation.
at advanced stages of trends, expect markets to rest and whipsaw.
if you can successfully identify and avoid trading urge in the above mentioned conditions
you need not fear whipsaws leading to financial whiplashes
and hence trade with confidence!


Friday, December 9, 2011

opponent from a different dimension

90% of the technical traders
lose in the market.

that they take their defeat, failure and loss
itself as an indicator
of some deficiency
in their knowledge and application of indicators and technicals.


they get back to
burning themselves
as well as the midnight oil
to learn more of technicals and indicators.

poor souls!
little do they know
that they are losing the trading battle
less on the technical front
and more on the tactical front.

they are trying to catch the market
with technicals
while the market is dodging them
in another dimension....

beating the traders in three ways
- whipsaws
- directional dodge
- unpredictable behaviour

no technicals can make a net
that can catch the liquid fish.

need to catch the flow
from its weakness
....the flow
the irresistible urge
and compulsion to flow
the bad habit to dodge!


Tuesday, December 6, 2011

earthquakes don't kill

long ago
i had read a sentence that hit me hard and stuck inside me

"earthquakes don't kill, falling structures do."

i remember it was an ad about earthquake resistant structures.

i recalled this super sentence a few days back
while studying how market movements kill retail traders.

so i translated the above line
inline with what happens in the markets.

"price movements don't kill, whipsaws do."

yes, that's true.

if price movements in a particular direction killed,
atleast half the traders who were in the opposite direction trade
would make money
while the those who were in the wrong direction
would quickly change theirs.

but curiously,
traders in both direction lose.
rather steamrolled!



rapid, unpredictable and trapping whipsaws!!!

if you draw a number of horizontal lines across different heights on a intraday price chart
you will see

- that this horizontal line cuts price many times during the day.
- that farther the line from the centre of the price movement of the day, lesser times it cuts the price and hence lesser the number of the whipsaws.

but it is not clear in advance where the centre of the price movement of the day will lie!

all these months and years i had been focusing my attention in trying to predict the next move of the price.

but after the above realisation, i have changed the pressure and focus of my technical force towards anticipating not the price move but towards anticipating the line of minimum whipsaws.

every stock has to crash someday

a stock has to crash some day.

many small caps remain small caps
all thru their life
and fade away as penny stocks.
some become mid caps
and few large caps!

when a penny or new comer company behind the stock starts growing
the stock starts rising much faster than the growth.
its because the price the stock commands in the market
includes the stocks prsent worth as well as its futuristic expected and estimated worth.

with time penny stock becomes small cap and then medium cap.
the premium that stock commands till that time is very high.
thereafter, the increase in growth rate determines the premium and not the growth itself.

for example, if the growth of the company were to be 12% viz a viz 15% it has been clocking since some quarters or years the share price of the company is set to nose dive despite that fact it is still growing. reason? the premium of ever-increasing growth expectation needs to come down.

if the dream run of the conpamy has not ended till that time
it still continues thereafter
but the management increasingly finds it difficult
to maintain the scorching (rather ever increasing and often unreasonable) rate of growth.

it fails to live upto the unreasonably high expectations.
expectations decide the stock price more than the reality which limits itself to bookvalue.

some companies finally go global, increase their market size to keep growing.
but in doing so they face increasing competition, price pressures etc.
and hence start struggling.

but some great great companies
survive this jet thrust and
keep growing.

but in the process they only delay the inevitable.
they again reach the stage sooner or later
when they find it difficult to match the expectations and p/e of the share holders.

some very smart companies buck even this reality.

they divide the company into many companies, make every new baby focus on a core competence and try and maintain the growth pace.

some succeed, some succumb.

even those who succeed, again face the growth speedbreaker and stumble at the growth sustainence promise to the investors.and mind you, i have not yet discussed the effects of recession, effects of changes in technology which render many a company obsolete etc.

finally, the inevitable happens.
company's growth rate starts tapering.
the premium dissolves and evaporates.

the blue eyed boy removes the goggles of promise, wears the spectacles of respect and reputation and accepts the valuation directed towards its book value with a consolation of annual pension called dividend.
every stock has to crash someday to ground of reality.
how long that can be prolonged is the real question.

those who buy blue eyed babies and keep the stocks in lockers, must take out and encash them while the baby has still not reached the middleage.

Monday, December 5, 2011

taking stock of the trades

results of last 22 trades (recent to backwards)
+26, -22, -20, -32, 0, -13, +33, +162, +38, +89, 0, -9, +31, -14, +30, +44, +46, -11, -8, +30, +72, +44

total +635, -129

net = +506

lessons = 80% of the profit comes from 20% of the trades. but since we can't be sure which 20%, we have to overcome fear and take every trade signal as per our method. also, it is not how many trades hit stop loss that matters, what matters is how less you lose in wrong trades and how you maximise the profit from the right ones! nobody feels good at the ringing of the stoploss bell. but you have to have the heart to keep listening and yet keep trading. few solid trades are worth all the pain! when you are not getting the head or tail of the situation it is either most likely not your fault and something is happening behind the curtain OR you are not in form. in both cases, stop trading for the day. (today being one of such days. and when you are going great guns, cricket ball looks like a football, keep going and turn your guns into a tank.

disclaimer = i missed some juicy trades too which don't figure in the above list. and was lucky in some which show here. being lucky as well as unlucky is also part of trading life.

Sunday, December 4, 2011

overcoming trade phobia

i always feared taking the trade
even after having done my homework
even after being very confident of the trade.
momentum! inertia!! fear!!!
all courage, all self-talk, all consolation used to go down the drain...
nothing worked....nothing seemed to work.
then i read one quotation
which changed it all
"first do what is necessary, then do what is possible...suddenly you are doing the impossible!"
necessary = open the trade window in the software and fill the trade details
possible = click the enter button
impossible ?
= already done by that time!
for the first one or two times
i had to kick myself in the back
like the mother penguin pushes her child
into the sea
for its first swim!


5 candles of profit

dear buddies,

those who love candle sticks and want a power technique for trend trading, i strongly suggest studying
CHAOS THEORY by Bill Williams

he uses a combination of 5 consecutive candles to find "fractals" which, if broken or crossed, may indicate the start of a trend

subject to the position of price and fractals wrt "jaws" "teeth" and "lips" of what he calls "alligator" setting of sma 13,8,5.

it seems complicated but, believe me, is easy if u r determined to learn it.

use it in conjunction with what u already know and see the magic!

i am giving below a few links of the same.

you can also check youtube forexplanation of the same in bills' own voice in his recorded lectures.

for trades and nifty levels on the basis of this "chaos theory", pl let me know.

Js (09418037474)

Saturday, December 3, 2011


JP :
Banta Singh went to an eye specialist to get his eyes tested and asked "Doctor, will I be able to read after wearing glasses?"
Yes of course, said the doctor, why not!
"Oh How nice it would be I have been illiterate for so long" replied Banta with joy.
Ha ha....same thing happens when people enter stock market, wear technical glasses and expect to read profit without getting literate about trading psychology \
sir i am not active trader
guide me where can i learn technical analysis?
let me give u a different advise. don't learn technical analysis. observe price movement for many days and ur own methods will pop in ur head.

SA: ok
you mean i have to observe after trading hours?
observe before during and after trading hours, gradually ur trading gut will get subconsciously programmed. just like some of the best auto mechanics in my town are illiterates but are most educated by their experience and observation
ok sir
thank you very much for your guidance
observing NIFY only enough right?

u r welcome!
yes observation is the best education. killer training!
u can gtalk with me @ jagmohanshan@ g
for my view on nifty keep track of my updates in
for my nifty views and links to articles in mudraa send ur cell no. to 09418037474
Js (niftyshots.blogspot)