Tuesday, July 31, 2012

similar situation, different decision

dear murliji,

thanks for asking and sound like the echo of my self talk.

1. why i terminated both calls of yday in 10-15 points

= there was a strong "undercurrent" signals for slide down. so i took the intraday downward position. but as is often possible near sma 34 lines, those strong signals are bulldozed. for 1-2 hours, it seemed that the upward movement was a bluff. so while i let the first short position drift without sl, at sufficient high intraday position, i gave my shorts a second shot but this time with stop loss. i went for a stoploss for 2 reasons - a)second trade was more in-the-money and costlier, b)if the market was to still continue to drift up (as it eventually did), i didn't need longer signal to accept that the "undercurrent" was false and an upward rally was in store. therefore, the second short trade was with a tight (but well thought of) 10 point one. the first one was costlier @ 15

2. why i let today's trade ride the roller coster

= yesterday's bulldozing of "short" signal was enough signal of an upward rally. so i had little doubt of going long for overnight. 1% asian market buoyancy in morning hinted that i was right. but the rbi policy was a factor that stood in-between. besides the overnight bullish hints, there were enough signals in the morning that hinted that upward movement was inevitable. i was jittery to see the markets dip in the pre-lunch session, but frankly, i was not surprised. i rechecked the signals and saw buoyant forces again. and i was sure that operators / market forces couldn't bulldoze opposite side signals on consecutive days. plus there were 1-2 more reasons. by now, it was obvious that market forces had used rbi news to play the intraday game. buying and adding to the long positions at the intraday lows was an excellent idea (which i decided against, for some reasons).

i checked signals again after 3 and saw clear btst invitation.

so while squaring yday trades was the acceptance of the limit of adverse trade setup, not squaring today's intraday adverse trade was a tough put-my-foot-down deliberate decision to stick to my understanding.
and all this time, i was almost ready with the backup plan. 

Friday, July 27, 2012

waiting before the next trade

dear murliji,
nice to hear from you.
now when i know that you are physically in the u.s. i miss your routine presence in mudraa more than when i knew, in the back of mind, that u were somewhere around.
your observation is good and your question pointed and right.
let me ask myself and attempt a frank answer.
i put the sl @ 5090spot equivalent because, at that time, 5090 was the line which, if crossed from below, would have indicated, as per my understanding, the pause or end of the downward slide.
infact, for quite sometime, nifty spot kept hovering around 5089.....almost teasing......missing it by a whisker 2-3 times before finally crossing it.
why i didn't square @ 5077spot = because that was not the line which indicated the end of downslide.....unlike 5090 which did.
the next question is - why i didn't go long @ 5090 after squaring shorts.
there are a few reasons when i rethink.
one, i was quite stressed after spending quite some time observing tick by tick in that tense situation with loaded position. i had to breathe again after coming out of the ring.
second, somewhere in the back of head, i knew that while markets may stop falling that may not itself indicate that they are about to rise.
so, as a natural instinct, i stood up the table, walked out, freshened up, relaxed a bit, returned, forgot the day trade and started looking for btst stbt opportunity.
with that fresh mind, and once out of the shadow of day trade's stress, i could focus on overnight trade signals better.
one more thing, the momentum (often unjustified and mob-minded) is difficult to change at the end, it is often hiding a different picture for the next day, when seen from a distance.
just like every morning is like a fresh puzzle and needs fresh look, every overnight set-up is a fresh riddle and needs a fresh view, detatched from the midset overhang of the day's workout.
the sabzimandi train analogy is right.
when i squared the shorts, i was not sure whether the train to the other side was ready for leaving.
the markets could easily have risen to 5030 levels before gap down the next day. in that case, it would have been prudent to book shorts and wait for shorting again.
say my hello to the president.
hope he or his treasury secretary or fed chief doesn't say anything which spoils my overnight weekend long position.

Wednesday, July 25, 2012

dilemma of timing the trade

timing the entry in a trade is one of the most challenging things.
but this question is the second question.
the first question is deciding the direction to trade.
once the first question is answered and decided, then comes the second question - that of the right time.
just like anti-terrorist commandoes are told to aim at centre of the forehead.
but during action time, specially during chaos, many a times, it is difficult to pick the centre point to shoot.
the target is moving and you are under stress,besides the atmospheric "noise"
at that time, it is more important to shoot and "hit somewhere" than waiting to lock the centre of the forehead.
sometimes, practically speaking, it is more important to shoot and hit somewhere than to shoot only at the perfect spot.
similarly, many a times, in trading, timing is important but absolute perfect timing remains a mirage!
when you have done your homework and spotted a target
shoot at the best available spot and not keep waiting looking for the absolute best universal spot.
inertia and indecisiveness kills both the soldier as well as a trader.
however, i must end with a note of caution.
eagerness to shoot is different from the concern not to miss the bus.
if it is eagerness, you are likely to be wrong.
but if it is a question of not being able to decide the exact point of shot while being reasonably sure of the target subject, your chances of being right are good.

side talk

dear karthik

the probability of today's trade going in the intended direction is high (that's why i took the trade, ofcourse).

wish to share that i take a trade only when there is atleast one (sometimes they are 2-4) strong strong reason to take a particular trade.

after taking the trade i just relax irrespective of the outcome because as per the law of averages if i keep following the method ruthlessly positive trades will always be much more than the negative ones (though negative ones will always be there, i know)

Monday, July 23, 2012

self talk

trading is never easy.
even if you make a killer profit in a trade
the next trade will always be as difficult as the previous one.
even after n number of successes your chance of going wrong are always there.
market never gives any weightage to past or recent or latest performance.
it never cares for reputation and sincerity and image and other personal equations.
every trade is a new trade.
market is a great leveller.....no special respect or hatred for anyone.
same is true from the reverse angle as well.
market is as easy after a negative trade as it was before that.
no risk, no reward.
every trade will be "difficult" and wrapped in fear.
there is nothing called "zero fear" and "sure shot" set-up for trade.
as anatoly karpov famously said "the surest way to lose is play for a draw"
those fearing drowing keep sitting and remain sitting on the shore.
nothing ventured, nothing gained.
trading is a verb, not adjective or noun.

self talk

take a trade only after good amount of homework.

good homework ensures a win-win situation

1. either the trade will go the anticipated way and you profit.

2. or, if the trade doesn't go the anticipated way despite all that good homework, it leaves you with a learning which was apparently not included in the template you used for homework. in other words, your knowledge base increases for the next homework.

never, self doubt. never doubt the accurace of the homework or that of your decision. if homework was good and things don't go accordingly, take it as an opportunity to discover something new including the revealing of a mischief.

but never kick yourself.

a trader with low self-esteem can never be confident.

kicking ourselves only weakens us psychologically and makes us vulnerable to the mind games of the operators.

news and effect

technicals don't worry about news. 
any "news" is inbuilt in the technicals. 

as they say "charts know that the news is coming."

what actually happens is 
that if the operators and big pockets are willing 
small news is magnified big time, 
and if they are less interested even big news fizzles out.

small news, small need = small or no effect
small news, big need = decent effect
big news, small need = small effect
big news, big need = big big effect

Friday, July 20, 2012

hedgin BN with N : my views about sid's thread

following are my views about sidhdharth's thread
good strategy
but it has some serious traps. some of these i am listing below (as much as i can recall; i tried this strategy in many forms and finally abandoned)
1. what if BN and N start going saperate ways. we assume in this strategy that BN and N have positive alpha. that is, when one goes up, other also goes up, and vice versa. this doesn't happen always. also, the rate of change of both varies. i found many a times that BN moved much slower to N. e.g. if IT moves opposite to BN (which does happen many a times) and moves faster than BN (assuming it is not BN's day), then the situation i mentioned can come (and it did many times when i tried it). many times, N remained in a range and BN moved a lot.....i bleeded like hell!
2. brokerage factor has to be very low, otherwise whatever profit you get is eaten by brokerage leaving you gasping for breath.
3. you need a lot of buffer fund to fund this ambitious method.
4. one has to do this method for a long time to cover for adverse unforeseen moves in BN and N. if you quit after one or two negative trades you are dead. and having guts to keep trading even when u r bleeding requires a drunkered's head....very very tough.
overall, thrilling strategy but as difficult and unpredictable to control as is controlling a bull in a bull fight!
saw this thread and couldn't resist sharing my views.
however, with deep pockets this is a practical and doable and winnable strategy. can't be brushed aside.
only that we talking about playing with a monster of a method.

self talk

if u stick to a promising method..........any method.......any bloody method (pardon the slang)......and stick to it RUTHLESSLY..............and don't stop trading after a negative trade, ur trade will go right 66% of the time......

and ofcourse......since nothing succeeds like success, nothing fails like overconfidence and negligence......

i am less interested in feeling good.....i am more interested in being irreverent but consistent. 

a trader and an analyst and an "expert" is only as successful and "expert" as the outcome of his last trade.

just like a cricketer.

i fear the wrong decision just before plunging into any trade.

that doubt, that fear, that nervousness is always there. but i have made it a "bloody" point to take every trade i think should be taken.

Tuesday, July 17, 2012

truth behind dilemma of target setting

can't give target of a trade when u ask

.....this game is that of operators

.....only they know what they want to do

....when and how much and how fast

......we are just wind-boats

.......all we can do and should do is decide when and in which direction to raise the sail and when to bring it down. 

frankly, can't say what should be the target. because i decide the end of a particular trade on the basis of wind.......what the wind will be like at a later time ...don't know....will see...

but ofcourse i do have some opinions.......for example, today i will be surprised to see market move more than 50points either ways.......

from another angle......my target is 2:30pm.......as per a strategy

fear and greed

a trader can't get rid of greed without getting rid of fear 
and can't get rid of fear without getting rid of fear.
unfounded greed and fear are exactly that.....unfounded.
just greed is not a greed but a state of awareness
similarly, just fear is not a fear but a state of sensibility.

Friday, July 13, 2012

cross acround the trader's neck

lessons so far from 10 experimental trades :

1. the criteria is ok / promising and needs tightening/refining. 

2. intraday alone is not enough...can never be enough.......what about rallies where movements mostly happen in gaps?
so, btst/stbt (overnight trades) is a must alongwith intraday trades to make decent money. otherwise, despite risk and stress, profits are likely to be proportionately less.
intend to start overnight trades also alongwith intraday ones w.e.f next week.

3. buy at or "somewhat" in the money options when less sure or when taking a trade against the trend (ofcourse at the signal of the method). and when reasonably sure or when taking pro-trend position, take deep in the money option.

4. deploy ur money in 2 stages....one after 10am (whenever signal comes as per the method), second around noon when the real "game" is played......will incorporate this in trades w.e.f next week hopefully.

5. use mutliple indicators / logic to identify market bluffs and traps.

6. use method and fixed-time fences to eliminate (or atleast minimise) the effect of dodging and mind games played by operators and market deep-pocket-forces. use 'law of averages' to your effect. expect wrong trades as per the method (they will always be there and are expected and ok) but never quit trading after the negative trade. i call these negative trades and not bad trades......no trade as per a method is a bad trade......a good method properly executed can still result in loss....it should be called a negative trade and not a bad trade........a negative trade is a probabilistic entity but not a routine one. the trouble is that we stop trading after a loss yielding trade taking it as a bad trade instead of a negative trade.........pick any method.....decide its parameters.......so ruthlessly that even a computer or robot can trade as per it.....and then stick to it......don't stop trading when you make profit......don't stop trading when you make loss........never abandon the method.......method is like a cross in the trader's neck.......lose it and the devil will get you.

Tuesday, July 3, 2012

What Money Can't Buy - the moral limit of markets

money masters.....

historical documentary that traces the origins of the money and political power structure

don't play their game

it is true that the trading challenge is very difficult indeed.
almost impossible but not impossible.
while "Trade with the operator robot not against him" sounds right i beg to differ.
working against or with the "robot" are actually similar things.
(i didn't say same but similar).
the "robots" (read operators) don't let anyone guess what they are going to do, how, how much and when.
at times, they themselves don't know.
their algorithms decide that on realtime info.
so, if you knew what they are going to do only then you can be "with" them.
but herein lies the paradox.
if you couldn't know how you went "against" them, how could you go "with" them?
if you can go "with" them, why did you not spot their game and avoid going "against" them.
whatever you do the robot will catch you on the wrong foot. 
fortunately, there is a silver lining (there always has to be)!
instead of worrying about being "with" or "against" them, just ensure one thing - 'don't play their game'
in other words - trade as if they were not there!
trade without reacting to them.
play "with" law of probability, law of averages.
don't let the market fluctuations dictate and skew your trading decisions.
stick to one or two or few principles, hold the hand of probability, go ahead and trade.
who can scare the trader who refuses to look in the eyes of the bully?

Monday, July 2, 2012

and how i am fighting back with them

this is a sequel to my earlier article

"how market beat my best tools"


the limitations of the tools as discussed by me in the above mentioned articles are not deathknell.
they are real and necessary evils which i accept.
and have resolved to use as contours of a strategy.

1. rsi / william
= i stop following them at the first sign of "bermuda triangle" effect. for rest of the occasions i continue to trust them.
in fact, by not behaving in the copybook fashion, rsi and william tell me silently and indirectly what i should know.

2. options data spread
= don't look at it for first 7 days. thereafter, the sting is generally out.

3. 8-34 sma
= using this to segregate between up and down trends and rangings
and hence take btst stbt and pro-trend intraday shots
also, using this as a confirmation tool.

4. elliot wave
= use as a guide and confirmatory tool to double-check trend and thus take better shots.

5. intraday options data
= i don't use it at the start of trends (range breakouts and sma 34 crossovers)
for rest of the times it works ok especially if i resist the temptation of anti-trend bait by it.

6. yesterday range breakout
= they are less but that is not their fault. just can't say no to those. take it as per availability.

7. btst
= take these and increase the number of profitable trade beyond the "yesterday range breakout" ones

8. call/put options strategies
= just buy plain vanilla options for intraday and btst stbt. risk is limited to give sound sleep and time decay is minimal.

Sunday, July 1, 2012

how market beat my best tools

1. rsi / william

= this is one deadly combination.....my pride.
it speaks to me. it tells me a lot of crucial info.
but after prolonged use and going thru quite a few seasons
i found that operators can bull doze these!
operators create extended periods of time when this combo becomes ineffective
like the bermuda triangle where compasses and altimeters and other instruments are reported to stop working or go mad!
when market comes out of its "bermuda triangle" this combo starts working perfectly as if nothing ever happened.
but when do the operators take the market plane in and out of the triangle makes it highly stressful and unprofitable.
following the instruments when you don't know that the readings in them are faulty can and will crash you!

2. options data spread

= i have cracked a code in this and love it.
just like rsia nd william combo above, many a times i found that operators bulldoze what options data spread say.
however, the probability of this happening in the first half of a monthly series is much higher than in the second half
when the operators dare not get caught in their own net they have woven in the first.

3. 8-34 sma

= this is one simple and hell of an effective tool in my armoury.
it works perfectly well in trending markets but is prone to the "bermuda triangle" effect during ranges!
however, its bermuda triangle is different from those in the universe of rsi and options data spread.
so this seems to work where others fail and struggles where others work.
this is one of the best tools but has a serious shortcoming - you can't leave the terminal!
you can't be a swing or positional trader with this and have the luxury of switch off the terminal and go shopping!
you have to keep glued to the screen and keep revising the trailing stop loss or SAR order (stop and reverse - but always in the trade). also, this method has a success ratio of around 40% with rest 60% being whipsaws. but as a consolation, 40% yields large profits and 60% throw less loss resulting in handsome returns. all you have to do it.....follow without head.....just keep following what it does.....even when (inevitably) it frustrates you and generates giants waves of self-doubt during whipsaws. consistency and mental toughness is the key with this simple but powerful tool.

4. elliot wave

= this is a very fascinating tool.
it seems to work most of the time. and when it works nothing feels better in the world. but the trouble is....when it doesn't, it
shatters all the confidence you have gained till then. doubt is always there. still, when it seems to be not working, if you convince yourself that the markets are trying to make a bigger and outer wave, you may be damn right and continue to love this tool. but still, i have seen many instances when this tool is bulldozed and silenced by the operators for some days or weeks. and that is what does the damage...tot he confidence of the trader and his or her bank balance.

5. intraday options data

= this one is a simple and promising tool for intraday but i have seen this failing during start or resumption of the rallies. its
success ratio, therefore has been around 40-45% (which is enough to put you off). still, i use it as an advisor tool.....like a
superstition you know may not work but gives confidence.....more of a habit!

6. yesterday/today range breakout

= yesterday range breakout is reasonably accurate but happens only 5-6 times a month. even then, the move may not be that big. so can't depend on it too much. can't make it the central theme.

7. btst

= i base my btst stbt decisions on four factors. 1)william% r movement on 5min chart, 2) pro-trend, 3) rsi-wlliam combo reading, 4) false sma crosover.
this is the least stressful game. however, clear signals of chances of a decent move are 6-8 per month. still, that is not bad and
this makes this better than others.

8. call/put options strategies

= these are complicated and work only if you have guessed the weather of the day rightly. e.g. different combinations are required in case of range bound movements than in sharp unexpected moves. also, chosing the right boundaries of options you select is crucial. options arena is designed and heavily tilted towards options writers/sellers and that too professionals which have practically unlimited money and sophisticated softwares to manage it all.