Welles Wilder - father of RSI & SAR (a biographical sketch)

Welles Wilder

a leader among technical analysts

the inventor of RSI and Parabolic SAR besides many other technical indicators.

Between high school and collage worked as an automobile mechanic, joined Navy and became an aeroplane mechanic.

After the Navy, graduated with a degree in Mechanical Engineering from North Carolina State College.

After seven years left engineering and got into Real Estate and Land development business!

Built 1,035 apartments in five cities in North Carolina and Virginia with two other people.

Bought an airplane, learned how to fly it, and made the rounds of the five projects about every day.

When the apartments were almost finished his two partners offered to buy his share of the projects.

Thus, at 38 years age, Wilder had "all the money needed" and "nothing to do"!

Became interested in trading commodities because "they are even more highly leveraged then like Real Estate".

Initially, made a lot of money in Silver.

Soon learnt that one can also lose money trading commodities.

So he stopped trading and began to get into technical analysis in the early to mid seventies.

Wrote and self published his first book, NEW CONCEPTS IN TECHNICAL TRADING SYSTEMS in 1978.

In the New Concepts book, he introduced 4 new automatic trading systems.

The Parabolic Time/Price System,

The Volatility System

The Directional Movement System, and

The Swing Index System.

and

the first momentum oscillator to put all commodities and Stocks on one scale

the RSI!!!

Also, developed an automatic visual trading system called The Reverse Point Wave system.

"The markets must win or else their will be no markets. There must be more money lost than won."

"The big winners are the Commercial Hedgers with huge money to back up their positions. These are the Fundamental Traders."

"The second group of traders is the Large Speculators which are mostly the big commodity funds. They are technical traders."

"The last group is the Small Trader. The Small Traders certainly outnumber the other two by I would guess a thousand to one. Since only 5% of Small Traders (over time) end up making a profit you can see where the money comes from to make a market."

"Since the markets must win, most trading systems can work fairly well for a year or two and they break down to loosing as more and more sophisticated market action adapts to defeat the system. So what has changed is that the markets adapt to most every kind of trading system, and it becomes harder and harder to come up with a system that can beat the markets. But, a few of them do beat the markets year after year."

"Letting your emotions override your plan or system is the biggest cause of failure."

"Some traders are born with an innate discipline. Most have to learn it the hard way."

"The trade should be in the major trend direction. It should not have wild gyrations. If possible there should be a nearby support area to provide a reasonable stop."

"If you can't deal with emotion, get out of trading."

"Risk is something one should consider before entering the trade. He can use a chart to determine the support and resistance. If those allow too much risk, forget the trade. Most importantly, do not increase the risk if the trade is going against you.

Dhyan Chand (a biographical sketch)

Major Dhyan 'Chand' Singh

August 29, 1905 – December 3, 1979

Widely regarded as the greatest hockey player of all time!

Dhyan Chand is to hockey what Bradman is to cricket, Mohammed Ali to boxing and Pele to football!

Legendary center-forward!

Won 3 Olympic gold medals

Scored more than 400 goals during his international career.

Awarded Padma Bhushan in 1956.

Born in Prayag, Allahabad in Uttar Pradesh.

His father Sameshwar Dutt Singh was in the Indian Army and played hockey in the army.

Had to terminate his education after class six due to frequesnt transfers of father.

Young Dhyan had no serious inclination towards sports, though he loved wrestling.

He did not play any hockey worth mentioning before he joined the Army.

He occasionally indulged in casual games in Jhansi with his friends.

Chand joined the Indian Army at the age of 16, in 1922 .

Subedar-Major Bale Tiwari noticed his dribbling skills. He became his mentor and laid the foundations of his game.

Between 1922 and 1926, Chand exclusively played the army hockey tournaments and the regimental games.

Chand was ultimately selected for the Indian Army team which was to tour New Zealand.

The team won 18 matches, drew 2 and lost only 1, receiving praises from all spectators. Returning to India, Chand was immediately promoted to Lance Naik.

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Once while playing a hockey game Major dhyan chand was not able to strike ball into the goal post of the opposition's team. After several misses he argued with the match referee regarding the measurement of the goal post and amazingly it was found incorrect!

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Final of the Punjab Indian Infantry tournament in Jhelum.

The UP team was leading by three goals to one.

Only 4 minutes to go.

Dhyan chand responded with three goals in four minutes to lead his team to victory.

He seemed to be able to pass opponent after opponent at will.

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it is said that at the Berlin Olympics in 1936, Dhyan Chand could not play for finals against Germany, as he was hurt. At half point, when India led by only 1-0 Dhyan Chand removed his shoes and entered the field bare foot. He took India to a stunning victory scoring 6 more goals. Adolf Hitler left midway as he couldn't bear to see his "racially superior" team being demolished.

In his autobiography titled “Goal!” published in 1952 by Sport & Pastime, Chennai, Dhyan Chand writes about that match as follows:

“When Germany was four goals down, a ball hit Allen's pad and rebounded. The Germans took full advantage of this and made a rush, netting the ball before we could stop it. That was the only goal Germany would score in the match against our eight, and incidentally the only goal scored against India in the entire Olympic tournament. India's goal-getters were Roop Singh, Tapsell and Jaffar with one each, Dara two and myself three.”

Later the German dictator offered to elevate 'Lance Naik' Dhyan to the rank of a Colonel if he migrated to Germany. Of course, Dhyan Chand refused.

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In Holland, the authorities broke his hockey stick to check if there was a magnet inside.

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After India played its first match in the 1936 Olympics, Dhyan Chand's magical stickwork drew crowds from other venues to the hockey field.

A German newspaper carried a banner headline: 'The Olympic complex now has a magic show too.' The next day, there were posters all over Berlin: 'Visit the hockey stadium to watch the Indian magician Dhyan Chand in action.

'After every India match, hundreds of spectators would troop down to the players enclosure and touch Dhyan Chand's hockey stick to see what trick it was that kept the ball from leaving his stick as he dribbled his way all over the field.

One journalist reported: 'It looks like he has some invisible magnet stuck to his hockey stick so that the ball does not leave it at all.'

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So great was the magic of Dhyan Chand that the Tokyo Olypics officials broke his hockey stick to search for a magnet inside. Embarrased on finding nothing, they consoled with the theory of a glue.

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On one occasion, a lady from the audience asked Dhyan Chand to play with her walking stick instead. He scored goals even with them!

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Don Bradman and Dhyan Chand once came face to face at Adelaide in 1935, when the Indian hockey team was in Australia. After watching Dhyan Chand in action, Don Bradman remarked "He scores goals like runs in cricket"

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An artist in Vienna depicted him as having eight arms.

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Once during a tour of Lyon in 1963, a female fan planted a kiss on Dhyan Chand despite him trying his best to avoid that.

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When everbody else thought he was going to shoot, he passed, to induce surprise.

And when he passed to you, you did not want to miss.

On that 1947 tour, he put through a wondorous ball to KD Singh Babu, then turned his back and walked away.

When Babu later asked the reason for this odd behaviour, he was told, "If you could not get a goal from that you did not deserve to be on my team."

Keshav Dutt, Olympic gold Medallist, said "His real talent lay above his shoulders.

His was easily the hockey brain of the century. He could see a field the way a chess player sees the board. He knew where his teammates were, and more importantly where his opponents were - without looking. It was almost psychic.

He treated everybody as pieces on a board meant for his use. He'd know from his own movement how the defense was forming, and where the gaps were. In other words, he was the only imponderable, Everbody else (opposition included) fell in predictable patterns around him."

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Residents of Vienna, Austria honoured him by setting up a statue of him with four hands and four sticks, depicting his control and mastery over the ball.

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Dhyan Chand owned a licensed army gun which he would use for hunting (which was not banned in those days).

He also loved to fish.

Cooking was his other favourite hobby. He was a non-vegetarian and enjoyed making mutton and fish dishes. He liked making halwa dripping with ghee.

His indoor pastime was billiards. After retirement in Jhansi, he used to play billiards till late in the night.

Dhyan Chand also played cricket well, and was good at batting due to his strong wrists. He used to play carroms and loved photography.

He admitted that he was not a good social mixer. While at home or during play, he kept to himself. He thought that it would be better if he kept quiet and just did his duty or job.

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In 1956, at the age of 51, he retired from the army with the rank of Major.

After he retired he coached for a while, then settled in his beloved Jhansi.

The last days of Dhyan Chand were not very happy, as he was short of money and was badly ignored by the nation. Once he went to a tournament in Ahmedabad and they turned him away not knowing who he was.

He developed liver cancer, and was sent to a general ward at the AIIMS, New Delhi. He died on the 3rd of December 1979 penniless and uncared for in a hospital, receiving a meagre pension..

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His birthday is celebrated every year as National Sports Day. The Indian Postal Service issued a postage stamp in his memory, and the Dhyan Chand National Stadium at New Delhi has been named after him.

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"Goal" is the autobiography of Hockey wizard Dhyan Chand published by Sport & Pastime, Chennai, 1952

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Hockey or Stock Trading....passion and dedication is magical!

The Boy Plunger (a biographical sketch) !

Jesse Lauriston Livermore (1877 — 1940)

Also known as the Boy Plunger, an early 20th century stock trader.

Famed for making and losing several multi-million dollar fortunes.

Short sold the stock market crashes of 1907 and 1929.

Started his trading career at the age of fifteen.

Ran away from home to escape a life of farming his father wanted him to have.

Began his career by posting stock quotes at the Paine Webber brokerage in Boston.

Married thrice.

He had the habit of writing down certain hunches he had about future market prices which he used to check for accuracy later.

A friend convinced him to put his first actual money on the market by making a bet at a bucket shop, a type of gambling that took bets on stock prices but did not actually buy or sell the stock.

By the age of fifteen, he had earned profits of over $1000 (equivalent to today's $20,000).

Eventually banned from most bucket shops for winning too much money from them.

He then moved to New York City for trading in legitimate markets.

And devised a new set of rules to trade the market.

During his lifetime, Livermore gained and lost several multi-million dollar fortunes.

He was worth $3 million and $100 million after the 1907 and 1929 market crashes, respectively.

Subsequently lost both!!!

Livermore's philosophy - Keep increasing the size of one's position as it goes in the right direction and cutting losses quickly.

Livermore sometimes did not follow his own rules strictly. He claimed that his lack of adherence to his own rules was the main reason for his losses after making his 1907 and 1929 fortunes.

Livermore first became famous after the Panic of 1907, when he sold the market short as it crashed.

He noticed a lack of capital to buy stock and predicted that there would be a sharp drop in prices when many speculators were simultaneously forced to sell by margin calls and a lack of credit.

He violated many of his key rules.

Though he preferred working alone, yet he listened to another person's advice and added to a losing position.

Gradually, he was $1 million in debt and declared bankruptcy.

He proceeded to regain his fortune and repay his creditors during the World War I bull market and resulting downtrend.

He owned a series of mansions around the world, each fully staffed with servants, a fleet of limousines, and a steel-hulled yacht for trips to Europe.

Livermore continued to make money in the bull markets of the 1920s.

In 1929, he noticed market conditions similar to that of the 1907 market. He began shorting various stocks and adding to his positions and they kept declining in price. When just about everyone in the markets lost money in the Wall Street crash of 1929, Livermore was worth $100 million after his short-selling profits.

Through unknown mechanisms, he yet again lost much of his trading capital, accumulated through 1929.

March 7, 1934 = the bankrupt Livermore was automatically suspended as a member of the Chicago Board of Trade.

He had lost it all.

November 28, 1940 = Livermore shot and killed himself in the cloakroom of a Hotel in Manhattan.

He got the nick name of 'boy plunger' because of the manner in which he would take large stock or commodity positions.

Livermore lived as he traded - full steam ahead.

“ All through time, people have basically acted and reacted the same way in the market as a result of: greed, fear, ignorance, and hope. That is why the numerical formations and patterns recur on a constant basis.” - Jesse Livermore in 'How To Trade In Stocks'

“ The game of speculation is the most uniformly fascinating game in the world. But it is not a game for the stupid, the mentally lazy, the person of inferior emotional balance, or the get-rich-quick adventurer. They will die poor.” — Jesse Livermore in 'How To Trade In Stocks'

Harshad Mehta (a biographical sketch)

Love him, hate him but you can't ignore him.

Name : Harshad Shantilal Mehta (aka Deep Chhaya)

The ultimate rags to riches story...

From the small town Raipur boy who was once rusticated from school to the uncrowned Sultan of Dalal Street!

First broker to become a mega-star of Indian capital markets & fire the greed and imagination of every middle class Indian in the early 1990s.

Born = 29 July'1954 in a Gujarati Jain family of modest means.

Father : Shantilal Mehta

Mother : Rasilaben Mehta

Early childhood spent in Mumbai where his father was a small-time businessman.

Later, the family moved to Raipur in Chattisgarh after doctors advised his father to move to a drier place on account of his indifferent health.

He also studied in S.S. Kalibadi Hr. Sec. School, Raipur,

But Raipur could not hold back Mehta for long and he was back in Mumbai after completing his schooling.

After coming to Mumbai Harshad Mehta joined his 1st job as dispatch clerk in the New India Assurance Company. But his 1st love is always Stock market.

In the early eighties he quit his job and sought a job with stock broker P. Ambalal affiliated to BSE before becoming a jobber on BSE for stock broker P.D. Shukla.

In 1981 he became a sub-broker for stock brokers J.L. Shah and Nandalal Sheth.

Once he was unable to sustain his overbought positions and decided to pay his dues by selling his house with consent of his mother Rasilaben and brother Ashwin.

The next day Harshad went to his brokers and offered the papers of the house as guarantee.

The brokers Shah and Sheth were moved by his gesture and gave him sufficient time to overcome his position.

After he came out of this big struggle for survival he became stronger and his brother quit his job to team with Harshad to start their venture GrowMore Research and Asset Management Company Limited.

While a brokers card at BSE was being auctioned, the company made a bid for the same with financial assistance from Shah and Sheth, who were Harshad's broker mentors.

He rose and survived the bear runs, this earned him the nickname of the Big Bull of the trading floor.

His actions, actual or perceived, decided the course of the movement of the Sensex as well as scrip-specific activities.

Harshad Mehta found that stocks of companies were not rising and falling as per their fundamentals, and he started manipulating one stock named ACC. It was rising , rising and rising only. The price of ACC was bid up to Rs 10,000.

For those who asked, Mehta had the replacement cost theory as an explanation. The theory basically argues that old companies should be valued on the basis of the amount of money which would be required to create another such company.

He started buying this ACC at mid 1990 and then he suddenly made it public. It was Harshad Mehta’s trademarked style.

Through the second half of 1991, Mehta was the darling of the business media!

But, where was Mehta getting his endless supply of money from? Nobody had a clue.

By then, the driving ambitions of a young man in the faceless crowd had been realised.

On April 23, 1992, journalist Sucheta Dalal in a column in The Times of India, exposed the scam.

The broker was dipping illegally into the banking system to finance his buying.

“In 1992, when I broke the story about the Rs 600 crore that he had swiped from the State Bank of India, it was his visits to the bank’s headquarters in a flashy Toyota Lexus that was the tip-off. Those days, the Lexus had just been launched in the international market and importing it cost a neat package,” Dalal wrote in one of her columns.

Harshad allegedly exploited the mechanism by using two tools

1) "the ready forward (RF) deal."

2) "the bank receipt (BR)"

In RF deal, crudely put, the bank lends against government securities. The borrowing bank actually sells the securities to the lending bank and buys them back at the end of the period of the loan, typically at a slightly higher price. In this process the borrowing and lending banks knows only broker and may not know the name of the other party.

And Harshad Mehta used this fact very well for his own personal benefit.Harshad Mehta and his cronies used this with great success to channel money from the banking system. He invested that money in stock market.

In a ready forward deal, the borrower, i.e. the seller of securities, gave the buyer of the securities a bank receipt (BR). Having figured this out, Mehtha needed banks, which could issue fake BRs, or BRs not backed by any government securities.

“Two small and little known banks came in handy for this purpose. These banks were willing to issue BRs as and when required, for a fee,”

Once these fake BRs were issued, they were passed on to other banks and the banks in turn gave money to Mehta, obviously assuming that they were lending against government securities when this was not really the case.

This money was used to drive up the prices of stocks in the stock market.

When time came to return the money, the shares were sold for a profit and the BR was retired. The money due to the bank was returned. The game went on as long as the stock prices kept going up, and no one had a clue about Mehta’s modus operandi.

Once the scam was exposed though, a lot of banks were left holding BRs which did not have any value - the banking system had been swindled of a whopping Rs 4,000 crore.

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"I thought I'd be like Pied Pier", he had told a newspaper in 1992,

"I thought I can sell dreams...asset-creation is not a crime"

Harshad's problem has always been his flashiness.

At his peak, he lived almost like a celebrity in a 15,000 sq ft house, which had a swimming pool, beautiful golf patch. He also had a crush for flashy luxurious cars and no wonder he used to have some of the best car of 1990’s in his huge parking.

Larger than life kind of personality can make the worst enemies for you. When he came to know this truth it was too late.

Even before that he was featured in a video newsmagazine feeding peanuts to bears at a Mumbai zoo to symbolize his victory over the bear-cartel in the stock market.

In fact, for weeks after the scam, he was convinced that he would never have been caught but for the bear cartel.

Whole bear cartel joined against Harshad Mehta. The bear cartel exposed the truth behind the constant rise of this big bull.

The amusing paradox is that the even bear cartel was using same “technique” as Harshad Mehta used.

But there was a difference - Bears cartel used the money from overseas banks where as Harshad Mehta used Indian banks for his growth. And this act was “crime” as per Indian law books.

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1997 saw Harshad Mehta making another big comeback attempt.

He was among the first to set up his own website to dispense tips.

He had also built up a network of senior media managers who gave him the publicity and commissioned him as a columnist.

He also had powerful friends.

Some of the largest newspapers in the country, were convinced that a Harshad Mehta column was sure to send circulation figures soaring.

Typically, Harshad did not stop at dispensing tips. He had struck a deal to ramp up the prices of several stocks!

He had managed to build up quite a speculative bubble and was again the focus of investor attention when India's nuclear tests caused a sudden collapse in prices and his bubble burst.

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He used to study fundamentals, he used to buy in big quantity and then he used to make is public.

And demand of that stock used to rise like anything after recommendation of this Big Bull !!

He was a darling of Indian media.He was dream seller.

Harshad Mehta thought different then others.

The basic concept behind his view was very optimistic and somehow it was good for Indian money market too.

He used to explain people that if fundamental of some company is good it should go up and should always goes up.

But excess of everything is bad!

"I still consider it an effort of my creativity. Some people were creative enough to understand the system and make lots of money while others were not. Not that the market did not have intelligent people around. It is just that they realised it too late."

A placard next to a coffee-table in Mehta's office read:

"Don't Get Mad, Get Even."

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In the wee hours of December 31, just before the year 2001 came to a close, Harshad Mehta passed away in a jail in suburban Mumbai.

His death remains a mystery. Some believe that he was murdered ruthlessly by an underworld nexus (spanning several South Asian countries (including Pakistan).

Some people call him a thief and for some he is a one who told, how to play in the stock market.

He actually showed the potential of the Indian Stock Market and took it to new heights which were never imagined then.

Charismatic but recklessly ambitious, Harshad Mehta set out to be a role model for investors.

The recent Hindi movie 'Gafla' is influenced by his story!

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I had the brush with the history when I saw this man from very close when he visited Shimla a few months before his death! While searching for information on him from the net and editing it (which took me around 2 days) I was overwhelmed by

1) the drive behind this man
2) the naked truth of the cartels in operation
3) the vulnerability of the Indian Stock market and Banking system (and the fools paradise we all retail traders live in)!!!

Rakesh Jhunjhunwala (a biographical sketch)

Rakesh Jhunjhunwala

Qualification = Chartered Accountant

In 2007, Forbes rated him as India's 51st and the world's #1062 richest man with wealth of $1.1 billion!

Partner in his asset management firm, Rare Enterprises.

'India's Warren Buffett'. (Jhunjhunwala has never met Warren Buffet but admires and even follows his style of investment.)

Stays at Malabar Hill and works from his office at Nariman Point in South Mumbai.

Well known among the investing circles as 'Rocky' and among his close associates as 'Bhaiyya'.

Considers Mr Radhakrishnan Damani as his guru and best friend.

Son of an income tax officer.

Started indulging in stocks while in Sydenham college and plunged into investing as a full time profession soon after completing his education.

He started his career with $100 in 1985 when the BSE Sensex was at 150

Self-belief, healthy influences and inspiration carried him thru many initial hurdles.

He learnt very early that "No gain without pain"!

Made his first big profit of Rs 5 lacs in 1986 when he sold 5,000 shares of Tata Tea at a price of Rs 143 (purchased 3 months ago @ 43).

Between 1986 and 1989 he earned Rs 20-25 lakhs.

His first major successful bet was iron ore mining company Sesa Goa. (Bought 4 lakh shares of Sesa Goa worth Rs 1 crore, Sold about 2-2.5 lakh @ Rs 60-65 and another 1 lakh @ 150-175. The prices then went up to Rs 2200!)

Madhu Dandavte's Union budget of 1990 boosted his investing career which increased his net worth by 5 times!

Jhunjhunwala is a long term investor, however he acknowledges that it was 'trading' income which helped him built his initial capital base!

His stock picking strategy is influenced by George Soros & Dr Marc Faber.

He swears by 'trend is your best friend'.

He is a bull these days but admits to have been a bear in the Harshad Mehta days. He believes that a successful trader should be like a chameleon.

He gives top priority to 'competitive ability', 'scalability' and 'management quality' of the enterprise.

The typical traits to look for while identifying potential multi-baggers, according to Mr Jhunjhunwala are - low institutional holding, under-researched and general pessimism about the stock.

A good time to Sell a stock when the 'earnings' expectations have peaked or the valuations appear ridiculously unreasonable.

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His Prayer

"God’s Grace, Elder’s Blessings"

His Aim

"To win all wars despite losing many a battle"

His Motto

"Where the head is held high, and the mind is without fear . . ."

His self-caution

"Ambitions cannot overshoot market opportunity"

His mantras =

"Understand the importance of liquidity"

"Buy right, hold tight – exit in frenzies"

"Don't be afraid to make mistakes, but affordable ones"

"Learn to be an independent thinker"

"No religion, no emotion, no ego"

"With discipline, emotion-less leverage has magic"

"Patience is born out of conviction"

"Be greedy, but be long-term greedy. Understand the role of time"

"India’s growth and it’s equity returns can be delayed, not denied."

"US Economy has to slow down"

"Aftermath of a 25 Yr bull market in the US will not be easy"

"Whatever you can do or dream you can,begin it. Boldness has genius, power and magic in it."

"Do something you love"

"Aspire, but never envy"

"Be paranoid of success–never take it for granted."

"Build a fighting spirit – take the bad with the good"

"When you see a horizon, it seems so distant. When you reach that horizon,you will realize how many more horizons are within reach"

"Trading is against human nature. In trading, the first and the last principle is that trading is trend and price based, and not opinion based. This requires you to square an unfavorable trade regardless of your opinion. This means that if I buy a stock at Rs 100, and then the price falls to Rs 95, I take my loss and square off my trade. This is counter-intuitive to most people. This is the one common quality of all successful traders."

(Compiled and edited from various sources on the net)