what to do when u have missed the trade?

murliji, u have asked

"Those who left the down trend bus prematuredly or those who haven't boarded yet, can they board in on Monday?"

--

i don't know that for sure.

will have to see the technical set-up / indicators on monday morning. if there is a big gap down opening, bullish rsi structure will be destroyed and that would mean that market will have to go down further to "make" next bullish divergence to be eligible for the next uptrend.

but inbetween the destruction and re-construction of this bullish divergence, market may attempt pullbacks or ranges. those may be the sell on rise occasions. we will look for the opportunities as they come.

difficult to predict too much in advance.

predicting market movement is like predicting weather. while u can predict to reasonable degree of accuracy for the next few days, the farther u attempt the prediction, lesser is the accuracy u can claim.

i have experienced that market itself doesn't know too much in advance where it is likely to go. operators don't know that either but what they know is this - they know that they can manipulate the way the things happen which have to happen.

--

having said that, i must add what i think of missed opportunities now a days...

an opportunity is always coming once every week. atleast, 3 times in a series for sure. not just for this series but forever.

so, whenever anyone has missed an opportunity, he/she would not have to wait for more than a few days, give and take a few.

but, whenever someone talks of the next opportunity, i take it as an indication of one kicking his boots for having missed a juicy chance and is itching for the next chance. though this is totally understandable, this needs to be conscious about as desperation can lead to reactive/instinctive behaviour by a trader leading to being trapped in operators' net.

we are susceptible to doing what we want to do instead of what we should be doing.

“Do you have it in you!!!”

There are on an average around 5 big opportunities in any market / index every year when a huge rally happens.

e.g. There have been 5-6 in nifty in last 12 months, 6 in CNX-IT and 4-5 in FTSE (UK)

the shortest is of 1 month duration while the longer one is 4-5 months long!!!

It is not impossible to catch those ‘mother of rallies’, it is easy to anticipate them but difficult to mouth and digest them whole (or a substantial part) without skill, strategy and mindcontrol.

I have not done these as yet. But since i developed the advance methodologies in the last 1 year, i am itching to catch the next one. Till that time, i am preparing patiently and practicing identifying and riding them (downscaling/simulating them in intra-month rallies).

In between every such rally is an intermediate ranging, sometimes small sometimes quite long.

Some of these rallies are short, and u may outstay in it, while other times the rallies may surprise you by the extent they keep going,  u having quit early!

All this need practice and skill with select tools.

Such rallies can’t be expected but followed as and when and to the extent they are, till they are!

But the point i want to make is twofold

minor– if u miss these 5-6 odd mega chances, what if you catch other peanut opportunities? And if u catch these, what if u lose all others!

Major- if the stakes to claim are that high (each rally can be 10-20% index rally can potentially make u quite rich in just a few weeks), are we in a position to leverage / encash it to the max?

Skill, technology, mental toughness, experience are one thing, capital (funds) and financial management (risk management) when u r in the big ride, is critical and decisive.

So much so that on one side we are desperate to encash it and on the other hand, when the opportunity is right there in front of our eyes, we either chicken out or play it small or are simply not ready for it!

The real fear of any sufficiently advanced trader is not the threat of loss, but the nightmare of missing the big profit!

So many times i have seen traders praying all life for the big opportunity and when they get it, they just say hello and turn back!

I strongly feel that so many struggling traders are in the real danger of self-hypnotism whereby they double cross themselves by convincing their conscious minds that they want it and programming their subconscious minds as to why they can’t do it!

I recall the Indian Army ad punchline – “Do you have it in you!!!”

I ask myself sincerely – “Do i have it in me?”

every invitation is not an opportunity!

have you ever played
minesweeper game
in windows?

the moment you open the game interface
81 tiny windows will pop up in a frame!

just like stock trading
where
the moment you open the trading screen
an array of opportunities will pop up in front of you!
inviting you
enticing you
luring you
to click
the "trade" button!

but just like in the minesweeper game
you shouldn't click the "trade" button
without applying your mind!

because many "windows" of opportunity
are actually
"window dressed" mines
waiting to be
"clicked" and "stepped on to"!

whether trading opportunities
or mine sweeper clicks
there are sufficient hints around
to sniff the danger
and pick and choose
profitable ones!

every invitation on the screen to trade
is not an opportunity!!!

right time to shoot

the 107 year old

96km long

serpentile

narrow gauge toy-train railway line

from kalka

to shimla

passes thru 103 tunnels

(only 102 are in actual use now).

the longest being 1.14km long.

--

the journey in this toy-train

is like travelling to heavens

while still alive!

--

over the clouds

under the clouds

over the bridges

under the bridges

into the tunnels

and out of them!

--

it is as much pleasure travelling in this train

as is there

in shooting it

with a powerful

camera

like a nikon d7000!

--

but obviously

you can't normally shoot it

inside the tunnel!

you've got to shoot it

only when it out of the tunnel!

(just like you can't take an aim at the market

inside the "overnight" tunnel!

you have to wait till it "comes out"

in the morning at the opening bell!)

--

to shoot the heavenly train

(with a camera)

you have to wait till it comes out of

one of the 103 tunnels!

even then

it is not easy to shoot it!

some times

it is behind mountains

while at other times

it gets hidden behind

cluster of deodars and pines.

at times

it vanishes in the folds of the valley!

--

you have to wait for

the suitable opportunity

to shoot

that great photo!

just like

you have to wait

for that correct opportunity

to shoot

that trade!

otherwise

while wasted photo in a digital slr

costs nothing more than a sigh,

a wasted trade in the market

costs something

even to professional

shooters!

SWOT

you must have heard about
the SWOT.

S=strengths
W=weaknesses
O=opportunities
T=threats

stock market
probably
is the only place
where
even the threats are opportunities!

and
trading weaknesses
are
the real threats

recognizing scalping opportunities (words from masters)

"For extremely short-term trades,

relying on the right brain is often the only practical approach.

Traders simply do not have enough time to perform complicated analysis.

Traders who are scalpers must trade mostly using their right brains.

For longer-term trading, traders have plenty of time for analysis.

The left brain is good at building and understanding models for how the world of trading works,

and the right brain is good at generating ideas

and recognizing opportunities."

- Curtis Faith

kalka-howrah mail - 2

the youngman soon became a successful trader!

after a few months

he visited delhi

for some official work.

in the evening

after getting free

he took a taxi

to the newdelhi railway station.

--

on reaching the station

he jumped out of the car

without paying!

"just wait here and take care of my luggage, we need to go further!" he said to the taxi driver

and then quickly rushed inside the station

leaving his suitcase

and the bewildered driver

behind!

--

inside

he went straigt to the ticket counter

bought the "multi-purpose any-train-on-the-route ticket"

came out

sat in the taxi again

and politely ordered

"pl take me to the underbridge 3 kilometers ahead!"

the taxi driver gave a strange look to the youngman

started the taxi

and reluctantly did what he was told!

--

the driver stopped the taxi

under the bridge 3km ahead of the station!

the youngman was happy

the driver was confused!

--

the guy paid the fare

thanked the driver

picked his suitcase

went under the bridge

and stood beside

a dozen railway tracks

under the railway signal pillars!

--

the taxi driver

was still there!

he wanted to doublecheck

what the suspicious youngman was upto!

and then

what he saw

made his eyes pop out of the sockets

in sheer disbelief!

--

a train came

stopped in front of the youngman.

the youngman looked for his coach

climbed in

took his seat

looked out of the window

and waved at the taxi driver!!!

--

the train again started after a few minutes

and picked up pace!

the lad took out his cellphone

and called home

"mom! i've got the train! on time!!"

"don't catch the wrong one this time, son!" mom replied jokingly!

"this time it is the right one!!"

"has it left the station?" she asked again

"it must have left sometime ago, mom!"

"what do you mean?" the shocked mom asked

"i caught it in-between!"

"good lord! what do you mean by 'in-between'?"

"mom, i always noticed that all trains stop at the subzi-mandi rail lights after moving out of new-delhi railway station. every train has to make way for the next train approaching the platform irrespective of whether the line ahead is clear or not! many times, it isn't. almost all trains move out the station but pause at these lights under the subzimandi bridge till they turn green! i came till here on taxi and didn't have to wait much!"

"didn't you feel awkward?"

"no, mom! not at all! i do this every day in my stock trading!"

"how!?"

"everytime a stock moves out of a range platform i always notice that it pauses and retreats a bit after moving out to some distance. it makes a higher low or lower high and then zooms ahead! i always enter the trade at that time, mom! this way, i am always in the right trade at the right time!"

say no!

how many times

has it happened with traders

that they entered a trade expecting a move

the move doesn't come

the trade goes the wrong way

the trader books the loss

only to see the market reverse

the way predicted by him

without him!?

this is a typical example of

a right trade at wrong time!

--

why does it happen?

because

"the obvious is obviously wrong"

in the market!

big pockets win only

when they catch u on the wrong foot!

so, what is the golden rule

to avoid entering a right trade at the wrong time?

= always say "no" to the opportunity

which looks like an opportunity!

it is a trap!!

always wait!!!

--

in the words of

Edward Chancellor

"the promise of outsize profits are followed by

the reality of painful losses.

you will make more money in the long run

by restraining your greed!"

and as Mark Twain had said

"I never spotted an opportunity

until it ceased to be one!"

platforms & airports of trading

in a public place
you see
hundreds of persons!
but
who is going to do what
you don't know!
who is going to go where
you can't know for sure!
you can guess to an extent
but frankly, you can't be sure!!
however,
when you see a guy
on his knees
with a rose in his hand
with a pretty girl in front of him
you can be reasonably sure that
the guy is proposing to the girl.
similarly,
it is not possible to know exactly
and beyond doubt
what a particular stock is going to do
in future
including near future!
so i do not trade
on the basis
of anticipating a move
of a stock or index!
i do not touch a stock
or index
in midway!
i repeat,
i leave alone any share and index
which is MIDWAY
i.e. it has not reached extreme or unique position.
like that guy proposing to his lass
i spot the opportunity to trade
when a stock can be clearly spotted
amidst even a crowd
in a unique position
and at the EDGE!
e.g. rsi or william%r at the EXTREME
or sma CROSSOVER
or BREAKOUT or BREAKDOWN!
when someone asks me
about my advise on a particular stock or index
i wish i could tell him point blank
that nobody can answer him that with certainty.
the stock or index's movement can be
accurately predicted only at the extremes
and that is what a trader should look for
to have a high percentage of profitable trades.
just like the trains and planes
one should not try to board trades
except on platforms and airports!

capacity

the auditorium burst

with waves of thunderous applause

by the final year students

of a reputed management institute

hypnotized by the electrifying speech

of the legendary businessman

invited to deliver the annual address!

--

immediately thereafter

open-house question-and-answer session started.

--

question after question

was put forward

only to be immortalised by the answers of

the businessman-of-the-decade!

--

after almost an hour

there was time for just one more question

--

"how do you effortlessly manage to increase

the turnover of your business

year after year

even when the sector is reeling under slowdown pressure!"

a girl student asked!

--

"when i was a child"

replied the veteran business-legend after a brief pause

"i used to accompany my grandfather to the temple.

the priest used to give me very sweet 'parshad' in my tiny folded hands.

it was so tasty that it used to be my main reason for daily going to temple!

but i always felt bad that i used to get very less of it!

my sweets used to finish too quickly!

one day, the priest noticed my sad face

and asked me for the reason!

'why do you give me so less sweets' i askedhim

'because you have so small hands' the priest told me.

that night i couldn't sleep well past midnight!

that day i had got the most precious lesson of my life

which stayed with me ever since.

i have always reminded myself

that to have more and bigger 'prashad'

from destiny

you need to have bigger folded hands to receive more!

you get only what you can comfortably hold and manage!

you get only what you are psychologically ready for...

it's not about the market-size

it's all about the basket-size!

since that day

whenever i have to increase the turnover

all i have to do is

stretch my mental barriers of reality

revise my definition of possible-impossible

upgrade the scale of my blue-print...

and that is the only constraint that i have to struggle to increase.

once that is done

everything else just falls into place

and i get the desired growth!"

ready for it? (Part-I)

if you are financially well off

then this article is not for you.

but if you are not

please keep reading.

--

chances are that you must have tried hell of a lot

in your life till this day

to get out of the financial state

you have been

and you are in!

-

by now you must be full of frustration

thinking why are you unable to get out of this situation...

you must be having a good number of dreams and desires...

neither you are able to fulfill them nor forget them!

you have been hanging

halfway between hell and heaven...

neither here, not there!

---

the million dollar question is

why are you there where you are?

and why are you not there where you want to be?

---

if you think that is because of your qualification

then think again...

i can show you a hundred people on the street who are not even literate

but are financially well-off!

i know an illiterate man who has established a flourishing wholesale vegetable supply business worth a few crores of turnover!

i know a barely literate man who is now one of the top civil contractors of the state with turnover of a few hundred crores!

so that excuse is out of the window!

---

if you think it's because of your luck,

think again...

you have had the same opportunities in front of your eyes in the market

as before lacs of other traders!

some made profit from the same opportunity

while others booked loss!

so, don't give me that excuse either!

---

if you have a remorse that you didn't succeed because you are less hardworking

you are again wrong...

i can remind you of several instances in your life

when you had worked damn hard!

so keep that guilt atleast an arm-length away.

---

in case you are thinking that you didn't have adequate capital

you are sadly mistaken...

i don't need to remind you the amount of your money that has gone through your hands into the hands of others over the years!

i can also give you several examples where people have made it big with much lesser!

---

and i am sure you won't commit the mistake of assuming that you don't have ideas!

one of the biggest is right in your hands....stock trading!

---

if you think you didn't succeed because of bureaucracy and corrupt system

think yet again...

we all are surrounded by scores of businessmen who succeeded despite these two blessings!

rather, they saw the disadvantage as a blessing loop-hole and exploited to the full to get ahead fast!

---


so

if you think seriously and honestly

you will realise that you are left with no alibi to justify your state-of-affairs!

---

but

what if i told you

that you and me have not succeeded big time so far

BECAUSE WE ARE NOT MENTALLY READY FOR IT !!!



(to be continued...)

the game doesn't end with technical analyses - II

where were you when there was a shorting opportunity

from nifty 6200 to 2600 in 2008?

where were you when there was an opportunity of going long from march to may 2009

from nifty 2600 to 4600?

where were you when nifty rose 1000 points from 5000 to 6000

in 5 months from june to october this year?

just like me, i bet you would have been here only!

some of the biggest opportunities came and went!

we can't complain we didn't get opportunities!

so the problem is not the lack of opportunities

problem is that we are not ready for it.

problem is we fail to recognize the opportunities!

Why?

because opportunities rarely come sugar-coated and gift-wrapped!

they always come crisis-wrapped and dipped in bitter sauce!

it has been like that always

and it will always be like that only.

opportunities will always keep coming

indicators will indicate

you will be around

but you will keep missing the bus

unless you tune yourself to recognise them in their disguise!

not only that you would have to bear

fear

worry

discomfort

and

all kinds of emotions

as a cost of boarding the bus!

---

the game doesn't end with technical analyses

it just starts from there!

where to invest?

investing is the most profitable form of trading!

it is a myth that you invest in a company.

the reality is that you invest in a management

and

you invest in a business!!!

if the business is bad

even best management can't do anything for long!

for a moment,

let's assume that the business makes business sense.

then, there are 4 types of "managements" available for investing:

1. good management going thru bad times
= this is the best investing bet, a multibagger!
give then time and they will give you a wonderful gift!
e.g. tata motors' journey from 110/stock to 1376/stock
present example = mahindra satyam

2. good manangement going thru good times
= hold on, this is the best momentum play
stay with them till they are around
e.g. hero honda (since inception)

3. bad management going thru good times
= stand near the exit door if you can't avoid the bait!
e.g. suzlon

4. bad management going thru bad time
= stay away!

The Trading Mahabharata

In Mahabharata

Kauravas outnumbered Pandavas by 100 to 5

In trading Mahabharata too

Kauravas outnumber the Pandavas!

The Kauravas are the ones who trade on gut feeling.

Even the Kauravas are of two types

the good ones who trade on gut feeling based on experience

and the bad ones who trade on gut feeling based on rush of blood.

The Pandavas are the ones who trade on the basis of a trading system.

They are in the minority!

The system of Pandavas tells them accurately about the trend of the Kauravas' guts!

Whenever a Pandava is in a dilemma over pulling the trigger as suggested by his system but discouraged by the Kaurava blood in him, Krishna (the trained part of a trader's brain) persuades him to follow his Dharma and enter the trade - leaving the result to him!

In the end, both the good Kauravas as well as the Pandavas go to heaven as both have fulfilled their respective Dharmas by following their respective trading styles.

Hell falls in the lap of the bad Kauravas who forgot their Dharma and followed their lust!

"Don't trade!"

I don't trade.

I always say "No" to a trade whenever a Technical Indicator suggests one!

I never trade.

THEY make me trade!

They FORCE ME to trade!

They (the indicators) finally give me an offer (situation) I simply can't say no to!

Their initial offers are often bluffs, traps or half baked peanuts!

In the end they always put on the table a mouth-watering offer I simply can't say no to!

That trade is less of a trade and more of a throw-away by the market!

By now, I have made it a rule

"Don't trade!"

"Go get the prize!"

A great hunter's hunter son returned home in the evening

after a day out in the deep jungle......hunting

dejected and tired!

"Why are you empty handed, son?" proud hunter father asked his talented hunter son.

The son remained silent.

"Tell me, son? Did you go for hunting today?"

The son nodded in affirmation.

"Is your gun OK?"

"Yes,Dad!"

"Did u have the ammunition? Was the powder dry?"

"Yes, Dad!"

"Was the weather OK?"

"Yes!"

"Did u find the animals?"

"Yes, Dad! Many of them?"

"Then, son, what happened?"

"Dad, When I aimed at a moving deer and was about to pull the trigger,

I saw another dear closer to the first one and moving slower!

The second dear appeared more lucrative target

so I changed the aim to this second deer.

I was about to shoot when this deer changed its speed

just then I saw another deer which was not moving.

So I thought it prudent to target this stationary one.

I changed the aim and just then the deer starting running.

I chased my gun's barrel in his direction when I saw another deer who seemed an easier target.

I pointed my gun on this one but just in the nook of time he moved behind a bush!

All day, Dad, I kept aiming but never got the chance!"

"We will go together for hunting tomorrow, Son! Now come and have dinner!"

The next morning the father and the son got up early.

Father picked up his 1920 vintage double barrel rifle and wore his lucky hunter shoes.

"Why don't you take your best gun, Dad?"

"You hunt your best with mind, not with gun, Son"

They went deep into the jungle.

The son spotted a deer!

"Over there, Dad." he whispered to his Dad

The father aimed.

The deer sensed the danger and started running.

Deers around that deer also started moving.

The father kept his aim on the marked deer and ignored all in the foreground.

Locked the target

and pulled the trigger.

The deer turned in a flash.

The bullet missed the deer.

Father kept his eye on the running deer in the target eyepiece of the rifle.

And pulled the trigger for the second time.

"Go get the prize, son! It's over there near the rock!"

4 advance mistakes traders commit

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

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

3. Trade ranges and trends in the same way.

4. Underestimate the trend and prematurely assume its reversal.

liars on the dalal street

"30% festival off!"

"upto 50% off!!!"

"50+30% discount"

"Buy 1, Get 1 free"

"Buy 2, Get 3 free"

"upto 90% off!"

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

Everyone asks for discount before buying!

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

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

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

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

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

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

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

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

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

Why not price it fairly?

A discount can mean one of the five things:-

1) Either you were being overcharged earlier, or

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

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

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

5) It is a distress sale.

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

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

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

=======

The same logic applies to stock prices

1) Either it was earlier overpriced, or

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

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

=======

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

Majority of the trades in the market are bluffs

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

56 and counting...

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

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

"When we have information, we kill criminals

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

I have made this my trading credo line

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

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

when to catch a falling knife!

A stock is compared to a falling knife when it is falling fast and non-stop.

If a not-so-famous small or midcap is falling, nobody pays any notice.

Everyone says "it is falling, so it must be a bad bet"

Consequently, those small and midcaps fall more and faster.

But if it is a Bharti or Satyam or Suzlon or Reliance or RNRL or Ranbaxy that is falling

the same statement changes dramatically!

The brand pull of these stocks is big enough to lure anyone!

Many tongues start coming out of their dens!

Many eyes start popping out of their sockets!

This is often a trap for traders.

Countertrend traders are lured to latch onto these stocks.

"It has never fallen this much. It is surely a steal at these levels."

"It can't fall more than this."

"Lets start entering in steps"

Arguments given are numerous....

Many "I am smart" traders don't even announce their intentions in their friend circle and silently start accumulating these falling apples (they don't yet know that it is a knife!).

One thing they forget in the excitement is - why is it falling like this in first place?

Are the big players nuts while dumping? Afterall, this is not a routine correction! The market is going up and this apple is falling?

When the apple keeps falling

the "I am smart" traders start realising that what they have caught is a knife instead!

----------

A stock falling due to fundamentals is basically a sell-on-every-rise.

It is not wrong to leave it alone if you are not sure about the fundamental logic!

So what is the best time to catch a falling knife?

Never!

falling knife....never!

fallen knife....again never!

knife.....never!

so when to buy it?

...when it is no more a knife but a spoon

....a golden spoon

Very often, a stock knocked out of the fundamental orbit remains free floating and wandering for a long time.

First it keeps falling.

then it keeps consolidating while the management realises the mess and starts working on the cleanup act.

Finally, when the poor stock has come out of the long oblivion

big players start pumping money into it....

That is the time when the stock starts showing life!

It is no more a knife now but a golden spoon.

Its graph makes a higher low!

That is the time to put this spoon in mouth!