never swim or trade naked

never swim naked.

atleast never trade naked.

if you are long, instead of buying 2 or 20 lots buy 3ce:1pe pr 30ce:10pe (or in that ratio). always trade hedged. that way, you use more funds, ofcourse, and a bit more in premium decay, but that is the insurance against trades gone wrong or adverse bluff moves.

always trade with a hedge...same instrument is advisable for amateurs. professionals have more sharp options. 

don't hesitate to skim or book adverse moves, if and when they come.

however, this strategy is only if you have a trading system, you know when and why to enter or exit, in which direction is the high probability. if you don't know that or don't know what to do in case of an adverse move, then hedging won't save you much. you have to find ways to recover cost of the hedging insurance.

i, per se, never trade naked. swimming i'm learning. bathing naked is ok.

dilemma of buying when premium is high

dear dheeraj,

whatever is at premium has good value....

also, when u will sell, u will get good part of premium back. premium will not become zero at the blink of eye.

plus, high premium indicates that somewhere in the series market will enter a range.....that helps in trading (ranges). you interpret technicals accordingly, in that light.

i am more jittery buying when premium is too low. generally i avoid it.

trend check?

one of the most popular, most important and least understood and confusing aspect in trading is.....trend.

"trend is your friend!" it is said. but just as in normal world, it is difficult to know who is your true friend, it is equally if not more difficult to know what is the underlying, undercurrent, true trend of the market as of now.

trading without knowing the underlying trend is like para-gliding without knowing the direction and speed of the wind.

as i said in one of previous articles, if you are pro-trend even your blunders are likely to be pardoned. even if a new trader knows nothing about the market, he or she is almost sure to make money if only he or she takes pro-trend trades, sticks to it and doesn't vibrate too much (which market tries hard to make you to).

while a pro-trend ill-timed casual trade is likely to give profit (or atleast little or no loss), a well-timed studied pro-trend trade can give snowball profits washing away all self-doubts.

trend is decided by the market forces endorsed by the operators who know almost all.

and many a times, the trend is not obvious, by choice. market fluctuates a lot making the retail trader believe that either there is no trend or trapping the poor fellow take the wrong trend as the trend.

how is trend decided? 

i pondered over this question for many many months and came out with different answers. i knew that the key to trading success lies in the lock of "trend". over the time, i shortlisted and devised some methods to know the real trend.

the three top shortlisted tools for knowing the real underlined undercurrent trend are:

- moving average

- rsi

- options premium data analyses

but curiously, but not so surprisingly (after you read the game plan of the operators putlined below), all three parameters above are not awake at the same time at any time. i guess this is deliberate, to confuse and trap the prey.

while there are many other ways to know the trend, these are among the best. for these tools are effcient in knowing a hidden, camouflaged or subtle trend as well.

and the good thing is that all three of these are technically and genetically different and hence independent and without influence from each other. 

in my blog www.niftyshots.blogspot.com, i will henceforth, try and share regularly trend for the current nifty series based on my study of the above parameters. since trend changes max 2-3 times a month, don't be surprised if the updation about it in the blog is not daily. so, when i share the trend direction, it indicates the trend on that day / during those days of that series. it may change after a few days as and if market decides for the same.

also, note that i call the trend - underlying trend, because many a times, a trend is either not obvious or not visible. for major portion of the time, operators will not like to let the trend be known. after all, operators are against the majority. and they want the minority to be as small as possible. they will try every trick of the trade to not let you know what the trend is going to be before the explosive breakout or breakdown. or, they will not like you to know that they are accumulating or distributing. accumulation and distribution phases happen before the trend is actually visible. 

what this means is that a trend is there even before it appears on the screen. also, a trend may be there even when there is no movement on the graph. just like a snake which is alive and waiting with held breath, even when it is motionless. not only that, a trend may be up even when the market may move 50-100 points down in one or few days.....vice verse is also true. 

operators do whatever is possible to keep everyone confused. they want you to take wrong sides. and once having done that they tend to move the market so fast that everyone is left stranded behind high and dry.

having said that, i want to end by saying that while operators do a lot of things to confuse and trick retail traders, they leave a few clear, inevitable and shameless clues that reveal the trend for the keen silent emotionless motionless eye.

happy "trading"

Don't overpay!

One of the best nifty options to buy is

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

in the direction suggested by the rsi!

But what should you pay for it?

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

If it is much more, it is costly.

If it is cheaper, it is a steal!

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

RSI is suggesting imminent upmove.

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

This is a mouth-watering bargain.

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

Only two cautions:

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

2. expiry should be atleast 5 days away.

Prepaid Trading - I

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

They say "Never trade naked options!"

The above statements are true lies!

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

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

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

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

By not opting for the option of options

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

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

Options became untouchables

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

started playing with it recklessly

and lost heavily!

They started saying

"my loss was limited...........to 100% of my premium!"

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

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

"Only For Us"

for the select few!

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

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

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

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

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

------------

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

You want to take the chance

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

or

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

like Arjun in Mahabharta!

Consequently, you opt out of the trade

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

....sans you!

On the other hand, if you knew options trading

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

If the trade goes the way suggested by your technical analyses

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

Otherwise, you lose a part of your small investment.

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

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

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

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

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

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

Keep watching this space!!!

Snakes in stock market

Dasypeltis...

Elachistodon westermanni....

You probably have not met them.

They are not openly visible, but everyone does come to know that they had come!

These are two genera of egg-eating snakes...

Similar snakes are found in stock market jungle as well !

They are not openly visible

but everyone does come to know that they had come!

They are always around!

They eat three types of eggs

- premium (F&O)

- stop losses

- slippages (difference between order price and trigger price)

Beware of them!