simple way to book profit without closing trade

 one way to book profit without coming out of the position (eg when trend is likely to continue but you want to take some profit off the table to feel comfortable and secure)

replace the costlier option with cheaper one.... 

eg assume you bought a BN call of 500 points...it becomes 800 or 900 or 1000.... it would be wise to book it and replace it with current BN call around 500 points. 

no doubt, current 500 point call may rise slower than 1000 point call but profits will still keep trickling in if trend continues. the slight reduction in profit may be considered as the cost of insurance for peace and profit booking. 

this tactic is like climbing a mountain cliff with progressively hooking oneself to higher harness.

this tactic has 2 more advantages

1. you now have money (out of thin air) to buy more positions if market steps back before resuming the trend.

2. if at all market reverses, you have your initial deployment safe.

of course, this tactic is valid for options only. which i anyways consider best for amateur traders because it is affordable for them and has inbuilt stop loss unlike futures. 

also, to add that standard advise, trade with 3 times smaller trade size than you can easily afford. if you trade with small quantity (3 times less than what you can easily afford), you can become fearless trader who doesn't chicken out amid volatility, and who can trade the method till the end of trade's logic.

if your method is right even small trade size will make you rich, sooner than you think. and if your method is wrong, even larger bet size won't help. that will make you poor, that too, sooner than you think....

i know most old traders knew this, even better than this....just thought i should share for new traders. besides, when i write it  down, it helps in revision.

why trading small quantity is a clever strategy

 if you trade with small quantity (3 times less than what you can easily afford), you can become fearless trader who doesn't chicken out amid volatility, and who can trade the method till the end of trade's logic.

if your method is right even small trade size will make you rich, sooner than you think. and if your method is wrong, even larger bet size won't help. that will make you poor, that too, sooner than you think.

go slow to go fast.

driving your own trade

Having lived in Himachal for some decades now, I am used to driving on the snaky blind hillside roads. very early I realized that driving on mountain roads is quite different from the rash brash driving of the plains where the view is unhindered versus the blind turns on mountains after every few meters.

One of the firm points I made to myself was that I will never overtake a car or bus, truck etc at the blind turn just because the driver of that vehicle is giving me indication (through indicator or waiving of hand) to overtake. out of fear or pure prudence, I decided not to blindly trust that person in the vehicle ahead. that I will check for myself and overtake when I find it safe. overtaking will be my decision and not that based on someone's else's understanding from his/her view.

and am I glad about that decision? you bet!

So many times, I was whizzed pass a truck bus or car from the opposite side which the driver ahead had missed or misjudged while waiving me to overtake.

Same thing I do in trading where the roads are much more treacherous as well as blind viewed. I overtake the market action only when I myself am sure (at least in my mind as per the system). the decision is purely mine and I stand by the consequences.


Js

why not all in one go?

Murliji: Dear JS. Just out of curiosity. You are fully confident of your system developed after years of hard work. Why book profit in few or some lots bullets. Why not at one go once you get trend reversal or end of rally feelers.

Js: excellent question Murliji. lemme give an example to justify partial booking. my system is reasonably confident of going from say 1000 to 2000.but markets are unpredictable in the route they take. they may go like 1000 to 1250 to 1075 to 1389 to 1215 to 1666 to 1444 to 1701 to 1506 to 1888 to 1666 to 2100.....why not milk all folds and pull backs.

: besides, nerves stay cool

: my system hints the direction and extent of rally but not the exact path, zig zag or straight. so I moulded and designed my system to comply with this uncertainty and unpredictability. my system is probabilistic wonder with deterministic handicap.

: the market had gone my expected direction and extent but I was never sure of the speed and exact route

: I can never be. none except operators can be

: I guess even operators ate not sure about exact path they will be taking. its something like a chess game. so many permutations combinations are the. even a single unexpected move or happening may force or lure operators to alter the course.

: for example, my system is telling me rally only half over, and that we are in sell on rise, and that some relief really is inevitable, and that relief really has to come stealthily, and that everyone is waiting for it etc etc. ...but when and how system doesn't tell me. I can only align and be ready and keep milking till then besides keeping plan b,c,d ready

risk of not taking the risk

Js: risk of not taking the risk is much more than the risks we avoid because of fear.....self talk

: and that ultimate risk is called....

: status quo....we will remain forever where we are....

: (method+ risk management+risk taking)x repetition= trading success

: when fall is slow and gradual, it is generally dangerous.....self talk

: like slow but non stop rain which causes big landslides....

: the satisfying point is not that the method worked this time also. the most satisfying inference is that the rascals (operators) knew it!!! I'm getting chills down my spine that the rascals knew what they were going to do and what they were up to in coming days....they were preparing for the game they are now playing....this is a big bloody insider casino....!!!

: accumulation distribution, expansion contraction take time and are there for a reason....and the reason is strategy....their strategy.....they don't act instantaneously.....they act as per a plan.....

: they can keep a dead market dancing and make the one with burning coal in pants stand calm....

Ashok: Js..its gr8 you have been able to gate crash into...

Js : without being modest,I don't mind admitting that

: got a few of their secrets I accidentally stumbled on to....

JP: Can they...?? LOL burning coal in pants stand calm. 😀😀😀😀 , yes, perhaps ... while coated their XXXXXX

Js: like having access to their bedroom thru key hole
: boardroom, not bedroom
: there is no pessimism in stock market.

pro trend trades....optimism....

anti trend trades.....height of optimism

: road to hell are paved with good intentions.....

: market patterns are like structures.....some are inherently weak and destined to crumble....give way.....self talk

Ashok: strength after weakness is provided by repairs?

Js: well said
: symptomatic relief from deep cracks by covering with plaster and narolac
: logic and trained intuition are two hands of a boxer trader.....both jabs required for attack as well as defence....

Sanket: Just a discussion question - profit must take out or invest in scrips or use for averaging the scrips???

Js: leverage profit by ploughing back partially.keep upping the game with safety net.keep some part as buffer fund. everything depends on reliability and repeatability of method

4 kinds of risks

1.confirmed gaurantees
......never take them.......

2.risky guarantees
.....always taken them

3.confirmed risks
.........always take them

4.risky risks
.....never take them

2 types of trades

there are 2 types of trades i (am forced to) take

one= when my technicals whisper that the market is about to move in a particular direction.

two = when technicals enter a dark tunnel (are unable to see), and only tacticals are there to guide.

in the second case, while there is no or little directional indication from technicals (i typically call it fog), tactical possibilities with operators to dodge/surprise/maneouvre/shakeup-the-market are good invert indirect indications.

presence of fear covered with froth of disbelief keeps such opportunities covered and potent.

while the first type are pro-active trades, the second ones are more of anticipatory types.

no wonder, it is easier to catch the formers than the latters.

(the current long position in a downtrend is a typical second type of trade)

the risk of not taking risk

as they say
not taking risk
is the biggest risk!

u r saying no to the opportunity?

thereafter u can't complain that u didn't get the opportunity!!!

u got one (rather u get many)
but the trouble is
that u want opportunities
without risk.

stock market it not a restaurent
where u can order for boneless fish or chicken.

there is nothing called risk-less opportunity.

risk and opportunity are inseparable.

in reverse all this means is
that wherever there is risk
there has to be an opportunity!!!

further,
it is only one small thing that you decide to take risk.

what's most important is

a) when to take the risk

b) and how much.

take risk at the edge of a pattern

and take that much beyond which the pattern which formed the basis of the trade, nomore holds

true!

there are only two ways a price can go
- either up or down

there is no third way.
so, you already have 50% chance of winning under your belt
now all you need to do
is to find ways to increase that probability!


(niftyshots.blogspot)

self talk

i generally try to take and share trades with stoploss of 10-15 points.
like the last one where the stoploss is just 11 points away.
if one trades in nifty futures and trades with 1 lot (say), then the max risk in a 11 point SL is of 550 rupees. add another 150 rupees as brokerage (majority brokers charge less), this adds up to 700 rupees.
if the trade goes in the desired direction and gives a profit of 30 (say) points, the benefit amounts to 30x50=1500 rupees. minus brokerage of 150, it comes to 1350 rupees.
if one trades with mini-nifty, all this gets reduced proporationately.
if one can't take this much of risk with this much of potential for profit, one should not consider taking up trading. instead he or she can opt for occasionally buying lottery ticket.
otherwise, it can be a pretty decent self-employment.

only 3 conditions : a) i am assuming that the trader has got basic trading skills, b) he ruthlessly and strictly uses stop loss preferably using bid option, so that no time is wasted if SL is hit, c) re-enter the trade if price crosses back the SL (preferably in the same session).

the only game spoiler can be = a sudden sharp move that jumps the stop loss bid range.

this may happen occasionally. this is stock market - a semi-war zone!
this is why it is so important that we lose small and profit max possible - to build a buffer for such occasions.
trading is simple but not simplistic! 


(niftyshots.blogspot.com)

no gains, without (the right type of) pains

risk can't be separated from trading.
a trader must accept this fact.
once you accept this, it will be prudent to understand that there are four choices of trading risk you can take
1. small risk taken, small gain booked
2. small risk taken, maximum gain booked
3. large risk allowed, small gain booked
4. large risk allowed, large gain expected.
while type 4 risk remains a dream, rather a nightmare,
type 3 risk is what amateurs do on the way to becoming pro's (provided they survive)
type 2 risk taker is a pro
and type 1 risk is the sign of a maturing amateur.

(niftyshots.blogspot.com)

accepting risk

trading is risky.

so, all traders, by that definition, can claim to have taken risk.

but there is difference between

'taking' risk

and 'accepting' risk.

if you 'take' risk without 'accepting' what all can come with it

you are fake

and destined to be knocked out

by market forces.

but, on the contrary

if you enter a trade

while 'accepting' the risk and hence the likelihoods

you can withstand the market stress

and survive its bluffs.

secret of making big money in trading

in stock market
i have realized one precious thing...
if you know a secret to make money **
and if you don't use it
it is almost as good as
not knowing that secret!

and if you know "a secret"
the trade will still be risky
but you've got to take that risk!

that mountain of emotions has to be crossed over!!

i repeat
that mountain of emotions has to be crossed over!!

but on the other hand
if you don't have "a secret"
better not take any risk at all
till such time that you have one
tried and tested...

even surety is risky!
(who knows what it will bring?)
but risky surety is better that risky uncertainty!

now the question is
if you know "a secret"
how much should one risk?

well,
you should risk
what you can afford to lose!

going a few steps forward -

- manage the risk
- try to hedge the risk
- and keep backup plan ready!

those who don't take risk
remain standing...

those who take blind risk
sink...







**(pl note that i said "a secret" and not "the secret"
- as i believe that there are more than one secrets or ways
to take money out of the stock market)

not a joke any more!

"why do traders miss the train every time???"

"because they can't afford to lose stop loss amount!"

importance of risk (words from masters)

"the instinct for avoiding unnecessary risk

can be very powerful.

this is a trait that ensures survival under conditions of danger and uncertainty.

but in trading, avoiding risk will prevent you from becoming a good trader, let alone a master.

traders trade in risk; it’s that simple.

master traders view risk as an important and necessary ingredient in any potential trade.

they know that the very best trades are often

the ones that are hardest for most people to make because of the perceived high risk.

the very fact that a trade is difficult to initiate

makes it less likely that others will also make that particular trade.

the lack of a large number of traders taking a similar position

makes it much easier to make money during the subsequent price movement."

- Curtis Faith

best stocks for investing and trading

for investing

large caps are dangerous = many will not be the tops in next 5-10 years and slump

mid caps are the least dangerous = many are likely to become large caps in next 5-10 years

small caps are the most dangerous = many are likely to vanish in next 5-10 years

--

for trading

mid caps are dangerous = these can fluctuate a lot even in short term

large caps are the least dangerous = they are least likely to fluctuate big in short term. if they do, they are likely to recover if fundamentals are intact.

small caps are most dangerous = these can fluctuate wildly including in circuit locks

--

caution : only companies with decent corporate governance are being talked here. rest are not worthy of touching except when gambling is acceptable!

If you ask me...

If you ask me what all I think are the absolute basic requirements to be successful in stock trading then I would list the following. These come from my own experience till date.

1) Method

If you don't trade as per a method (i.e. you trade randomly)

or

if you keep shuttling between various methods and haven't yet shortlisted & finalised the method you are going to use

then there is no chance for you except some lucky run here or there!

If you have shortlisted a favourite method your journey upwards is definitely on.

2) Buffer amount

If you don't have sufficient buffer amount in your bank after the committed margin money, the stress generated by the normal and abnormal market fluctuations will effect your ability to take correct decisions and hold onto correct positions.

If you have sufficient buffer amount, then you have no tension about unforeseen circumstances.

Shocker times come very few but their fear wears you out!

3) Experience

Once you have a method in the pocket and buffer funds in the bank you still need experience. The real trading is much uglier than that displayed in the showroom!

A soldier who has gun in the hand and bullets in the belt still needs the experience of the battleground lest he should be butchered by the enemy who have three things in their bag - gun, bullets and EXPERIENCE!

4) Consistency

Consistency is the most inconsistent thing in the world.

Many talented and brilliant people faded away like a flash in the pan just because they couldn't be consistent.

You can be only as successful in life as you can be consistent!

Inconsistency can still scuttle your trading dreams despite method and funds!

5) Emergency skills

Emergencies and real bad situations do come once in a while, even in stock market.

No real champion is made without the ability to survive and overpower difficult situations.

If you don't prepare yourself to face such emergencies then don't be surprised that your trading career is hijacked one fine day!

6) Mental toughness

This is the stick you need to support you at every step in trading career!

This is the stick you need to shoo away every unfriendly dog encounter on the dalal street!

Everything is psychological.

No place or situation tests human endurance as much as battlefield and stock market.

A growing mental toguhness is the final frontier to trading success!

A crash course in Day Trading!

A young farmer went to city to learn futures trading in wheat.

But there, he saw everyone day trading.

"Who knows what will happen overnight? Day trading is better." he heard.

"One bird in hand (intraday profits) is worth two, even 10 in the bush (swing trading or investing)" someone said.

"Only day trading can ensure sound sleep at the night irrespective of what is happening in Europe or US in the meantime!" he overheard.

"If all of them are doing day trading it must be the better thing!" he thought.

So he decided to learn day trading instead of futures swing trading his father had asked him to.

"I will surprise my father when I go back. He will be pleased." he thought!

For the next 5 days he learnt the "smart tactics" from the pit traders in the fish market terminal room.

On Saturday he went home with his neck held high!

"My entire village should be proud of me" he was sure!

When he reached home he found that his father had gone to his relatives in adjacent village for 2 days!

"I have 2 days to show results!" he thought.

Next morning he went to his fields.

Small wheat shoots had come out of the seeds planted a few weeks back.

The sun was shining and the sky was clear!

A good crop was on the cards.

He then went to his friend's house and had a nice time for the rest of the day.

Next morning when he woke up, he saw the sky overcast....

Dark thick clouds everywhere.

He checked weather forecast on TV.

"Severe Thunderstorms!!!" they announced.

He went to his fields.

It started to drizzle.

Clouds roared in the sky above.

Lightening flashed.

It was all too scary!

"Bearish signal!" his trained trader mind whispered!

"This is going to destroy the crop"

"I must prematurely book whatsoever crop profit I am getting. Greed of any more profit may leave our family with nothing."

He went to the garage, took out his combine harvester and razed the half baked crop in just half an hour.

He was happy at his trading skills!

"Now I am assured of good night's sleep despite whatever happens in US or Europe overnight!" he proudly said to himself.

"...a bird in hand is worth 10 in the bush!" he was reminded!

He went home and found that his dad had returned home as well.

He proudly narrated his "achievement"!

"I am proud of you my son!" his dad said.

"With your day trading skills, you have surely harvested enough food for our cattle for the rest of the season! Now take me to the city tomorrow morning to learn day trading. For I have no other way left to feed my family after your achievement!"

The son was shocked!!!

He remained silent for what seemed like ages!

He realised his foolhardiness!

He went out and saw the clouds receding!

The lightening had stopped flashing.

The drizzling had stopped.

"My son! Never worry about Clouds whether in market or fields. Never worry about lightening. There will be many every other day! Never worry about thuderstorms. Never worry about what they predict in the forecast on TV. If you have faith in the crop, wait patiently! The sky is not falling and neither is the world going to end tonight whether here in India or Europe or US! This is what I learn from my father - your grandfather, and this is what he had learnt from his father!"

How & when I use options!

I trade options

-only when I have to take a position for maximum 3-4 days

-when expiry is atleast a week away

-when I want to minimise risk against overnight disaster

-when i want to leverage more with same capital

I don't use options for hedging or spreading or straddling.

I don't write (i.e. sell) option calls because I consider it defensive play for the mischievous or those who use big money to swallow the adventurous traders.

Call options are wonderful tools in the right hands, rather right minds!

Stunt Trading

Disclaimer & Warning : This article is just to share a concept and experience and not a recommendation to do stunt trading or gambling. Gambling is illegal in many countries. It can be highly dangerous and potentially financially disasterous to gamble or trade big without professional guidance and without developing highest level of trading competence. This article is purely meant for education and discussion purpose for adult and professional traders only! Readers descrition is solicited. Author doesn't accept any responsibility for any loss or profit arising out of the discussion below!)

=================

Professional gambling is not gambling in true sense.

It is placing extraordinarily high stakes

on the extraordinarily favourable odds!

(Only those who understand the literal meaning of the above two lines can truely grasp what I mean, otherwise there is a real danger of getting me wrong and should not read more of this!)

The result is extraoridnarily high returns!!

I remember, in an interview telecasted in a program in Discovery Channel, a highly successful stuntman from Hollywood said "All our unbelievable stunts are totally secure! All these are scientifically pre-tested and calculated acts of seemingly extreme bravery! Anyone doing an unsafe stunt is a fool!"

Professional Gambling in stock market is nothing less than Professional Stuntmanship.

Anyone doing an unsafe stunt trading is a fool!

I do get a chance to do stunt trading atleast once every fortnight!

But I have certain immutable rules for it.

I never do stunt trading on the short side.

I always do these on the long side.

I always do these with index and not stocks.

And I always do these with options.

I typically buy upto 10 or even more index option lots when I am 99.9% sure of being successful.

I never hold these for more than a few hours.

And when do I do this?

Well, out of 10 times my indicator tells me to buy, I find the best 1 trading opportunity out of those 10 buy-calls which I consider safest for stunt trading!

It gives me decent money in a flash, a super kick and professional satisfaction.

As a double-safety measure

I call off the trade the moment I feel I am excited and not cool, or when there is a slighest of doubt!!!

Last, but not the least, I experience high adrenalin levels even when I have zero doubts!

(Having goose bumps even while I write this!)

Open your mouth!

When my son was a little boy I noticed that his bites were tiny!

The piece of chapatti (or rather anything) he used to put in his mouth (with 4 teeth) were amusingly minuscule!

Every family member used to laugh at the wonderful sight.

Only a sparrow could fill her tummy with that bite size!

But for him, that bite size was big enough!

Kids are not Ph.D.'s but they know by sheer "inbuilt" sense that they should be interested in only as much as they can bite!

As big as they can chew!

As big as they can digest!

Now, he has grown up from a little boy to a boy.

And his bites too have grown up.

Still smaller than bites of mine but big enough for his mouth and body!

This reminds me of the bites we take in our stock market trades!

Sometimes, some of us bite too big! too much!!

Big enough to excite our trading 'tongues'

but also big enough to embitter our peace of mind.

Often we land ourselves in a position when we can neither swallow the wrong jumbo bitter bite nor can we spit it out and get rid of it!

Afterall, it is not just food but money caught in our mouth!

not just money but (at times) our entire existence and happiness that is in our mouth!!

It becomes a choking lump in our throat.

Often killing many a "baby" and "boy" traders!

So, what to do?

Bite what u can chew

Chew what u can digest

Time the bite as per hunger, capacity and discipline instead of senselessly grazing anything, anysize, anytime anywhere!

Next time your father asks you

"Johny,Johny....open your mouth"

What should come out is

"Ha! Ha! Ha!"

and not

"Ah! Ah! Ah!"