"i have a strange problem." said the talented trader
"i am good at reading the charts
and technical analyses
but when the trade is going my way
and i am having decent profit on the screen
i chicken out
by booking profit prematurely!
I am unable to convert my wins into
real big ones!
this is really preventing me from making it big in stock trading!"
--
the veteran trader was listening patiently to the confession of a bright trader!
he realised that the young man's problem lay in his getting overwhelmed by the sight of the profit!
he remained silent for several minutes
and then suggested
"stop looking at the bank balance
stop looking at the amount of unrealised profit
imagine that you are not trading money
but trading points
or trading the chart lines!
imagine that you are playing a game of reading charts correctly!
let your broker take care of the accounting!"
Tuesday, December 28, 2010
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!"
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!"
'the secret' in stock trading
you must have read
rhonda byrne's
"the secret"
the book that has become a phenomenon!
--
all it says is
"you attract things".
in the words of John Assaraf
"thoughts become things"
--
seems magical!
isn't it!
atleast that is what i first thought
when i first saw the movie
and read the book!
--
but
being a science student
i wanted some logic
to believe the law
and understand the philosophy!
--
recently
i got my logic
and i want to share it here!
--
to me
the law means
"what you are searching for
whether good or bad
positive or negative
your eyes locate
and mind recognises!
what you aren't looking for
you miss all!
even if it is right in front of you!"
--
let's understand this with an experiment
--
look at something which is at a distance of about 10 meters
from where you are sitting!
look at it carefully for 5 seconds.
now bring your left thumb
in the line of your eyes and that thing!
without moving your head or thumb
look at the thumb carefully!
--
while looking at the thumb
can you see the details of the thing 10meters away?
obviously, not.
--
now without moving the thumb
can you focus at the distant thing?
yes, you can!
but while focusing on the distant thing
can you see the details of your thumb?
again, you can't!
--
that is why
"what you are searching for
whether good or bad
positive or negative
your eyes locate
and mind recognises!
what you aren't looking for
you miss all!
even if it is right in front of you!"
--
this way
"we attract our destiny and everything on the way!"
and
"thoughts become things"
--
now,
using this law
can we attract profit
in stock market?
also,
if we are attracting loss as of now
what are we focusing at?
what's in our thoughts?
--
i leave the answers on you!
rhonda byrne's
"the secret"
the book that has become a phenomenon!
--
all it says is
"you attract things".
in the words of John Assaraf
"thoughts become things"
--
seems magical!
isn't it!
atleast that is what i first thought
when i first saw the movie
and read the book!
--
but
being a science student
i wanted some logic
to believe the law
and understand the philosophy!
--
recently
i got my logic
and i want to share it here!
--
to me
the law means
"what you are searching for
whether good or bad
positive or negative
your eyes locate
and mind recognises!
what you aren't looking for
you miss all!
even if it is right in front of you!"
--
let's understand this with an experiment
--
look at something which is at a distance of about 10 meters
from where you are sitting!
look at it carefully for 5 seconds.
now bring your left thumb
in the line of your eyes and that thing!
without moving your head or thumb
look at the thumb carefully!
--
while looking at the thumb
can you see the details of the thing 10meters away?
obviously, not.
--
now without moving the thumb
can you focus at the distant thing?
yes, you can!
but while focusing on the distant thing
can you see the details of your thumb?
again, you can't!
--
that is why
"what you are searching for
whether good or bad
positive or negative
your eyes locate
and mind recognises!
what you aren't looking for
you miss all!
even if it is right in front of you!"
--
this way
"we attract our destiny and everything on the way!"
and
"thoughts become things"
--
now,
using this law
can we attract profit
in stock market?
also,
if we are attracting loss as of now
what are we focusing at?
what's in our thoughts?
--
i leave the answers on you!
why we don't trigger stop loss
there are two reasons
why you will pull the trigger of the rifle
in the jungle
in front of a lion!
one
to protect yourself.
second
to hunt the lion.
the lion is likely to get killed
in both the cases
but
there is hell of a difference
between the two motives!
in one
you are defensive
in other
you are on the offensive
one is full of fear
other is full of confidence
similarly,
every trader has two reasons to trigger the stop loss
one
to prevent loss
second
to gain profit
again, there is hell of a difference between the two!
if first one is the motive
you will not trigger the stop loss
because your amateur mind will not be ready to bear even the small loss till that time!
and as far as the second reason
to pull the stop loss trigger is concerned
an amateur trader won't understand it!
he fails to see how triggering the stop loss
can gain him profit!
this is the fundamental reason
why amateurs don't honour the stop loss!
in the words of Harv Eker
the rich play 'to win'
the poor play 'not to lose'!
why you will pull the trigger of the rifle
in the jungle
in front of a lion!
one
to protect yourself.
second
to hunt the lion.
the lion is likely to get killed
in both the cases
but
there is hell of a difference
between the two motives!
in one
you are defensive
in other
you are on the offensive
one is full of fear
other is full of confidence
similarly,
every trader has two reasons to trigger the stop loss
one
to prevent loss
second
to gain profit
again, there is hell of a difference between the two!
if first one is the motive
you will not trigger the stop loss
because your amateur mind will not be ready to bear even the small loss till that time!
and as far as the second reason
to pull the stop loss trigger is concerned
an amateur trader won't understand it!
he fails to see how triggering the stop loss
can gain him profit!
this is the fundamental reason
why amateurs don't honour the stop loss!
in the words of Harv Eker
the rich play 'to win'
the poor play 'not to lose'!
Monday, December 27, 2010
did you fall in trade?
how do we choose our life partner?
we fall in love with somebody
we decide to marry
and when parents come into picture
we start looking for reasons
find some good ones!
but the fact is
we are always decided much before
we start thinking!
(probably, that is the reason they call it
FALLING in love!)
--
just like the sales maxim
"customers decide emotionally and justify logically!"
--
similarly,
how do we invest or trade?
we like a stock or situation
we decide to marry (i.e.trade)
and when parents (i.e. logic, left brain) come into picture
we start looking for reasons
and indicators,
find some good ones!
but the fact is
we are always decided much before
we start thinking!
(probably, we should start calling it
FALLING in trade!)
we fall in love with somebody
we decide to marry
and when parents come into picture
we start looking for reasons
find some good ones!
but the fact is
we are always decided much before
we start thinking!
(probably, that is the reason they call it
FALLING in love!)
--
just like the sales maxim
"customers decide emotionally and justify logically!"
--
similarly,
how do we invest or trade?
we like a stock or situation
we decide to marry (i.e.trade)
and when parents (i.e. logic, left brain) come into picture
we start looking for reasons
and indicators,
find some good ones!
but the fact is
we are always decided much before
we start thinking!
(probably, we should start calling it
FALLING in trade!)
one way to move forward despite losses
one way
to stand up
once more
and
move forward
despite losses....
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forgive yourself
for the trading mistakes!
to stand up
once more
and
move forward
despite losses....
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forgive yourself
for the trading mistakes!
a gift cheque for you!
u spend
hundreds every day (if not more)!
--
a good portion of this is totally avoidable
some portion is a clear wastage
and some part is sheer carelessness!
what to talk of the amount we can save by negotiation and planning!
--
if we just consciously save 10 bucks everyday
out of
the waste, careless and avoidable expenses only
(not difficult i hope!)
we would have saved
300 a month!
not a big amount, isn't it!
--
now if u put this 300 in a mutual fund
thru SIP route every month
for 35 years from the age of 25 to 60
and
assuming a return of 20% pa
and inflation of 7% pa
do you have any idea what would you have saved?
--
25,02,076/-
AFTER providing for inflation!!
TAX-FREE!!!
============
terminal value of the 420 instalments at the end of 35 years (420 months), starting from last instalment and going backwards
300 303 307 310 313 317 320 323 327 330 334 338 341 345 349 352 356 360 364 368 372 376 380 384 388 392 397 401 405 410 414 419 423 428 432 437 442 446 451 456 461 466 471 476 481 486 492 497 502 508 513 519 524 530 536 542 547 553 559 565 572 578 584 590 597 603 610 616 623 630 636 643 650 657 664 671 679 686 693 701 709 716 724 732 740 748 756 764 772 780 789 797 806 815 823 832 841 850 860 869 878 888 897 907 917 927 937 947 957 967 978 988 999 1010 1021 1032 1043 1054 1066 1077 1089 1101 1112 1124 1137 1149 1161 1174 1187 1199 1212 1225 1239 1252 1266 1279 1293 1307 1321 1335 1350 1364 1379 1394 1409 1424 1440 1455 1471 1487 1503 1519 1535 1552 1569 1586 1603 1620 1638 1655 1673 1691 1710 1728 1747 1766 1785 1804 1823 1843 1863 1883 1903 1924 1945 1966 1987 2008 2030 2052 2074 2097 2119 2142 2165 2189 2212 2236 2260 2285 2309 2334 2360 2385 2411 2437 2463 2490 2517 2544 2571 2599 2627 2656 2684 2713 2743 2772 2802 2832 2863 2894 2925 2957 2989 3021 3054 3087 3120 3154 3188 3222 3257 3292 3328 3364 3400 3437 3474 3511 3549 3587 3626 3665 3705 3745 3785 3826 3868 3909 3952 3994 4037 4081 4125 4170 4215 4260 4306 4353 4400 4447 4495 4544 4593 4643 4693 4743 4795 4846 4899 4952 5005 5059 5114 5169 5225 5281 5338 5396 5454 5513 5573 5633 5694 5755 5817 5880 5944 6008 6073 6138 6205 6272 6339 6408 6477 6547 6618 6689 6761 6834 6908 6983 7058 7135 7212 7289 7368 7448 7528 7610 7692 7775 7859 7944 8029 8116 8204 8292 8382 8472 8564 8656 8750 8844 8940 9036 9134 9233 9332 9433 9535 9638 9742 9847 9954 10061 10170 10280 10391 10503 10616 10731 10847 10964 11083 11202 11323 11446 11569 11694 11820 11948 12077 12207 12339 12473 12607 12743 12881 13020 13161 13303 13447 13592 13739 13887 14037 14189 14342 14497 14653 14812 14972 15133 15297 15462 15629 15798 15968 16141 16315 16491 16669 16849 17031 17215 17401 17589 17779 17971 18165 18361 18560 18760 18963 19168 19375 19584 19795 20009 20225 20444 20664 20888 21113 21341 21572 21805 22040 22278 22519 22762 23008 23256 23507 23761 24018 24277 24540 24805 25072 25343 25617 25894 26173 26456 26742 27030 = 2502076 Total
hundreds every day (if not more)!
--
a good portion of this is totally avoidable
some portion is a clear wastage
and some part is sheer carelessness!
what to talk of the amount we can save by negotiation and planning!
--
if we just consciously save 10 bucks everyday
out of
the waste, careless and avoidable expenses only
(not difficult i hope!)
we would have saved
300 a month!
not a big amount, isn't it!
--
now if u put this 300 in a mutual fund
thru SIP route every month
for 35 years from the age of 25 to 60
and
assuming a return of 20% pa
and inflation of 7% pa
do you have any idea what would you have saved?
--
25,02,076/-
AFTER providing for inflation!!
TAX-FREE!!!
============
terminal value of the 420 instalments at the end of 35 years (420 months), starting from last instalment and going backwards
300 303 307 310 313 317 320 323 327 330 334 338 341 345 349 352 356 360 364 368 372 376 380 384 388 392 397 401 405 410 414 419 423 428 432 437 442 446 451 456 461 466 471 476 481 486 492 497 502 508 513 519 524 530 536 542 547 553 559 565 572 578 584 590 597 603 610 616 623 630 636 643 650 657 664 671 679 686 693 701 709 716 724 732 740 748 756 764 772 780 789 797 806 815 823 832 841 850 860 869 878 888 897 907 917 927 937 947 957 967 978 988 999 1010 1021 1032 1043 1054 1066 1077 1089 1101 1112 1124 1137 1149 1161 1174 1187 1199 1212 1225 1239 1252 1266 1279 1293 1307 1321 1335 1350 1364 1379 1394 1409 1424 1440 1455 1471 1487 1503 1519 1535 1552 1569 1586 1603 1620 1638 1655 1673 1691 1710 1728 1747 1766 1785 1804 1823 1843 1863 1883 1903 1924 1945 1966 1987 2008 2030 2052 2074 2097 2119 2142 2165 2189 2212 2236 2260 2285 2309 2334 2360 2385 2411 2437 2463 2490 2517 2544 2571 2599 2627 2656 2684 2713 2743 2772 2802 2832 2863 2894 2925 2957 2989 3021 3054 3087 3120 3154 3188 3222 3257 3292 3328 3364 3400 3437 3474 3511 3549 3587 3626 3665 3705 3745 3785 3826 3868 3909 3952 3994 4037 4081 4125 4170 4215 4260 4306 4353 4400 4447 4495 4544 4593 4643 4693 4743 4795 4846 4899 4952 5005 5059 5114 5169 5225 5281 5338 5396 5454 5513 5573 5633 5694 5755 5817 5880 5944 6008 6073 6138 6205 6272 6339 6408 6477 6547 6618 6689 6761 6834 6908 6983 7058 7135 7212 7289 7368 7448 7528 7610 7692 7775 7859 7944 8029 8116 8204 8292 8382 8472 8564 8656 8750 8844 8940 9036 9134 9233 9332 9433 9535 9638 9742 9847 9954 10061 10170 10280 10391 10503 10616 10731 10847 10964 11083 11202 11323 11446 11569 11694 11820 11948 12077 12207 12339 12473 12607 12743 12881 13020 13161 13303 13447 13592 13739 13887 14037 14189 14342 14497 14653 14812 14972 15133 15297 15462 15629 15798 15968 16141 16315 16491 16669 16849 17031 17215 17401 17589 17779 17971 18165 18361 18560 18760 18963 19168 19375 19584 19795 20009 20225 20444 20664 20888 21113 21341 21572 21805 22040 22278 22519 22762 23008 23256 23507 23761 24018 24277 24540 24805 25072 25343 25617 25894 26173 26456 26742 27030 = 2502076 Total
why u trade decides what u get!
why are you into stock trading?
obviously, for money
but what seems obvious
is not so obvious at the root!
at the root
the reason for coming to stock market may be
- to recover lost money
- to earn some extra bucks
- in search of financial security
- to overcome the poverty
- to gain wealth
- to "prove yourself"
....or any other reason!
--
- if you took to trading to recover lost money, you have brought with you fear and frustration of having been the 'victim of loss'! your subconscious will find ways to prove that you were 'a
victim'! and what better way to prove this than showing you as a victim again! nothing can really happen till you come out of that psyche and trade not to recover, but gain normally!
- if you have come here for that "side income" for "extra bucks", you have reached here with a
baggage of realisation that "it is difficul to making money". your obedient sub-conscious will try its best to defend your belief that it is really "difficult to make monay"! consequently, i won't be surprised if you face so much of difficulty that you don't gain but lose "extra"!
- if you have taken to trading in search of relief from financial insecurity, your psyche is full of fear of insecurity! whatever you earn in stock market, you are unlikely to get that "secure" feeling! your discomfort might increase actually increase! from the insecurity of less money from the insecurity of too much money! the only way left to get security would be to lose this "too much money" and get some relief!
- if you have become a stock trader because you want to come out of years of poverty or financial distress that you and your parents have had to go through, then you have started with an anger against lack of money! whatever money you make in the stock market, is likely to make you remind this anger! rather, the more money you make the more the anger will be there, courtesy that fear of losing it all again. finally, in bouts of psychological stress, your subconscios is likely to land you in losing trades that somewhat relieve you from the pressure!
- if you have started trading to become wealthy you are carrying a strong belief and grudge that
wealth has been eluding you and it is not your fault! your sub-conscious will prove that your
belief is justified. and it is likely to prove this by showing that wealth is still "eluding you"! i am sorry to say that the grudge and belief are here to stay till you nourish them!
- if you are here "to prove" yourself, then i have no hesitation to say that whatever be your
performance you will always have the feeling that you have not "proved yourself enough". this
belief is likely to wrongly influence your decisions which will result in loss that will justify
that "you indeed have to prove yourself!"
--
why do i say all that?
less so because i have experienced one of this myself!
less so because i have seen many around me go thru some of these states!
but more so
because
our minds work that way!
--
whatever is your reality paradigm
whatever is your frame of reference
whatever you think
your subconscious will be out to prove it!
and attract it!!
everything which tallies with your belief world is accepted
everything else is ignored
your subconscious proves what you believe!!!
--
so, what if you have entered the dalaal street with the above reasons?
do you still have hope?
yes!
absolutely!!
but there is a condition!
you have to approach the market with a positive approach!
with a positive reason!
with a positive psyche.
without any negative baggage!
--
remember, if the motive or driving force behind
your taking up trading is
negative
your fate is sealed even before you start!
--
instead
whatever your past
make sure that you are in the market for positive reasons
of aim or ambition or passion or happiness
with darkness behind your back
and your face brightly lit with sunshine!
obviously, for money
but what seems obvious
is not so obvious at the root!
at the root
the reason for coming to stock market may be
- to recover lost money
- to earn some extra bucks
- in search of financial security
- to overcome the poverty
- to gain wealth
- to "prove yourself"
....or any other reason!
--
- if you took to trading to recover lost money, you have brought with you fear and frustration of having been the 'victim of loss'! your subconscious will find ways to prove that you were 'a
victim'! and what better way to prove this than showing you as a victim again! nothing can really happen till you come out of that psyche and trade not to recover, but gain normally!
- if you have come here for that "side income" for "extra bucks", you have reached here with a
baggage of realisation that "it is difficul to making money". your obedient sub-conscious will try its best to defend your belief that it is really "difficult to make monay"! consequently, i won't be surprised if you face so much of difficulty that you don't gain but lose "extra"!
- if you have taken to trading in search of relief from financial insecurity, your psyche is full of fear of insecurity! whatever you earn in stock market, you are unlikely to get that "secure" feeling! your discomfort might increase actually increase! from the insecurity of less money from the insecurity of too much money! the only way left to get security would be to lose this "too much money" and get some relief!
- if you have become a stock trader because you want to come out of years of poverty or financial distress that you and your parents have had to go through, then you have started with an anger against lack of money! whatever money you make in the stock market, is likely to make you remind this anger! rather, the more money you make the more the anger will be there, courtesy that fear of losing it all again. finally, in bouts of psychological stress, your subconscios is likely to land you in losing trades that somewhat relieve you from the pressure!
- if you have started trading to become wealthy you are carrying a strong belief and grudge that
wealth has been eluding you and it is not your fault! your sub-conscious will prove that your
belief is justified. and it is likely to prove this by showing that wealth is still "eluding you"! i am sorry to say that the grudge and belief are here to stay till you nourish them!
- if you are here "to prove" yourself, then i have no hesitation to say that whatever be your
performance you will always have the feeling that you have not "proved yourself enough". this
belief is likely to wrongly influence your decisions which will result in loss that will justify
that "you indeed have to prove yourself!"
--
why do i say all that?
less so because i have experienced one of this myself!
less so because i have seen many around me go thru some of these states!
but more so
because
our minds work that way!
--
whatever is your reality paradigm
whatever is your frame of reference
whatever you think
your subconscious will be out to prove it!
and attract it!!
everything which tallies with your belief world is accepted
everything else is ignored
your subconscious proves what you believe!!!
--
so, what if you have entered the dalaal street with the above reasons?
do you still have hope?
yes!
absolutely!!
but there is a condition!
you have to approach the market with a positive approach!
with a positive reason!
with a positive psyche.
without any negative baggage!
--
remember, if the motive or driving force behind
your taking up trading is
negative
your fate is sealed even before you start!
--
instead
whatever your past
make sure that you are in the market for positive reasons
of aim or ambition or passion or happiness
with darkness behind your back
and your face brightly lit with sunshine!
Sunday, December 26, 2010
snake of loss!
many traders jokingly say
"i will start making money in trading
the day i start taking positions
opposite to what my head asks me to do"
i see pain hidden in this self-joke...
the statement seems to be an utterance in frustration
but in my opinion
is not a bad idea at all...
seriously....
--
why do i say that?
because these traders are almost always wrong
and the opposite of their trades is almost always right!
--
why does this happen?
"negative approach!"
these traders desire profit
but keep thinking and fearing of loss!
consequently
they miss every signal of profit.
what starts in search of profit
ends up a hide and seek with loss!
--
why?
just read this first...
--
once a snake was spotted in the thick bushes
at the end of the lawn in front of the house
the family searched for it frantically
but couldn't find it!
that night they could hardly sleep.
next day they searched again
without any success
"it seems to have gone!" everyone thought
but the fear of snake stayed back.
they kept the light in the verandah on
to scare off the snake
in case it was still around!
none could have a sound sleep that night also
next day they decided that enough was enough
so they set the dry bushes on fire!
all bushes were reduced to ash
and there was no snake!
all family heaved a big sigh of relief!
they expected to have a sound sleep that third night
but somehow they couldn't
the fear of past 48 hours refused to go away immediately!
so they kept the verandah light on for that night too!
night passed off peacefully
next morning
when the lady of the house opened the door of the bathroom
she was welcomed by the snake!
what had happened was that
the burning of the bushes had resulted in the snake being rendered homeless
and hence running out for another shelter
since none existed in the cemented neighbourhood
the wandering snake saw the movement of rodents in the verandah
which were attracted by the light
left 'on' to ward-off the snake.
snake reached the verandah and found the way in!
the very steps to ward-off the snake
resulted in the snake landing directly into the house!
--
fear can do strange things
it can distort your decision making process
and provoke and instigate you to do
exactly what you shouldn't have done
it pushes you in the trap
instead of taking you away!
--
as superbly underlined by rhonda byrne
in the masterpiece revolutionary book
"the secret"
we attract things by thoughts!
--
our compulsive obsessive fear in the head inevitably always shows up!
--
so
don't go after the snake of loss.
he is not after you.
rest assured!
when he appears by sheer chance
just change your path
and leave him alone!
"i will start making money in trading
the day i start taking positions
opposite to what my head asks me to do"
i see pain hidden in this self-joke...
the statement seems to be an utterance in frustration
but in my opinion
is not a bad idea at all...
seriously....
--
why do i say that?
because these traders are almost always wrong
and the opposite of their trades is almost always right!
--
why does this happen?
"negative approach!"
these traders desire profit
but keep thinking and fearing of loss!
consequently
they miss every signal of profit.
what starts in search of profit
ends up a hide and seek with loss!
--
why?
just read this first...
--
once a snake was spotted in the thick bushes
at the end of the lawn in front of the house
the family searched for it frantically
but couldn't find it!
that night they could hardly sleep.
next day they searched again
without any success
"it seems to have gone!" everyone thought
but the fear of snake stayed back.
they kept the light in the verandah on
to scare off the snake
in case it was still around!
none could have a sound sleep that night also
next day they decided that enough was enough
so they set the dry bushes on fire!
all bushes were reduced to ash
and there was no snake!
all family heaved a big sigh of relief!
they expected to have a sound sleep that third night
but somehow they couldn't
the fear of past 48 hours refused to go away immediately!
so they kept the verandah light on for that night too!
night passed off peacefully
next morning
when the lady of the house opened the door of the bathroom
she was welcomed by the snake!
what had happened was that
the burning of the bushes had resulted in the snake being rendered homeless
and hence running out for another shelter
since none existed in the cemented neighbourhood
the wandering snake saw the movement of rodents in the verandah
which were attracted by the light
left 'on' to ward-off the snake.
snake reached the verandah and found the way in!
the very steps to ward-off the snake
resulted in the snake landing directly into the house!
--
fear can do strange things
it can distort your decision making process
and provoke and instigate you to do
exactly what you shouldn't have done
it pushes you in the trap
instead of taking you away!
--
as superbly underlined by rhonda byrne
in the masterpiece revolutionary book
"the secret"
we attract things by thoughts!
--
our compulsive obsessive fear in the head inevitably always shows up!
--
so
don't go after the snake of loss.
he is not after you.
rest assured!
when he appears by sheer chance
just change your path
and leave him alone!
Saturday, December 25, 2010
mind v/s indicators
who makes the trading decision
you or your mind?
obviously your mind.
you are nobody
your mind is the real you
and what is your mind?
is it the hardware which is mind
or the software in it?
obviously it is the software
if hardware were the mind
all minds in the world would have been the same
and you would be making money in the markets as much as
the most succesful trader having the same hardware!
so,
it is the software that is the mind
and it is this software which is trading
not you!
if you are losing more than you are winning
then the culprit is the software!
who programmed this software?
was it programmed in C++ or Java or VB?
how much time would it have taken to develop this software?
well, no programmer programmed your mind's software!
this software was programmed
through a lifetime of
conscious and subconscious learnings and experiences!
whatever you think
is not you but the the software in your mind that is thinking
on the basis of its likes and dislikes
preferences and biases
fears and greeds
lessons and prejudices
programmed into it till date!
--
everyday
during trading hours
this software is pitched in a direct fight
with the logical signals of technical indicators!
do you have any idea who wins this fight
day after day
everyday?
it's your mind's software!
T.Harv Eker has also strongly endorsed this in his classic
"secrets of a milionaire mind".
the poor logical technical indicator is always vetoed
unless he is saying what is same as the programmed mind is saying!
is it surprising any more that you have been losing despite knowing indicators?
--
and for heavens sake
now don't start flogging mercilessly your mind!
it's not his fault!
start reprogramming it with
"millionaire" thoughts and habits and behaviour patterns!
till date you have not been a milliOnaire
and hence your programmed thoughts are not those of a millionaire
rather, you have been hating the millionaire coterie hearts-of-hearts all these years
and hence your programmed minds are anti-millionaire
whereas your conscious mind wants to be one!
--
tell your mind that
money is not a sin!
profit is not a dirty word, loss is!
tell him gently that
it is not a crime to be wealthy!
risk is not bad but a must!
all sweet things are not profitable
and all bitter things are not bad!
tell him to be less fearful and more bold
tell him that the company of the losers is not a good thing
tell him that it is ok to be oppotunist
tell him that it is ok to profit at other's expense
tell him that it is not a sacrifice to lose in the market
.....tell him a hundred more things
ask him to dare to unlearn old things not fit in the ruthless trading world
persuade him to learn new lessons....
because what he learns
will react in your bank balance!
you or your mind?
obviously your mind.
you are nobody
your mind is the real you
and what is your mind?
is it the hardware which is mind
or the software in it?
obviously it is the software
if hardware were the mind
all minds in the world would have been the same
and you would be making money in the markets as much as
the most succesful trader having the same hardware!
so,
it is the software that is the mind
and it is this software which is trading
not you!
if you are losing more than you are winning
then the culprit is the software!
who programmed this software?
was it programmed in C++ or Java or VB?
how much time would it have taken to develop this software?
well, no programmer programmed your mind's software!
this software was programmed
through a lifetime of
conscious and subconscious learnings and experiences!
whatever you think
is not you but the the software in your mind that is thinking
on the basis of its likes and dislikes
preferences and biases
fears and greeds
lessons and prejudices
programmed into it till date!
--
everyday
during trading hours
this software is pitched in a direct fight
with the logical signals of technical indicators!
do you have any idea who wins this fight
day after day
everyday?
it's your mind's software!
T.Harv Eker has also strongly endorsed this in his classic
"secrets of a milionaire mind".
the poor logical technical indicator is always vetoed
unless he is saying what is same as the programmed mind is saying!
is it surprising any more that you have been losing despite knowing indicators?
--
and for heavens sake
now don't start flogging mercilessly your mind!
it's not his fault!
start reprogramming it with
"millionaire" thoughts and habits and behaviour patterns!
till date you have not been a milliOnaire
and hence your programmed thoughts are not those of a millionaire
rather, you have been hating the millionaire coterie hearts-of-hearts all these years
and hence your programmed minds are anti-millionaire
whereas your conscious mind wants to be one!
--
tell your mind that
money is not a sin!
profit is not a dirty word, loss is!
tell him gently that
it is not a crime to be wealthy!
risk is not bad but a must!
all sweet things are not profitable
and all bitter things are not bad!
tell him to be less fearful and more bold
tell him that the company of the losers is not a good thing
tell him that it is ok to be oppotunist
tell him that it is ok to profit at other's expense
tell him that it is not a sacrifice to lose in the market
.....tell him a hundred more things
ask him to dare to unlearn old things not fit in the ruthless trading world
persuade him to learn new lessons....
because what he learns
will react in your bank balance!
Thursday, December 23, 2010
ready for it - II
if being mentally not ready
is responsible for not succeeding in stock trading
here is a different but effective way to develop a 'millionaire mindset'
but to do that first i need to share with you something
--
in his masterpieces
'6 thinking hats'
and
'6 action shoes'
the great thinker and management guru
Edward de Bono had beautifully driven home the point
that every person has and needs many faces
which he shows or can show!
every face is different
and has a specific ability
suitable for a particular situation
represented by different kinds of 'shoes' or 'hats' in de Bono's books!
it is like playing different roles.
the persona has to come in a totally different avatar for each role!
the problem arises when the man plays the wrong role on the wrong stage!
e.g. if one were to sit across the negotiation table
with the mindset of 'formal navy shoes' (formal approach)
in a situation which demanded
the mindset of 'pink slippers' (informal approach)
the outcome is likely to be a disaster.
what you feel like and behave like and look like
in 'formal navy shoes'
is totally opposite to
how you feel and behave and look
in 'pink slippers' or any other type of shoes!
so, whatever the challenge
just select the right kind of 'action shoes' or 'thinking hat'
and succeed!
--
based on the above
here is the trick to develop "a millionaire mindset"
which is otherwise difficult without
a million dollars in your bank account!
--
"Act"
--
in other words
just play the role of a "millionaire"!
i know, you would say that
since you are not a millionaire
your role play will be faulty!
well, don't worry about that.
you will do it quite well
better than a real millionaire!
--
in fact
you can prepare yourself for any role or responsibility
or challenge in life
by just starting to act the role...
first play the role
then it will come out naturally!
--
feel like
behave like
act like
look like
think like
a millionaire in that very situation!
ask yourself
what different would a millionaire think in such a situation?
what would a millionaire do different in such a situation?
how would a millionaire react differently to this situation?
this way you will not chicken out of situations where you shouldn't have
this way you will have the courage to take a risk your indicators say you should have
this way you will survive the difficult situation without booking profit prematurely
this way you will book the stop loss ruthlessly like a seasoned emotionless businessman
...and so on
you will realise that the trouble used to arise
when we used to react in petty and penny ways of
"non-millionaires"!
a change in decisions
will change the results for you!
--
even if you are a rocket scientist or a surgeon or an engineer or a chartered accountant
your daily mannerism and thinking patterns and fears are different from that of a millionaire
and this is the root cause of faulty decisions
which have landed you in your present state-of-affairs!
--
in T.Harv Eker's words
by acting
you are programming your mind
to generate feelings
to create thoughts
to trigger actions
which will bring amazing and different results!
is responsible for not succeeding in stock trading
here is a different but effective way to develop a 'millionaire mindset'
but to do that first i need to share with you something
--
in his masterpieces
'6 thinking hats'
and
'6 action shoes'
the great thinker and management guru
Edward de Bono had beautifully driven home the point
that every person has and needs many faces
which he shows or can show!
every face is different
and has a specific ability
suitable for a particular situation
represented by different kinds of 'shoes' or 'hats' in de Bono's books!
it is like playing different roles.
the persona has to come in a totally different avatar for each role!
the problem arises when the man plays the wrong role on the wrong stage!
e.g. if one were to sit across the negotiation table
with the mindset of 'formal navy shoes' (formal approach)
in a situation which demanded
the mindset of 'pink slippers' (informal approach)
the outcome is likely to be a disaster.
what you feel like and behave like and look like
in 'formal navy shoes'
is totally opposite to
how you feel and behave and look
in 'pink slippers' or any other type of shoes!
so, whatever the challenge
just select the right kind of 'action shoes' or 'thinking hat'
and succeed!
--
based on the above
here is the trick to develop "a millionaire mindset"
which is otherwise difficult without
a million dollars in your bank account!
--
"Act"
--
in other words
just play the role of a "millionaire"!
i know, you would say that
since you are not a millionaire
your role play will be faulty!
well, don't worry about that.
you will do it quite well
better than a real millionaire!
--
in fact
you can prepare yourself for any role or responsibility
or challenge in life
by just starting to act the role...
first play the role
then it will come out naturally!
--
feel like
behave like
act like
look like
think like
a millionaire in that very situation!
ask yourself
what different would a millionaire think in such a situation?
what would a millionaire do different in such a situation?
how would a millionaire react differently to this situation?
this way you will not chicken out of situations where you shouldn't have
this way you will have the courage to take a risk your indicators say you should have
this way you will survive the difficult situation without booking profit prematurely
this way you will book the stop loss ruthlessly like a seasoned emotionless businessman
...and so on
you will realise that the trouble used to arise
when we used to react in petty and penny ways of
"non-millionaires"!
a change in decisions
will change the results for you!
--
even if you are a rocket scientist or a surgeon or an engineer or a chartered accountant
your daily mannerism and thinking patterns and fears are different from that of a millionaire
and this is the root cause of faulty decisions
which have landed you in your present state-of-affairs!
--
in T.Harv Eker's words
by acting
you are programming your mind
to generate feelings
to create thoughts
to trigger actions
which will bring amazing and different results!
Tuesday, December 21, 2010
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...)
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...)
bravery in the market
in stock markets too
"fortune favours the brave!"
but what kind of brave?
--
1. without method and inexperienced?
= never!
(rather, u r going to get killed without the bravery medal)
--
2. without method but experienced?
= sometimes
(but net bank balance remains same or negative!)
--
3. with method but inexperienced?
= more than 'never' but lesser than 'sometimes'
(bank and mental balance always bleeding)
--
4. with method and experienced?
= more than 'sometimes' but lesser than 'always'
(ban and mental balance always growing)
---
so?
a) have a method, and
b) be less brave till you gain experience!
----
finally
what is bravery?
= doing 'it'
or keep doing 'it'
despite fears
when "you know" that it should be done!
"fortune favours the brave!"
but what kind of brave?
--
1. without method and inexperienced?
= never!
(rather, u r going to get killed without the bravery medal)
--
2. without method but experienced?
= sometimes
(but net bank balance remains same or negative!)
--
3. with method but inexperienced?
= more than 'never' but lesser than 'sometimes'
(bank and mental balance always bleeding)
--
4. with method and experienced?
= more than 'sometimes' but lesser than 'always'
(ban and mental balance always growing)
---
so?
a) have a method, and
b) be less brave till you gain experience!
----
finally
what is bravery?
= doing 'it'
or keep doing 'it'
despite fears
when "you know" that it should be done!
Sunday, December 19, 2010
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!
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!
Saturday, December 18, 2010
the game doesn't end with technical analyses
there was a time when i thought
knowledge of technical indicators was a sureshot passport to success in stock trading.
so, i studied technical trading religiously!
while my knowledge increased manifold
it didn't show in results!
so, i worked harder and learnt more technical indicators...
but i was shattered when i started losing more and often...
i had no clue as to why i was losing more and more when i was supposed to be winning....big and easy!
infact, i was losing much more than those who knew almost nothing!
i had already "mastered" some indicators
i could foresee many moves of the market beforehand!
still my bank account kept bleeding...
---
my dreams of quitting my job for a fulltime career in stock trading went for a toss!
i must admit that i mentally quit stock trading atleast 20 times
everytime with a big heartbreak!!!
each time i swore not to come back again
each time i "finally decided" to concentrate on job and look for other avenues of making money!
but every time a graph came in front of my eyes, my mind started giving unsolicited opinion
and more often than not, that opinion was damn right!!
--
i was in a situation where i could neither quit nor stay in trading!
i badly needed help!
help was everywhere, but not the one i needed!
i realised that
while both the winning and losing traders know their technical indicators
while both had their "godfather" favourite technical indicators
there was somthing else which made "hell-of-a-difference"
something which i was missing like a big fool!
it started dawning on me that technical analyses was only half the job....rather even lesser!
--
then, one day, i got my hands on
'secrets of the millionaire mind' by T.Harv Eker
and i got my answer!!!
the difference was
"the mindset"!!!
the winner's mindset....
pattern of thoughts....
pattern of response....
pattern of taking decisions!
while both the winner as well as loser traders
use the same indicators
in the same market
at the same time
.....the difference was
in their response!
the way the winning and losing traders respond to same signals is shockingly different!!!
i realised that losing and winning traders
thought
and felt
and acted
differently
even while the indicators indicated the same indication to all!
--
i also realised that there was similarity in the thought patterns of the winners!
and not surprisingly, there was a common-thread in the thought patterns of losers!
same situation but
one buys, other waits!
one buys, other chickens out!
one shorts, other plays safe!
one shorts, other chickens out!
one jumps, other waits patiently!
one buckles, other endures!
--
the message was loud and clear.
i shifted my attention from studying more technical indicators
to studying my thought patterns...
my reactions to situations...
my response to stimuli...
the difference between what i knew and what i did...
--
my technical indicators were still the same
but my mindset was changing!
...not surprisingly, the results started to change too.
---
indicators only tell you what is likely to happen
what you do thereafter makes all the difference!!
without the right mindset
riding the false confidence generated by the steroid effect of indicators
may prompt you to take bigger positions resulting in a bigger hit!
technical indicators cannot take us beyond the first level
winner's mindset does!
the game doesn't end with technical analyses
it just starts from there!
knowledge of technical indicators was a sureshot passport to success in stock trading.
so, i studied technical trading religiously!
while my knowledge increased manifold
it didn't show in results!
so, i worked harder and learnt more technical indicators...
but i was shattered when i started losing more and often...
i had no clue as to why i was losing more and more when i was supposed to be winning....big and easy!
infact, i was losing much more than those who knew almost nothing!
i had already "mastered" some indicators
i could foresee many moves of the market beforehand!
still my bank account kept bleeding...
---
my dreams of quitting my job for a fulltime career in stock trading went for a toss!
i must admit that i mentally quit stock trading atleast 20 times
everytime with a big heartbreak!!!
each time i swore not to come back again
each time i "finally decided" to concentrate on job and look for other avenues of making money!
but every time a graph came in front of my eyes, my mind started giving unsolicited opinion
and more often than not, that opinion was damn right!!
--
i was in a situation where i could neither quit nor stay in trading!
i badly needed help!
help was everywhere, but not the one i needed!
i realised that
while both the winning and losing traders know their technical indicators
while both had their "godfather" favourite technical indicators
there was somthing else which made "hell-of-a-difference"
something which i was missing like a big fool!
it started dawning on me that technical analyses was only half the job....rather even lesser!
--
then, one day, i got my hands on
'secrets of the millionaire mind' by T.Harv Eker
and i got my answer!!!
the difference was
"the mindset"!!!
the winner's mindset....
pattern of thoughts....
pattern of response....
pattern of taking decisions!
while both the winner as well as loser traders
use the same indicators
in the same market
at the same time
.....the difference was
in their response!
the way the winning and losing traders respond to same signals is shockingly different!!!
i realised that losing and winning traders
thought
and felt
and acted
differently
even while the indicators indicated the same indication to all!
--
i also realised that there was similarity in the thought patterns of the winners!
and not surprisingly, there was a common-thread in the thought patterns of losers!
same situation but
one buys, other waits!
one buys, other chickens out!
one shorts, other plays safe!
one shorts, other chickens out!
one jumps, other waits patiently!
one buckles, other endures!
--
the message was loud and clear.
i shifted my attention from studying more technical indicators
to studying my thought patterns...
my reactions to situations...
my response to stimuli...
the difference between what i knew and what i did...
--
my technical indicators were still the same
but my mindset was changing!
...not surprisingly, the results started to change too.
---
indicators only tell you what is likely to happen
what you do thereafter makes all the difference!!
without the right mindset
riding the false confidence generated by the steroid effect of indicators
may prompt you to take bigger positions resulting in a bigger hit!
technical indicators cannot take us beyond the first level
winner's mindset does!
the game doesn't end with technical analyses
it just starts from there!
Wednesday, December 15, 2010
high probability turning points
from my experience i have seen that price has high probability of turning at the following
signals:
level 1 signal: william%r reaches extreme, rsi still away
level 2 signal: william%r stays at extreme, rsi reaches extreme
level 3 signal: william%r and rsi together reach extreme
only a very powerful rally can bulldoze all these three levels of signals.
this information can be used to trade at specific points with stop loss.
just make sure that both rsi as well as william%r are of same duration
e.g. if u r taking rsi(14) then william(14) should be taken
and if u r taking rsi (10) then william(10) should be taken
also, same duration chart is to be taken, whether 1 month or 1 year or 5 days etc.
signals:
level 1 signal: william%r reaches extreme, rsi still away
level 2 signal: william%r stays at extreme, rsi reaches extreme
level 3 signal: william%r and rsi together reach extreme
only a very powerful rally can bulldoze all these three levels of signals.
this information can be used to trade at specific points with stop loss.
just make sure that both rsi as well as william%r are of same duration
e.g. if u r taking rsi(14) then william(14) should be taken
and if u r taking rsi (10) then william(10) should be taken
also, same duration chart is to be taken, whether 1 month or 1 year or 5 days etc.
least painful trading method - II
(this is a sequel to part I. to understand it in the right context pl read part I and the related discussion at http://www.mudraa.com/singlepost.php?messid=74251)
here is a reasonably dependable way to successfully identify and ignore the false price crossover of sma line
in other words, this is a good way to anticipate and foresee a whipsaw before hand:
keep rsi 14 and william%r14 charts open under the main price+sma chart
if the price cuts sma from below and gives a buy signal but
william%r is near extreme overbought boundary whereas rsi is not near any extreme
square-off short position but wait for going long
9 out of 10 times price will reverse and short position will need to be taken again
if all this happens near the close of the trading day
the risk of keeping the short position open is well-taken!
---
conversely
if the price cuts sma from above and gives a sell signal but
william%r is near extreme oversold boundary whereas rsi is not near any extreme
square-off long position but wait for going short
9 out of 10 times price will reverse and long position will need to be taken again
if all this happens near the close of the trading day
the risk of keeping the long position open is well-taken!
---
even otherwise,
this is a superb way of successfully spotting reversals 9 out of 10 times
here is a reasonably dependable way to successfully identify and ignore the false price crossover of sma line
in other words, this is a good way to anticipate and foresee a whipsaw before hand:
keep rsi 14 and william%r14 charts open under the main price+sma chart
if the price cuts sma from below and gives a buy signal but
william%r is near extreme overbought boundary whereas rsi is not near any extreme
square-off short position but wait for going long
9 out of 10 times price will reverse and short position will need to be taken again
if all this happens near the close of the trading day
the risk of keeping the short position open is well-taken!
---
conversely
if the price cuts sma from above and gives a sell signal but
william%r is near extreme oversold boundary whereas rsi is not near any extreme
square-off long position but wait for going short
9 out of 10 times price will reverse and long position will need to be taken again
if all this happens near the close of the trading day
the risk of keeping the long position open is well-taken!
---
even otherwise,
this is a superb way of successfully spotting reversals 9 out of 10 times
Tuesday, December 14, 2010
least painful trading method
i have studied and closely experienced many indicators and techniques of stock trading.
all are good.
but each thrills to kill
each flatters to deceive
if not, then it is too difficult to interpret accurately and timely
i love my indicators like my pets
so, i never had the heart to tell them that they were good but not ultimate.
but, hearts of hearts, i was looking for
a simple
and effective
and universal
and almost foolproof
trading method!
finally, i have one
that was always around but always ignored
that was too simple and therefore mistrusted
that is not perfect but much better than all others.
it's shortcomings?
it demands some blood during valleys and plateaus of ranges
---
it's benefits?
well! there are so many!!!
operators fear it like ghosts fear the cross!
---
and here it is:
"simple moving average"
how to use it?
when priceline cuts sma34/30min line on 1month chart from above = sell
when it cuts it from below = buy
ALWAYS be in the trade, whether long or short
even when there is blood in your hand
if you need to switch sides more than thrice in quick succession
stay away for some time
you may be passing thru range-bound turbulence
---
why have i chosen 34/30min?
whipsaws are minimum in this setting.
(this setting is allowed, rather automatic in google finance. many other software or charts allow sma 34 but not with 30min tick interval)
if you can follow the above method ruthlessly long enough
and if the brokerage is not high
then the pain of ranges will be fantastically offset by the gains of rallies!
---
all are good.
but each thrills to kill
each flatters to deceive
if not, then it is too difficult to interpret accurately and timely
i love my indicators like my pets
so, i never had the heart to tell them that they were good but not ultimate.
but, hearts of hearts, i was looking for
a simple
and effective
and universal
and almost foolproof
trading method!
finally, i have one
that was always around but always ignored
that was too simple and therefore mistrusted
that is not perfect but much better than all others.
it's shortcomings?
it demands some blood during valleys and plateaus of ranges
---
it's benefits?
well! there are so many!!!
operators fear it like ghosts fear the cross!
---
and here it is:
"simple moving average"
how to use it?
when priceline cuts sma34/30min line on 1month chart from above = sell
when it cuts it from below = buy
ALWAYS be in the trade, whether long or short
even when there is blood in your hand
if you need to switch sides more than thrice in quick succession
stay away for some time
you may be passing thru range-bound turbulence
---
why have i chosen 34/30min?
whipsaws are minimum in this setting.
(this setting is allowed, rather automatic in google finance. many other software or charts allow sma 34 but not with 30min tick interval)
if you can follow the above method ruthlessly long enough
and if the brokerage is not high
then the pain of ranges will be fantastically offset by the gains of rallies!
---
Saturday, December 11, 2010
trading decisions!
5 frogs were sitting on a log of wood
3 out of them decided to jump
how many are left behind?
"2" replied the student.
"wrong! all 5 are still sitting there" the teacher shot back!
"there is a difference between making a decision and acting on the decision!" he explained!
---
the story got etched in the student's mind.
days passed
and then years....
the student became teacher
in 'School of Stock Trading'!
---
"let me tell you a story" he announced in the class
"5 frogs were sitting on a log of wood
all 5 jumped off it!
how many had decided to jump?"
students got really confused.
they had heard about the famous story where the teacher asks how many are left behind!
but this story was strange!
when nobody answered
the teacher declared
"none"
"all 5 jumped in panic without thinking"
"they were all amateur stock traders!"
3 out of them decided to jump
how many are left behind?
"2" replied the student.
"wrong! all 5 are still sitting there" the teacher shot back!
"there is a difference between making a decision and acting on the decision!" he explained!
---
the story got etched in the student's mind.
days passed
and then years....
the student became teacher
in 'School of Stock Trading'!
---
"let me tell you a story" he announced in the class
"5 frogs were sitting on a log of wood
all 5 jumped off it!
how many had decided to jump?"
students got really confused.
they had heard about the famous story where the teacher asks how many are left behind!
but this story was strange!
when nobody answered
the teacher declared
"none"
"all 5 jumped in panic without thinking"
"they were all amateur stock traders!"
day trading without indicators
my first brush with stock market
happened in 1990
when binny (aka manpreet oberoi)
my classmate in punjab engineering college, chandigarh
shared with me that his father was an active trader in stock market
besides a regular job with ballarpur industries!
he told us that his father had started trading with 10000 corpus
and during the harshad mehta saga
the market value of his father's stock positions had crossed 1 crore
(equivalent to 32 crores of 2010)!
"i can tell the state of the market from the mood of my dad in the morning!" binny told us!
i was reminded of all this when i was having a serious look at the daily calls of krishnamurthy in
mudraa.com!
his calls are amazingly but deceptively simple and profoundly effective!
since people have the tendency to take only complicated things seriously little surprise that
krishnamurthy's calls have as many critics as are the fans!
this gentleman gives "buy above-sell below" call everyday after a few minutes of market opening.
two lakshman rekhas (trigger lines)
one above and one below the spot value.
though he has not shared the exact criterea he follows to draw those lines but my study says that
he tries to identify an upper as well as lower nifty limit which if breachedn mark a decisive
movement of the nifty for atleast very short term future!
initially i thought he used "universal" support and resistance levels
but many times i realised that he was doing something else.
i also noticed that he was not playing with pivot points or using some stock level calculator.
i have come to realise that he decides the limits by seeking answer to a simple question
"what is the upper and lower nifty limit which if breached would mean that nifty has taken a
decisive direction for the day! and if not breached would mean that nifty is rangebound should be
left alone!"
for this, in my opinion, he uses
1) the previous day nifty boundaries
2) and boundaries marked by its early morning moves!
i found this technique wonderfully simple, easy and very very logical.
there are no technical indicators involved
no short-term long-term chart reading
just staying with the reality of the hour!!!
the trouble with chart and indicator reading is that
they inject the trader with an opinion
and the trader's psychology wraps that opinion with ego
and keeps clinging to it like the captain of a sinking ship!
---
in this "buy above-sell below" method
we follow what the market is doing
irrespective of whether we understand the reason or not
irrespective of whether the indicators and fundamentals and charts agree or not
just plain "follow the trend of NOW" and think later
what is happening becomes more important than what should happen!
this way, no market operator or forces can trick you!
whatever he does, u follow him!
---
but i want to add two words of caution
1) ruthlessly square-off your position if nifty retraces into the lakshman rekha (this does happen
once in a while)
2) book profit when you are getting more than you can afford to let go! (many times nifty retraces
after going reasonably far!)
---
like the mood of binny's father
the mood of nifty in the morning
reveals the immediate intentions of it!
---
i remember, i had shared similar technique in my posts (noon express and forenoon express)
but krishnamurthy's method is much more simple and effective!
happened in 1990
when binny (aka manpreet oberoi)
my classmate in punjab engineering college, chandigarh
shared with me that his father was an active trader in stock market
besides a regular job with ballarpur industries!
he told us that his father had started trading with 10000 corpus
and during the harshad mehta saga
the market value of his father's stock positions had crossed 1 crore
(equivalent to 32 crores of 2010)!
"i can tell the state of the market from the mood of my dad in the morning!" binny told us!
i was reminded of all this when i was having a serious look at the daily calls of krishnamurthy in
mudraa.com!
his calls are amazingly but deceptively simple and profoundly effective!
since people have the tendency to take only complicated things seriously little surprise that
krishnamurthy's calls have as many critics as are the fans!
this gentleman gives "buy above-sell below" call everyday after a few minutes of market opening.
two lakshman rekhas (trigger lines)
one above and one below the spot value.
though he has not shared the exact criterea he follows to draw those lines but my study says that
he tries to identify an upper as well as lower nifty limit which if breachedn mark a decisive
movement of the nifty for atleast very short term future!
initially i thought he used "universal" support and resistance levels
but many times i realised that he was doing something else.
i also noticed that he was not playing with pivot points or using some stock level calculator.
i have come to realise that he decides the limits by seeking answer to a simple question
"what is the upper and lower nifty limit which if breached would mean that nifty has taken a
decisive direction for the day! and if not breached would mean that nifty is rangebound should be
left alone!"
for this, in my opinion, he uses
1) the previous day nifty boundaries
2) and boundaries marked by its early morning moves!
i found this technique wonderfully simple, easy and very very logical.
there are no technical indicators involved
no short-term long-term chart reading
just staying with the reality of the hour!!!
the trouble with chart and indicator reading is that
they inject the trader with an opinion
and the trader's psychology wraps that opinion with ego
and keeps clinging to it like the captain of a sinking ship!
---
in this "buy above-sell below" method
we follow what the market is doing
irrespective of whether we understand the reason or not
irrespective of whether the indicators and fundamentals and charts agree or not
just plain "follow the trend of NOW" and think later
what is happening becomes more important than what should happen!
this way, no market operator or forces can trick you!
whatever he does, u follow him!
---
but i want to add two words of caution
1) ruthlessly square-off your position if nifty retraces into the lakshman rekha (this does happen
once in a while)
2) book profit when you are getting more than you can afford to let go! (many times nifty retraces
after going reasonably far!)
---
like the mood of binny's father
the mood of nifty in the morning
reveals the immediate intentions of it!
---
i remember, i had shared similar technique in my posts (noon express and forenoon express)
but krishnamurthy's method is much more simple and effective!
Friday, December 10, 2010
future of realty sector
* any idea how many of the 120 crore people in the country have their own house?
* any idea how many of those who don't have house want to own one?
* any idea how many of those who already own a house want to own one more?
* any idea how many of those who already own a house want to own a bigger one?
* any idea how many of those who already own a house want to "invest in" many more?
* all houses on the planet will need to be rebuilt after 50-100 years of their safe life!
* and we haven't yet talked about hotels and hospitals and factories and office accomodations and schools and institutions etc.!
* and we haven't yet talked about repair, maintenance, upgradation and alterations in every house!
* and we haven't yet talked about financing the builders and financing the buyers?
* and we haven't yet talked about the designers and architects and furnishers etc.
---
there is hell-of-a-big market out there!
everyone wants a house of his/her own.
the question is who can provide one which fits in respective pockets!
the trouble is corporates don't want profit opportunity, they want profiteering opportunity!
we need assembly line of house production!
so the question is which company can mass produce?
the question is which company can keep the cost down and quality consistent?
the question is which company can come survive the mafia mentality and work with industry approach?
the question is which company can handle the land bank and debt monsters?
the question is which company understands the needs of different species of customers!
the question is which company has the technology and can innovate?
the question is which company has the leadership?
the question is
where are such companies?
* any idea how many of those who don't have house want to own one?
* any idea how many of those who already own a house want to own one more?
* any idea how many of those who already own a house want to own a bigger one?
* any idea how many of those who already own a house want to "invest in" many more?
* all houses on the planet will need to be rebuilt after 50-100 years of their safe life!
* and we haven't yet talked about hotels and hospitals and factories and office accomodations and schools and institutions etc.!
* and we haven't yet talked about repair, maintenance, upgradation and alterations in every house!
* and we haven't yet talked about financing the builders and financing the buyers?
* and we haven't yet talked about the designers and architects and furnishers etc.
---
there is hell-of-a-big market out there!
everyone wants a house of his/her own.
the question is who can provide one which fits in respective pockets!
the trouble is corporates don't want profit opportunity, they want profiteering opportunity!
we need assembly line of house production!
so the question is which company can mass produce?
the question is which company can keep the cost down and quality consistent?
the question is which company can come survive the mafia mentality and work with industry approach?
the question is which company can handle the land bank and debt monsters?
the question is which company understands the needs of different species of customers!
the question is which company has the technology and can innovate?
the question is which company has the leadership?
the question is
where are such companies?
Thursday, December 9, 2010
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!
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!
future of i.t.
* everything on the planet will eventually be run or monitored by software. so just see what all around you is still not managed by software, and you will see the scope for i.t.
* software will compete with each other.
* every software already written in the world will eventually become obsolete and hence would need to be re-written. isn't that hell of a scope for i.t.
* everything on the planet will be converted into data and squeezed to get juice of information that can be gainfully and artistically and innovatively consumed! if u can estimate the amount of data that can be produced for this analyses, then u r almost god!
* the day software is used enmass to produce ideas and solutions instead of just managing the show, it will result in next generation leap!
* from software point-of-view, the world will get more and more demarcated and "niched". each niche segment will become larger than its parent only to be niched again....only to become extinct. the cycle will continue and the universe for software will keep becoming larger.
* software will be required to improve upon everything on the planet including lives, processes, products etc.
* software will make every field converge. this will create new avenues and horizons. the entire world will have to be rewired and reprogrammed.......repeatedly!!!
* every software will need to be maintained and improved!
* every software will need to be trained on!
* every software will need an ever-improving hardware!
* and we haven't yet talked about artificial intelligence.......!!!
* software will compete with each other.
* every software already written in the world will eventually become obsolete and hence would need to be re-written. isn't that hell of a scope for i.t.
* everything on the planet will be converted into data and squeezed to get juice of information that can be gainfully and artistically and innovatively consumed! if u can estimate the amount of data that can be produced for this analyses, then u r almost god!
* the day software is used enmass to produce ideas and solutions instead of just managing the show, it will result in next generation leap!
* from software point-of-view, the world will get more and more demarcated and "niched". each niche segment will become larger than its parent only to be niched again....only to become extinct. the cycle will continue and the universe for software will keep becoming larger.
* software will be required to improve upon everything on the planet including lives, processes, products etc.
* software will make every field converge. this will create new avenues and horizons. the entire world will have to be rewired and reprogrammed.......repeatedly!!!
* every software will need to be maintained and improved!
* every software will need to be trained on!
* every software will need an ever-improving hardware!
* and we haven't yet talked about artificial intelligence.......!!!
Monday, November 29, 2010
coaching a champion!
many people ask me
"if you know this much about trading how come u r not a millionaire urself?"
"u teach stock trading thru technical indicators but u urself don't have a proven history of stock market success."
i always knew that i knew a few things which i could train others on.
but the above logic given by the critics was always somewhere in my mind
till i got the answer which gave words to what i always believed.
here it is...
---
Günther Bosch is a Romanian-German former tennis player.
He played tennis in the Romanian Davis Cup team.
He was the Romanian "number three"
always in the shadow of Ilie Nastase and Ion Tiriac .
So, are these credentials sufficient to secure him a place in tennis history?
Probably not?
hold you thoughts....
---
My second example is of a cricketer who had a brief first-class career with Queensland in 1978-79
in which he played in 7 matches and hit 160 runs.
He also played league cricket in England.
He never played at the test level.
Does this stand him any chance to have a place in cricket history?
Probably not?
---
Now for some reality check.
Günther Bosch shot to fame when he coached Boris Becker in becoming the first unseeded player and the youngest to win at the Wimbledon in 1985 at the age of 17!!!
He today holds a thesis on "psychology in tennis"!
The cricketer mentioned above is non other than John Buchanan who was appointed the coach of Australian Cricket team in 1999 and who propelled the team to unprecedented success.
At one stage his record was 15 wins from 15 games played.
I also have reverse example of champions (whom i don't wish to name) who proved to be disasterous coaches....!!!
---
While i don't intend to say that i am a Gunther or Buchanan by any stretch of imagination
neither do i intend to say that i am a great trading coach
all i want to say is that
i strongly felt that i had a few important things to tell the budding traders
and that i need not be a trading champion myself to make champions out of you!
a coach can be successful without being a champion himself or herself
but a champion generally doesn't become a champion without a coach!
"if you know this much about trading how come u r not a millionaire urself?"
"u teach stock trading thru technical indicators but u urself don't have a proven history of stock market success."
i always knew that i knew a few things which i could train others on.
but the above logic given by the critics was always somewhere in my mind
till i got the answer which gave words to what i always believed.
here it is...
---
Günther Bosch is a Romanian-German former tennis player.
He played tennis in the Romanian Davis Cup team.
He was the Romanian "number three"
always in the shadow of Ilie Nastase and Ion Tiriac .
So, are these credentials sufficient to secure him a place in tennis history?
Probably not?
hold you thoughts....
---
My second example is of a cricketer who had a brief first-class career with Queensland in 1978-79
in which he played in 7 matches and hit 160 runs.
He also played league cricket in England.
He never played at the test level.
Does this stand him any chance to have a place in cricket history?
Probably not?
---
Now for some reality check.
Günther Bosch shot to fame when he coached Boris Becker in becoming the first unseeded player and the youngest to win at the Wimbledon in 1985 at the age of 17!!!
He today holds a thesis on "psychology in tennis"!
The cricketer mentioned above is non other than John Buchanan who was appointed the coach of Australian Cricket team in 1999 and who propelled the team to unprecedented success.
At one stage his record was 15 wins from 15 games played.
I also have reverse example of champions (whom i don't wish to name) who proved to be disasterous coaches....!!!
---
While i don't intend to say that i am a Gunther or Buchanan by any stretch of imagination
neither do i intend to say that i am a great trading coach
all i want to say is that
i strongly felt that i had a few important things to tell the budding traders
and that i need not be a trading champion myself to make champions out of you!
a coach can be successful without being a champion himself or herself
but a champion generally doesn't become a champion without a coach!
Saturday, November 27, 2010
weapons of mass destruction
EMI
= Sorrow available in instalments
Credit Cards
= Sorrow for "free"
Debit Cards
= Sorrow for "money"
Social and peer pressure
= competition for sorrow
Envy
= sorrow of 'lack of sorrow'
Advertisements
= Sorrow glorified
Brands
= Sorrow standardized
Malls
= Sorrow enmass'
Sale
= Festivals of sorrow
= Sorrow available in instalments
Credit Cards
= Sorrow for "free"
Debit Cards
= Sorrow for "money"
Social and peer pressure
= competition for sorrow
Envy
= sorrow of 'lack of sorrow'
Advertisements
= Sorrow glorified
Brands
= Sorrow standardized
Malls
= Sorrow enmass'
Sale
= Festivals of sorrow
Friday, November 26, 2010
interpreting change in open interest
when a stock falls on increase in open interest, go short
when a stock rises on increase in open interest, go long
when a stock falls on decrease in open interest, unwind long but wait for shorting
when a stock rises on decrease in open interest, cover shorts but wait for going long
if you couple this information with put/call ratio, the results can be amazing!
when a stock rises on increase in open interest, go long
when a stock falls on decrease in open interest, unwind long but wait for shorting
when a stock rises on decrease in open interest, cover shorts but wait for going long
if you couple this information with put/call ratio, the results can be amazing!
interpreting put-call ratio
During up-move
1. put-call ratio much higher than 1.0
= continuation of the up-trend till the ratio comes down
2. put-call ratio slightly higher than 1.0
= approaching reversal
3. put-call ratio much lower than 1.0
= slowdown of up-trend or reversal on the cards
4. put-call ratio slightly lower than 1.0
= continuation of the up-trend till the ratio comes down or rises further.
---
During down-move
1. put-call ratio much higher than 1.0
= a panic situation. not sustainable for long. slowdown of down-trend or reversal on the cards
2. put-call ratio slightly higher than 1.0
= continuation of the down-trend till the ratio comes down or goes up
3. put-call ratio much lower than 1.0
= continuation of the down-trend till the ratio goes up.
4. put-call ratio slightly lower than 1.0
= approaching reversal
---
if you couple this information with change in open interest, the results can be amazing!
1. put-call ratio much higher than 1.0
= continuation of the up-trend till the ratio comes down
2. put-call ratio slightly higher than 1.0
= approaching reversal
3. put-call ratio much lower than 1.0
= slowdown of up-trend or reversal on the cards
4. put-call ratio slightly lower than 1.0
= continuation of the up-trend till the ratio comes down or rises further.
---
During down-move
1. put-call ratio much higher than 1.0
= a panic situation. not sustainable for long. slowdown of down-trend or reversal on the cards
2. put-call ratio slightly higher than 1.0
= continuation of the down-trend till the ratio comes down or goes up
3. put-call ratio much lower than 1.0
= continuation of the down-trend till the ratio goes up.
4. put-call ratio slightly lower than 1.0
= approaching reversal
---
if you couple this information with change in open interest, the results can be amazing!
Wednesday, November 24, 2010
understanding crowd - IV
"Strength of the crowd is in its numbers"
As a corollary, when two crowds of differing opinions come face to face, the bigger crowd decides the resultant!
As another corollary, the larger the crowd the longer it survives before getting scuttled!
A rally is nothing but crowd behaviour at its finest!
So, applying the above logic to a rally
the bull camp is the defending crowd
the bear camp is the offensive crowd
when both these crowds come face to face
1) the bigger crowd decides the direction of the market
2) the larger the following (volumes) of the winner crowd, the longer the rally sustains
.
Also, the speed of a correction is directly proportional to the speed of dispersing of the tired crowd and the speed of increase in the following of the challenger crowd.
.
.
.
.
(jointly written with Ashish Dewett)
.
.
(to be continued)
As a corollary, when two crowds of differing opinions come face to face, the bigger crowd decides the resultant!
As another corollary, the larger the crowd the longer it survives before getting scuttled!
A rally is nothing but crowd behaviour at its finest!
So, applying the above logic to a rally
the bull camp is the defending crowd
the bear camp is the offensive crowd
when both these crowds come face to face
1) the bigger crowd decides the direction of the market
2) the larger the following (volumes) of the winner crowd, the longer the rally sustains
.
Also, the speed of a correction is directly proportional to the speed of dispersing of the tired crowd and the speed of increase in the following of the challenger crowd.
.
.
.
.
(jointly written with Ashish Dewett)
.
.
(to be continued)
understanding crowd - III
A full century ago
French social psychologist Gustave Le Bon had said
"A crowd can never accomplish acts demanding a high degree of intelligence"
Crowd behaviour is utter mediocrity at its extreme hype!
All crowds are destined to disperse after the binding force - the influence, fades!
A crowd movement is like a tide that washes ashore all rubbish alongwith pearls and seashells!
Crowd behaviour is stupidity and mass-hypnotism at its high!
Nobody knows why but everyone is running because he sees everyone running.
It is easy to establish the presence of such a contagion, but not easy to explain.
Proof (of what is happening) becomes more sanctimonious than the Reason (of why it is happening)!
World is full of approval-seeking people ever-so-willing to be labelled as "right"
and there is no way they can be right except being with the crowd!!
Hence, there is no dearth of followers in a crowd!!!
Beyond a critical mass level, crowd is a self-growing self-fuelling monster
200 years ago, the great French thinker Victor Hugo had said
"Nothing can stop an idea whose time has come"
It must have been said in context with the crowd behavior.
It can be safely presumed that 'nothing can stop a crowd whose trigger has been pulled'.
Traders seeking sense and logic in rallies are as misplaced
as is the science looking for logic in art!
Little wonder the "crowd" rallies are big
and inevitably followed by big correction.
.
.
.
(to be continued)
French social psychologist Gustave Le Bon had said
"A crowd can never accomplish acts demanding a high degree of intelligence"
Crowd behaviour is utter mediocrity at its extreme hype!
All crowds are destined to disperse after the binding force - the influence, fades!
A crowd movement is like a tide that washes ashore all rubbish alongwith pearls and seashells!
Crowd behaviour is stupidity and mass-hypnotism at its high!
Nobody knows why but everyone is running because he sees everyone running.
It is easy to establish the presence of such a contagion, but not easy to explain.
Proof (of what is happening) becomes more sanctimonious than the Reason (of why it is happening)!
World is full of approval-seeking people ever-so-willing to be labelled as "right"
and there is no way they can be right except being with the crowd!!
Hence, there is no dearth of followers in a crowd!!!
Beyond a critical mass level, crowd is a self-growing self-fuelling monster
200 years ago, the great French thinker Victor Hugo had said
"Nothing can stop an idea whose time has come"
It must have been said in context with the crowd behavior.
It can be safely presumed that 'nothing can stop a crowd whose trigger has been pulled'.
Traders seeking sense and logic in rallies are as misplaced
as is the science looking for logic in art!
Little wonder the "crowd" rallies are big
and inevitably followed by big correction.
.
.
.
(to be continued)
understanding crowd - II
As already mentioned (in part-I)
a crowd is not a crowd in psychology till it has certain characteristics.
In psychology,
Group + Influence = Crowd
So the important factor is
"Influence"
Who influences?
What influences?
Is it the politics?
economics?
A group of sheep never goes anywhere!
So, the influence on the group is rarely from inside.
It has to come from outside!
Political or Economical developments are definitely among the influences!
But these have small effects.
Sheep traders, who are majority in number but minority in value
don't move much immediately in the wake of any political or economical happening!
they just wait for secondary triggers - initial outcome of the original happenings.
so, who decides those secondary triggers?
who is behind those thick dark veils in the market ?
who actually influences the stock market crowd?
It is "the big money"
it constitutes FIIs, DIIs, Funds, Banks, and alike.
the big surplus money flow in the world comes in handy in such adventures!
These big pockets can kneel down an elephant what to talk of overbought RSI
and jack up the blue-whale what to talk of severely oversold SMA
They can bulldoze the logic
and create severe ripples of sentiments...
...
...
...
(to be continued)
a crowd is not a crowd in psychology till it has certain characteristics.
In psychology,
Group + Influence = Crowd
So the important factor is
"Influence"
Who influences?
What influences?
Is it the politics?
economics?
A group of sheep never goes anywhere!
So, the influence on the group is rarely from inside.
It has to come from outside!
Political or Economical developments are definitely among the influences!
But these have small effects.
Sheep traders, who are majority in number but minority in value
don't move much immediately in the wake of any political or economical happening!
they just wait for secondary triggers - initial outcome of the original happenings.
so, who decides those secondary triggers?
who is behind those thick dark veils in the market ?
who actually influences the stock market crowd?
It is "the big money"
it constitutes FIIs, DIIs, Funds, Banks, and alike.
the big surplus money flow in the world comes in handy in such adventures!
These big pockets can kneel down an elephant what to talk of overbought RSI
and jack up the blue-whale what to talk of severely oversold SMA
They can bulldoze the logic
and create severe ripples of sentiments...
...
...
...
(to be continued)
understanding crowd - I
a crowd is not considered a crowd in psychology till
- it turns in a particular direction
- personality of individuals is lost in it
- it is driven by reasons but is not conscious about it
- logic goes to sleep and impulse takes the driver's seat
- intelligence goes on leave, wisdom is scared away
- there is overwhelming dominance by sentiments
---
so when caught in a crowd
just run
in its direction.
when out of a crowd
look for one!
And for heavens sake
never stand against it!!
---
And when does the crowd turn?
not so early
not so easily...
atleast never mistaken its slowing down as its reversal
look for typical symptoms of its reversal including its tiring out.
it falls, like every demon, only after a prolonged effort and gyrations!!!
- it turns in a particular direction
- personality of individuals is lost in it
- it is driven by reasons but is not conscious about it
- logic goes to sleep and impulse takes the driver's seat
- intelligence goes on leave, wisdom is scared away
- there is overwhelming dominance by sentiments
---
so when caught in a crowd
just run
in its direction.
when out of a crowd
look for one!
And for heavens sake
never stand against it!!
---
And when does the crowd turn?
not so early
not so easily...
atleast never mistaken its slowing down as its reversal
look for typical symptoms of its reversal including its tiring out.
it falls, like every demon, only after a prolonged effort and gyrations!!!
Monday, November 22, 2010
availability and affordability of hell
2500 years ago
Buddha pointed towards "desire" as the root cause of "sorrow".
the truth hasn't changed much in these 2500 years
except for one word....
"desire"
the word "desire" in the above statement has been replaced by "consumption"
Today, "consumption" is the root cause of "sorrow".
we consume what we outrightly don't need
we consume what we don't really need
we consume more than we need
we consume costlier and higher than we need
we consume what we already have
we consume what is not good for us
....our lives are littered with criminal wastage!
resulting into unending unjustified misery!
---
Sorrow, which used to be a supply-side despair
has turned into a demand-side curse!
availability and affordability of hell
has become an irresistable invitation
in the absence of a real agenda!
---
Buddha pointed towards "desire" as the root cause of "sorrow".
the truth hasn't changed much in these 2500 years
except for one word....
"desire"
the word "desire" in the above statement has been replaced by "consumption"
Today, "consumption" is the root cause of "sorrow".
we consume what we outrightly don't need
we consume what we don't really need
we consume more than we need
we consume costlier and higher than we need
we consume what we already have
we consume what is not good for us
....our lives are littered with criminal wastage!
resulting into unending unjustified misery!
---
Sorrow, which used to be a supply-side despair
has turned into a demand-side curse!
availability and affordability of hell
has become an irresistable invitation
in the absence of a real agenda!
---
Sunday, November 21, 2010
give me a chance!
a man trekked all the way up
to the top of the mountain
and shouted on top of his voice
"if by chance
i get a chance
i'll be successfullllllllllll.....!
i want to be successful
pleeeeeeeeeeeease help me with a chance around!!!"
---
his shriek echoed in the valley below
"if by chance
i SEE a chance
i'll be successfullllllllllll.....!
i want to be successful
pleeeeeeeeeeeease help me SEE the chance around!!!"
---
the man was confused to hear what he heard!
"what's the matter son?" the lone tree on the mountain top whispered...
"my echo is not exactly what i said?" asked the perplexed man
"this is a valley of enlightenment, son!" the tree replied
"it wants to tell u that
the unlucky souls are not short of luck
they just have weak or cursed eyesight!
they are unable to see the chance as a chance!
chances are always around....
it is only that we don't recognise a chance in the chance!
rather, there is nothing called chance....
mind has the ability to convert anything or everything into a chance!"
---
"so don't ask for a chance, son
ask for a better eyesight
or better still
ask for a better mindsight
to recognise the chances
all around...
(www.flyingovercloud9.blogspot.com)
to the top of the mountain
and shouted on top of his voice
"if by chance
i get a chance
i'll be successfullllllllllll.....!
i want to be successful
pleeeeeeeeeeeease help me with a chance around!!!"
---
his shriek echoed in the valley below
"if by chance
i SEE a chance
i'll be successfullllllllllll.....!
i want to be successful
pleeeeeeeeeeeease help me SEE the chance around!!!"
---
the man was confused to hear what he heard!
"what's the matter son?" the lone tree on the mountain top whispered...
"my echo is not exactly what i said?" asked the perplexed man
"this is a valley of enlightenment, son!" the tree replied
"it wants to tell u that
the unlucky souls are not short of luck
they just have weak or cursed eyesight!
they are unable to see the chance as a chance!
chances are always around....
it is only that we don't recognise a chance in the chance!
rather, there is nothing called chance....
mind has the ability to convert anything or everything into a chance!"
---
"so don't ask for a chance, son
ask for a better eyesight
or better still
ask for a better mindsight
to recognise the chances
all around...
(www.flyingovercloud9.blogspot.com)
Me and my 11 friends
i want to do it
i always wanted to do it
i asked my friends for their opinion
my self doubt said
"you can't"
my ego said
"you shouldn't"
my self-control said
"don't"
my self-worth said
"can you?"
my self-conscience said
"you may"
my self-consciousness said
"you haven't ever"
my self-image said
"you just can't"
my self-esteem said
"you should have already"
my self-respect said
"atleast try, now!"
my self-confidence said
"you can"
my character said
"you must"
I thanked them all and said
"come, let's start!"
(www.flyingovercloud9.blogspot.com)
i always wanted to do it
i asked my friends for their opinion
my self doubt said
"you can't"
my ego said
"you shouldn't"
my self-control said
"don't"
my self-worth said
"can you?"
my self-conscience said
"you may"
my self-consciousness said
"you haven't ever"
my self-image said
"you just can't"
my self-esteem said
"you should have already"
my self-respect said
"atleast try, now!"
my self-confidence said
"you can"
my character said
"you must"
I thanked them all and said
"come, let's start!"
(www.flyingovercloud9.blogspot.com)
Friday, November 19, 2010
discovering the purpose of my life
I googled for "purpose of life"
and the first result led me to the following webpage
http://www.stevepavlina.com/blog/2005/01/how-to-discover-your-life-purpose-in-about-20-minutes/
----
I followed it honestly and came out with the following list of mine.
This is not the final one , i am sure, and not necessarily in the order of importance.
Also, I didn't cry in the end as mentioned in the webpage but definitely became numb.
Here is the list:-
. have a house, bank balance and fully-satisfied life?
. see my kids become "something"?
. become a great writer?
. enjoy tourism around India and the globe?
. relax and enjoy everyday of life?
. read as much as possible of wisdom and knowledge about various aspects of life that has been written since thousands of years?
. inspire and awaken people?
. to spend years as an excellent simple efficient effective GM?
. to experience time freedom and money freedom?
. live a cosmic life; the one that is in unison with the universe?
. become an amazingly successful trader with amazing techniques?
. want to look at life in a different way and discover the real one?
. want to reach the age of 90 (be around till that time)?
. want to drink life in the cups of music, writings, paintings, food, visuals, experiences, explorations...?
. want to be happy all life?
(myunauthorisedautobiography.blogspot.com)
and the first result led me to the following webpage
http://www.stevepavlina.com/blog/2005/01/how-to-discover-your-life-purpose-in-about-20-minutes/
----
I followed it honestly and came out with the following list of mine.
This is not the final one , i am sure, and not necessarily in the order of importance.
Also, I didn't cry in the end as mentioned in the webpage but definitely became numb.
Here is the list:-
. have a house, bank balance and fully-satisfied life?
. see my kids become "something"?
. become a great writer?
. enjoy tourism around India and the globe?
. relax and enjoy everyday of life?
. read as much as possible of wisdom and knowledge about various aspects of life that has been written since thousands of years?
. inspire and awaken people?
. to spend years as an excellent simple efficient effective GM?
. to experience time freedom and money freedom?
. live a cosmic life; the one that is in unison with the universe?
. become an amazingly successful trader with amazing techniques?
. want to look at life in a different way and discover the real one?
. want to reach the age of 90 (be around till that time)?
. want to drink life in the cups of music, writings, paintings, food, visuals, experiences, explorations...?
. want to be happy all life?
(myunauthorisedautobiography.blogspot.com)
Tuesday, November 16, 2010
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.
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.
Monday, November 15, 2010
Trading with Memory!
Traders are humans.
And all humans have three kinds of memory.
1) sensory memory
2) working memory
3) reference memory
Much of what we see or hear in the market is crap.
Our sensory memory rightly discards much of it hence saving our decision system from overheating or overloading.
Only whatever is noteworthy is passed on by the sensory memory to the working memory "for a closer look".
This includes things which can be potentially threatening or rewarding!
If your working memory "is not impressed" with this shortlisted information, it is dropped.
Otherwise, it is double-checked with the reference memory.
So,what is the use of this all theory?
Simple.
First, Keep your sensory memory free from all clutter.
Don't overload it with a flood of irrelevant market news being pumped by the business channels etc.
Otherwise there is every chance that this highly sensitive and important memory will malfunction.
Important information will either be missed or crap will be passed on to the inner echelons.
Als, too much of hyperactive information flood can create illusion for this sensory barrier resulting in over-reaction or under-reaction.
Second, Keep your Reference memory well stacked with rich knowledge and experience.
This will help it give the right decision and consultation whenever the working memory throws any qualified question!
And in between these two memories (sensory and reference memories) lies the thankless job of the working memory which has to segregate diamonds out of the shortlisted piece of glasses!
Keep it fresh and sincere!
Moral of the story :
Trading is fun but not funny!
And all humans have three kinds of memory.
1) sensory memory
2) working memory
3) reference memory
Much of what we see or hear in the market is crap.
Our sensory memory rightly discards much of it hence saving our decision system from overheating or overloading.
Only whatever is noteworthy is passed on by the sensory memory to the working memory "for a closer look".
This includes things which can be potentially threatening or rewarding!
If your working memory "is not impressed" with this shortlisted information, it is dropped.
Otherwise, it is double-checked with the reference memory.
So,what is the use of this all theory?
Simple.
First, Keep your sensory memory free from all clutter.
Don't overload it with a flood of irrelevant market news being pumped by the business channels etc.
Otherwise there is every chance that this highly sensitive and important memory will malfunction.
Important information will either be missed or crap will be passed on to the inner echelons.
Als, too much of hyperactive information flood can create illusion for this sensory barrier resulting in over-reaction or under-reaction.
Second, Keep your Reference memory well stacked with rich knowledge and experience.
This will help it give the right decision and consultation whenever the working memory throws any qualified question!
And in between these two memories (sensory and reference memories) lies the thankless job of the working memory which has to segregate diamonds out of the shortlisted piece of glasses!
Keep it fresh and sincere!
Moral of the story :
Trading is fun but not funny!
Gone with the wind!
Option trading is like a sailboat!
You don't need to move it.
You don't need to do something.
You don't need to do anything.
All it expects from you is
predict when the wind will flow
and in which direction!
Till then just sit and enjoy the sun!
Winds do move.
And when they move, they don't change direction too frequently!
So,just raise the sail
turn its face in the line of the wind
lock the sail
and enjoy fishing!
You don't need to move it.
You don't need to do something.
You don't need to do anything.
All it expects from you is
predict when the wind will flow
and in which direction!
Till then just sit and enjoy the sun!
Winds do move.
And when they move, they don't change direction too frequently!
So,just raise the sail
turn its face in the line of the wind
lock the sail
and enjoy fishing!
Sunday, November 14, 2010
4 steps to become a legendary trader!
While reading Gurcharan Das's masterpiece
"The Difficulty of Being Good" (Penguin Books)
I have been reminded of a beautiful life philosophy we read in school only to forget on reaching the college!
This may sound old-fashioned
but is a fine life-technology
written by a great mind,
sage Manu
in 100AD
in his immortal treatise, Manu-Smriti.
As prescribed by the great sage, the human life span is divided into four stages known as ‘ashrams’ (shelter).
The Vedas define a specific purpose for each ashram and offer specific instructions to be followed in each ashram.
I. The first ashram, Brahmacharya, is the student phase of life when the person is supposed to immerse himself or herself to learn the art of life and that of making a living.
II. The second ashram, Grahasta (meaning householder) ashram is the stage of family life. It constitutes raising a family, earning a living through the skills acquired during Brahmacharya ashram. It encourages the enjoyment of material life.
III. The third ashram, Vanaprastha (Retreat to Forest) indicates living in a withdrawn manner. People in this ashram play the role of mentors.
IV. The final stage is Sanyasa or renunciation. The person wthdraws from society to spend the remaining part of his or her life in meditation and solitude.
----------
I found it interesting as well as scary!
Scary because of seeming impossible implementation of ashrams in today's social setup.
Interestingly, i found it very useful for anyone who wants to prepare for trading.
Stage I:
Brahmacharya = Student phase to learn trading and technical analyses, refraining from trading!
True to expectations - this "Brahmacharya" is impossible for the debonair traders!
Stage II:
Grahasta = Making-a-living-by-trading phase
True to anticipation, ill-trained traders (who skipped the first ashram) fail in this stage except 'enjoying the material life' at the expense of the principal amount!
Stage III:
Vanaprastha = Retreat to forest (of investing)
This stage never comes! One can't be a good mentor if he hasn't been a good student!
Stage IV:
Sanyasa = True to the Inevitability, the dejected and rejected non-trader gets ejected from the market to spend his or her remaining life in meditation and solitude.
Strangely, this lost trader takes up the Brahmacharya (student phase) after the pain and humiliation of the Sanyasa!
In this second innings, Grahasta phase (making a living and enjoying the worldly pleasures) comes but with the spirit of Vanaprastha, courtesy the bitter experience of the first innings!
---
"The Difficulty of Being Good" (Penguin Books)
I have been reminded of a beautiful life philosophy we read in school only to forget on reaching the college!
This may sound old-fashioned
but is a fine life-technology
written by a great mind,
sage Manu
in 100AD
in his immortal treatise, Manu-Smriti.
As prescribed by the great sage, the human life span is divided into four stages known as ‘ashrams’ (shelter).
The Vedas define a specific purpose for each ashram and offer specific instructions to be followed in each ashram.
I. The first ashram, Brahmacharya, is the student phase of life when the person is supposed to immerse himself or herself to learn the art of life and that of making a living.
II. The second ashram, Grahasta (meaning householder) ashram is the stage of family life. It constitutes raising a family, earning a living through the skills acquired during Brahmacharya ashram. It encourages the enjoyment of material life.
III. The third ashram, Vanaprastha (Retreat to Forest) indicates living in a withdrawn manner. People in this ashram play the role of mentors.
IV. The final stage is Sanyasa or renunciation. The person wthdraws from society to spend the remaining part of his or her life in meditation and solitude.
----------
I found it interesting as well as scary!
Scary because of seeming impossible implementation of ashrams in today's social setup.
Interestingly, i found it very useful for anyone who wants to prepare for trading.
Stage I:
Brahmacharya = Student phase to learn trading and technical analyses, refraining from trading!
True to expectations - this "Brahmacharya" is impossible for the debonair traders!
Stage II:
Grahasta = Making-a-living-by-trading phase
True to anticipation, ill-trained traders (who skipped the first ashram) fail in this stage except 'enjoying the material life' at the expense of the principal amount!
Stage III:
Vanaprastha = Retreat to forest (of investing)
This stage never comes! One can't be a good mentor if he hasn't been a good student!
Stage IV:
Sanyasa = True to the Inevitability, the dejected and rejected non-trader gets ejected from the market to spend his or her remaining life in meditation and solitude.
Strangely, this lost trader takes up the Brahmacharya (student phase) after the pain and humiliation of the Sanyasa!
In this second innings, Grahasta phase (making a living and enjoying the worldly pleasures) comes but with the spirit of Vanaprastha, courtesy the bitter experience of the first innings!
---
"Who runs the World?"
Heard aloud
outside Airforce One
at 2300hrs GMT
10000 ft. above ground
while crossing the Atlantic
in pitch dark
"Who runs the World?
- God or America?"
after 70 seconds of pin drop silence
came the reply
"Americaaaaaaaaaaaaaaaaaaaaaa......!"
One hour passed....
before the volcano erupted again
"Whooooooooo runs Americaaaaaaaaa?
- God or Me?"
again 100 seconds passed
before the reply
"Meeeeeeeeeeeee...............!!"
One hour passed again.....
before a somber voice whispered
"How do I do it?"
this time there was silence for full 600 seconds
before the shriekkkkkk...
"I don't knowwwwwwww...................!!!"
"It is the trend boys! The trend is our friend!"
"And who will change the trend - God or Me?"
and then there was a deafening silence till the dawn
when came the reply
"Godddddddddddddddddd...............!"
"Amen!"
outside Airforce One
at 2300hrs GMT
10000 ft. above ground
while crossing the Atlantic
in pitch dark
"Who runs the World?
- God or America?"
after 70 seconds of pin drop silence
came the reply
"Americaaaaaaaaaaaaaaaaaaaaaa......!"
One hour passed....
before the volcano erupted again
"Whooooooooo runs Americaaaaaaaaa?
- God or Me?"
again 100 seconds passed
before the reply
"Meeeeeeeeeeeee...............!!"
One hour passed again.....
before a somber voice whispered
"How do I do it?"
this time there was silence for full 600 seconds
before the shriekkkkkk...
"I don't knowwwwwwww...................!!!"
"It is the trend boys! The trend is our friend!"
"And who will change the trend - God or Me?"
and then there was a deafening silence till the dawn
when came the reply
"Godddddddddddddddddd...............!"
"Amen!"
The real horses in the race!
A horse came into the stable and went straight to his buddy horse!
"I am very angry with you!"
"Why, dear?"
"The Mayor in the party was telling his friend that he is going to bet on you in the Sunday race on the tip of your jockey! Your jockey is a dishonest man!"
"But the jockey is bluffing!"
"Why?"
"Because I never told him that I am gonna win on Sunday!"
"Why?"
"Because I don't know it myself! And even if I knew about my fate, i don't know the fate of you fellow friends who will race with me! And even if I knew that, I don't know human language and my jockey doesn't know mine!"
"Oh, I see! But then why is your jockey lying?"
"Well, he says the same thing - that I am going to win the next Sunday race - to every new customer every week! He knows that someday I will. Either that will happen by law of averages, or I will have to do it lest I be shot! The client, on the other hand, is always dying to believe some story just before the race, courtesy his warm pocket!"
"But doesn't your jockey lose face whenever you don't win?"
"Well, the jockey blames it all on me. And the client can't say anything to me as I never gave the tip to him that I am going to win!"
"Wao!!"
"And that is not all. All jockeys are saying the same things to their clients. No horse minds that. The horses are getting good stuff to eat, jockeys are getting paid, brokers are making money......."
"Poor clients! These fat betters have got the bucks and want to throw them. We just give them a nice joyous way! They are the real horses in the race whom the brokers are betting big on!"
"Cheers! Neigh......Neighhhh..........."
"Cheers! Neigh......Neigh.....Neighhhh..........."
"I am very angry with you!"
"Why, dear?"
"The Mayor in the party was telling his friend that he is going to bet on you in the Sunday race on the tip of your jockey! Your jockey is a dishonest man!"
"But the jockey is bluffing!"
"Why?"
"Because I never told him that I am gonna win on Sunday!"
"Why?"
"Because I don't know it myself! And even if I knew about my fate, i don't know the fate of you fellow friends who will race with me! And even if I knew that, I don't know human language and my jockey doesn't know mine!"
"Oh, I see! But then why is your jockey lying?"
"Well, he says the same thing - that I am going to win the next Sunday race - to every new customer every week! He knows that someday I will. Either that will happen by law of averages, or I will have to do it lest I be shot! The client, on the other hand, is always dying to believe some story just before the race, courtesy his warm pocket!"
"But doesn't your jockey lose face whenever you don't win?"
"Well, the jockey blames it all on me. And the client can't say anything to me as I never gave the tip to him that I am going to win!"
"Wao!!"
"And that is not all. All jockeys are saying the same things to their clients. No horse minds that. The horses are getting good stuff to eat, jockeys are getting paid, brokers are making money......."
"Poor clients! These fat betters have got the bucks and want to throw them. We just give them a nice joyous way! They are the real horses in the race whom the brokers are betting big on!"
"Cheers! Neigh......Neighhhh..........."
"Cheers! Neigh......Neigh.....Neighhhh..........."
Clear Hai!
God and Advertisements are everywhere.
Nothing moves without them!
And anything moves with them!!!
Ads are of 6 types:
1. Logical
Ads which appeal to your left brain!
= Like the ads of LIC, Water purifiers, Tata Sky, Dettol
2. Emotional
Ads which want to "set" your Attitude in the right brain!
= Like the ads of Fevicol, Raymonds
3. Abstract
Ads which want to "set" your Ego
= Like the ad of Scorpio, Bournville' !
4. Demostrative
Ads which know they have to "prove it" to "win it"
= Like the ads of Harpic, Dove, Fair & Lovely!
5. Endorsement
Ads directed at the sheep inside every human
= All ads by celebrities!
6. Experiential
Ads which make you feel "it"
= Like the ads of Old Spice, Axe, D-cold, Maggi,
---------------
Stock markets trap you by using these 6 kinds of ad methods!
1. Logical
e.g. " It is severely oversold. Can't go down any further. "
2. Emotional
e.g. by fuelling the panic & greed,
by fanning the left-out feeling....
3. Abstract
symbols of prosperity and powerplays before your eyes
4. Demostrative
trader interviews and success stories
5. Endorsement
all expert opinions and recommendations
6. Experiential
every accidental profit traps your mind for a larger fall!
--------------
To protect myself from all this
I always keep 'Sprite' in my refrigerator!
Clear Hai !!!
-------------
Nothing moves without them!
And anything moves with them!!!
Ads are of 6 types:
1. Logical
Ads which appeal to your left brain!
= Like the ads of LIC, Water purifiers, Tata Sky, Dettol
2. Emotional
Ads which want to "set" your Attitude in the right brain!
= Like the ads of Fevicol, Raymonds
3. Abstract
Ads which want to "set" your Ego
= Like the ad of Scorpio, Bournville' !
4. Demostrative
Ads which know they have to "prove it" to "win it"
= Like the ads of Harpic, Dove, Fair & Lovely!
5. Endorsement
Ads directed at the sheep inside every human
= All ads by celebrities!
6. Experiential
Ads which make you feel "it"
= Like the ads of Old Spice, Axe, D-cold, Maggi,
---------------
Stock markets trap you by using these 6 kinds of ad methods!
1. Logical
e.g. " It is severely oversold. Can't go down any further. "
2. Emotional
e.g. by fuelling the panic & greed,
by fanning the left-out feeling....
3. Abstract
symbols of prosperity and powerplays before your eyes
4. Demostrative
trader interviews and success stories
5. Endorsement
all expert opinions and recommendations
6. Experiential
every accidental profit traps your mind for a larger fall!
--------------
To protect myself from all this
I always keep 'Sprite' in my refrigerator!
Clear Hai !!!
-------------
Why do we Gamble - I
Trading is not Gambling.......
But it's first cousin!
Afterall,
Money won is twice as sweet as money earned! (from the movie "The Color of Money")
According to Thomas Zentall, professor of psychology at University of Kentucky in Lexington
"....there may be a fundamental biological reason for gambling rather than..........the idea that gambling is practiced because it is enjoyable and entertaining."
We don't know those "biological" reasons but are relieved to know that there exist some!
We can therefore, continue trading without feeling guilty (or atleast without being conscious) that we are doing something which tastes like gambling but has a different and better name!
---
But the interesting question is why do we gamble (or trade)?
Basically, those who gamble (less or more) broadly fall into six types.
1) First types are those who "know" they have been "left behind in life" and it hurts!
So, they want to "get it all" back......fast!
Such traders are hardworking restless traders who lose faster and are think seriously only while dressing their wounds!
("In a bet there is a fool and a thief. - Proverb")
2) Second types are those who "think" they have been left behind in life and it hurts but not that much!
So, they try hard and more
but not outright gamble!
Such traders have casual approach towards trading!
Occasionally they win, quite a few times they lose, but majority times they stay out due to fear!
3) Third types are those who "feel" that they have been "probably" left "out" in life
but it "doesn't seem to be hurting" them.
So, they keep doing their own sweet thing!
These are the people who irritate amateur traders by outperforming them thru mutual funds or long-term seemingly-dumb but highly profitable investments
despite not knowing anything beyond ABC of trading!
These third types tease the first two types to try harder and hence.............lose even more!
4) There is a strange fourth type who don't bother whether they have been "left behind" or "moved ahead".
They don't even acknowledge that any race is taking place!
They simply stay out of "everything".
Do they become extinct?
No.
Do they become out-dated?
Yes.
---
5 & 6) If you think only the left-behinds gamble, then hold your thoughts.
Even those who have "zoomed ahead" also gamble
(whereas even a laid-back approach would have rained them enough money to use it even as fuel for their chimneys!)
These fifth ones gamble to get entertainment.
And the sixth ones gamble due to bouts of carelessness!
The examples of the sixth ones are the Tatas who bought Land Rover - Jaguar as well as Chorus at ridiculous price!
or the L&T which bought big chunks of the crumbling Satyam like a child in a hurry!
They remind me of a famous saying by VP Pappy
"If you ain't just a little scared when you enter a casino, you are either very rich or you haven't studied the games enough."
---
Moral of the story?
If you can't avoid it, atleast understand it!
If you must play, decide upon three things at the start: the rules of the game, the stakes, and the quitting time. - Chinese Proverb
But it's first cousin!
Afterall,
Money won is twice as sweet as money earned! (from the movie "The Color of Money")
According to Thomas Zentall, professor of psychology at University of Kentucky in Lexington
"....there may be a fundamental biological reason for gambling rather than..........the idea that gambling is practiced because it is enjoyable and entertaining."
We don't know those "biological" reasons but are relieved to know that there exist some!
We can therefore, continue trading without feeling guilty (or atleast without being conscious) that we are doing something which tastes like gambling but has a different and better name!
---
But the interesting question is why do we gamble (or trade)?
Basically, those who gamble (less or more) broadly fall into six types.
1) First types are those who "know" they have been "left behind in life" and it hurts!
So, they want to "get it all" back......fast!
Such traders are hardworking restless traders who lose faster and are think seriously only while dressing their wounds!
("In a bet there is a fool and a thief. - Proverb")
2) Second types are those who "think" they have been left behind in life and it hurts but not that much!
So, they try hard and more
but not outright gamble!
Such traders have casual approach towards trading!
Occasionally they win, quite a few times they lose, but majority times they stay out due to fear!
3) Third types are those who "feel" that they have been "probably" left "out" in life
but it "doesn't seem to be hurting" them.
So, they keep doing their own sweet thing!
These are the people who irritate amateur traders by outperforming them thru mutual funds or long-term seemingly-dumb but highly profitable investments
despite not knowing anything beyond ABC of trading!
These third types tease the first two types to try harder and hence.............lose even more!
4) There is a strange fourth type who don't bother whether they have been "left behind" or "moved ahead".
They don't even acknowledge that any race is taking place!
They simply stay out of "everything".
Do they become extinct?
No.
Do they become out-dated?
Yes.
---
5 & 6) If you think only the left-behinds gamble, then hold your thoughts.
Even those who have "zoomed ahead" also gamble
(whereas even a laid-back approach would have rained them enough money to use it even as fuel for their chimneys!)
These fifth ones gamble to get entertainment.
And the sixth ones gamble due to bouts of carelessness!
The examples of the sixth ones are the Tatas who bought Land Rover - Jaguar as well as Chorus at ridiculous price!
or the L&T which bought big chunks of the crumbling Satyam like a child in a hurry!
They remind me of a famous saying by VP Pappy
"If you ain't just a little scared when you enter a casino, you are either very rich or you haven't studied the games enough."
---
Moral of the story?
If you can't avoid it, atleast understand it!
If you must play, decide upon three things at the start: the rules of the game, the stakes, and the quitting time. - Chinese Proverb
Saturday, November 13, 2010
5 M's of trading
Trading is a one man industry!
Like any industry there are 5 crucial M's
--------------------------
"Man"
there is only one!
and that is you!!
Employ, train and manage a good "you"
Fire the bad "you" before it "fires" you!
--------------------------
"Money"
the principal amount
must have enough to deploy
must have enough in reserve
safeguard it
but use it
--------------------------
"Material"
margin amount and opportunity are the material of trading industry!
together, they are the raw material for the finished product
- profit!
both are important - alone none is of any use!
don't waste these materials which are in short supply and very costly!
also, in this industry, no re-work is permitted on the finished product!
--------------------------
"Method"
Yes, method is a must in this industry also
no method = all rubbish
--------------------------
"Machine"
The trade is the machine in this industry
Till you put the material in this machine
nothing will come out!
so, overcome your fear and take that trade!
--------------------------
Like any industry there are 5 crucial M's
--------------------------
"Man"
there is only one!
and that is you!!
Employ, train and manage a good "you"
Fire the bad "you" before it "fires" you!
--------------------------
"Money"
the principal amount
must have enough to deploy
must have enough in reserve
safeguard it
but use it
--------------------------
"Material"
margin amount and opportunity are the material of trading industry!
together, they are the raw material for the finished product
- profit!
both are important - alone none is of any use!
don't waste these materials which are in short supply and very costly!
also, in this industry, no re-work is permitted on the finished product!
--------------------------
"Method"
Yes, method is a must in this industry also
no method = all rubbish
--------------------------
"Machine"
The trade is the machine in this industry
Till you put the material in this machine
nothing will come out!
so, overcome your fear and take that trade!
--------------------------
"5s" of a trading mind
Everything in the world is created twice!
First in the mind, then in reality!!
A trader's dream success also obeys this rule.
And for this to happen a trader's workplace and his mind must be organised!
"5s" is the way for this!
"5s", invented in Japan, stands for five (5) Japanese words that start with the letter 'S':
--------------------
Seiri
(Tidiness)
"Throw away all rubbish"
= a trader should forget about all the jargon, trade simple and remember just the key lessons that matter!
--------------------
Seiton
(Orderliness)
"Set everything in proper place for quick retrieval and storage"
= all important lessons and checkpoints should be listed and available easily for quick reference when required!
--------------------
Seiso
(Cleanliness)
"Clean the workplace"
= a trader should maintain neat and clean body, mind, bank account, computer, net connection, trading room and intentions!
--------------------
Seiketsu
(Standardization)
"Standardize the way of maintaining cleanliness"
= a trader must have a method
--------------------
Shitsuke
(Discipline)
"Practice 5s daily - make it a way of life"
= a trader must follow the method!
--------------------
First in the mind, then in reality!!
A trader's dream success also obeys this rule.
And for this to happen a trader's workplace and his mind must be organised!
"5s" is the way for this!
"5s", invented in Japan, stands for five (5) Japanese words that start with the letter 'S':
--------------------
Seiri
(Tidiness)
"Throw away all rubbish"
= a trader should forget about all the jargon, trade simple and remember just the key lessons that matter!
--------------------
Seiton
(Orderliness)
"Set everything in proper place for quick retrieval and storage"
= all important lessons and checkpoints should be listed and available easily for quick reference when required!
--------------------
Seiso
(Cleanliness)
"Clean the workplace"
= a trader should maintain neat and clean body, mind, bank account, computer, net connection, trading room and intentions!
--------------------
Seiketsu
(Standardization)
"Standardize the way of maintaining cleanliness"
= a trader must have a method
--------------------
Shitsuke
(Discipline)
"Practice 5s daily - make it a way of life"
= a trader must follow the method!
--------------------
Prepaid Trading - IV
Life, they say, is the art of possibilities!
If that is so,
Trading with options is nothing less than the dance of possibilities!
And when you know that buying an option guarantees
"unlimited profit, limited loss"
then why not dance this dance!
My friend Rishant is real good at this!
In his words
"In life as well as trading, it is not what 'IS' that is exciting!
What's really thrilling is the thought of what 'CAN' be!"
Every month he sets aside a few thousand bucks for this "thrilling gamble".
He doesn't smoke, he doesn't drink, he is not a spendthrift either.....
but he does spare some money for this!
He calls it "lottery in the dalaal street"
Every month he buys this "lottery ticket"
He buys a cheap stock option for the next month series
of a good-stock-in-the-pit
(on the basis of technical analyses of 1 year chart)
of a strike value "what CAN be" instead of "what is"!!!
He bets for the seemingly impossible!
He bets for the opposite!!
Amazingly, more often than not, the opposite is what that has been happening
(albeit to different degrees!)
and over the months, he has surely become the artist of possibilities!!!
If that is so,
Trading with options is nothing less than the dance of possibilities!
And when you know that buying an option guarantees
"unlimited profit, limited loss"
then why not dance this dance!
My friend Rishant is real good at this!
In his words
"In life as well as trading, it is not what 'IS' that is exciting!
What's really thrilling is the thought of what 'CAN' be!"
Every month he sets aside a few thousand bucks for this "thrilling gamble".
He doesn't smoke, he doesn't drink, he is not a spendthrift either.....
but he does spare some money for this!
He calls it "lottery in the dalaal street"
Every month he buys this "lottery ticket"
He buys a cheap stock option for the next month series
of a good-stock-in-the-pit
(on the basis of technical analyses of 1 year chart)
of a strike value "what CAN be" instead of "what is"!!!
He bets for the seemingly impossible!
He bets for the opposite!!
Amazingly, more often than not, the opposite is what that has been happening
(albeit to different degrees!)
and over the months, he has surely become the artist of possibilities!!!
Prepaid Trading - III
Here is a clever trading tactic used by one of my friends who is an Army Major just retired from short-service commission.
He calls this Reconnaissance Ambush Trading!
This he does with a team of Options and Futures.
Whenever his TA (Technical Analyses) suggests that the market is going to make a big move
he gets ready but doesn't deploy his "futures" straightaway!
Instead, he "sends in a reconnaisance team of commandos" to "test the waters"!
He buys an "out-of-money" call or put option (as the case may be)
and waits....
This option is like a reconnaissance mission which is used to determine the enemy forces disposition, intention, composition and capabilities without exposing the troops to danger.
He uses option as "cover" for his main "cash" troops!
If the option goes in his favour, that's what his TA predicted and that's what he wanted!
He is in a profitable position and all he needs to decide now is whether he should reinforce his winning position to make it big or just let the option run alone as far as possible.
If the option goes against his TA
he doesn't mind it!
This is precisely the reason he sent in his "options" before his massive "cash" troops!
There is a strong chance that market is bluffing and will give him more juicy position to deploy his big backup cash reserve!
Since he has an "out-of-money" option position, the loss is much lesser and limited as compared to the adverse movement in the market.
e.g. a 100 point fall results in a 25 point option bleeding. But a full recovery with futures or bigger option will result in net 75 point profit!
So, he patiently waits till the tide turns
and then he goes all out on the offensive either with bigger "in-the-money" option or with futures!
In his words
"When I get the signal, I send in the option squad. On the basis of information I get from this core team, I decide whether and when to send my entire company in the battlefield! Many a times, these Option commandos are enough for the assignment!"
He calls this Reconnaissance Ambush Trading!
This he does with a team of Options and Futures.
Whenever his TA (Technical Analyses) suggests that the market is going to make a big move
he gets ready but doesn't deploy his "futures" straightaway!
Instead, he "sends in a reconnaisance team of commandos" to "test the waters"!
He buys an "out-of-money" call or put option (as the case may be)
and waits....
This option is like a reconnaissance mission which is used to determine the enemy forces disposition, intention, composition and capabilities without exposing the troops to danger.
He uses option as "cover" for his main "cash" troops!
If the option goes in his favour, that's what his TA predicted and that's what he wanted!
He is in a profitable position and all he needs to decide now is whether he should reinforce his winning position to make it big or just let the option run alone as far as possible.
If the option goes against his TA
he doesn't mind it!
This is precisely the reason he sent in his "options" before his massive "cash" troops!
There is a strong chance that market is bluffing and will give him more juicy position to deploy his big backup cash reserve!
Since he has an "out-of-money" option position, the loss is much lesser and limited as compared to the adverse movement in the market.
e.g. a 100 point fall results in a 25 point option bleeding. But a full recovery with futures or bigger option will result in net 75 point profit!
So, he patiently waits till the tide turns
and then he goes all out on the offensive either with bigger "in-the-money" option or with futures!
In his words
"When I get the signal, I send in the option squad. On the basis of information I get from this core team, I decide whether and when to send my entire company in the battlefield! Many a times, these Option commandos are enough for the assignment!"
Friday, November 12, 2010
Prepaid Trading - II
1) u have just 5000 in ur pocket
2) u don't want to take big risk
3) u want to make big money
4) u want to do this fast!
Impossible?
I m possible!
Trust prepaid (options) trading!
Step I :
put 4000 out of 5000 back in the chester.
Step II :
learn 2 technical indicators thoroughly.
Step III :
when your TA (technical analysis) indicates that the market is about to move up or down buy one lot call or put (whatever be the case) which is available at around 20 bucks. This will cost you around 1000.
if your TA is right the call/put (as the case may be) will zoom to 40 bucks in a few sessions.
book profit.
(even if your TA was wrong, all you would have lost is 1000. in that case, take another 1000 from your chester and take another shot. you have 5 such chances with the 5000 you started. but for the time being, i am sure ur TA would be correct!)
after step III, you now have 2000 in your pocket (besides 4000 in the chester)
Step IV :
when your TA (technical analysis) again indicates that the market is about to move up or down buy TWO lots of call or put (whatever be the case) which is available at around 20 bucks. This will cost you around 2000.
if your TA is right the call/put (as the case may be) will zoom to 40 bucks in a few sessions.
book profit.
now you have doubled your wealth again.
now you have 4000 in hand.
so far, you have doubled twice.
Now, divide your wealth again in two parts.
put 2000 in the chester (now your chester has 4000+2000=6000).
you now are left with 2000 in hand.
--------------
repeat Step IV with this 2000 and buy double the lots you bought last time!
and double it to 4000.
repeat Step IV again with 4000.
and double it to 8000.
Now you have doubled twice again.
divide it in two parts. put 4000 in the chester (now your chester has 4000+2000+4000=10000).
you now are left with 4000 in hand.
--------------
repeat Step IV with this 4000 and buy double the lots you bought last time!
and double it to 8000.
repeat Step IV again with 8000.
and double it to 16000.
Now you have doubled twice again.
so, divide your wealth-in-hand again in two parts.
put 8000 in the chester (now your chester has 4000+2000+4000+8000=18000).
you now are left with 8000 in hand.
---------------
repeat Step IV with this 8000 and buy double the lots you bought last time!
and double it to 16000.
repeat Step IV again with 16000.
and double it to 32000.
Now you have doubled twice again.
so, divide your wealth-in-hand again in two parts.
put 16000 in the chester (now your chester has 4000+2000+4000+8000+16000=34000).
you now are left with 16000 in hand.
--------------
repeat Step IV with this 16000 and buy double the lots you bought last time!
and double it to 32000.
repeat Step IV again with 32000.
and double it to 64000.
Now you have doubled twice again.
so, divide your wealth-in-hand again in two parts.
put 32000 in the chester (now your chester has 4000+2000+4000+8000+16000+32000=66000).
you now are left with 32000 in hand.
---------------
This way you keep doubling your fortune.
You keep increasing your chester money.
starting with minimum money.
without taking big risk (considering the backup money in your chester)
God forbid, if your TA goes wrong at any time, you can start with a lower step from a portion from the chester.
Have patience for the initial few steps. the compounding rise will take you higher than you can imagine faster than you can think!
---------------
all the best!!!
---------------
2) u don't want to take big risk
3) u want to make big money
4) u want to do this fast!
Impossible?
I m possible!
Trust prepaid (options) trading!
Step I :
put 4000 out of 5000 back in the chester.
Step II :
learn 2 technical indicators thoroughly.
Step III :
when your TA (technical analysis) indicates that the market is about to move up or down buy one lot call or put (whatever be the case) which is available at around 20 bucks. This will cost you around 1000.
if your TA is right the call/put (as the case may be) will zoom to 40 bucks in a few sessions.
book profit.
(even if your TA was wrong, all you would have lost is 1000. in that case, take another 1000 from your chester and take another shot. you have 5 such chances with the 5000 you started. but for the time being, i am sure ur TA would be correct!)
after step III, you now have 2000 in your pocket (besides 4000 in the chester)
Step IV :
when your TA (technical analysis) again indicates that the market is about to move up or down buy TWO lots of call or put (whatever be the case) which is available at around 20 bucks. This will cost you around 2000.
if your TA is right the call/put (as the case may be) will zoom to 40 bucks in a few sessions.
book profit.
now you have doubled your wealth again.
now you have 4000 in hand.
so far, you have doubled twice.
Now, divide your wealth again in two parts.
put 2000 in the chester (now your chester has 4000+2000=6000).
you now are left with 2000 in hand.
--------------
repeat Step IV with this 2000 and buy double the lots you bought last time!
and double it to 4000.
repeat Step IV again with 4000.
and double it to 8000.
Now you have doubled twice again.
divide it in two parts. put 4000 in the chester (now your chester has 4000+2000+4000=10000).
you now are left with 4000 in hand.
--------------
repeat Step IV with this 4000 and buy double the lots you bought last time!
and double it to 8000.
repeat Step IV again with 8000.
and double it to 16000.
Now you have doubled twice again.
so, divide your wealth-in-hand again in two parts.
put 8000 in the chester (now your chester has 4000+2000+4000+8000=18000).
you now are left with 8000 in hand.
---------------
repeat Step IV with this 8000 and buy double the lots you bought last time!
and double it to 16000.
repeat Step IV again with 16000.
and double it to 32000.
Now you have doubled twice again.
so, divide your wealth-in-hand again in two parts.
put 16000 in the chester (now your chester has 4000+2000+4000+8000+16000=34000).
you now are left with 16000 in hand.
--------------
repeat Step IV with this 16000 and buy double the lots you bought last time!
and double it to 32000.
repeat Step IV again with 32000.
and double it to 64000.
Now you have doubled twice again.
so, divide your wealth-in-hand again in two parts.
put 32000 in the chester (now your chester has 4000+2000+4000+8000+16000+32000=66000).
you now are left with 32000 in hand.
---------------
This way you keep doubling your fortune.
You keep increasing your chester money.
starting with minimum money.
without taking big risk (considering the backup money in your chester)
God forbid, if your TA goes wrong at any time, you can start with a lower step from a portion from the chester.
Have patience for the initial few steps. the compounding rise will take you higher than you can imagine faster than you can think!
---------------
all the best!!!
---------------
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!!!
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!!!
Tuesday, November 9, 2010
and the winner is.....
3 years ago I started a monthly SIP (Sytematic Investment Plan) with SBI Mutual Fund's Magnum Tax Gain'93.
I started it not because of my prudence
but because of
a) repeated edging by one Mr.Vijay (a real gentleman financial advisor whom I now trust utmost) and
b) the reason that I wanted to save some tax under section 80C but in a way which gives more return than traditional life insurance
(I believe that one should buy term insurance for life insurance and mutual fund with or without SIP for savings!) (the above mentioned fund gives 80C benefit besides market investment returns)
Frankly speaking, when i started the SIP with a small monthly contribution I was least excited!
Reason?
"It will take ages before the monthly systematic investment will becaome a fortune!" I thought.
Still, I did start with the SIP and gave 12 cheques to Vijay.
Every month it was an irritant to part with the instalment.
Many times I decided to stop the SIP after the committed 12 instalments.
But after around 8 months, one day I was pleasantly surprised to receive a dividend cheque from the MF.
It was a decent amount but it appeared many times bigger due to the surprise element!
Besides, my corpus had grown!
So, I continued with the MF after the first year as well.
Here, I wish to share that I started the SIP when the Sensex was above 20000 just before the crash!
But because of it being monthly SIP, my instalments kept entering the market at every stair in the staircase.
My SIP instalment went into the market at 20000 as well as 7500, 15000 as well as 9000, 12000 as well as 10000......
....and it is still continuing........
The annual dividends I get fund my kids annual fees automatically! Alternately, it leaves me with a handsome amount to do anything I wish to! Last year we had a grand annual family vacation in Kullu & Manali!
And the beauty is that the corpus is growing.....
.....in compounded fashion just like the prize money in Kaun Banega Karorpati (Who wants to be Millionaire).......
What was an irritant every month is today a monthly reminder of the assured and growing prosperity!
Every month I thank Vijay hearts of hearts for somehow forcing me into this equity-linked savings.
Jokingly, I have been playing a race between my savings in this MF and the growth in my self-trading earnings.
I have no hesitation in admitting that I have been left gasping behind the MF especially after this recent bull spurt!
Why I shared this story with you?
Two reasons.
First, to recommend SIP based Mutual Fund investing to everyone!
Second, to share a strange phenomenon mentioned below.
I have
never ever
never ever
never ever
thought of selling my SIP savings!
I just think of investing more and more......
I just think of topping it up whenever market is in oversold state!
whereas I rarely survive the itch to book profit in my trades!!!
What fantastic paradoxical opposite faces of my same self!!!
One is willing to not only hold all investments forever but keep adding to it! (The fund manager keeps rotating the investment into sectors and stocks as per the situation)
The other is dying to run away with the pennies after every round!
One full of stress!
One full of pleasure!!
I have least doubt who will win this race.
It will surely be the tortoise this time as well!
I started it not because of my prudence
but because of
a) repeated edging by one Mr.Vijay (a real gentleman financial advisor whom I now trust utmost) and
b) the reason that I wanted to save some tax under section 80C but in a way which gives more return than traditional life insurance
(I believe that one should buy term insurance for life insurance and mutual fund with or without SIP for savings!) (the above mentioned fund gives 80C benefit besides market investment returns)
Frankly speaking, when i started the SIP with a small monthly contribution I was least excited!
Reason?
"It will take ages before the monthly systematic investment will becaome a fortune!" I thought.
Still, I did start with the SIP and gave 12 cheques to Vijay.
Every month it was an irritant to part with the instalment.
Many times I decided to stop the SIP after the committed 12 instalments.
But after around 8 months, one day I was pleasantly surprised to receive a dividend cheque from the MF.
It was a decent amount but it appeared many times bigger due to the surprise element!
Besides, my corpus had grown!
So, I continued with the MF after the first year as well.
Here, I wish to share that I started the SIP when the Sensex was above 20000 just before the crash!
But because of it being monthly SIP, my instalments kept entering the market at every stair in the staircase.
My SIP instalment went into the market at 20000 as well as 7500, 15000 as well as 9000, 12000 as well as 10000......
....and it is still continuing........
The annual dividends I get fund my kids annual fees automatically! Alternately, it leaves me with a handsome amount to do anything I wish to! Last year we had a grand annual family vacation in Kullu & Manali!
And the beauty is that the corpus is growing.....
.....in compounded fashion just like the prize money in Kaun Banega Karorpati (Who wants to be Millionaire).......
What was an irritant every month is today a monthly reminder of the assured and growing prosperity!
Every month I thank Vijay hearts of hearts for somehow forcing me into this equity-linked savings.
Jokingly, I have been playing a race between my savings in this MF and the growth in my self-trading earnings.
I have no hesitation in admitting that I have been left gasping behind the MF especially after this recent bull spurt!
Why I shared this story with you?
Two reasons.
First, to recommend SIP based Mutual Fund investing to everyone!
Second, to share a strange phenomenon mentioned below.
I have
never ever
never ever
never ever
thought of selling my SIP savings!
I just think of investing more and more......
I just think of topping it up whenever market is in oversold state!
whereas I rarely survive the itch to book profit in my trades!!!
What fantastic paradoxical opposite faces of my same self!!!
One is willing to not only hold all investments forever but keep adding to it! (The fund manager keeps rotating the investment into sectors and stocks as per the situation)
The other is dying to run away with the pennies after every round!
One full of stress!
One full of pleasure!!
I have least doubt who will win this race.
It will surely be the tortoise this time as well!
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