surviving "heavy loss" phobia

4 things that can help u protect yourself from crippling effects of "heavy loss-phobia"

a. sound trading system which goes right around 7 times out of 10 and has well defined point (call it stoploss or SAR) where it auto signals reversal.

b. psychological strength to stick to the method.

c. enough buffer funds to keep you going in case of those 3 odd failures or unforeseen situations including circuits.

d. continuously improving the trading system.

e. not trading your own trades. asking someone to trigger those on your behalf so that you are psychologically free to focus on trade signals without bias. not counting lost pennies everytime of those 3 out of 10 trades.

swing trading thumb rule - I

take the position in-line with the trend at the start of the 2nd week of the series and ride without fear till the end of 3rd week of the series.

alternate trading

(in reply to a query)

http://www.mudraa.com/singlepost.php?messid=152809

dear chandrasekaranji,

very valid points. thanks for sharing.

i have given a lot of attention to these considerations in recent times. that is why i say that retail traders are playing on technical level and getting beaten at tactical level. 

i do not rely too much on technicals these days. 

one of my friend in a south indian city has a friend in a european stock exchange and is a top notch software professional. his job is to program and test and improve and manage the software for the top FIIs/ Banks which invest globally. his is quite a "secret" and "sensitive" job. he once told my friend that he comes to know whenever those big fat honchos are about to buy or sell en'mass. he told that they have all the info globally before hand. he told him that big men know it beforehand and make it happen for rest of the world. no amount of technical study can predict what those "doers" are going to do.

technicals are boys toys to self amuse. they do work but not sufficiently.

therefore, i have been working for the last several months to find ways to know DIRECTLY what the "operators" are going to do rather than "INDIRECTLY" trying to guess thru technicals what they are likely to do. 

i don't think that there can be more "scientific" way to do homework for trading! 

and trust me finding the shadow or fingerprints of operators is not impossible if you go all out with that focus. have found 2-3 and working to develop the details. 

regards

trend check?

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

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

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

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

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

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

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

how is trend decided? 

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

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

- moving average

- rsi

- options premium data analyses

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

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

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

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

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

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

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

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

happy "trading"

how and from where i learnt options

( in answer to a question)

see, i just studied options in a simple way. 

i learnt the basics from various websites thrown up by googl e.  first i learnt the basics from there and then i tried to learn strangle, straddle etc. but soon i realized that those advanced combinations are for deep pocket fii/dii/hni's....besides being complicated and risky.......and foolhardy. 

then i realized that even plain options are very powerful if only one's fundamental method is strong and well developed. so, i just focused on and learnt the basics of options thoroughly. i learnt their behaviour by continuously monitoring them in different situations. 

i realized that learning a tool very very thoroughly revealed powers of it which are much potent than the complicated combinations of the same. 

complicated strategies are only an alibi for lack of a sound basic method.

....and all this i learnt using my own head....with a lot of trial and error and hell lot of practice using just the fundamentals of the idea/concept behind "options".

and while i was on this grand exciting journey or reinventing the wheel of options, i came up with some original and powerful new ideas, tactics, strategies and insights.

fundamentals of anything has the seed of all advanced greenshoots. 

i tried many websites and a few ebooks on options but all seemed to confuse me beyond the basics. just like you can catch the truth behind a person from his body language, you can see thru a book from its word-language.......and these books were definitely lacking "self-confidence" and conviction about what they were preaching. and all were the same as far as the basics were concerned.

best wishes

operator truths every trader should know

- in day trading or short-term trading 1-2% people make the other 98% play.

- they know things beforehand....amazing....but not for them...call it insider information or whatever.....they bloody know all the crucial info....in toto...!!!

- they have got super powerful computers, software and networks (highly guarded with access denied to outside the coterie). they have links and access inside not only one or two but all the principal companies of all sectors across countries across continents. afterall, the money is one only....you can trace the roots of almost all the money to a handful of banks and entities.

- they have got practically unlimited money at almost zero interest! (how about that facility)? actually, they are the insiders, everyone else on the planet is the outsider!

- they don't worry about developments and news. they know the developments and news beforehand. many of them, they shape themselves. those which they don't know or can't influence don't effect them much. do you think governments anywhere can take any decision which is contra to their interests?

- businesses are as much as for the profit from the manipulation of stocks than from the profit from the primary production and distribution.

- operators don't buy options, they only sell (write) them.

- they don't choose which options to sell. they sell any option and as many of them which retail traders are willing to buy. only thing they control is the premium. they put much higher premium in the direction they don't want to go. this way they control the volumes in a particular direction.

- operators don't decide on the time of squaring the option. that is decided by the retail operators who bought it. they square the option and as many of them which the retail operators wish to square off. again, the only thing operators control is the premium at the time of squaring off. they put higher premium on the side which gives less benefit to the retail operator.

- the money is made by the operator not at the end of the series but continuously and non-stop at every second of the trading day in every single trade....they keep making money drop by drop, second by second....it is a myth that operators make a killing in big shots.....they don't....they keep making money by bleeding non stop without much ado....just like rivers are formed by drop by drop melting of snow over vast stretches of glaciers.

- operators are there because retail traders are there and in that proportion. otherwise, operators would have been forced to work only as VCs (venture capitalists).

- operators control/move market in 4 ways
a) actively buying
b) actively selling
c) refusing to support buying
d) refusing to support selling

- when they want you to participate, they don't move the market fast. and when they don't want people to get on board and still want to change the levels/altitudes of the market, they move it very swiftly by controlling bid prices and accepted prices......obedient army of computer networks do that.

- it is extremely difficult and impractical for a retail trader to trader after considering all factors at play. they can't. even otherwise they will go mad doing that. they have to find a tactical and smart and clever indirect way.

- operators don't like smart, clever, stable, silent traders.

- never panic....fear switches off the mind which alone can take on the mighty operators.

- if you don't have your own knife and fork to trade, don't sit at the table.

my own laws and rules of day-trading

my first introduction to stock market was in november 2003. but i got serious only in jan 2009. though i had become literate about trading by that time, my real education and training started only after that. and what a journey it has been in these 46 months. full of sweat, tears, blood, death and re-birth....

majority portion of this journey is archived in the form of my 1000+ articles and posts in mudraa.com as well as my blog.

while the learning is still on and will and should always be, i have no hesitation in admitting that i have passed out of the univ and started my pro journey.

in the past 2-3 months i have been seriously devoting time to fine-tune and test and retest and improve my trading method. during this period, i have written and shared quite less due to the time constraint.

today, was in quite a relaxed mood and took the liberty of teasing myself with one of my favourite self-questions - "what are the laws of day-trading as per you as of today as per your method and understanding?"

this is one question that i have been asking myself very very regularly so that i always keep the larger picture right before my eyes and mind.

here is the latest list of my laws and rules for day-trading.

- trade pro-trend and even your blunders will be pardoned. (i have devised my methods to identify the three phases - up trend, no-trend, down-trend)

- technical indicators are the time tables of operators. operators and bandits never stick to time table. don't fool yourself with technical indicators but be aware of them anyway. look for the clue of the operator movement. retail traders play at the technical level and lose at the tactical level. retail traders will lose lesser simply by playing the trade rather than trading the trade.

- market does opposite to the majority opinion.

- use options, not stoploss.

- do your homework and enjoy the "game" of operators. choose right, sit tight.

- never spend your profit. plough it back after taking out contribution to the buffer fund. start with small principal, don't infuse any more capital. resolve to be a millionaire from one coin with the clever method.

- when you realize your mistake or see that the situation has changed since your homework, admit it and save whatever coins are left. stand up and win back lost coins and more.

- play points and not money. gradually, you will develop strong stomach muscles for bigger bets without butterflies.

- take advantage of the temporary adversity rather than succumbing to it.

- divide your capital in parts and start only with one. don't rush to become an operator overnight. learn to stand before you walk, learn to walk before you run before you fly....multiplication will take care of any amount of time you take to wait and learn addition and subtraction.

- experts know nothing. whatever they say won't happen. atleast that way, that day. not because they don't know, but because operators make it a point to go the other way, the other route. operators' modus operandi will never get exposed openly. because when it gets exposed openly, the operators would have abandoned it much earlier.

- all days are not tradable, all trades are not of same duration and juice. all trades are different in tactically.

- more study takes you away from the truth. finally, you would have to unlearn all to bring the real thing back in focus. the world of conventional trading training is fake. it is creating an army of goats for the predators.

why i don't use a stoploss now!

http://thebestbusinessintheworld.blogspot.in/2010/01/u-cant-be-winner-in-stock-market.html

this is an article i wrote 3 years ago.

i opened it again after all this time and was amused to read it. so i thought why not update it with my present views on the topic.

= i no longer use stoploss. i trade only in options which have inbuilt stoploss. i trade only intraday or very short-term and only in nifty options. i trade only with well-developed method. i used my head to create the method. now, i no longer use the head. i just let that method do the trading for me. my emotions have gone almost out of some window. i just use my head in the evening (no every evening) only to fine tune the method. i am not afraid of the adverse unexpected unforeseen move. reasons? probably one reason is that such instances happen very less. second, i have developed the confiection that i select trades after sufficient homework of technique and tactic that it would be hard to lose if i stayed stable in case of adverse move. thirdly, i have programmed myself to take advantage of the bluff or adverse move of the market instead of panic. one reason that allows me this luxury is that i put in money in steps. i never put all my money on the table. i have sufficient backup buffer funds. 

trading has become boring and hence profitable for me.

i no longer use stoploss. but it is so hard for me to advocate not ot use it to others. because somewhere deep, i know that stoploss is a devil created by the devil which doesn't want you to stop fearing. and ofcourse, fear you will, if light of knowhow and experience is not with you.

Js

option screw drivers to suite the need

when market was @ 5445spot today, 5400pe was @ 19
when the market slipped t0 5395 (50points), 5400pe rose from 19 to 33 (14points)

when the market was @ 5405spot, 5300ce was @ 121
when the market was @ 5415spot, 5300ce was @ 135
(14points)

14points in both
but total movement in the first was 50points
and in the later 15points.

same result, different effort.

in the first case, i was less sure of the move,
so i bought cheaper slow moving option.

in the second case, i was more sure of the move,
so i bought costlier fast moving "overdrive gear" option.

that's the beauty of options!

flexibility......
different screw drivers as per the need!!!

how many lots?

Dear all,

This is to emphasize that when I buy cheaper at-the-money or out-of-money options I don't buy more lots than I would have bought had I bought costlier in-the-money options.

I buy cheaper options when I expect comparative uncertainty or volatility, or when the situation is less clear.

By buying cheaper options I put lesser money at risk.

I buy a lot of cheap option lots only when I want to gamble big time with controlled risk, like I did when I bought 5100 pe lots for less than 9rs on expiry day on 26 July which rose to 61rs.

just because i was ready to deploy larger amount in costlier options doesn't mean that i buy more lots of cheaper options just to deploy all that amount.

Best wishes

booking profit and trailing stoploss

i have this standard profit booking rule for intraday or overnight nifty trades with in-the-money options:

one third lots booking@25 points,

one third lots @40 points

and balance flexible.

once a target is crossed, previous target becomes trailing stop loss for the balance lots.

trailing stop loss for balance lots after crossing first target is the entry point.

why i prefer to trade in options instead of futures

* safety (especially large unforeseen sudden moves)...and hence peace of mind. you thereafter never trade with "scared money".

* more leverage of capital

* adverse movement is lesser than the pro-movement for the same movement of spot.

*  more effective stop loss.

* lot of flexibility viz. a viz. which option to buy 

* deeper in-the-money options have much less premium and move as much as futures.


* options have inbuilt stoploss.

----

all i have to guard against is the time decay.

similar situation, different decision

http://www.mudraa.com/trading/143227/0/btst-30july-js.html

dear murliji,

thanks for asking and sound like the echo of my self talk.

1. why i terminated both calls of yday in 10-15 points

= there was a strong "undercurrent" signals for slide down. so i took the intraday downward position. but as is often possible near sma 34 lines, those strong signals are bulldozed. for 1-2 hours, it seemed that the upward movement was a bluff. so while i let the first short position drift without sl, at sufficient high intraday position, i gave my shorts a second shot but this time with stop loss. i went for a stoploss for 2 reasons - a)second trade was more in-the-money and costlier, b)if the market was to still continue to drift up (as it eventually did), i didn't need longer signal to accept that the "undercurrent" was false and an upward rally was in store. therefore, the second short trade was with a tight (but well thought of) 10 point one. the first one was costlier @ 15

2. why i let today's trade ride the roller coster

= yesterday's bulldozing of "short" signal was enough signal of an upward rally. so i had little doubt of going long for overnight. 1% asian market buoyancy in morning hinted that i was right. but the rbi policy was a factor that stood in-between. besides the overnight bullish hints, there were enough signals in the morning that hinted that upward movement was inevitable. i was jittery to see the markets dip in the pre-lunch session, but frankly, i was not surprised. i rechecked the signals and saw buoyant forces again. and i was sure that operators / market forces couldn't bulldoze opposite side signals on consecutive days. plus there were 1-2 more reasons. by now, it was obvious that market forces had used rbi news to play the intraday game. buying and adding to the long positions at the intraday lows was an excellent idea (which i decided against, for some reasons).

i checked signals again after 3 and saw clear btst invitation.

so while squaring yday trades was the acceptance of the limit of adverse trade setup, not squaring today's intraday adverse trade was a tough put-my-foot-down deliberate decision to stick to my understanding.

and all this time, i was almost ready with the backup plan. 

waiting before the next trade

http://www.mudraa.com/singlepost.php?messid=142999

dear murliji,

nice to hear from you.

now when i know that you are physically in the u.s. i miss your routine presence in mudraa more than when i knew, in the back of mind, that u were somewhere around.

your observation is good and your question pointed and right.

let me ask myself and attempt a frank answer.

-

i put the sl @ 5090spot equivalent because, at that time, 5090 was the line which, if crossed from below, would have indicated, as per my understanding, the pause or end of the downward slide.

infact, for quite sometime, nifty spot kept hovering around 5089.....almost teasing......missing it by a whisker 2-3 times before finally crossing it.

why i didn't square @ 5077spot = because that was not the line which indicated the end of downslide.....unlike 5090 which did.

the next question is - why i didn't go long @ 5090 after squaring shorts.

there are a few reasons when i rethink.

one, i was quite stressed after spending quite some time observing tick by tick in that tense situation with loaded position. i had to breathe again after coming out of the ring.

second, somewhere in the back of head, i knew that while markets may stop falling that may not itself indicate that they are about to rise.

so, as a natural instinct, i stood up the table, walked out, freshened up, relaxed a bit, returned, forgot the day trade and started looking for btst stbt opportunity.

with that fresh mind, and once out of the shadow of day trade's stress, i could focus on overnight trade signals better.

one more thing, the momentum (often unjustified and mob-minded) is difficult to change at the end, it is often hiding a different picture for the next day, when seen from a distance.

just like every morning is like a fresh puzzle and needs fresh look, every overnight set-up is a fresh riddle and needs a fresh view, detatched from the midset overhang of the day's workout.

--

the sabzimandi train analogy is right.

---

when i squared the shorts, i was not sure whether the train to the other side was ready for leaving.

the markets could easily have risen to 5030 levels before gap down the next day. in that case, it would have been prudent to book shorts and wait for shorting again.

---

say my hello to the president.

hope he or his treasury secretary or fed chief doesn't say anything which spoils my overnight weekend long position.

dilemma of timing the trade

timing the entry in a trade is one of the most challenging things.

but this question is the second question.

the first question is deciding the direction to trade.

once the first question is answered and decided, then comes the second question - that of the right time.

just like anti-terrorist commandoes are told to aim at centre of the forehead.

but during action time, specially during chaos, many a times, it is difficult to pick the centre point to shoot.

the target is moving and you are under stress,besides the atmospheric "noise"

at that time, it is more important to shoot and "hit somewhere" than waiting to lock the centre of the forehead.

sometimes, practically speaking, it is more important to shoot and hit somewhere than to shoot only at the perfect spot.

similarly, many a times, in trading, timing is important but absolute perfect timing remains a mirage!

when you have done your homework and spotted a target

shoot at the best available spot and not keep waiting looking for the absolute best universal spot.

inertia and indecisiveness kills both the soldier as well as a trader.

however, i must end with a note of caution.

eagerness to shoot is different from the concern not to miss the bus.

if it is eagerness, you are likely to be wrong.

but if it is a question of not being able to decide the exact point of shot while being reasonably sure of the target subject, your chances of being right are good.

side talk

dear karthik

the probability of today's trade going in the intended direction is high (that's why i took the trade, ofcourse).

wish to share that i take a trade only when there is atleast one (sometimes they are 2-4) strong strong reason to take a particular trade.

after taking the trade i just relax irrespective of the outcome because as per the law of averages if i keep following the method ruthlessly positive trades will always be much more than the negative ones (though negative ones will always be there, i know)

self talk

yes,

trading is never easy.

even if you make a killer profit in a trade

the next trade will always be as difficult as the previous one.

even after n number of successes your chance of going wrong are always there.

market never gives any weightage to past or recent or latest performance.

it never cares for reputation and sincerity and image and other personal equations.

every trade is a new trade.

market is a great leveller.....no special respect or hatred for anyone.

same is true from the reverse angle as well.

market is as easy after a negative trade as it was before that.

no risk, no reward.

every trade will be "difficult" and wrapped in fear.

there is nothing called "zero fear" and "sure shot" set-up for trade.

as anatoly karpov famously said "the surest way to lose is play for a draw"

those fearing drowing keep sitting and remain sitting on the shore.

nothing ventured, nothing gained.

trading is a verb, not adjective or noun.

self talk

take a trade only after good amount of homework.

good homework ensures a win-win situation

1. either the trade will go the anticipated way and you profit.

2. or, if the trade doesn't go the anticipated way despite all that good homework, it leaves you with a learning which was apparently not included in the template you used for homework. in other words, your knowledge base increases for the next homework.

never, self doubt. never doubt the accurace of the homework or that of your decision. if homework was good and things don't go accordingly, take it as an opportunity to discover something new including the revealing of a mischief.

but never kick yourself.

a trader with low self-esteem can never be confident.

kicking ourselves only weakens us psychologically and makes us vulnerable to the mind games of the operators.

news and effect

technicals don't worry about news. 

any "news" is inbuilt in the technicals. 

as they say "charts know that the news is coming."

what actually happens is 

that if the operators and big pockets are willing 

small news is magnified big time, 

and if they are less interested even big news fizzles out.

small news, small need = small or no effect

small news, big need = decent effect

big news, small need = small effect

big news, big need = big big effect

hedgin BN with N : my views about sid's thread

following are my views about sidhdharth's thread

http://www.mudraa.com/trading/136566/0/interesting-hedging-technique-siddharth.html

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

good strategy

but it has some serious traps. some of these i am listing below (as much as i can recall; i tried this strategy in many forms and finally abandoned)

1. what if BN and N start going saperate ways. we assume in this strategy that BN and N have positive alpha. that is, when one goes up, other also goes up, and vice versa. this doesn't happen always. also, the rate of change of both varies. i found many a times that BN moved much slower to N. e.g. if IT moves opposite to BN (which does happen many a times) and moves faster than BN (assuming it is not BN's day), then the situation i mentioned can come (and it did many times when i tried it). many times, N remained in a range and BN moved a lot.....i bleeded like hell!

2. brokerage factor has to be very low, otherwise whatever profit you get is eaten by brokerage leaving you gasping for breath.

3. you need a lot of buffer fund to fund this ambitious method.

4. one has to do this method for a long time to cover for adverse unforeseen moves in BN and N. if you quit after one or two negative trades you are dead. and having guts to keep trading even when u r bleeding requires a drunkered's head....very very tough.

overall, thrilling strategy but as difficult and unpredictable to control as is controlling a bull in a bull fight!

saw this thread and couldn't resist sharing my views.

however, with deep pockets this is a practical and doable and winnable strategy. can't be brushed aside.

only that we talking about playing with a monster of a method.

self talk

if u stick to a promising method..........any method.......any bloody method (pardon the slang)......and stick to it RUTHLESSLY..............and don't stop trading after a negative trade, ur trade will go right 66% of the time......

and ofcourse......since nothing succeeds like success, nothing fails like overconfidence and negligence......

i am less interested in feeling good.....i am more interested in being irreverent but consistent. 

a trader and an analyst and an "expert" is only as successful and "expert" as the outcome of his last trade.

just like a cricketer.

i fear the wrong decision just before plunging into any trade.

that doubt, that fear, that nervousness is always there. but i have made it a "bloody" point to take every trade i think should be taken.

truth behind dilemma of target setting

can't give target of a trade when u ask

.....this game is that of operators

.....only they know what they want to do

....when and how much and how fast

......we are just wind-boats

.......all we can do and should do is decide when and in which direction to raise the sail and when to bring it down. 

frankly, can't say what should be the target. because i decide the end of a particular trade on the basis of wind.......what the wind will be like at a later time ...don't know....will see...

but ofcourse i do have some opinions.......for example, today i will be surprised to see market move more than 50points either ways.......

from another angle......my target is 2:30pm.......as per a strategy

fear and greed

a trader can't get rid of greed without getting rid of fear 

and can't get rid of fear without getting rid of fear.

unfounded greed and fear are exactly that.....unfounded.

just greed is not a greed but a state of awareness

similarly, just fear is not a fear but a state of sensibility.

cross acround the trader's neck

lessons so far from 10 experimental trades :

1. the criteria is ok / promising and needs tightening/refining. 

2. intraday alone is not enough...can never be enough.......what about rallies where movements mostly happen in gaps?

so, btst/stbt (overnight trades) is a must alongwith intraday trades to make decent money. otherwise, despite risk and stress, profits are likely to be proportionately less.

intend to start overnight trades also alongwith intraday ones w.e.f next week.

3. buy at or "somewhat" in the money options when less sure or when taking a trade against the trend (ofcourse at the signal of the method). and when reasonably sure or when taking pro-trend position, take deep in the money option.

4. deploy ur money in 2 stages....one after 10am (whenever signal comes as per the method), second around noon when the real "game" is played......will incorporate this in trades w.e.f next week hopefully.

5. use mutliple indicators / logic to identify market bluffs and traps.

6. use method and fixed-time fences to eliminate (or atleast minimise) the effect of dodging and mind games played by operators and market deep-pocket-forces. use 'law of averages' to your effect. expect wrong trades as per the method (they will always be there and are expected and ok) but never quit trading after the negative trade. i call these negative trades and not bad trades......no trade as per a method is a bad trade......a good method properly executed can still result in loss....it should be called a negative trade and not a bad trade........a negative trade is a probabilistic entity but not a routine one. the trouble is that we stop trading after a loss yielding trade taking it as a bad trade instead of a negative trade.........pick any method.....decide its parameters.......so ruthlessly that even a computer or robot can trade as per it.....and then stick to it......don't stop trading when you make profit......don't stop trading when you make loss........never abandon the method.......method is like a cross in the trader's neck.......lose it and the devil will get you.

What Money Can't Buy - the moral limit of markets

http://www.youtube.com/watch?v=ZafL7_CaMbg

money masters.....

historical documentary that traces the origins of the money and political power structure

http://www.youtube.com/watch?v=JXt1cayx0hs

don't play their game

it is true that the trading challenge is very difficult indeed.

almost impossible but not impossible.

while "Trade with the operator robot not against him" sounds right i beg to differ.

working against or with the "robot" are actually similar things.

(i didn't say same but similar).

the "robots" (read operators) don't let anyone guess what they are going to do, how, how much and when.

at times, they themselves don't know.

their algorithms decide that on realtime info.

so, if you knew what they are going to do only then you can be "with" them.

but herein lies the paradox.

if you couldn't know how you went "against" them, how could you go "with" them?

or

if you can go "with" them, why did you not spot their game and avoid going "against" them.

whatever you do the robot will catch you on the wrong foot. 

fortunately, there is a silver lining (there always has to be)!

instead of worrying about being "with" or "against" them, just ensure one thing - 'don't play their game'

in other words - trade as if they were not there!

trade without reacting to them.

play "with" law of probability, law of averages.

don't let the market fluctuations dictate and skew your trading decisions.

stick to one or two or few principles, hold the hand of probability, go ahead and trade.

who can scare the trader who refuses to look in the eyes of the bully?

and how i am fighting back with them

this is a sequel to my earlier article

"how market beat my best tools"

http://thebestbusinessintheworld.blogspot.in/2012/07/1.html
http://www.mudraa.com/trading/139606/0/how-market-beat-my-best-tools-js.html

the limitations of the tools as discussed by me in the above mentioned articles are not deathknell.

they are real and necessary evils which i accept.

and have resolved to use as contours of a strategy.

1. rsi / william
= i stop following them at the first sign of "bermuda triangle" effect. for rest of the occasions i continue to trust them.
in fact, by not behaving in the copybook fashion, rsi and william tell me silently and indirectly what i should know.

2. options data spread
= don't look at it for first 7 days. thereafter, the sting is generally out.

3. 8-34 sma
= using this to segregate between up and down trends and rangings
and hence take btst stbt and pro-trend intraday shots
also, using this as a confirmation tool.

4. elliot wave
= use as a guide and confirmatory tool to double-check trend and thus take better shots.

5. intraday options data
= i don't use it at the start of trends (range breakouts and sma 34 crossovers)
for rest of the times it works ok especially if i resist the temptation of anti-trend bait by it.

6. yesterday range breakout
= they are less but that is not their fault. just can't say no to those. take it as per availability.

7. btst
= take these and increase the number of profitable trade beyond the "yesterday range breakout" ones

8. call/put options strategies
= just buy plain vanilla options for intraday and btst stbt. risk is limited to give sound sleep and time decay is minimal.

how market beat my best tools

1. rsi / william

= this is one deadly combination.....my pride.
it speaks to me. it tells me a lot of crucial info.
but after prolonged use and going thru quite a few seasons
i found that operators can bull doze these!
operators create extended periods of time when this combo becomes ineffective
like the bermuda triangle where compasses and altimeters and other instruments are reported to stop working or go mad!
when market comes out of its "bermuda triangle" this combo starts working perfectly as if nothing ever happened.
but when do the operators take the market plane in and out of the triangle makes it highly stressful and unprofitable.
following the instruments when you don't know that the readings in them are faulty can and will crash you!

2. options data spread

= i have cracked a code in this and love it.
just like rsia nd william combo above, many a times i found that operators bulldoze what options data spread say.
however, the probability of this happening in the first half of a monthly series is much higher than in the second half
when the operators dare not get caught in their own net they have woven in the first.

3. 8-34 sma

= this is one simple and hell of an effective tool in my armoury.
it works perfectly well in trending markets but is prone to the "bermuda triangle" effect during ranges!
however, its bermuda triangle is different from those in the universe of rsi and options data spread.
so this seems to work where others fail and struggles where others work.
this is one of the best tools but has a serious shortcoming - you can't leave the terminal!
you can't be a swing or positional trader with this and have the luxury of switch off the terminal and go shopping!
you have to keep glued to the screen and keep revising the trailing stop loss or SAR order (stop and reverse - but always in the trade). also, this method has a success ratio of around 40% with rest 60% being whipsaws. but as a consolation, 40% yields large profits and 60% throw less loss resulting in handsome returns. all you have to do it.....follow without head.....just keep following what it does.....even when (inevitably) it frustrates you and generates giants waves of self-doubt during whipsaws. consistency and mental toughness is the key with this simple but powerful tool.

4. elliot wave

= this is a very fascinating tool.
it seems to work most of the time. and when it works nothing feels better in the world. but the trouble is....when it doesn't, it
shatters all the confidence you have gained till then. doubt is always there. still, when it seems to be not working, if you convince yourself that the markets are trying to make a bigger and outer wave, you may be damn right and continue to love this tool. but still, i have seen many instances when this tool is bulldozed and silenced by the operators for some days or weeks. and that is what does the damage...tot he confidence of the trader and his or her bank balance.

5. intraday options data

= this one is a simple and promising tool for intraday but i have seen this failing during start or resumption of the rallies. its
success ratio, therefore has been around 40-45% (which is enough to put you off). still, i use it as an advisor tool.....like a
superstition you know may not work but gives confidence.....more of a habit!

6. yesterday/today range breakout

= yesterday range breakout is reasonably accurate but happens only 5-6 times a month. even then, the move may not be that big. so can't depend on it too much. can't make it the central theme.

7. btst

= i base my btst stbt decisions on four factors. 1)william% r movement on 5min chart, 2) pro-trend, 3) rsi-wlliam combo reading, 4) false sma crosover.
this is the least stressful game. however, clear signals of chances of a decent move are 6-8 per month. still, that is not bad and
this makes this better than others.

8. call/put options strategies

= these are complicated and work only if you have guessed the weather of the day rightly. e.g. different combinations are required in case of range bound movements than in sharp unexpected moves. also, chosing the right boundaries of options you select is crucial. options arena is designed and heavily tilted towards options writers/sellers and that too professionals which have practically unlimited money and sophisticated softwares to manage it all.

are you trading against a robo?

whether you know it or not
whether you see or feel or experience or spot it or not
you are!
you are mostly trading against a robo!
an algorithm
a super-software!!!


welcome to algorithmic trading!


also known as algo trading or blackbox trading or robo trading or automated trading.


what is this?


simple......a super software, a highly intelligent superfast calculative algorithm does trading for you
while you sip coffee, play golf or take a nap or just watch the screen.


almost totally automatic trading.


all trading decisions as to what to trade, when, how much, at what rate........everything is decided by the computer, the algorithm, the software.....without any human intervention!!!


just like "deep blue" or "deep thought" super computers played chess against Garry Kasparov.


the only difference.....chances are that you are not Garry!!!


rather, in this case, the Garrys have teamed up with Deep Blues + Deep Thoughts to play against...........


.......well you guessed it right......poor you!!!


major fii's, pension, mutual and hedge funds and others don't trade......they algo trade!!!


they sneak in or out big elephant or dinosaur orders in slices with computer precision and stealth.


this they do to manage and manipulate the market and leave almost no footprint by making sure big entries and withdrawals are almost unnoticed.


algo trading makes sure that you see minimu spikes and dips in volumes while mammoth trading takes place.


these algorithms are so powerful that they are programmed to calculate a hundred things and manage "the game" in such a way that they always win!


these algorithms are designed to initiate lightening fast action on dumping on buying shares on the basis of news received electronically.


e.g. before even before human bank management comes to know of an aberration in the liquidity, these algorithms see it coming (courtesy their computational power backed by the intelligent programs) and trigger the action.....even before others come to know of it and understand it!


this is known as 'high frequency trading' (HFT) and has dramatically changed the world of trading from inside!


couple this the astronaumical advantage with money power these giants have!


according to a top consultancy firm, 73% of all US equity trading volume is algo trading!!!


in some other markets, the % trade volume taken care of by algo trading is even higher!


some of the recent crashes and abnormal moves are alleged to be caused by algo trading......rare chances when the secret gets spilled out!


and we haven't yet talked about algo bugs - intended or accidental!!!


welcome to the world of algo trading! 


the robo is always waiting for you. he can't see you.....but he can definitely feel you


when you get squeezed gently by him!!!