Thursday, March 29, 2012
Wednesday, March 28, 2012
love and trade
you can't become rich
without the power of consistent multiplication
you can't multiply
without taking risk
you can't take and survive risk
without discpline
you can't be disciplined
without confidence in discipline
you can't have confidence
without knowledge
you can't have the real knowledge
without struggle
you can't survive the struggle
without determination
you can't be determined
without passion
you can't be passionate
without loving the occupation!
trading is about love
before it is about money.
taking a break
so many times we hear
the batsman is not in form.
what does the poor chap do?
go out in the middle
bat again
to prove to himself and others
that he is not out-of-form.
result?
since he IS out of form
he goes for a poor score yet again
thereby further cementing the view
that he is out-of-form.
the poor chap can do nothing.
if he stops batting
and takes a break
he risks his place in the team
by giving opportunity
for an in-form hungry player
sitting on the benches.
--
similar is the state of a stocf trader!
in cricket
so many times
he knows and sees
that he is
out-of-form.
he loses
doesn't believe that
and trades again.
he loses again
and again
and again
but refuses to admit
that he is out-of-form.
not that he doesn't know how to trade
but that he is out-of-form.
it becomes an ego issue.
self denial!
what should he do?
unlike the poor cricketer
this poor trader doesn't have to worry about
some other trader taking his place!
so why doesn't he take a break?
is it advisable to trade on expiry days?
dear vadiji
you asked - "is it advisable to trade on expiry days ?
day trading near expiry is a tough game due to unpredictable, sharp and sudden, often illogical moves.
but such wild movements are only within a band / range which is not difficult to guess from options data spread of nifty.
but if you are looking for swing/positional trading opportunities, these intraday fluctuations don't matter.
outer charts remain largely uneffected.
expiry volatility is just like air turbulence. if you are reasonably sure where the flight is headed don't worry about the time of the flight.
key to profit lies in the heap of losses!
many of you
must have been in stock market
since many years.
if i ask you point blank
"what would be the rough total of your winning trades?"
what figure would you give?
and then if i asked you
"what would be the rough total of your losing trades?"
what figure would you give?
chances are
that the sum total of the profitable trades will not be zero.
some decent figure would be there.
and the sum total of the losing trades will be huge
much more than the sum total of the winning trades.
and what would be the net total
(after combining the two figures).
again the chances are
that you would have slipped non stop
in all these years!
well, what's my point?
its plain and simple.
the above facts contain
two part-solution to your problem.
first,
if you were to only reduce and minimize your losing trade frequency and size
especially the size,
your balance sheet will dramatically improve!
who knows, by now, you might have been only marginally in the red, if not in the green,
with a treasure of experience as the base for the final flight!!!
as dr. brett steernbarger says
"If there is a holy grail to successful trading, it probably is risk management."
and now
the part-two of the solution-
why and when did you book the profit
of your few profitable trades?
was it fear of losing the profit
or was it a clear red signal to the rally?
again, chances are
you have a habit of
blinking first!
the cause of fear of losing the profit
like the cause of any other fear
is
darkness
and excitement.
darkness caused by absence of a method
and excitement caused by desperation.
think about it!
Tuesday, March 27, 2012
wealth builder, no stoploss trades
http://www.mudraa.com/trading/125400/0/wealth-builder-no-stoploss-trades-js.html
is averaging an option good or bad?
in my opinion, averaging the option is neither good nor bad.
lets assume you buy xx00 call.
it drops from 40 to 10.
you were either wrong in judging the situation or unexpected unforeseen was forced by operators.
you study the situation again
and now find that it is much better time to buy again.
should you buy xx00 call now? again?
well, yes - if you know what went wrong in first trade.
no-if you don't know what's happening.
the first trade might just be a case of right judgement of a move but wrong timing.
i have seen that non-trending markets turn often and decent.
have seen options drop from 100 to 50 and again go up to 225 (example).
if one doesn't know what's hapening, what happened, averaging is bad.
if one knows what happened, averaging is good.
ofcourse, need for averaging shouldn't have occured in first place. correct averaging helps in recovering a loss with lesser difficulty. also, risk of averaging at low price is low.
lets assume you buy xx00 call.
it drops from 40 to 10.
you were either wrong in judging the situation or unexpected unforeseen was forced by operators.
you study the situation again
and now find that it is much better time to buy again.
should you buy xx00 call now? again?
well, yes - if you know what went wrong in first trade.
no-if you don't know what's happening.
the first trade might just be a case of right judgement of a move but wrong timing.
i have seen that non-trending markets turn often and decent.
have seen options drop from 100 to 50 and again go up to 225 (example).
if one doesn't know what's hapening, what happened, averaging is bad.
if one knows what happened, averaging is good.
ofcourse, need for averaging shouldn't have occured in first place. correct averaging helps in recovering a loss with lesser difficulty. also, risk of averaging at low price is low.
understanding "options" again
an option is the bet, the premium, the "black" that a particular level "will come".
just like betting in on a particular team in cricket (though illegal)
e.g. cuurent market price (cmp) for nifty =5278
5200put is available for 28
what this means is people are willing to pay 28 rupees as a bet that 5200 will come.
similarly the bet amount (can also call it premium) for 5100.5000.4900 puts is 13/-, 7/-, 3/- respectively.
also, the 5200 call march series is available for 122/-
but 5200 has already "come"
we are already 78 points above 5200. so 122minus78=44 is the premium people are willing to pay to buy the asset named 5200call. now if, at expiry, market is at 5700, all traders who are holding the "tickets" of 5200 call would be eligible to get 5700minus5200=500points. not bad if you paid just 122 for buying that ticket.
if the expiry were to take place at 5278 itself, the 5200call ticket holder will be entitled to 5278minus5200=78. only the premium, the "black money" paid to buy the ticket will be the loss.
when you buy a call below the cmp, it is called "out of money" as you pay only the premium, the bet, the black
when you buy a call below the cmp, it is called "in the money" as it has already come and you have to pay both the parts = 1. the amount by which it has already crossed the current market price, and, 2.the "black"
reverse is the case with "put".
"call" is the name of the ticket when you bet that market will go up. (call up)
"put" is the name of the ticket when you bet that the market will come down. (put down)
how to remember = "CALL UP and PUT the phone DOWN"
Saturday, March 24, 2012
whats happening on the top floor?
one of the automobiles showroom in himachal
is 5 storeys high.
or should i say
5 storeys low!
the top floor is at the level of the road
while the all others are below road head.
this showroom is a masterpiece of sort
considering the topography it is located in.
amazingly, all floors are drive-in.
top two floors are showrooms
and bottom three are for service, repair etc.
when this was built
the architect had clearly told
not to park more than 8 SUVs
on the top floor.
each SUV has the weight of a monster
and the bottom pillars were designed to withstand
as much weight.
any more SUV on the top floor
could put the entire building at the risk.
but i noticed it many times
that due to space constraints
especially during festival seasons
safety norms were often thrown to winds
and much more monsters were accomodated on the top floor
than the stipulated limit.
the people on the four floors below the top floor
usually remained unaware of the dangerous situations.
they never ever had the hint
often that they were so close to a mishap.
they never had even a slight hint
that their safety had been often put at stake!
all the time
everyone on the lower floors
remained oblivious of the always lurking threat to their life.
since the pillars never gave way
and since festival seasons came and went away
and since nothing ever happened
the innocent guys down under
still don't know
what all threatened to happen but didn't.
for them life continues
ignorant of the real undercurrents!
--
same thing happens in stock markets.
stock market universe
is multi storeyed.
while policy makers, promotors, trading houses, brokerages etc. occupy the second from the top floors,
there is no doubt who occupies the top floor!
obviously, the fii's and the deep pockets.
also, there is no doubt about who occupies the bottom floor!
the poor retail traders!!!
the poor chaps never know
how their safety and financial life
is threatened day in and day out
by those on the top floor.
they never knew,
they don't still,
and will, probably never ever know
what financial burden is being put on the economy pillars they are standing
by those at the top.
the poor chaps will either never come to know
or will find themselves buried under collapse.
what they will never come to know is
that those on the top floor
ran out of the building
just before the collapse.
Wednesday, March 21, 2012
the pugmarks (21mar)
21 march, EoD
fii's were net buyers today (9th day in a row and for 30th time in last 35 trading sessions)
dii's were net sellers today (7th day in a row and for the 33rd time in last 35 trading sessions)
shocking statistics!
who so ever blinks now, will decide the direction of the market in a big way!
if fii's finally starts selling too, who saves the market?
if dii's finally start buying too, who stops the market?
---
see the data of past 2 months.
dii's have been blatantly opposite to the trend.
and fii's have been making the trend.
this thing is beyond doubt and argument.
chances are that fii's will bulldoze the dii's.
there is a limit to how much you can sell,
but there is no limit to how much you can buy
given the unlimited supply of cheap funds with fii's.
also, if buyer is making the trend, he would not let the trend reverse after buying.
---
see the data of past 2 months.
dii's have been blatantly opposite to the trend.
and fii's have been making the trend.
this thing is beyond doubt and argument.
chances are that fii's will bulldoze the dii's.
there is a limit to how much you can sell,
but there is no limit to how much you can buy
given the unlimited supply of cheap funds with fii's.
also, if buyer is making the trend, he would not let the trend reverse after buying.
what do rsi and william say (21mar)
21mar, EoD
as per 1 month chart with 30min tick, this looks like a rally.
but the 1 year chart with 1day tick indicates that the rally is standing in front of the mirror of 5371 where it may get reflected down.
5day chart with 5min tick indicates a flat to mildly soft opening.
let's see.
what the smart money may be planning? (21mar)
21mar, EoD
As per options data spread for nifty march series as of now,
operators can extend the tide till 5425
but thereafter, the signal is red as of now.
the operators are now caught between two great walls of 5275 and 5425 (150points)
the incentive to break these before expiry is not much.
which chart timeline to see and when
there are generally the following timescales in charts i see
- 5 year chart with 1week least count (tick size)
- 1 year chart with 1day tick
- 1 month chart with 30minute tick
- 5 day chart with 5min tick
- 1 day chart with 2min tick
5 year chart is for overall general viewpoint and not of very much practical value except for investors.
1 year chart is very good for positional traders who take monthly positions
1 month chart is best for swing traders who take positions for a few days
5 day chart is best for intraday or 1-2 days only
1 day chart is only for finding the exact timing for intraday.
just like the maxim "boss is always right"
if the smaller timeframe chart doesn't work
look at the outer timeframe chart fort he answer.
these array of chart timelines are just like the optical zoom in your SLR.
2x, 4x, 8x, 16x, 32x, 64x, 128x zoom
the more closely you want to see.....zoom in
and farther and broader you want to see......zoom out
never follow any son chart blindly without crosschecking the permission of the daddy chart.
Tuesday, March 20, 2012
what the smart money may be planning (20mar)
20mar, EoD
as per options data spread for nifty march series as of now
operators still have a valid claim for 5300spot and extended visa till 5350spot,
BUT
it is interesting to note that they have losened their bull grip.
however, its not that the downside is open till horizon.
as of now gates are open on the downside only till 5200 +/-25.
-----------------------
www.niftyshots.blogspot.com
what do rsi and william%r say (20mar)
20mar EoD
1month chart with 30min tick-size (least count) is showing bullish attitude.
5day chart with 5min tick size is indicating soft opening.
interesting to see how this pans out considering that europe is in dark red as i key in.
Monday, March 19, 2012
the web of sma 8 and 34 (19mar)
once technical indicator or method may not be sufficient to map the market. i use around half a dozen ways to analyses the market. i first look at them separately and then overlap the inferences to expect the high probability eventuality. while almost all other major indications and methods are being regularly updated and shared here by me, this one (sma 8 and sma34) was left out. so i am starting this separate thread to track this simple but very useful indicator set.
Js
===
===
19 mar, EoD
so it indeed was "sell on rise" as i suspected last week.
the situation nowclearly indicates that we are well into the well.
some upward buoyancy can be expected, but coming out and above is not so near.
5300 +/- likely to be a brief gush of air.
the pugmarks (19mar)
fii's are lions of this jungle......it pays to try and read their pugmarks.......what they are doing viz. a viz. what eh market is doing and may do......in this thread i will be sharing my views on the pugmarks i see.....
19 march , EoD
now this is very amusing!
despite the scary fall for third straight trading session
fii's are again net buyers (160crores)
amazing!!!
they are obviously not buying non-stop to lose! enough hint from their pugmarks!
(and imagine.....dii's have been net sellers since days and weeks.....the day they turn buyers can't be too away!)
=====
last week i said
"16mar EOD
would you believe this!!!
market lost lot of promised ground on 14th, yet fii's bought 1659crore worth stocks!
market fell approx. 100 points on 15th, yet fii's bought 156 crore worth stocks!!
market fell approx. 100 points from top on 16th (today), yet fii's bought 883 crore worth stocks!!!
if they are shopping (and not selling) at 5500, 5400 and 5300, are they doing so to lose by letting the market fall?
no way! "
what the smart money may be planning (19mar)
19mar 2:52pm, nifty cmp=5259spot
as per nifty march series options spread as of now,
operators are losing not-so-less.
downside from here is highly unlikely.
upside in 1-2 days is limited to 5350 or so.
what do rsi-william%r say (19mar)
19 mar, EoD
cmp=5257 spot.
as per 1month chart with 30min tick
the market is at the high probability bounce point.
though a runaway rally on upside is unlikely, some upside from here likely.
we are still in a dangerous slide zone, but atleast a good wall of hope, and corner of pause is here.
=======
(niftyshots.blogspot.com)
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Thursday, March 15, 2012
digital trading
analog technology was good
but had a lot of limitations
and had to go.
it did, except for traces.
digital techcnology took over.
strangely,
in trading
majority traders are still trading
the analog way.
and not so surprisingly
the operators and big players
are into digital trading.
no,
i am not talking about the trading terminals
or software....
i am talking about the method of trading.
analog style of trading
is trading by tracking the exact path of the market movement
and basing every trading decision
including entering, exiting etc.
on the basis of this.
on the contrary
digital style of trading
is trading without tracking the exact path of market movement
and instead trading from point to point.
it is a simple case of on or off,
all you are interested in is
'has the price reached the target?'
e.g. consider a situation
where the market forces and fundamental factors
are sure to take the market higher from current point A to higher point B
it is no longer a question of whether the market will go to point B
the only questions are
when and how?
if you are trading the analog way
and following every twist and turn and drama of the priceline
caused by operators
like a snake follows the pipe of snake charmer,
emotional roller coaster ride
will cause you to get in out as dictated by the operators.
this is the mother of all trading mistakes
and trading traps.
on the other hand
if you are trading the digital way
and have taken a position near point A
and are not bothered to know and see
which timetable and route the price follow
to reach point B
as long as it does hit point B
you are sure to remain relatively stressfree
and handsomely profitable.
all you need to do before that is
1. get the eyes to know the likely move.
2. change your mindset and habit from analog to digital.
remember, operators trade digital
and make sure that you keep trading analog.
Thursday, March 8, 2012
why are elliot waves the way they are?
elliot waves are nothing but the graphical representation of the cyclic behavioural DNA of the psychology of the market.
to understand the why and how of the elliot wave, let's imagine the waves talking. what they say can reveal what they mean and why they are the way they are.
this will help us understand and appreciate the rules behind elliot waves as well.
======================
what the waves say?
wave 1 = "feel like doing 'it'. let's do it"
wave 2 = "should we have really started doing it?"
wave 3 = "yes, we were right, now stop thinking, stop doubting. go all out and do it good and big. those who missed, pl come along! those who still fear can join us on the way!!!"
(this is why wave 3 is the longest and has to be the longest, otherwise this theory hasn't been satisfied and will have to be)
wave 4 = did we over do? we might have got carried away. shouldn't we, therefore, retrace?
wave 5 = no, we hadn't overdone it. and in the fear of having overdone it, we have still left something undone. let's complete it. and let the last of the laggards come in.
Wednesday, March 7, 2012
types of trader emotional states and what to do about them
experiences and learning in stock market are unending.
recently i realised
that there are some select
repeated emotions
which repeatedly trap traders.
i have tried to identify some of them.
below, i sharing some of these emotional states
and will keep on identifying and sharing new ones
as and when i identify.
sometimes, these emotions are kicked itself
due to your own reasons.
but majority of the times
these are caused by the shepherd operators
in the trader sheep herds.
hope these are useful to you.
=====================================
emotion : hangover
what you feel = "bull or bear run will continue"
what you do = get complacent, lower your guard, ignore signals, take big positions at euphoria points
what you should do = be aware of the hangover. drink a lot of water.
emotion : hallucinations
what you feel = "start seeing the sunrise or sunset, not just imagining it, when none is there nor near"
what you do = take premature positions, keep holding on to these
what you should do = be aware of the hallucinations, stay awake, trust what you see, keep imagination under check. drink a lot of water
emotion : psychosis
what you feel = "this may be real but i don't like it. this may not be real but i like it. i want it and will have it. at all costs!"
what you do = you turn adamant and stick to losing positions or chicken out despite knowing all.
what you should do = treat yourself of psychosis. drink a lot of water.
emotion : neurosis
what you feel = "this is not happening."
what you do = you don't believe what you see and pray that it changes.
what you should do = get treatment. drink a lot of water.
emotion : hypnotised, armaan, fools paradise, believe just because it is beautiful.
what you feel = "this is nice. this must be real."
what you do = get emotionally swept away. believe it just because it is beautiful. believe the fools paradise and not only fail to capitalise the fake opportunity but suffer in the end.
what you should do = don't believe everything that glitters, trust your head, don't put the cart before the horse, see the difference between a balloon and an aeroplane, use the rumours and false runs.
emotion : numbness
what you feel = don't feel anything. totally confused and lost.
what you do = don't act on losing positions, or jump in with eyes closed, or close winning positions.
what you should do = whenever feeling dizzy, stop the car, pull it aside and stay there till you regain consciousness. same about trading. don't try to be a bollywood hero. stepping out and being wise is no less heroism. come back to senses. drink a lot of water.
======================================
just identify your emotion and choose your course of action.
be your own psycho-analyst.
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