the martial art of catching a falling knife

"never try to catch a falling knife"
has become a cliche'.

it has seemingly become
such an old fashioned statement
that
actually catching a falling knife
has now become a fashion statement.

only that everytime
this daring catwalk turns out to be
a robe malfunction!

the knives that fall by mistake
or because of some serious misunderstanding
are the ones that do rise back.

but such accidents are rare.

rarely do the knives fall
for no reason!

either there is some earthquake outside
or some butcher inside
the trading house.

and till that reason is there

they will keep falling

while dodging on the way!

knives of butchers (read operators)
move up and down;
in which case
both rising as well as falling knives
can be deadly.

still,
a knife is a knife.

always better to be picked
from the table.

if, however, you are a samurai
there is
one safe way to catch a falling knife -

and that is
to move your hand down
equal to the speed of its fall.

i.e. buying the crashing stock
expecting it to keep falling
and hence be mentally, spiritually and physically
ready to let it go
if it doesn't seem to be stopping.
and repeating the process
again and again
till its handle
is firmly in your grip!

trading is the only martial art
where a loose grip is a must! 

when to buy the declining stocks?

"first they sink to the bottom.

then they come up;

but not right away.

they've got to be good and dead a couple of days.

it isn't time for these corpses to rise to the surface.

they are not quite dead yet."


- reminiscences of a stock operator

"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!"

Crumple zones of stock market!

Just like every car has "crumple zone"

- a criss-cross webcage of joints and steel members

which bend and absorb the energy generated by the impact in case of an accident

stock market charts too have crumple zones in the form of

supports and resistances.

Whenever there is an accidental or incidental fall or rise

the tremendous energy generated is absorbed by at these

support and resistance points

as a result of which a free fall or free rise is prevented.

This acts as a safety system for those who are caught on the wrong foot.

Whenever there are no support or resistance levels between two points

expect destructive energy to land on the traders caught in-between!

So, those who have nightmares about "circuits"

can take some heart from these crumple safety zones in the stock market.

But, remember, when you see yourself saved by the crumple zone in front of your nose, treat it as time given to you to eject. Crumple zone chain reaction may finally stop only after you!

Check your stock or index for these today!

Are you a rebel?

Are you a rebel by nature?

Do you mostly take a contrarian stand in any forum?

Are your views often different from the crowd?

Are you a non-traditionalist?

Are you a loner?

Are you "different" from the crowd?

Do you feel uncomfortable when amongst a herd of people?

Are you more of a leader and less of a follower?

Are you the one who doesn't take things on their face value, but stand up and question?

Do you feel uncomfortable with the status-quo and challenge the state-of-affairs?

Are you a believer of reversal of fortune during bad times?

Are you a believer of change?

Have you been a struggler in your life who believes that good times don't last long?

Are you a suspecting person?

Are you one who doesn't believe things before eyes easily?

Do you get fed up fast with bad times?

Do you also fear excess good fortune due to the pain associated with the ending of good times?

----------

If the above statements are true for you

then

you are probably having difficult time in trading

which is primarily

go-with-the-broader-trend game

where the majority is right even when they are wrong!

and it pays not to be a loner!

it pays not to suspect the trend before the eyes

not to fear the excess good fortune

not to be a rebel

not to take a contrarian stand

not to bother about your views till you know the view of the crowd

---------

where it pays to be one out of the crowd

to be comfortable only when amongst a herd of people

to be more of a follower than a leader

to not to question too much till others don't!

feel comfortable with the status-quo!

believe in the maxim that too much of a good thing is great!!!

when to catch a falling knife!

A stock is compared to a falling knife when it is falling fast and non-stop.

If a not-so-famous small or midcap is falling, nobody pays any notice.

Everyone says "it is falling, so it must be a bad bet"

Consequently, those small and midcaps fall more and faster.

But if it is a Bharti or Satyam or Suzlon or Reliance or RNRL or Ranbaxy that is falling

the same statement changes dramatically!

The brand pull of these stocks is big enough to lure anyone!

Many tongues start coming out of their dens!

Many eyes start popping out of their sockets!

This is often a trap for traders.

Countertrend traders are lured to latch onto these stocks.

"It has never fallen this much. It is surely a steal at these levels."

"It can't fall more than this."

"Lets start entering in steps"

Arguments given are numerous....

Many "I am smart" traders don't even announce their intentions in their friend circle and silently start accumulating these falling apples (they don't yet know that it is a knife!).

One thing they forget in the excitement is - why is it falling like this in first place?

Are the big players nuts while dumping? Afterall, this is not a routine correction! The market is going up and this apple is falling?

When the apple keeps falling

the "I am smart" traders start realising that what they have caught is a knife instead!

----------

A stock falling due to fundamentals is basically a sell-on-every-rise.

It is not wrong to leave it alone if you are not sure about the fundamental logic!

So what is the best time to catch a falling knife?

Never!

falling knife....never!

fallen knife....again never!

knife.....never!

so when to buy it?

...when it is no more a knife but a spoon

....a golden spoon

Very often, a stock knocked out of the fundamental orbit remains free floating and wandering for a long time.

First it keeps falling.

then it keeps consolidating while the management realises the mess and starts working on the cleanup act.

Finally, when the poor stock has come out of the long oblivion

big players start pumping money into it....

That is the time when the stock starts showing life!

It is no more a knife now but a golden spoon.

Its graph makes a higher low!

That is the time to put this spoon in mouth!