why not all in one go?

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

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

: besides, nerves stay cool

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

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

: I can never be. none except operators can be

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

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

“Do you have it in you!!!”

There are on an average around 5 big opportunities in any market / index every year when a huge rally happens.

e.g. There have been 5-6 in nifty in last 12 months, 6 in CNX-IT and 4-5 in FTSE (UK)

the shortest is of 1 month duration while the longer one is 4-5 months long!!!

It is not impossible to catch those ‘mother of rallies’, it is easy to anticipate them but difficult to mouth and digest them whole (or a substantial part) without skill, strategy and mindcontrol.

I have not done these as yet. But since i developed the advance methodologies in the last 1 year, i am itching to catch the next one. Till that time, i am preparing patiently and practicing identifying and riding them (downscaling/simulating them in intra-month rallies).

In between every such rally is an intermediate ranging, sometimes small sometimes quite long.

Some of these rallies are short, and u may outstay in it, while other times the rallies may surprise you by the extent they keep going,  u having quit early!

All this need practice and skill with select tools.

Such rallies can’t be expected but followed as and when and to the extent they are, till they are!

But the point i want to make is twofold

minor– if u miss these 5-6 odd mega chances, what if you catch other peanut opportunities? And if u catch these, what if u lose all others!

Major- if the stakes to claim are that high (each rally can be 10-20% index rally can potentially make u quite rich in just a few weeks), are we in a position to leverage / encash it to the max?

Skill, technology, mental toughness, experience are one thing, capital (funds) and financial management (risk management) when u r in the big ride, is critical and decisive.

So much so that on one side we are desperate to encash it and on the other hand, when the opportunity is right there in front of our eyes, we either chicken out or play it small or are simply not ready for it!

The real fear of any sufficiently advanced trader is not the threat of loss, but the nightmare of missing the big profit!

So many times i have seen traders praying all life for the big opportunity and when they get it, they just say hello and turn back!

I strongly feel that so many struggling traders are in the real danger of self-hypnotism whereby they double cross themselves by convincing their conscious minds that they want it and programming their subconscious minds as to why they can’t do it!

I recall the Indian Army ad punchline – “Do you have it in you!!!”

I ask myself sincerely – “Do i have it in me?”

a view from the 15th floor

imagine you are standing on the 15th floor
of a skyscapper
in the heart of the city.

you are standing in the balcony
with a cup of coffee in you hand
looking at everything below.

you see a few people going from right to left.
and then you see one man going from left to right.
nothing special about it.
then you see 12 more going from right to left.
followed by 27, again going from right to left.
gradually the number increases
groups of 50, 65, 47 move like a swamp of bees
from right to left.
gradually the number starts dropping
29,17,9,7,4,2....

you keep standing there.
perplexed!

you call your friend
whom you are visiting
and whose flat it is
and share what you just saw.

he laughs
and tells you
that the 11am movie show has just started
that gaussian wave of people was nothing
but the flow of audience for the show!

"when the show will be over
you will see all of them returning in the reverse direction
but not in the same increasing-peaking-decreasing fashion
but big rush initially followed by a tail of laggards.
end of a rally is faster than the start of the rally!"
your trader friend tells you.

"o i see!" you say.

next morning you are standing in the gallery again
but at 9am.

suddenly you see a group of over 200 people
running from right to left!

you rush inside
drag your friend out
and ask
"has the movie show advanced?
or is this mad rush for the "dirty picture"?

"no, no! something is wrong
movie show is 2 hours away
and i heard that it is all sold out!"

both of you wait
and then you know the cause
when you hear the sirens of firebrigade trucks
rushing from right to left.

you keep standing for an hour
and notice the fire trucks returning after dousing the fire
followed by the same group of 200 idle onlookers
returning from left to right.

your trader friend smiles
and says

"a panic sell-off or hoax rallies happen and end like that only!"

--

you return home the next day
and resume your trading
without indicators....

just watching the number of people going right to left
and left to right
and the speed and size of the group.

for a change
you stop losing money
and make 3 consistent profitable trades
first time in 2 years!









(niftyshots.blogspot.com)

it is never too late!

it is never too late

to say "sorry"

--

it is never to late

to return home

--

it is never too late

to learn

--

it is never too late

to start living

--

it is never too late

to take care of health

--

it is never too late

to admit your mistake

--

it is never too late

to befriend an enemy

--

it is never too late

to join a rally

--



if things still don't work

you always have the option

of

"stop loss"

--

this act of

unilateral courage

will be the one

u will never regret!



besides giving u a consolation

that atleast u tried!



and who knows.......



all great achievements

including your birth

were once

a grave risk!!!

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

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)

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)

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!!!

Bidding for Diana!

Mulla Nasruddin went to a mela.

He saw a crowd in a corner.

"50000 Dinars!"

"55000"

"65000 dinars!"

"66000!!!"

He was perplexed to hear the loud voices.

It didn't take his inquisitive mind long to figure out that traders were participating in an auction.

"70000 dinars!"

"72000"

"75000 dinars!"

"What is the auction for?" Mulla asked!

"I don't know exactly" replies an onlooker.

Mulla went to the person who was one of the traders putting the bids.

"What is the thing being auctioned?"

"Probably it has got something to do with a horse!" the trader replied.

"You are bidding and you don't even know that?" Mulla ridiculed the trader!

"Why should I bother? I came here to make money. I saw people bidding so competitively. I am sure it must be something precious they all are after!" the trader justified.

Another trader standing nearby heard the two's conversation and said

"I just came here. Somebody told me that the auction was related to the famous racing horse Diana! When I saw so many merchants so feverishly putting the bids I was sure that Diana must be precious!" replied the trader.

"Where is the Diana?" Mulla asked further.

"Don't know? Haven't seen!" the trader replied, visibly upset at the disturbing Mulla.

Mulla too wanted to bid for Diana.

He had a small bag full of gold coins he had won as prize from the sheikh in the previous town.

But he wanted to have a look at the Diana first.

He asked other traders but nobody had even a clue about Diana!

Then finally one trader said "Diana is probably hidden in that tent!"

Mulla saw a guarded tent at a distance.

He stealthily went to the rear of the tent and peeped inside.

He saw a goat inside!

A guard caught Mulla peeping inside.

"What are you doing here?" the guard asked.

"I am looking for Diana!" Mulla asked.

"Diana is not here!" the guard shot back.

"But the trader there said the auction was related to Diana-the racing horse!"

"Yeah! It is!" the guard nodded.

"But this is a goat!"

"This famous goat's milk is supplied by my master Sheikh Abdul for the consumption of Diana! My master hired the royal agents to auction the goat!"

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!!!

Tandoor and the Knife!

'Never catch a falling knife' they said!

But they never warned against hastily putting hand inside the Tandoor (Indian clay oven fired with charcoal)

Long after the chapattis (North Indian bread) have been baked in the tandoor

long after the fresh fuel is abandoned

the Tandoor remains hot inside!

Red hot!

Simmering smokeless ambers deceptively cold but fully alive inside!

Just like a Tandoor can maintain high cooking temperature for long periods, a bull run can remain simmering for extended periods!

A Tandoor, traditionally, is left to cool-off overnight before the ash is removed.

A bull trend should be allowed to cool-off before putting hands into it!

RSI-SMA Doubletrap technique (II)

1) Buy when priceline cuts the SMA 34 line from below after bullish divergence between RSI 14/30min and priceline on 1 month chart (Bullish divergence = When price is going down and rsi going up).

Hold till priceline cuts SMA 34 line from above.

2) Short when priceline cuts the SMA 34 line from above after there is bearish divergence between RSI 14/30min and priceline on 1 month chart. (Bearish Divergence = when price is going up and rsi is going down).

Hold till priceline cuts SMA 34 line from below.

how to tell how long will the rally continue?

An up rally will continue till the priceline cuts the SMA 34 line in 1 month chart from above.

A down rally will continue till the priceline cuts the SMA 34 line in 1 month chart from below.

After that, the priceline may again cross back the SMA 34 line but the bulk of the rally is done. Also, the rally is definitely not over till SMA 34 line is cut!

A pin for the balloon (When to short?)

Shorting is profitable but highly risky & nerve wrecking game!

Often timing of shorting blows in our face!

Like shorting bank nifty as on last week!

So, what is the best and the safest point to short a stock or index futures?

The answer lies in the nature!

When do volcanoes erupt?

When do Earthquakes come?

When does an Avalanche start?

When does a cloud burst?

When does the pendulum reverse?

When does the tide turn?

When does a war break out?

....

All of these happen when two conditions are satisfied

1. Excess over a limit

2. A trigger to start it all

Excess of everything is bad, including a rally.

Every rally extends into the "excess" zone.

Smart money sets the ball in motion.

Dumb money follows in heaps and herds and doesn't know when to stop.

Smart money enters on logic. Dumb money keeps coming on frenzy!

Sentiments take over and they don't know when to stop!

After all, the late enterants also want to make money.

The people who buy from the late comers want to make money too!

This chain reaction (called distribution) reaches too far till everyone left feels like a fool except the part of smart money which is still their in some corner!

The funny part is that nobody is willing to admit the folly even now.

They close their eyes to the deep fall below and hope against the hope!

They all wait for the frist one to fall!

Even then they keep living in the fools paradise, ignore the first signs and buy some more!

Heights!!!

This causes the lower high on the graph!

That is the time the Avalanche starts to gather momentum!

That is the time to go short!

Stampede is about to start!!!

Everything will start falling under its own weight!

Everything will crumble down like a pack of cards!!

Latest examples of this

Sugar & Metal stocks' mad bull run followed by the crash

So, if yours is the smart money, don't worry about the crash amidst the rally

keep riding

till the two conditions are met

- excess over the limit

- the trigger punctuated by a lower high.

Till then, let the ridiculous distribution game continue

Let the excess happen!

As someone said "A pin is waiting for every inflated balloon!"

When to square-off and reverse?

When to square-off and reverse?

A. If the rsi-run from lower to higher extreme or that from higher to lower extreme is stepped and not straight, it has been a rally and not a sell-off or buy-in.

B. If the rsi-run from lower to higher extreme or that from higher to lower is NOT stepped but straight, it has been a sell-off or buy-in and NOT a rally (unless it is coming out of a ranging/consolidation period, in which case it can be a rally)

square-off and take reverse positon

at the first lower high (in case of long unwinding)

at the first higher low (in case of short covering)

But in case A

do this after the divergence between rsi and priceline

and in case B

divergence is not likely to happen, so no need to wait for it.

Pl note: 1) Play with strict stoploss. You can always retake position.

2) When the market or stock is ranging/consolidating, you can square-off even before lower high or higher low, at the time of rsi touching extreme.

3) Only those graphs should be used which give high resolution tickers. The above mentioned observations have been derived using Google Finance charts. 1month chart with 30 min ticker and 3-6 month chart using 1 day ticker. I have seen that many other chart sources use much biger ticker and hence low sentivity.

Doing a SAR with RSI and William%R

See the peak on the left of A?

That was the peak when rsi 14/30min on 1 month chart was at the upper extreme.

Should U have squared-off at that time?

I suggest you don't. nobody knows whether Nifty rally will be stretched to more height.

In such cases, always sell on the lower high.

In this case peak A is the lower high after the peak rsi.

This is the clear hint that nifty is going to correct.

So at this point square off the longs and take fresh short position.

========

At point B, rsi has reached the lower extreme. Should you cover your shorts at this point?

Had it been a sell-off, u should have squared the shorts here.

But this has been a small rally.

What's the difference between a rally and a sell-off?

Sell-off is generally straight line, rally is a stepped fall or rise.

since this fall has been a rally (though small), u r likely to see a divergence between rsi and nifty before the rise starts again.

so, hold your shorts till that point.

That point comes at C when rsi is rising and nifty is falling (divergence).

Cover shorts here (profit of 70 points) and initiate fresh long position.

========

At X, rsi touches the higher extreme.

Should we square off long here?

But, as mentioned in case of point A, we are not sure whether the nifty may rally further.

so, here again we will square-off at the lower high during retreat (rsi already having touched the upper extreme).

Our "hold" decision proves good when we see the rsi falling but the nifty holding on.

This is a clear signal that rsi is making space for nifty ot climb further.

Then the nifty climbs to D.

So should we now unwind longs at D?

Again, we don't know whether nifty will rally even further.

(Although there is clear divergence between rsi and nifty. rsi has fallen, nifty has climbed)

However, we wait.

But the nifty falls and we unwind longs at Y (lower high) and go short.

(profit in this 2nd leg = 100 points, total profit so far in around 15 days = 170)

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

We get some anxious moments when nifty climbs to Z after the william%r gives buy signal at J.

We hold the shorts with stop loss equal to height of D (anticipating double top).

Fortunately, nifty starts falling after Z all the way to E.

Notice that this fall is straight and not stepped, meaning thereby that this is a sell-off and not a rally.

This means that divergence is unlikely to happen between rsi adn nifty (as i mentioned earlier, divergence happens after rally and not sell-off)

So we cover shorts at E (profit in this 3rd leg=100 points, total profit so far in around 3 weeks= 270) and initiate fresh longs.

Notice that we have been always in the market, just like SAR.

We have been going long immediately when we cover shorts

and go short immediately when we unwind longs!

This milks the market to max!

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

At F, rsi reaches near upper extreme and we unwind our longs as this is not a rally but a sharp buy-in (as the rise is straight and not stepped).

We unwind our longs and intiate fresh short.

Profit in this 4th leg = 60 points. total profit till now = 330 points.

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

Nifty then falls to G when rsi reaches lower extreme.

Notice that william%R is always confirming the right points of buying and selling.

We cover shorts at G and initiate fresh longs.

Profit in this 5th leg = 50. Total profits so far in around 20 days = 380.

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

From here rsi rises till nifty reaches H.

Since this has not been a straight rise but a stepped one, we should be expecting divergence to appear between rsi and nifty.

so we hold the longs.

Profit so far in this 6th leg =120 points.

total profit in 1 month since start of this analyses = 500.

For one lot this would have given Rs.25000/-.

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

We have milked the market fluctuation to the max while always being in the market, using rsi supported by william%r.

Do this to boost profits & choke losses!

In case of an up rally,

say "No" to shorting indications such as RSI crossing 85 or even more!

say "Yes" to any indication to go long without a hitch such as RSI falling to 40-30-20!

Going short at every high bend inside an up rally can be dangerous and very less profitable.

Going long at every low bend inside an up rally can be least dangerous and highly profitable.

In case of a down rally,

say "No" to all indications to go long such as RSI falling below 15 or even more!

say "Yes" to any indication to go short without a hitch such as RSI rising to 50-60-70!

Going long at every low bend inside a down rally can be dangerous and very less profitable.

Going short at every high bend inside an up rally can be least dangerous and highly profitable.

In case of a range-bound movement,

say "Yes" to all indications to go long or short without a hitch!

Follow this simple but magical advice and your profits will double and losses will become quarter of whatever they are as of now!

Happy Trading!