Which came first, the chicken or the egg?
Although we still don't have a definitive answer to this dilemma
one thing is for sure
there is always an egg before the chicken and always an egg after the chicken!
The first one produces the chicken
then the chicken produces the second egg!
While the first egg is the principal amount
the second one is the profit!
This second egg acts as the principal amount for the next chicken!
This way an entire poultry farm gets created!
---------------
What if the very first egg gets broken?
There will be no chicken and no second egg?
Rather, there will be no further unending chain of chickens and eggs!!
So, it is not as important to know which came first - the chicken or the egg!
What's really important is whether the first egg remains safe.
And since every egg produced by the chicken in the chain is a principal amount for the subsequent chain of chickens and eggs, all the eggs need to be safe-guarded.
--------------
Majority of the new traders in the market are reckless with the egg(s) in their hand!
They underestimate the market
overestimate their skills
and start trading big bets without getting seasoned in the markets.
This is like juggling with the eggs in the dark while running backwards on a slippery floor with eyes closed !!!
Inevitably they end up with eggs on their face!!
hopes on the floor
and the future out of the window!
--------------
Trade small till your practice eggs are hard boiled in the market!
Showing posts with label test trading. Show all posts
Showing posts with label test trading. Show all posts
Saturday, September 11, 2010
Friday, September 3, 2010
Learning to fly!
How does a fighter pilot learn to fly?
Step 1 : He learns to fly
Step 2 : He flies.
Right?
Wrong!
If he is learning to fly without flying he is not learning to "fly"
and if he is flying, he is already flying!
Therefore, a cadet has to fly to learn to fly!
So, how do they train a pilot (besides, ofcourse, the theoretical part)?
They fly him with an instructor (generally a Squadron Leader) in a twin seater jet.
The SqL flies....
The cadet learns...
.....while flying!
Controls are gradually exchanged between the two!
Real time real training!
These days they also have flight simulators
but all trainee pilots know they will be alive even if they crash. All they fear is a rap on the knuckle and a reprimand!
It is still 'paper flying'.
They still have to fly to learn to fly!
Similarly, you don't learn to trade before your start trading!
You learn to trade by trading.
(Ofcourse after basic theoretical training, which, if good, can even prepare you psychologically by telling you what to expect. The more you sweat during theoretical trading, the less you bleed in actual trading. But real trading is learnt by trading.)
Step 1 : He learns to fly
Step 2 : He flies.
Right?
Wrong!
If he is learning to fly without flying he is not learning to "fly"
and if he is flying, he is already flying!
Therefore, a cadet has to fly to learn to fly!
So, how do they train a pilot (besides, ofcourse, the theoretical part)?
They fly him with an instructor (generally a Squadron Leader) in a twin seater jet.
The SqL flies....
The cadet learns...
.....while flying!
Controls are gradually exchanged between the two!
Real time real training!
These days they also have flight simulators
but all trainee pilots know they will be alive even if they crash. All they fear is a rap on the knuckle and a reprimand!
It is still 'paper flying'.
They still have to fly to learn to fly!
Similarly, you don't learn to trade before your start trading!
You learn to trade by trading.
(Ofcourse after basic theoretical training, which, if good, can even prepare you psychologically by telling you what to expect. The more you sweat during theoretical trading, the less you bleed in actual trading. But real trading is learnt by trading.)
Wednesday, May 12, 2010
Advanced Jet Trainer
When I initially started trading with rsi, i used the following "Advanced Jet Trainer" trading technique.
I used it because I wanted to gather courage to trade freely in the merciless wild world of stock market
but was afraid of the monster called loss if my trading decisions were to go wrong.
In this simple technique, there is no or very less loss but good profit!
This technique boosted my confidence like steroids and busted my fears like cannons!
The technique is very simple:
I used to buy one mini-nifty lot "permanently" when rsi 14/30min on 1 month chart exhausted in the oversold zone.
Thereafter, all I used to do was
* Short one mini-nifty lot whenever this rsi exhausted in the overbought zone
* Buy one mini-nifty lot whenever this rsi exhausted in the oversold zone.
Since I always had one mini-nifty long
my short decisions, if right, resulted in addition of value to my perma-long
if wrong, it resulted in no-profit-no-loss (as my short position was always hedged by the perma-long)!
my long decisions (in addition to the perma-long), if right, resulted in double profit (perma long as well as additional long)
if wrong, it resulted in very less and momentary loss since I always bought when rsi had already exhausted in oversold zone!
whenever I missed the shorting opportunity (rarely that happened), I never worried because I knew it will come up!
This simple technique did wonders for me.
I was rarely wrong, and almost always right!
Eventually, I gained enough confidence to trade without the "crutches" of the perma-long mini-nifty lot.
Just like a child learns to balance the bicycle without the two supporting legs with small rollers at the end!
I gradually graduated to nifty (rather multiple lots) instead of mini-nifty.
This simple "training" technique is based on the assumption that markets' have a natural tendency to go up.
They can keep going up forever but can't keep going down forever!
(Disclaimer : This is not a recommendation to try this technique. What worked for me may not work for everyone. This is just to share. Pl use your discretion.)
I used it because I wanted to gather courage to trade freely in the merciless wild world of stock market
but was afraid of the monster called loss if my trading decisions were to go wrong.
In this simple technique, there is no or very less loss but good profit!
This technique boosted my confidence like steroids and busted my fears like cannons!
The technique is very simple:
I used to buy one mini-nifty lot "permanently" when rsi 14/30min on 1 month chart exhausted in the oversold zone.
Thereafter, all I used to do was
* Short one mini-nifty lot whenever this rsi exhausted in the overbought zone
* Buy one mini-nifty lot whenever this rsi exhausted in the oversold zone.
Since I always had one mini-nifty long
my short decisions, if right, resulted in addition of value to my perma-long
if wrong, it resulted in no-profit-no-loss (as my short position was always hedged by the perma-long)!
my long decisions (in addition to the perma-long), if right, resulted in double profit (perma long as well as additional long)
if wrong, it resulted in very less and momentary loss since I always bought when rsi had already exhausted in oversold zone!
whenever I missed the shorting opportunity (rarely that happened), I never worried because I knew it will come up!
This simple technique did wonders for me.
I was rarely wrong, and almost always right!
Eventually, I gained enough confidence to trade without the "crutches" of the perma-long mini-nifty lot.
Just like a child learns to balance the bicycle without the two supporting legs with small rollers at the end!
I gradually graduated to nifty (rather multiple lots) instead of mini-nifty.
This simple "training" technique is based on the assumption that markets' have a natural tendency to go up.
They can keep going up forever but can't keep going down forever!
(Disclaimer : This is not a recommendation to try this technique. What worked for me may not work for everyone. This is just to share. Pl use your discretion.)
Monday, April 19, 2010
"Long-term greedy"
Here is a good advice from a "bad" but brilliant man - Goldman!
"as long as money is made over the long term, trading losses in the short term are not to be worried about."
This is Goldman's famous philosophy of being "long-term greedy"!!!
This applies wonderfully well to the learners in stock market!
As long as the new budding amateur traders are learning and improving
"mistakes" and losses are pardonable.
These are like consuming ammunition to train the budding soldiers......
These are like trainee pilots crashing the trainer jets but ejecting just before that.....
These are like friendly goals of budding football champs....
These are like broken bones of budding boxing champions....
As long as the lessons are being learnt
and experience is being gained
and methods being hardened
loss should be accepted with a mature smile!
as a cost of learning!!!
Afterall, training a stock trader is as costly as training a fighter pilot!
Be a proud "trainee fighter pilot" of The Royal Air Force
of National Stock Exchange!!!
"as long as money is made over the long term, trading losses in the short term are not to be worried about."
This is Goldman's famous philosophy of being "long-term greedy"!!!
This applies wonderfully well to the learners in stock market!
As long as the new budding amateur traders are learning and improving
"mistakes" and losses are pardonable.
These are like consuming ammunition to train the budding soldiers......
These are like trainee pilots crashing the trainer jets but ejecting just before that.....
These are like friendly goals of budding football champs....
These are like broken bones of budding boxing champions....
As long as the lessons are being learnt
and experience is being gained
and methods being hardened
loss should be accepted with a mature smile!
as a cost of learning!!!
Afterall, training a stock trader is as costly as training a fighter pilot!
Be a proud "trainee fighter pilot" of The Royal Air Force
of National Stock Exchange!!!
Thursday, April 15, 2010
Real Tears,Sweat and Blood! (Paper trading with money!)
Dummy fake trading (without money) where we just record our trasactions on a paper (or in mind) is called Paper Trading.
Many traders opt for this to test the water, wet their feet before actually jumping into REAL trading where the sweat, blood and tears are REAL!
But traditional paper trading has many short comings.
Often, traders don't take it seriously.
The discipline required to paper-trade is often missing.
Following shortcomings have been seen:-
1) Psychological seasoning (ups and downs and dull periods) doesn't happen
2) Patience is not learnt
3) Performance under pressure is not tested.
4) Method is not truely tested due to lack of seriousness without money at the stake!
5) Consistency is not tested (rarely have i seen a trader paper-trade for more than one day or one trade!)
6) Real pain of losing is not experienced!
7) Slap of the stupid decision is not experienced!
8) Hidden traps and minor but crucial points are not learnt!
9) Self-confidence doesn't come. Fear of losing money still remains.
10) Real feeling of triumph is not experienced after big and earned profits!!
All fighter pilots have to be trained on a sub-sonic Trainer Jet before flying a Sukhoi.
Can't expect the lieutinent to fly the monster after just "paper-flying"!
So, what is required is : a trading training with minimum or no risk of losing
and yet with real experience with real tears, sweat and blood!
So, what to do? How to do?
Trade real but tiny.
e.g. Buy just 1 or 2 shares of a company.
And mentally multiply with 100.
e.g. I bought 1 Ranbaxy share in 2004 for 980/- and assumed that I had bought 98,000/- worth of these!
If profited 12 rs., i took it as 12x100=1200/- profit. similarly, for loss.
I held on to it for more than 1 month and experienced every thrill, every lesson, every setback i could have!
An unmatched learning without burning my fingers and yet experiencing the emotions of losing and gaining money.
If we can spend thousands on seminars and diplomas and certifications, why not a few hundred in brokerage for training!
Many traders opt for this to test the water, wet their feet before actually jumping into REAL trading where the sweat, blood and tears are REAL!
But traditional paper trading has many short comings.
Often, traders don't take it seriously.
The discipline required to paper-trade is often missing.
Following shortcomings have been seen:-
1) Psychological seasoning (ups and downs and dull periods) doesn't happen
2) Patience is not learnt
3) Performance under pressure is not tested.
4) Method is not truely tested due to lack of seriousness without money at the stake!
5) Consistency is not tested (rarely have i seen a trader paper-trade for more than one day or one trade!)
6) Real pain of losing is not experienced!
7) Slap of the stupid decision is not experienced!
8) Hidden traps and minor but crucial points are not learnt!
9) Self-confidence doesn't come. Fear of losing money still remains.
10) Real feeling of triumph is not experienced after big and earned profits!!
All fighter pilots have to be trained on a sub-sonic Trainer Jet before flying a Sukhoi.
Can't expect the lieutinent to fly the monster after just "paper-flying"!
So, what is required is : a trading training with minimum or no risk of losing
and yet with real experience with real tears, sweat and blood!
So, what to do? How to do?
Trade real but tiny.
e.g. Buy just 1 or 2 shares of a company.
And mentally multiply with 100.
e.g. I bought 1 Ranbaxy share in 2004 for 980/- and assumed that I had bought 98,000/- worth of these!
If profited 12 rs., i took it as 12x100=1200/- profit. similarly, for loss.
I held on to it for more than 1 month and experienced every thrill, every lesson, every setback i could have!
An unmatched learning without burning my fingers and yet experiencing the emotions of losing and gaining money.
If we can spend thousands on seminars and diplomas and certifications, why not a few hundred in brokerage for training!
Tuesday, March 30, 2010
Mood of the master can be judged from behaviour of the servant (Mastering RSI)
If the priceline is the master, RSI is the master's most faithful and beloved servant.
The mood of the master can be judged from the behaviour of the servant.
When the master (price) is in a strong mood to trend, the obedient servant (RSI) bangs his head straight into the 80 or 20(rsi) wall !
And since the master is in no mood to stop trending, the faithful RSI keeps bouncing and bumping into the 80-90-100 or 20-10-0 rsi wall again and again after retracing a step or two repeatedly.
And all this while the master keeps moving further, till he runs out of steam!
And then, the alert servant rsi takes the hint and retreats.
If the master is in mood to move but not too much too fast, his trusted servant retreats from 70-75 wall after just one hit and the master is visibly pleased at his "employee's" diplomacy.
When the master is in a casual mood, the loyal footman RSI retreats from halfway, pleasing his boss further.
RSI is to Price what Abdul Karim was to Queen Victoria.
Very faithful and intelligent and useful
but hated by co-workers
like RSI is hated by other Technical Indicators for its potency.
Anyone wanting to master the master, watch his shadow
the RSI.
The mood of the master can be judged from the behaviour of the servant.
When the master (price) is in a strong mood to trend, the obedient servant (RSI) bangs his head straight into the 80 or 20(rsi) wall !
And since the master is in no mood to stop trending, the faithful RSI keeps bouncing and bumping into the 80-90-100 or 20-10-0 rsi wall again and again after retracing a step or two repeatedly.
And all this while the master keeps moving further, till he runs out of steam!
And then, the alert servant rsi takes the hint and retreats.
If the master is in mood to move but not too much too fast, his trusted servant retreats from 70-75 wall after just one hit and the master is visibly pleased at his "employee's" diplomacy.
When the master is in a casual mood, the loyal footman RSI retreats from halfway, pleasing his boss further.
RSI is to Price what Abdul Karim was to Queen Victoria.
Very faithful and intelligent and useful
but hated by co-workers
like RSI is hated by other Technical Indicators for its potency.
Anyone wanting to master the master, watch his shadow
the RSI.
Thursday, March 18, 2010
Testing the Dog's mood!
I noticed a peculiar habit of one of my friends.
Recently I went to a Govt official's house with him.
Our host had a fierce dog as pet.
My friend, on seeing the hound behind the closed gate stopped, took out an eclair and threw at the animal.
"Do you think dogs eat eclairs?" I asked him.
"I know he may not like eclair. But I am just testing the dog's mood" my friend replied.
"I just want to know whether the dog is in excited mood. whether he is in the mood to attack or not."
"I want to test him on the eclair before offering my leg"
I was amused to hear all this.
Why don't we enter a stock in risky situations like these in two steps.
Step 1: Offer an eclair!
Step 2: Offer our leg!!
I am pained to see my friends straight-away offering not just their leg but their neck to risky trade hounds.
By entering a swing or positional trade in steps, you not only are much safer but also if things go wrong in second or third step, you already have some profit from the first step to cover your loss.
Recently I went to a Govt official's house with him.
Our host had a fierce dog as pet.
My friend, on seeing the hound behind the closed gate stopped, took out an eclair and threw at the animal.
"Do you think dogs eat eclairs?" I asked him.
"I know he may not like eclair. But I am just testing the dog's mood" my friend replied.
"I just want to know whether the dog is in excited mood. whether he is in the mood to attack or not."
"I want to test him on the eclair before offering my leg"
I was amused to hear all this.
Why don't we enter a stock in risky situations like these in two steps.
Step 1: Offer an eclair!
Step 2: Offer our leg!!
I am pained to see my friends straight-away offering not just their leg but their neck to risky trade hounds.
By entering a swing or positional trade in steps, you not only are much safer but also if things go wrong in second or third step, you already have some profit from the first step to cover your loss.
Monday, March 1, 2010
How do you do that!
Many years ago I was watching a Transtel documentary on BBC.
A lady journalist was interviewing a chopper (helicoptor) fighter pilot of Royal Airforce of Great Britain.
She asked the pilot about the sophisticated equipments inside the fighter chopper.
He showed many sophisticated instruments and controls.
Then he showed a small single-eye goggle.
It was to be worn by the pilot over his left eye while flying the chopper!
So what was so special about that single-eye goggle?
Well, it was not a goggle but a small screen on which a number of instrument readings were appearing while the pilot was flying the chopper.
This helped him keep "an" eye on the flying machine's controls.
While the pilot is keeping his left eye on the readings of the chopper, he is navigating the direction in which his chopper is going and spotting the enemy targets with his right eye!!!
The interviewer (as well as TV audience like me) were shocked to listen to this crazy and "impossible" act.
How can a human being continuosly watch readings of intruments on the screen in front of left eye and spot enemy targets with the right?
"How do you do that?" the lady asked the fighter pilot.
The pilot's answer is a big lesson for all of us traders.
He said
"Practice"
A lady journalist was interviewing a chopper (helicoptor) fighter pilot of Royal Airforce of Great Britain.
She asked the pilot about the sophisticated equipments inside the fighter chopper.
He showed many sophisticated instruments and controls.
Then he showed a small single-eye goggle.
It was to be worn by the pilot over his left eye while flying the chopper!
So what was so special about that single-eye goggle?
Well, it was not a goggle but a small screen on which a number of instrument readings were appearing while the pilot was flying the chopper.
This helped him keep "an" eye on the flying machine's controls.
While the pilot is keeping his left eye on the readings of the chopper, he is navigating the direction in which his chopper is going and spotting the enemy targets with his right eye!!!
The interviewer (as well as TV audience like me) were shocked to listen to this crazy and "impossible" act.
How can a human being continuosly watch readings of intruments on the screen in front of left eye and spot enemy targets with the right?
"How do you do that?" the lady asked the fighter pilot.
The pilot's answer is a big lesson for all of us traders.
He said
"Practice"
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