my market philosophies

- market doesn't know whether you are long or short. so, rest assured, the market is not after you. since it can't see you (the individual), it is not thirsty for your blood and money. you are yourself running scared and coming in the way of the speeding trolla like a street dog. remain cool and perch atop the moving beast.

- market will either go up or down, it has no third way. so, there is always 50% chance of winning. all we have to do thereafter is to try and improve that percent.

- we are playing on technical level and getting beaten on the tactical front.

turning radius of markets

when i see traders seek and ask for shorting opportunities in bull runs or buying opportunities in bear drops, i feel like jumping into the screen to his side of the pc and shrieking "Don't!!!"

reason?

every car has a turning radius. every car needs some circle, some width to turn.

only cars in cartoons can turn around like a 'V'.

same is with the markets.

if and when they have to turn, they need a "turning radius". they can't and don't turn in a 'V'

so, whenever, u see a bull run or bear slip (in any time frame), wait for that circle or curve to be
formed.

trading situations are like elephants (not just cars). they take some time and manoeuvring to turn, and they can't hide it.

never panic at sharp adverse sudden unforeseen unwarranted move. it always invariably retreats
(atleast and mostly) once.

then. ofcourse, it depends upon how much leveraged position you have in your mouth that may
threaten to choke you or how much buffer holding funds you have.

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"

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.

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?

fact of the matter is......

+600

+200

-300

-0

-600

+0

+300

-200

-0

+100

-100

-600

-100

+400

-400

-200

+500

+100

-100

-100

-300

+300 = june

given above are the net series-end to series-end nifty spot change values in last 22 months

few points worth noting

1. average net change in nifty=250

2. more than 400=6 times

3. zero to 100=9 times

4. 200-300=7 times

5. more than 600=none

6. options buyer don't have a chance. the small movement is enough to make any option premium unrecoverable except by writing. that too is risky and needs a precision strategy.

7. you can't predict the direction. by the time you know, it changes

8. you can't predict the extent of change, by the time you know, it ends.

9. the "game" is made for option writers and not for option buyers. in fact, only those option writers have a chance who have unlimited funding and smart auto-software.

10. you move, market kills you. only chance you have : you stay still, let market move.

11. if you make 33% of the 100% move of the market, you are a genious.

12. level of a genious is inversely proportional to the complexity of the strategy.

13. there are 9 of 22 times (41% approx) chance that you will not get any chance to make money (encashing the chance is another question altogether)

14. all big moves are unpredictable and hence uncatchable. doubt will freeze you or checkmate you.

15. options and futures are tools of the operators......bait to hook the fish.

all (non-operator) traders are playing on technical and fundamental levels

and getting beaten on tactical level.

the KBC of stock market

http://www.mudraa.com/singlepost.php?messid=125400

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.

opponent from a different dimension

90% of the technical traders
lose in the market.

pity
that they take their defeat, failure and loss
itself as an indicator
of some deficiency
in their knowledge and application of indicators and technicals.

result?

they get back to
burning themselves
as well as the midnight oil
to learn more of technicals and indicators.

poor souls!
little do they know
that they are losing the trading battle
less on the technical front
and more on the tactical front.

they are trying to catch the market
with technicals
while the market is dodging them
in another dimension....
tactics,

beating the traders in three ways
- whipsaws
- directional dodge
- unpredictable behaviour

no technicals can make a net
that can catch the liquid fish.

need to catch the flow
from its weakness
....the flow
the irresistible urge
and compulsion to flow
the bad habit to dodge!

(niftyshots.blogspot.com)

earthquakes don't kill

long ago
i had read a sentence that hit me hard and stuck inside me
deep.

"earthquakes don't kill, falling structures do."

i remember it was an ad about earthquake resistant structures.

i recalled this super sentence a few days back
while studying how market movements kill retail traders.

so i translated the above line
inline with what happens in the markets.

"price movements don't kill, whipsaws do."

yes, that's true.

if price movements in a particular direction killed,
atleast half the traders who were in the opposite direction trade
would make money
while the those who were in the wrong direction
would quickly change theirs.

but curiously,
traders in both direction lose.
rather steamrolled!

why?

whipsaws!!!

rapid, unpredictable and trapping whipsaws!!!

if you draw a number of horizontal lines across different heights on a intraday price chart
you will see

- that this horizontal line cuts price many times during the day.
- that farther the line from the centre of the price movement of the day, lesser times it cuts the price and hence lesser the number of the whipsaws.

but it is not clear in advance where the centre of the price movement of the day will lie!

all these months and years i had been focusing my attention in trying to predict the next move of the price.

but after the above realisation, i have changed the pressure and focus of my technical force towards anticipating not the price move but towards anticipating the line of minimum whipsaws.

6 passwords of day trading - VI

day trading is an enigma.
investing calls every new trader but none goes there first.
many never go there.
all come pulled towards day trading like hypnotised souls.

this write-up is for those souls
who want to live and die with their obsession
the day trading.

if day trading is a vault of money.
here are the 6 passwords to open that vault.

--------------------------

password 6 = don't "trade"

this one is controversial, exciting, mysterious
and most rewarding!

genious and most successful traders
never look like one!

they are never conscious or excited about trading.
for them trading is a routine business of common sense.
and common-sense is nothing but emotional wisdom.
they are not desperate for money
so they don't take "hyper" decisions.

they don't"look" like a trader at all!
they look dull and pretty ordinary.
they have no hoopla or air of a trader!

they don't trade with money but their edge!
they don't trade for money but for vindication of their edge!

that they put in money
and that they get a loads more back
is just incidental.

they know emotions are the handles operators catch the small traders.
by being emotionless, they are beyond the traps of market manipulations.

when things go or don't go their way
they are not excited or scared.

all they humm to themselves is
"is it!"
"o, i see!"
"all right. so be it!"

they trade like a machine.

they don't trade with a software
they trade like a software.

for them loss is just a "pickle" with the main dish of profit.

6 passwords of day trading - V

day trading is an enigma.
investing calls every new trader but none goes there first.
many never go there.
all come pulled towards day trading like hypnotised souls.

this write-up is for those souls
who want to live and die with their obsession
the day trading.

if day trading is a vault of money.
here are the 6 passwords to open that vault.

--------------------------

password 5 = "edge"

i am shocked to see
amateur day-traders entering trading pit
with only money stacked in both pockets of their pants!

no wonder
while coming out
they have not only lost all that money
but also their pants!

and what a relief it is
to see a trader
with money in one pocket
and a "secret personal trading weapon" in the other!

this "weapon"
may be a combination of deadly indicators
a support-resistance-breakout-breakdown gameplan
a gap opening strategy
a price-volume momentum plan
...some trick
...some secret knowledge edge!

the point is -
money is not enough to fight!
you need some method, some weapon,
some trick, some advantage,
a unique gameplan you specialise in.

all in all
you need a dependable edge
on the basis of which
you can bet your money.

trading without an edge
is like trading with orphan money
which is begging to be "adopted"
by a responsible deserving trader.

an edge is your personal specialised trading idea
that has proven to be successul for you
majority percentage of the times!

once you have got that edge
don't bother whether it works in that particular trade or not
just keep repeating it
ruthlessly
and repeatedly.

if the edge was right
it will get you money
majority of the times.

specialise and keep improving your edge!

one good one is more than enough!

6 passwords of day trading - IV

day trading is an enigma.
investing calls every new trader but none goes there first.
many never go there.
all come pulled towards day trading like hypnotised souls.

this write-up is for those souls
who want to live and die with their obsession
the day trading.

if day trading is a vault of money.
here are the 6 passwords to open that vault.

--------------------------

password 4 = "time"

well begun is half done, they say!

so true in day-trading!!

when to enter a day-trade is decisive.

if you enter at the wrong time
even if your direction of trade is right
you may slip into loss for some time before the trade actually turns in your favour!

by that time, you may have panicked and chickened out or quit.

even otherwise, you are unnecessarily inviting stress.
you are unnecessarily cutting down potential profit.

i have seen many day-traders enter positions randomly.

even when you are on the side of smart money
even when you are mentally aligned and aware of the bigger picture
even when you are prepared for the "guerilla" war
you need to enter at the right time!

i give some examples below:

- enter only at a higher low (for a long position)
or a lower high (for a short position)

- keep intraday fibonacci retracement levels in mind.

- keep support and resistance levels in mind.

- don't enter the position without the permission of the indicators, if you have some on your payroll.

"never try to time the market" may be a rule for investing but certainly not for day trading.

6 passwords of day trading - III

day trading is an enigma.
investing calls every new trader but none goes there first.
many never go there.
all come pulled towards day trading like hypnotised souls.

this write-up is for those souls
who want to live and die with their obsession
the day trading.

if day trading is a vault of money.
here are the 6 passwords to open that vault.

--------------------------

password 3 = "run"

day trading is not for wealth creation
it is for cash flow generation.

it is an atm.

you never retire from day-trading.

if u want to accumulate wealth
go to swing trading and then to investing.

day trading is self-employment at its best.

i have seen many day-traders bleeding to financial death
by not getting this basic password right.

they expect to become rich by trading trading
and all their trading decisions go wrong because of this.

greed of "all the money" immobilizes them.
fear of "recovering that gone wealth" freezes them.

day trading is a guerilla war.
you don't go there with tents and bonfire!
you go there on a mission
do it
and get lost!

what a paradox
that amateur day-traders
fear losing money
and hence don't buy multiple lots
but still expect big money.

this leaves them with only one way
stay in the position for long....and this traps them.

day trading doesn't mean you have to be there all day!

it is not a 9 to 3 job dammit!

as i said earlier
it is like a visit to an atm
put in the debit card of indicator
key in the amount
wait for the machine to count
take the money before it re-enters the machine
hold it tight
and go!

6 passwords of day trading - II

day trading is an enigma.
investing calls every new trader but none goes there first.
many never go there.
all come pulled towards day trading like hypnotised souls.

this write-up is for those souls
who want to live and die with their obsession
the day trading.

if day trading is a vault of wealth
here are the 6 passwords to open that vault.

--------------------------

password 2 = "write"

there is nothing right
nothing wrong
in day trading.

all morality, righteousness, should, would and could
are taken care of
and neutralized
within one minute
of the day's opening.

the gap up or gap down eats up
all pressure of the accumulated overnight developments.

the real drama starts thereafter.

95% of the day-trading money
is in the hands of just 2% of the players.

after the opening
a game is triggered by the "big pockets"
which seems to have nothing to do
with the weekly theme being played in the market.
despite the fact that it always stays within those boundaries.

afterall the smart money is not fool money!

i have seen that majority day-traders are trapped
and stay trapped
wondering why the obvious is not happening!!!

the rope of being right
gets them butchered.

they fail to see
that if 'the right' keeps happening
nobody makes money
as everyone knows what is right!

the should and could never would
in day trading!!!

what is happening is the reality.
what should happen is the trap!

don't be caught in the dilemma of right or wrong
be on the right side of the trend.

more and more day traders are opting for options.
they buy cheap options
written (sold) at unlimited "risk" by smart money.

smart money has the money power to control
accumulation and distribution game.

this is the reason
why the option (whether call or put) on the top of the traded-volume chart
is the wrong way for that time for that day.

if you are with the trend
then you are right
even when you are "wrong".

"right" is not right in day-trading
"write" is right.

stay with the trend.....whatever.
no if, no but.

6 passwords of day-trading - I

day trading is an enigma.
investing calls every new trader but none goes there first.
many never go there.
all come pulled towards day trading like hypnotised souls.

this write-up is for those souls
who want to live and die with their obsession
the day trading.

if day trading is a vault of wealth
here are the 6 passwords to open that vault.

--------------------------

password 1 = "light"

= day trading is the refuge of those who fear the night.
those who fear the darkness.
why i say so?
well, one day is just a part of the bigger picture being painted.
not all billions in the market are taken out every evening.
if that were so, nifty to crash to zero every evening!!!
markets don't fall like newton's apple.
they just yo-yo.

market moves in cycles.
there are cycles inside cycles inside cycles.
there are yearly cycles
with monthly cycles inside them
with weekly or fortnightly cycles inside them
with one or two day cycles inside them.

while majority money stays in outer cycles
mischievous money does play the one or two day cycle.
that is where a day trader should focus to have any chance
of making money in day trading
and that too consistently.

market is overwhelmingly packed with day traders.
beeing a day trader is itself a sign that
the trader has accepted the reality
that making big money and creating wealth in stock trading
is not for him or her.

he or she has consoled the self
to focus on daily earning of bread!

these day traders
treat every new day as a new puzzle to guess and crack.
they forget that the day is only a part of
the weekly or monthly puzzle being solved.

the only difference is
that the mischievous money
cause and use day trading volatility and unpredictability
to play catch-me-if-you-can trap game.

almost all day traders
get trapped in this.

if only the trader were to realise
that this mischievous money
has serious limitation
of staying within the outer puzzle boundaries
the trader will not run like scared lambs.

"light" of this knowledge
is must.

a day trader
whatever technicals or method or tricks or strategies he or she uses
must know
what theme is being played since last few days!

once this is clear and etched in your mind
the remaining passwords will help you win.


(to be continued)

trading bicycle!

sometimes (if not always)
if u have power in your pocket
you are tempted to use it.
in stock markets
those with money
have the power to take a trade.
amateur traders
succumb to the lure of using this power
almost everytime!
they are "instigated" to use them!
-
i too have been through this phase.
i just couldn't say no
to chocolates, icecream and indicator signals.
overwhelming majority of signals from the indicators and methods and tricks i learnt
turned out to be right.
but i was still not making money
atleast not considerable amount.
much less than what was possible!
i always wondered what was the reason
till i realised
that 80% of these "signalled" trades yielded
just 20% of the profit
but 80% of the trading costs!
besides, these 80% calls caused 100% of the stress!!!
i realised
that i had to reduce my number of trades.
i realised
that i had to find a way
to spot the hollow (though right) signals!
this seemed more difficult
than learning trading!
acquiring power is easy.
taming mind not to use it at the drop of the hat
is difficult.
-
and then, one fine day
the solution was right in front of me.
i recalled, remembered
(this fact is the easiest to notice
but the most difficult to follow)
that
prices move in cycles.
i am not talking about seasons
though they are included herein,
i am not just talking about macro-economic cycles
though they too are included here
neither do i mean only bull and bear cycles
although they are also included
i am talking much smaller cycles.
the weekly / fornightly cycles.....
-
i spent some days
just re-watching all charts
from this point of view.
i marked points on the charts (5min tick, 30min tick, 1day tick etc)
which according to me
were the turning points
of a cycle!
all crest and troughs....
amazingly, all these turning points were superbly marked by indicators also.
also, every cycle was part of a bigger cycle. in other words, there are cycles in cycles in cycles...the smallest cycle being the intraday (2 min tick cycle).
it was an amazing realisation.
the secret was in front of me.
all i needed now
was to adopt this in my trading.
i had to ignore all the signals after and before the turning points.
the signals for the turning points had to be different and distinct from the "in-between" signals.
-
to reduce the stress while i experimented
i used options for these "cyclic" trades.
since the signals i use are generated using a combination of two indicators,
i findly call this type of trading style
as riding the trading bicycle.
-
riding this bicycle
my number of trades are dramatically down
and bottomline is dramatically up!

the secret game-plan of option writers

we all know
the number of option sellers
are much lesser than the number of option buyers
as option selling requires much more premiumthan option buying
besides there being more and unlimited risk in selling options!

are option sellers (or "writers" as they are called) bad on money matters
that they opt for risky and expensive option of writing option?

they are supposed to be smart people
and they are not fools.

so what they do cannot be wrong
atleast not for overwhelming majority of the times!

yesterday, i observed some strange things.

they were always in front of me
but somehow they always skipped my eyes.

i was observing the behaviour of
the quotes for call options of bank nifty
on the trading terminal.

the first obvious observation -
as the underlying rate of the index increased
the asking rate for SELLING the call option
kept on increasing systematically
rather, very systematically.

second observation -
they always smoothly maintained the premium gap
between their asking rate
and asking rate of buyers.

third observation -
the premium kept on increasing
with the rate of increase of the underlying price.

fourth observation -
and this one is quite significant....
THERE WAS NO SHORTAGE OF NUMBER OF LOTS
ON THE SALE!!!

fifth observation -
and this is bombastic!

THE SELLERS WERE READY TO SELL ANY NUMBER OF LOT OF OPTIONS
IRRESPECTIVE OF MARKET CONDITIONS!!!

sixth Observation -
and this mind blowing!!
THE SELLERS WERE PROVED TO BE WRONG IN THEIR POSITIONS.

--

i was shocked !
what are these sellers doing?
they are supposed to be custodians of smart money
and they are losing!!!?

what is their game plan?

all they stand to gain is
the premium amount
and that too
at the expiry!

and that too, if they are right.
and in this case
as i saw
they turned out to be wrong!

being smart money
they couldn't be wrong
even when caught red handed.
there must be something more than that meets our eyes!
so, what is their game plan?
what are they up to?
--

i searched for clues to the answer
but didn't seem to get it.

then,
it struck me
"who is writing the put options?
what is happening at the put writing space?
what's the scenario there?"

i shifted my attention.
i focused on the put writing column for some time
and was shocked with a smile!

it was exactly the mirror image of what was happening
in the call writing column.

* as the underlying rate of the stock fell
the asking rate for SELLING the call option
kept on increasing systematically
rather, very systematically.

the asking rates were changing as if being controlled by a computer.
i am sure it was a computer behind it all!

the change in the asking rates of option buying was more jerky
and intermittent than option writing!

this indicated that humans were buying from computer software!!!

* the put writers always maintained the premium gap
between their asking rate
and asking rate of buyers of put options.

* the premium kept on increasing with the rate of fall of underlying price.

* THERE WAS NO SHORTAGE OF NUMBER OF PUT LOTS ON THE SALE!!!

* THE SELLERS WERE READY TO SELL ANY NUMBER OF LOTs OF PUT OPTIONS TOO
WITHOUT BOTHERING ABOUT WHETHER THE PRICE WILL KEEP FALLING OR NOT!!!

and last but not the least (rather the most crucial)
THE SELLERS WERE PROVED TO BE WRONG IN THEIR POSITIONS again!

--

all pieces of puzzle seemed to fall in place now.

the end of the thread of the game was in my hand.

the tactic of the option writers was simple

= they were selling any number of calls being asked by buyers
but at handsome premium!

and they were selling any number of puts being asked by buyers
but at handsome premium!

the loss in put writing was sure to be offset by the gain in call writing
or vice versa in reverse market movement

they always were assured of premium gain.

so they never bothered about
which way the market was going to go

they will always be assured of going with the trend
courtesy computers in their service.

but there were two more critical requisites for this strategy to succeed

one, they had to have very big bags of money (we all know they have! not just big bags but currency printing machines!!!)

two, they have to be satisfied with just premiums!

the second condition was a bit perplexing!

but when i recalled the annual earning figures of all big operators / FIIs / banks
i realized that they never earned more than 50-200% per annum
big from our standards
but too small with respect of our own stupid expectations.

getting 50% plus per annum was a cake walk if one was assured of the premiums only!
and that was precisely there game!!!

they had money
they were satisfied with premiums only!

even normal percentage return on big big volumes would give them millions (if not billions) of returns in absolute value.

it is a game of principal amount, not percentage.

--

a big cartel or wing of the operators or big pockets
are not interested in the future of the market.
their own future lies
in the present of the market- the premiums of the current and nearby series!
moreover,
they are also not overtly bothered about the market fluctuations.

they have the regulator controls in their hand
- not supporting buying when they want it to slip.
- not supporting selling when they want it to rise.
- supporting buying when they want it to soar
- supporting selling when they want it to collapse.

--

i stood where i was sitting

and saluted the writers

not the story writers
but the fortune writers!!!