waiting before the next trade

http://www.mudraa.com/singlepost.php?messid=142999

dear murliji,

nice to hear from you.

now when i know that you are physically in the u.s. i miss your routine presence in mudraa more than when i knew, in the back of mind, that u were somewhere around.

your observation is good and your question pointed and right.

let me ask myself and attempt a frank answer.

-

i put the sl @ 5090spot equivalent because, at that time, 5090 was the line which, if crossed from below, would have indicated, as per my understanding, the pause or end of the downward slide.

infact, for quite sometime, nifty spot kept hovering around 5089.....almost teasing......missing it by a whisker 2-3 times before finally crossing it.

why i didn't square @ 5077spot = because that was not the line which indicated the end of downslide.....unlike 5090 which did.

the next question is - why i didn't go long @ 5090 after squaring shorts.

there are a few reasons when i rethink.

one, i was quite stressed after spending quite some time observing tick by tick in that tense situation with loaded position. i had to breathe again after coming out of the ring.

second, somewhere in the back of head, i knew that while markets may stop falling that may not itself indicate that they are about to rise.

so, as a natural instinct, i stood up the table, walked out, freshened up, relaxed a bit, returned, forgot the day trade and started looking for btst stbt opportunity.

with that fresh mind, and once out of the shadow of day trade's stress, i could focus on overnight trade signals better.

one more thing, the momentum (often unjustified and mob-minded) is difficult to change at the end, it is often hiding a different picture for the next day, when seen from a distance.

just like every morning is like a fresh puzzle and needs fresh look, every overnight set-up is a fresh riddle and needs a fresh view, detatched from the midset overhang of the day's workout.

--

the sabzimandi train analogy is right.

---

when i squared the shorts, i was not sure whether the train to the other side was ready for leaving.

the markets could easily have risen to 5030 levels before gap down the next day. in that case, it would have been prudent to book shorts and wait for shorting again.

---

say my hello to the president.

hope he or his treasury secretary or fed chief doesn't say anything which spoils my overnight weekend long position.

love and trade

you can't become rich
without the power of consistent multiplication

you can't multiply
without taking risk

you can't take and survive risk
without discpline

you can't be disciplined
without confidence in discipline

you can't have confidence
without knowledge

you can't have the real knowledge
without struggle

you can't survive the struggle
without determination

you can't be determined
without passion

you can't be passionate
without loving the occupation!

trading is about love
before it is about money.

anything to lose!

want to be successful in trading?
here is a simple way.
"make mistakes!"
but you won't.
so i hereby, change my wording
"stick to your convictions of a trade"
only 2 things are possible
- either ur conviction will be proved right
- or ur system's chinks will be exposed, hence paving way for improvement.
--
in his masterpiece
"6 success forces"
 joseph sugarman had included one success force as
"do anything to fail"
--
if , however
you don't believe in admitting the mistake
and don't believe in improving your trading system
or,
don't have a trading system in first place
i have only one advice
"don't make mistakes at all!"
there is only one way of doing that
don't trade.




(niftyshots.blogspot.com)

gtalk

JP :
Banta Singh went to an eye specialist to get his eyes tested and asked "Doctor, will I be able to read after wearing glasses?"
Yes of course, said the doctor, why not!
"Oh How nice it would be I have been illiterate for so long" replied Banta with joy.
Me:
Ha ha....same thing happens when people enter stock market, wear technical glasses and expect to read profit without getting literate about trading psychology \
SA:
sir i am not active trader
guide me where can i learn technical analysis?
Me:
let me give u a different advise. don't learn technical analysis. observe price movement for many days and ur own methods will pop in ur head.

SA: ok
you mean i have to observe after trading hours?
Me:
observe before during and after trading hours, gradually ur trading gut will get subconsciously programmed. just like some of the best auto mechanics in my town are illiterates but are most educated by their experience and observation
SA:
ok sir
sure
thank you very much for your guidance
observing NIFY only enough right?

Me:
u r welcome!
yes observation is the best education. killer training!
=============================================
u can gtalk with me @ jagmohanshan@ g mail.com
for my view on nifty keep track of my updates in mudraa.com
for my nifty views and links to articles in mudraa send ur cell no. to 09418037474
Js (niftyshots.blogspot)

good batsmen can be good traders

yes,
a good batsman can be a good trader.
lets see how....


a good batsman tries to read the bowler's hand while he releases the ball
= a good trader needs to read the hands of the operators


a good batsman knows the field setting
= a good trade knows the chart setting


a good batsman doesn't fiddle with a ball too much out of stump and leaving him
= a good trader doesn't fiddle with an "inviting opportunity" too much "out of stump and leaving him"


a good batsman doesn't hesitate to use his feet once he has seen the ball well
= a good trader doesn't hesitate to take the trade once he has seen it well


a good batsman respects every good ball by the bowler
= a good trader respects every good trick by the operator


a good batsman knows that every ball can't be hit for a six
= a good trader knows that every price movement can't be traded for a "six"


a good batsman knows that a ball can't be hit as demanded by the spectators
= a good trader doesn't get carried away by the hooting of the "spectators of fear,greed and excitement" inside his head


a good batsman knows that he needs to settle down, read the pitch and read the wicket before giving a charge
= a good trader knows that he must understand the market situation, trend and stage of the trend before entering the trade


a good batsman knows the importance of singles and running between the wickets
= a good trader knows the importance of booking every profit that may vanish. he knows the importance of scalping.


a good batsman knows the importance of partnerships, staying at the wicket.
= a good trader knows the importance of holding the nerve and staying in a winning trade


a good batsman knows that he must face the pace to score
= a good trader knows that he must face the fury of volatility


a good batsman knows that more the pace of the ball easier it is to score by just sweet timing.
= a good trader knows that more the volatility and tricks used by the operators, easier it is to make money by just sweet timing.


a good batsman knows that at times he needs to see off the new ball, see off a fierce spell....
= a good trader knows that at times he needs to just pass-off and see-off the fierce spell of uncertainty, volatility et al.


a good batsman knows that getting out at duck is part of the game
= a good trader knows that loss, hard luck and wrong decisions are part of the trade.


a good batsman knows that every new innings is new and different
= a good trader knows that every new trade is new and different


---


be "the wall", "mr.dependable", "the colonel", "the hurricane".............

diagram of a trader's journey

john fisher's classic diagram of
the process of transition
that wonderfully explains the journey to success or failure of every trading apprentice
http://www.businessballs.com/processofchange.pdf

nike, deo and watch

a trader was losing non-stop.
he tried every indicator
every tips provider
every website
every business tv channel
every trick
every strategy
cash and carry
futures
options
indices
stocks
....everything!
he still kept losing!
one friday evening
his dad gifted him a watch.
on saturday
he bought a pair of nike.
on sunday
he bought a new deodorant.
on monday morning
he wore the new watch
slipped into his nike
sprayed the new deodorant
and went to the religare hub
to trade.
and he made a big profit.
he was shaken with surprise.
next day
he made handsome profit again!
he was totally perplexed.
but the next day
he lost!
then
he recalled
that he had forgotten his watch home that day,
was not wearing his nike
and had not sprayed that deo!
next day
we made sure that he "took" all three to the trading pit!
and he made big profit!!!
he was ecstatic!
he came out
jumped in the air
and punched his fist in sheer joy!
his hand hit the tubelight.
the tubelight got shattered
and so did his dream
which ended with the restless sleep!
he checked the alarm clock.
"1 hour for the market to open!" it said.
he got out of the bed
freshened up
dressed up
left the nike in the shoe rack
spared the deo
and went out
bare wrist - without the watch.
-
that evening
he made his biggest profit!
he had traded
on his own
without nike, deo and watch.

open letter to a nervous friend new in the market

dear trader buddy,

thank u for ur kind warm words.

the crucial words u said are "i am also a share market lover"

frankly nothing else is compulsary.

i too loved the market. and this love has taken me a long way.

being a "zero" is actually a big advantage because majority of info and know-how floating in the market is crap.

just start from what u know,

keep searching for whatever comes to ur mind.

i used net for this purpose.

net has everything.

i learnt quite a few technicals, then dropped almost all of them when i saw they didn't work well.

then 2-3 were left.

i observed market and charts for long long hours.

this resulted my own methods and ideas. some worked, many didn't.

one good thing i fortunately did was

that i never committed big money till i "graduated" in trading.

just master 2-3 technicals, read a lot of articles, listen to a lot of interviews on business channels,

read a lot of business mags and newspapers, visit a lot of websites and forums,

paper trade a lot and keep noting logic behind trades and learnings.....

treat trading stocks as if you had started learning trading onions and potatoes and tomatoes in a veg market

.....believe me there is not much of a difference.....

all the best....it is going to be a long journey but would be short for you since u love the market.

jagmohan

why i prefer trading in bank nifty - III

futures are kitchen knives, options are coffee house dosa knives.


in the hands of professionals with sufficient buffer funds, futures is ok. how would a guy with 50 lacs in bank feel while taking a 3lac bank nifty position in futures? he will feel no blood pressure thumps when there is wild fluctuation. he can hold his position without any ado. he can freely test his technical ability by waiting to see the market turning in the direction of his analyses. (i am assuming that this rich guy is a mature one and has undergone sufficient training and knowledge and experience with his technicals). 


on the contrary, how will that guy feel if he has just 5000 in bank account and has already committed 25000 with the broker to take a 3lac position in bank nifty futures? he can stay liquid only for 200 points adverse move. he will be like a bird that will be the first to fly at the clap of the operator. 

futures move faster than options. to counter this, one can buy multiple option lots.

future has little time decay threat. out-of-money options has big threat of this.

if the market was to remain tight range bound for some days an option holder may get dissolved in the coffee cup of the option writer.

on the other hand, playing options is like trying circus with safety net.
options are gun-against-ones-own-temple if one does not know technicals. otherwise it is the most rewarding unfair advantage in the world.

safetywise, futures trading is like bungy jumping without the rope - hoping that the parachute of technicals opens in time.
and ninty percent of the time, amateur traders forget to pack in this parachute before jumping.

why i prefer trading in bank nifty - II

a 10 rupee out-of-money option can attain 270 value on 1000 move in bank nifty in a month.

this happens 8 times in 12 months on an average.

for 500 point move, it becomes 70.

any new comer can afford a risk of 2000 bucks (including costs) for a 10rupee option.
accuracy of his or her technical ability will be tested to the full.
this will either reward new traders exremely handsomely or will expose them to themselves regarding the gap in their technical learning.

this is the best and wise way to step into trading world rather than blowing away money and peace of mind and future.

pity that some traders focus on size or extent of dare of the trade instead of focusing of technique. no amount of smartness or money power can make up for the deficiency of technicals.

6 trading shoes

if you don't like wearing a hat
you have the choice of
6 trading shoes.

in my previous article
"6 trading hats"
i talked about the adaptation of
edward de bono's
"6 thinking hats"
to trading.

the treatise will be incomplete
if i don't discuss
edward de bono's
another masterpiece

"six action shoes"

amazon.com describes it as
"a brilliant new way to take control of any business or life situation"

how about trading!!!

let's see -

THE SIX SHOES

1. NAVY FORMAL SHOES

- these are the black formal navy drill shoes
when u r in them
u follow rules, systems and procedures!
no artistry, no gut, no if, no but.

"navy formal shoe" mindset is essential
to ensure safety and to avoid mistakes.

- in trading, you wear these shoes (psychologically)
while following your trading system

2. ORANGE GUMBOOTS

- these are long, imposing, hard "boots"
ready to face any dirty or tough situation

- in trading, you "wear" these shoes
when things turn real bad or outright ugly.
you don't lose heart, deploy emergency rescue plans and fight back.

the idea is to handle unexpected bad situations with courage, determination and self-control.

3. PINK SLIPPERS

- slippers are for relaxation and comfort
easy to get in and get out. you slip into them and take it easy.
you lower your guard remain informal.

- in trading you "slip" into "slipper" mindset
while coolly waiting for a favourable situation
or
once in the trade - ignoring volatility till there is a clear exit signal.

4. BROWN BROGUES

- these are "woodland" leather shoes which are designed to weather any condition!
brogues represent practical sensible adaptive unshaky approach.
they stand for “what can be done in this situation” mindset.
they denote common sense and readiness to “get your hands dirty” if the need be!

- in trading, u "wear" your "brogues"
during volatility or adverse losing movements.

the idea is to get past trying market times or uncertainty.

5. GREY SNEAKERS

- these are flexible, sports shoes.
....quiet, casual and relaxed

- in trading, u "wear" "sneakers"
while understanding a situation before spotting a trade.
it is all about collecting information and quitely analysing it.
you can't be looking for profitable trading opportunities while wearing brogues or boots or slippers!

6. PURPLE RIDING BOOTS

- these are the authority boots of the king's men. not for ordinary people.

- these are worn by operators and fund managers and big players
who have the reigns in their hand....
who know that its they who drive the price.....

- not to be worn by retail traders in the street.

6 trading hats

in his iconic masterpiece
"six thinking hats"

edward de bono had suggested
that mind needs to play
atleast 6 different roles
at different times
to effectively manage anything.

he emphasizes that all types of situations in front of us
can be braoadly classified into 6 types
and all these types of situations
need different response from us.

unfortuantely
we deal with all types of situations
with same mindset.

result?
wrong results
in atleast 5 out of 6 times!

he anticipated
that adjusting mindset to changing situations
is easier said than done.

to make it easier
he suggested
that one may imagine wearing
a different coloured hat
symbolising a particular different mindset.

he picked 6 colours

white = neutral, objective.
red = emotions, anger
black = serious, somber
yellow = sunny, positive
green = growth, fertility
blue = cool, sky

based on these colours
he suggested 6 coloured hats!

i found these perfect for trading also.

my adaptation of the same is given below:

-

1. the white (trading) hat
(for gathering information and facts)
= just watching, collecting fatcs, absorbing and understanding what's happening; checking indicators; the ground work without bias, prejudice or preconceptions.

2. the yellow (trading) hat
(symbolizing exploring and probing, looking for and analysing available facts and figures)
= translating the facts, figures and technicals, letting them speak fearlessly without any pressure or bias!

3. the black (trading) hat
(symbolizing the judgment as to why something may not work, spotting threats, dangers and difficulties)
problem if overused.
= looking at the possible traps, gaps and overlooks. challenging the analysis. considering the "what if" scenario

4. the red (trading) hat
(to search for and welcome any intuition, emotions and feelings; no justification required at the moment)
= stopping the logic and listening to your trained gut!

5. the green (trading) hat
(for ideas, creativity, exploring possibilities, letting the thought take you where it wants to)
= double checking, looking deeper and further

6. the blue (trading) hat
(to think and control)
= executing the decision and strategy ruthlessly and without emotions till its time to wear white trading hat again!

thinking like a trader

"trading
distilled down to its simplest form
is a pattern recognition numbers game.

we use analysis to identify patterns,
define risk
and determine profit targets.

the trade works or it doesn’t.

in either case we go on to the next trade.

this is simple to conceive difficult to do.

trading is hard
because you must operate in a state of
not having to know,
even though your analysis may at times
prove you to be correct. "

- trading in the zone
mark douglas

games operators play

there are only two directions
the price can go.

either up
or
down.

there is no third way.

and one of these directions is right
in a given time period.

if you take the right direction
which is a 50% probability
and if you stick to it
(the probability of which is very less
but lets assume it for the sake of discussion)

then how would the operators feel?

not very good.

what would they want to do in such a situation?

first,
they will pray that others don't do that.
atleast the majority doesn't take that position.

if the majority does that
then the operators are left with just two options

either, force change the reality to the opposite direction
(which is dangerous for them considering fundamentals)

or

as the better option

scare or trick you out or opposite.

so, choose right, sit tight.

don't worry about your trading success rate

what is better in trading?
70% success rate
or 45%?

70%, right!

well, not necessarily.

i was just checking
my old trading data
from the
ruthless trading diary that i maintain
and want to share two crucial observations.

1. out of 46 trades i took
during a particular period last year
my success rate was 63%
but i had eroded 12% of my principal amount
compared to what i had at the start of that period.

2. out of 18 trades i have taken
in the last 2months
my success rate is 45%
and i have made 19%
on what i started with
at the start of this period.

on digging deeper
the reasons were simple

in case 1
i was cutting winners early
and booking losses late.

in case 2
where my strategy was different
i had hedged positions.
so for every profit
there was a loss.
but since i had hedged
two different things
of different nature
the difference in profit and loss was big.

--

so?

though recording and analysing
trades is important
too much of emphasis on trade success ratio
is not that important.

it often is just a reflection of your method.

you may be winning more
and yet bleeding.

what really matters is
your strategy
its implementation
and consistency.

so, don't worry about your trading success rate
once you get it right
you will see a dramatic change in the net results!

project "freedom"

when i was in college
we had read somewhere
that any project taken in hand
takes
double the cost
and triple the time.

and that too
if our preperation was great
and we were skilled.

unforeseen
overlooked
uncontrollable
and chance factors
play a big role!

same thing applies
to many aspects of lives
including
learning stock trading.

it takes
double the cost
and triple the time
if not more,
hell lot more!

and that too
if our preperation is great
and we are skilled
and disciplined
and mentally tough
and lucky!

also,
provided
we have started the endeavor with full seriousness
and preferably under watchful eyes!

i started trading seriously in january 2009
and expected to be
financially free
on the basis of trading
by december that year.

all this while
i was damn serious
and enterprising.

only now,
as recently as today,
i have had
the first glimpse of my aim
completion of which
is still a few months away.

i am already 18 months behind my targeted aim!

and how much money i can't disclose!!

what a journey it has been

project "freedom"!!!

time to passout?

when i joined pec chandigarh
in 1989
for a 4 year degree course
i was amused to see
a few students in our college
who
as we came to know
had been there
since a decade or more!

they were more like
"uncles"
amidst us.

upon some investigation
we found
that these "not-so-young" students
were still there
not because they were
poor at studies
(though they might have been)
but because they didn't want to passout?

why?

because they all were
into politics

majority of them
were
either office bearers
of the student wings
of their patron political parties
or
their "cadre".

none of them wanted to
leave the plum posts rich with bucks and goodies.


all of them wanted to remain young forever
all of them wanted to remain students forever
because becoming grown up
would have rendered them ineligible
for "posts" meant for "growing ups"!

they were not bothered about "career" after studying
because they had got their "career" even while studying.

not surprisingly
they all remained there
even when we passed out
four years later.

i hope they are not their
still
after 18 years!!!

same thing happens in the market.

students join the "open school of stock market"
with an intention to passout
after learning.

but
to their own amusement
and to that of each others
they end up
like those "uncle" students
who never want to passout!

while learning never ends

there comes a time
when you learnt enough
to start making a living
and put learning
on back burner
and on auto-mode!

there comes a time
when you don't have substantially new things to learn!

that is the time you need to passout
and kiss goodbye to the school
and take up
"the job"

staying in the school
just to play to a gallery
or keep everyone in good humour

or settling for the "scholarship" instead of "fat paycheque"

proves costly!

a suitable boy!

the girl

picked up the newspaper

opened the matrimony page

and started searching

for "a suitable boy"

--

she stopped at one

and read

"wanted bride

for a handsome boy

age 27

5'10"

fair

M.A.

teetotaller

vegetarian

early simple marriage....."

--

she was not impressed.

she abandoned the ad midway

and was about to skip to the next one

when her eyes stumbled at the last line of that ad

"preparing for IAS"

this line changed the entire scenario

she talked to her parents

they fixed the marriage

and

the two tied the knot!

--

after 6 months

the boy failed at the IAS exam.

the girl divorced him!

--

after another 6 months

the girl decided to marry again.

she picked up the newspaper again

went to the matrimony page

and started searching

for mr.right!

--

her eyes stopped at the following ad

"wanted

divorcee bride

for a handsome boy

age 32

5'9"

wheatish complexion

M.Sc.

non-vegetarian

early marriage....."



the girl was again not impressed

dropped the ad midway

and was about to move to the next ad

when her eyes

noticed the last line

"opened a demat account

started stock trading"


she again talked to her parents

they arranged the marriage

and

both

"entered the holy trade"

--

within 3 months

the young "trader"

went bankrupt....

the girl divorced him!

--







(moral of the story =

you don't become a trader

just because you have started trading)

zen and the art of trading!

submit

to

the

market

before

it submits itself

to

you!!!

prepaid trading - V

if you don't know driving
what would you learn first?

a small car?
a truck?
a bull-dozer?

where would you test drive it?

open ground?
in the himalayas?
crowded chandni chowk?

--

ok.

now if you don't know trading
what amount would you test trade with?

1,000?
3,00,000?
30,000,00?

--

i know u said 1,000.

but i also know u traded
3,00,000
or 30,00,000

no wonder, the result was obvious!

--

below
i share with all new traders
a method
that one of my fellow trader friend uses!

every month
he sets aside 3000 bucks to trade!

"even if i lose all of this
i don't mind!
but i will neither add a penny
nor take out a penny
from this amount
for this month!"

what he does is simple.

using his method
he studies the graph
waits for the opportunity
and once he spots one
he buys a call or put option
(as the case may be)
worth 3000!

e.g. taking today's value
if he were to take a short position
he would have bought
5300 put (march series)
(52.5 x 50 = 2625 + 113 brokerage = 2738)

now suppose
the market were to go up
and he loses 1100 bucks
he would
be left with approx 1800.

he will learn his lesson
look for the net opportunity
and enter the next trade.

but with what amount?

1800!

taking today's rates

he would have bought one lot of
put 5200 (march series)
(34.9 x 50)

for the sake of example
suppose he again loses 700
he would be left with around 900
(after brokerage etc.)

now he would again search for an opportunity
to learn and hone his skills
and enter a trade!

but with how much money?

900!

taking today's rates
he would buy
a 5000 put
(13.75 x 50)

i took just the losing scenario.

if he were to profit,

he would buy the higher priced option.

this process would continue

till expiry!

next month

he would trade

with the opening account for that month

which would be the closing amount of last month

plus fresh fund infusion of 3000!!!

--

this way

he is learning

plus he is not afraid of losing too much

plus he is assured of a long stay in the market

plus he has a chance of making it big as well!

he knows what are his expense boundaries

he is trading prepaid!