cross acround the trader's neck

lessons so far from 10 experimental trades :

1. the criteria is ok / promising and needs tightening/refining. 

2. intraday alone is not enough...can never be enough.......what about rallies where movements mostly happen in gaps?

so, btst/stbt (overnight trades) is a must alongwith intraday trades to make decent money. otherwise, despite risk and stress, profits are likely to be proportionately less.

intend to start overnight trades also alongwith intraday ones w.e.f next week.

3. buy at or "somewhat" in the money options when less sure or when taking a trade against the trend (ofcourse at the signal of the method). and when reasonably sure or when taking pro-trend position, take deep in the money option.

4. deploy ur money in 2 stages....one after 10am (whenever signal comes as per the method), second around noon when the real "game" is played......will incorporate this in trades w.e.f next week hopefully.

5. use mutliple indicators / logic to identify market bluffs and traps.

6. use method and fixed-time fences to eliminate (or atleast minimise) the effect of dodging and mind games played by operators and market deep-pocket-forces. use 'law of averages' to your effect. expect wrong trades as per the method (they will always be there and are expected and ok) but never quit trading after the negative trade. i call these negative trades and not bad trades......no trade as per a method is a bad trade......a good method properly executed can still result in loss....it should be called a negative trade and not a bad trade........a negative trade is a probabilistic entity but not a routine one. the trouble is that we stop trading after a loss yielding trade taking it as a bad trade instead of a negative trade.........pick any method.....decide its parameters.......so ruthlessly that even a computer or robot can trade as per it.....and then stick to it......don't stop trading when you make profit......don't stop trading when you make loss........never abandon the method.......method is like a cross in the trader's neck.......lose it and the devil will get you.

and how i am fighting back with them

this is a sequel to my earlier article

"how market beat my best tools"

http://thebestbusinessintheworld.blogspot.in/2012/07/1.html
http://www.mudraa.com/trading/139606/0/how-market-beat-my-best-tools-js.html

the limitations of the tools as discussed by me in the above mentioned articles are not deathknell.

they are real and necessary evils which i accept.

and have resolved to use as contours of a strategy.

1. rsi / william
= i stop following them at the first sign of "bermuda triangle" effect. for rest of the occasions i continue to trust them.
in fact, by not behaving in the copybook fashion, rsi and william tell me silently and indirectly what i should know.

2. options data spread
= don't look at it for first 7 days. thereafter, the sting is generally out.

3. 8-34 sma
= using this to segregate between up and down trends and rangings
and hence take btst stbt and pro-trend intraday shots
also, using this as a confirmation tool.

4. elliot wave
= use as a guide and confirmatory tool to double-check trend and thus take better shots.

5. intraday options data
= i don't use it at the start of trends (range breakouts and sma 34 crossovers)
for rest of the times it works ok especially if i resist the temptation of anti-trend bait by it.

6. yesterday range breakout
= they are less but that is not their fault. just can't say no to those. take it as per availability.

7. btst
= take these and increase the number of profitable trade beyond the "yesterday range breakout" ones

8. call/put options strategies
= just buy plain vanilla options for intraday and btst stbt. risk is limited to give sound sleep and time decay is minimal.

the KBC of stock market

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

5 candles of profit

dear buddies,

those who love candle sticks and want a power technique for trend trading, i strongly suggest studying
CHAOS THEORY by Bill Williams

he uses a combination of 5 consecutive candles to find "fractals" which, if broken or crossed, may indicate the start of a trend

subject to the position of price and fractals wrt "jaws" "teeth" and "lips" of what he calls "alligator" setting of sma 13,8,5.

it seems complicated but, believe me, is easy if u r determined to learn it.

use it in conjunction with what u already know and see the magic!

i am giving below a few links of the same.

you can also check youtube forexplanation of the same in bills' own voice in his recorded lectures.

http://codebase.mql4.com/4488

http://www.alpari.co.uk/en/market-analysis-guide/chaos-theory/alligator-and-gator.html

http://mises.org/books/chaostheory.pdf

for trades and nifty levels on the basis of this "chaos theory", pl let me know.

Js (09418037474)
(niftyshots.blogspot)

an incomplete trading method

any trading method

which is too accurate

to leave any room for operator's surprises

is

incomplete

and faulty

and will, therefore, be itself comprehensively surprised!!!

trading options without worrying about time decay!

options are blessings for the traders who want to trade with controlled risk.
unlike futures, options have limited risk.

but they have a serious problem
- time decay!

their premium value decays as expiry comes closer!

i always wondered if there was any way to bypass this severe limitation.

hedging a bought option with writing another was, somehow,
not a very lucrative and convincing way.

but recently i came out with a simple but effective way
to over this disadvantage.

i noticed
that 80% of the price movement
happens in 20% of the time.

the operators use the rest of time
to accumulate or distribute
within a range
thus "wasting precious time of traders"!

how about if could take a position in options
just when the price "aeroplane" is about to take off?

why take the seat while it may keep standing
at the tarmac for a few hours or even days?

this way one can use options till the last day of expiry!!!

with this idea under my belt
all i had to do was
search for probable signals
when the price is about to move big
besides the signals
when the meat of the price movement has happened
and it may enter the phase of consolidation.

i did it with rsi and william%r.
one can do this
with any indicators of choice.

what do we do for the rest of the time?

well,
we remain in the departure lounge
watch tv, read magazine, eat popcorn and sip a cola
imported from the nation of the operators!

essence of day trading

like millions of others
i have been
and am
the fan of mike tyson
former undisputed heavyweight world champion.

he won his first 19 professional bouts by knockout
12 before the end of the first round.
in 1988, he knocked out michael spinks in the 91 seconds.

but when the fight lasted 10 rounds
in a fight with james "buster" douglas in 1990
mike himself got knocked out.

--

a fight worth a few million dollars
lasting a few seconds
makes every second quite pricey!!!

--

now here is the beautiful question -
should the bout be short or long?

well,
from the audience and tv channels and sponsorers point of view
it should last quite a few rounds.

from tyson's point of view
it should be over as fast as possible.
the more time it takes
the harder it may get to beat the opponent.

after all,
a career and hell lot of money is at stakes.

longer fights have more entertainment value
but increase risk of losing!

--

now lets extend the scope of this question
to trading!

should the day trade "bout" be short or long?

while longer trades have high "entertainment" value
they don't necessarily have higher "prize" value for the trader!

rather it is often the opposite.
the longer it takes to be profitable in a day trade after getting into the trade
the lesser the chance of making profit
and more the chance of one being in the wrong trade.

as art simpson said in his famous "phantom of the pits" rules
- if a trader waits for the markets to prove his trading position wrong
it might be too late! it is wiser to assume oneself wrong if not proven right in reasonable time!

coming back to the question
'should the day trading bout be short or long?'

-

every day trader starts the day with a dream of making 50 points from nifty!

what a paradox that he/she misses out a simple mathematics option.
there are a few alternative ways to make those 50 points
- make 50 point in one lot!
- make 25 points in 2 lots!!
- making 17 points in 3 lots!!!

how many 50 point movements are there in a week?
and how many 25 or 17 point moves?

you know the answer....
while 50 point intraday moves generally happen 3-4 days in a week
25 point moves happen 2-3 times a day
while 17-point moves happen once every 30minutes or an hour!!!

getting a trade right has nothing to do with the number of points that trade may give.
so success ratio of getting the trade right is same
for a small or medium or large ride.

so, why don't day traders go for multiple lot - short rides?

what a paradox
that traders fear double or triple or multiple lots
but do not fear single lot for a 50-point ride which comes so rarely
(assuming they actually recognize, catch and ride it full!)

- no wonder the failure rate in day trading so high.

the reason is not far to be found.

traders feel less pain in bleeding to death
than facing the fear of a fast fight.

but herein lies the second and bigger paradox
- if you are not so sure of your method
and want to trade single or small lot
why even lose that??

and if you are reasonably sure of your method
and ready to put one lot at stake
why not trade with two?

it is a mindset issue
a habit trap.

a 17point high volume trade
has high probability of success.

all you need is
a reliable method
strong risk management
and a fighter-pilot mind.

never trade to an audience.

day trading is a guerilla warfare -
wait behind the bush for the opportunity
pounce on one
and get lost with the booty!!!

the longer you stay in sight
more the chances that "they" will get you down.

discussion on "diamond rule of booking profit"

thank u all for the healthy and enriched discussion (http://www.mudraa.com/trading/104685/0/diamond-rule-of-booking-profit-js.html) which sometimes i desperately miss despite knowing that we have a lot of sharp, experienced and fiercely talented minds in mudraa

==========

i would like to share my views one by one on what has been opined here

dear mr.arora,
u said


"Dear JS
I have tried this method several times.It does not work well.What if the market is struck in a range for next few days or reverses.Suppose you square a call at 200 with a put at 100 and in next few days both become half,your profit will shrink to half as mostly happens.You cannot decide optimum point at which you will book your call as Nifty has its own ways.
suppose your call at 200 becomes 150 next day and languishes there for a long time ,as sson as it touches 180 you would be tempted to book and curtail your loss,and lo it would soon touch 250 leaving you repentful."
---

dear mr.arora,
u r right
but i think i need to clarify a few things about this rule.
1. if the market gets stuck in a range after we "book profit" the way i shared above? = well, if you see the rally pausing, why not square off totally!
"don't catch a falling knife" we say during bear runs or sell-offs.
similarly, we can say "don't catch a rising spike"
but what if the knife has stopped falling and the spike stopped rising?
there is no harm in that case.
as u said, if the market enters range after we take reverse option position, then who stops us from winding up everything especially when we are sure that the rally has stopped or ended or paused for the time being and that we will not lose potential profit by squaring-off prematurely!
2. if the market reverses, the reverse option position will soon gain as much as u will lose - the only condition being that u buy at-the-money or in-the-money option and not out-of-money option. i have noticed that majority of the opinions shared in this thread are based on fears caused by "out-of-money" positions.
3. as far as judging the appropriate time to "book-profit" is concerned, i beg to state that while it may not be possible to exactly pinpoint the moment, it will be suffice to judge it approximately. this rule is actually a strategy which can take care of the gaps in timing. no timing is better than rough timing.

==========


dear hvm
u said

"I feel if the underlying secuirty is volatile than these strategy would work.
Further, taking JS example, when gain from Call value exceeds the Put premium than one sell off the Call Option and wait for Put option to sell when Bank nifty comes down."

--

hvm, u r right, this rule helps when the rocket is still moving but we have fear or indication of it falling.
but i somehow don't agree ur second line (or i have not got u) = e.g. during upmoves, when the call still keeps moving up and the benefit from its rise exceeds the loss from the put's decline (with which we "booked profit"), even then don't square-off the call. this rule applied then also. this is a multiple stage rule. who knows it may be a big big rally and may continue to go. at that time we should again buy a at-the-money put of new cmp.
i think everyone still remembers the rally of may 2010 when the nifty went 1000+ points in a single rally. had we known this rule we could have minted money.


===========

alkaji
u said
"sir insted of buying an option...can we short sell option.... consider... if i bought 4900ce when nifty was trading at 4925 n when it came to 5000..insted of buying 5000pe ..wouldn't be it better to write 5000ce insted... coz if mkt remain range bound..  value of option will become less day by day.....hence we will gain anyway.... 
also u mention that operators do short sell but with proper hedging...... just my view... plz gide!!"

--

alkaji, i don't agree that we should short sell option.....................the reason = if the rally continues further, we would lose in the short sell. the beauty of the reverse option is that if the rally continues, the reverse options evaporates soon.
we can counter the fear of losing premium in case of range-bound market by actually winding up everything (as i said while replying to mr.arora)

===========

dear sv
u said"Future of this month long and next month short/ this month short and next month long?
Can also be used as hedging straregy.
Comments please."

--

dear sv,
hedging future with future is a "rahul dravid" patience strategy and one is likely to get it wrong many times. also, it is recommended only during down runs.
otherwise, hedging future with future is like writing ur own cheque in your name. we want others' cheques in our name.
future against future is a safe game but it goes nowhere......it is too safe. why not square-off actually if we are to do this.
if at all u do that u need to pitch a different future (stock or index) against original future........but it is complicated and slippery."

===========

dear sim,
u saidthis rule I tried, but in reverse order, when my SL Hit I hedge it with another one at the money,,,,  BUT now the Loss is fixed and the profit on one can be booked at the swing"what we end up is we book the profit leg and wait for opportunity on the loss leg holding it,, we should have a mind set to close both together!"

--

dear sim,
in reverse, an "ON" will become "NO". this rule is only for "booking profit" but not for "booking loss". may be i will chalk out one for that condition.
when u book loss with a reverse option, ur original option is already in-the-money. in that case, if things still go in the same direction, ur profit with new option will be less than ur loss with the original one.
if u see this rule with opposite lens, it will give opposite inference.

===========

diamond rule of booking profit

never book profit by squaring off

book profit by taking reverse at-the-money option.

whether your decision turns right or wrong, you will profit.




let me give an example which is the reason behind my coming out with this rule
i bought 9000call of bank nifty.
bank nifty came to 9330 and as indicated my my trading method, i booked profit by squaring off the call.
had i waited i would have profited as the bank nifty went to 9500.
but instead of squaring off the call had i taken an at-the-money put option (9300 put) and held on to 9000call, i would have lost 50 points in 9300put and got 140+ points more in 9000call - a clean profit of 90+ points.
i have figured out the reverse scenario as well.
i am thrilled with this rule, this rule is my take-away for the day. it has costed my just 1250 per lot.
this rule has many applications with profound practical implications.

clarification on 'instant day trading rules' - II

dear bipin, pramanik,
u have got point 1 right
point 2 was something different :
let's take today's example (i will use today's eod data of nifty to explain)
top selling option = 4800pe (no. of contracts sold = 321181)
runner up (only opposite option) = 5000ce (no. of contracts sold = 297354)
here, since top selling option is a put, i would interpret it as an indication of "upward bias" and hence find points to buy. i will by and large, try to find opportunities to buy on dips.
and since the number of contracts sold of the runner-up enemy option (in this case 5000CE is runner up by not-too-small margin i will consider the upward bias interpretation of mine as reasonably ok.
had this difference in the number of contracts traded been more, the upward bias would have been stronger.
but please note that this is a crude (though logical and reliable) method to day trade. i used to use this but not now ( i have other guns to trigger). please don't use blindly. recently one of my friends shared a similar idea and this reminded me of all this. i thought of sharing with everyone.
picking the right entry point is critical after having got the direction of the wind.
also, pl keep in mind that since the data is only for the day (http://www.nifty50options.blogspot.com/ , http://www.nseindia.com/content/fo/MostActiveContractsOPTIDXBANKNIFTY.htm) the interpretation would be for that very day only.

clarification on 'instant day trading rules' - I

dear mitul, i have already shared the logic in another post.

i am sharing it here as well.

retail traders buy options and big pockets / operators sell/write options (overwhelming majority).

if there is a mad rush amongst retail traders to buy options (whether they are doing that voluntarily or are being coerced and trapped by the operators to do so is an altogether different and interesting matter) it is obvious that they will not have their way. they are unlikely to be allowed so - by the operators.

operators are no santa claus and christmas is always a trading holiday.

operators are not there to lose money.

what they do should be taken as right and others should be taken as wrong.

trading is not about what is wrong and what is right. trading is about who is wrong and who is right and being with the right. 

instant day trading rules

rule 1. always go opposite to the direction of the top selling option for the day.


rule 2. the closer the runner up anti-option to this top selling option, slower the trend.


rule 3. buy at higher low and sell at lower high. 


rule 4. note down the sequence of options (of different strike prices) in decreasing order of number of lots sold. e.g. call, put, put, call, call, put. keep an eye on the change in the sequence. it indicates the shifting techtonic plates below the trading earth.


http://www.nifty50options.blogspot.com/


http://www.nseindia.com/content/fo/MostActiveContractsOPTIDXBANKNIFTY.htm

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)

absolute simplest method to trade

buy an option in the direction of the trend

if u can time it with william or rsi or else, fine

if you can't time

any time will do.

stay in it

till the trend hasn't changed for sure.

you will lose much less

and make much more

if u follow this single method religiously.

never ever try to be smart going against the trend.

what's in front of you will be right much more often than what is not visible.

tricks by operators don't change the trend

they only add jerks to the trend to snap-out the weak.


caution : if it is not trending, stay away.

 

11 laws of averaging declining stocks

1. average only the fundamentally strong stocks. never average the weak.

2. time the averaging on the basis of technical indicators.

3. never average blindly the losers. all losers are not worth averaging. fundamentally weak should be handled as per the law 4.

4. average the fundamentally strong losers by selling the fundamentally weak losers.

5. averaging is not bad. rather, it is an opportunity. you get an opportunity to accumulate more of the good stock at even lower price.

6. never average if you want quick results. don't average for the short term.

7. don't average if you can't digest the stock slipping further.

8. never average in one go. average in steps.

9. don't hesitate to average the fundamentally strong stocks even in bear markets.

10. there is no end to the number of times you can keep averaging a fundamentally strong stock. provided, ofcourse, your judgement of the fundamental strength of the stock is correct.

11. never average in f&o. average only in delivery.