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.

every stock has to crash someday

a stock has to crash some day.

many small caps remain small caps
all thru their life
and fade away as penny stocks.
some become mid caps
and few large caps!

when a penny or new comer company behind the stock starts growing
the stock starts rising much faster than the growth.
its because the price the stock commands in the market
includes the stocks prsent worth as well as its futuristic expected and estimated worth.

with time penny stock becomes small cap and then medium cap.
the premium that stock commands till that time is very high.
thereafter, the increase in growth rate determines the premium and not the growth itself.

for example, if the growth of the company were to be 12% viz a viz 15% it has been clocking since some quarters or years the share price of the company is set to nose dive despite that fact it is still growing. reason? the premium of ever-increasing growth expectation needs to come down.

if the dream run of the conpamy has not ended till that time
it still continues thereafter
but the management increasingly finds it difficult
to maintain the scorching (rather ever increasing and often unreasonable) rate of growth.

it fails to live upto the unreasonably high expectations.
expectations decide the stock price more than the reality which limits itself to bookvalue.

some companies finally go global, increase their market size to keep growing.
but in doing so they face increasing competition, price pressures etc.
and hence start struggling.

but some great great companies
survive this jet thrust and
keep growing.

but in the process they only delay the inevitable.
they again reach the stage sooner or later
when they find it difficult to match the expectations and p/e of the share holders.

some very smart companies buck even this reality.

they divide the company into many companies, make every new baby focus on a core competence and try and maintain the growth pace.

some succeed, some succumb.

even those who succeed, again face the growth speedbreaker and stumble at the growth sustainence promise to the investors.and mind you, i have not yet discussed the effects of recession, effects of changes in technology which render many a company obsolete etc.

finally, the inevitable happens.
company's growth rate starts tapering.
the premium dissolves and evaporates.

the blue eyed boy removes the goggles of promise, wears the spectacles of respect and reputation and accepts the valuation directed towards its book value with a consolation of annual pension called dividend.
every stock has to crash someday to ground of reality.
how long that can be prolonged is the real question.

those who buy blue eyed babies and keep the stocks in lockers, must take out and encash them while the baby has still not reached the middleage.

taking stock of the trades

results of last 22 trades (recent to backwards)
+26, -22, -20, -32, 0, -13, +33, +162, +38, +89, 0, -9, +31, -14, +30, +44, +46, -11, -8, +30, +72, +44

total +635, -129

net = +506

lessons = 80% of the profit comes from 20% of the trades. but since we can't be sure which 20%, we have to overcome fear and take every trade signal as per our method. also, it is not how many trades hit stop loss that matters, what matters is how less you lose in wrong trades and how you maximise the profit from the right ones! nobody feels good at the ringing of the stoploss bell. but you have to have the heart to keep listening and yet keep trading. few solid trades are worth all the pain! when you are not getting the head or tail of the situation it is either most likely not your fault and something is happening behind the curtain OR you are not in form. in both cases, stop trading for the day. (today being one of such days. and when you are going great guns, cricket ball looks like a football, keep going and turn your guns into a tank.

disclaimer = i missed some juicy trades too which don't figure in the above list. and was lucky in some which show here. being lucky as well as unlucky is also part of trading life.

overcoming trade phobia

i always feared taking the trade
even after having done my homework
even after being very confident of the trade.
reason?
momentum! inertia!! fear!!!
all courage, all self-talk, all consolation used to go down the drain...
nothing worked....nothing seemed to work.
then i read one quotation
which changed it all
"first do what is necessary, then do what is possible...suddenly you are doing the impossible!"
-
necessary = open the trade window in the software and fill the trade details
possible = click the enter button
impossible ?
= already done by that time!
-
for the first one or two times
i had to kick myself in the back
like the mother penguin pushes her child
into the sea
for its first swim!



(niftyshots.blogspot)

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)

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)

the risk of not taking risk

as they say
not taking risk
is the biggest risk!

u r saying no to the opportunity?

thereafter u can't complain that u didn't get the opportunity!!!

u got one (rather u get many)
but the trouble is
that u want opportunities
without risk.

stock market it not a restaurent
where u can order for boneless fish or chicken.

there is nothing called risk-less opportunity.

risk and opportunity are inseparable.

in reverse all this means is
that wherever there is risk
there has to be an opportunity!!!

further,
it is only one small thing that you decide to take risk.

what's most important is

a) when to take the risk

b) and how much.

take risk at the edge of a pattern

and take that much beyond which the pattern which formed the basis of the trade, nomore holds

true!

there are only two ways a price can go
- either up or down

there is no third way.
so, you already have 50% chance of winning under your belt
now all you need to do
is to find ways to increase that probability!


(niftyshots.blogspot)