Tuesday, December 28, 2010

how to win big!

"i have a strange problem." said the talented trader

"i am good at reading the charts

and technical analyses

but when the trade is going my way

and i am having decent profit on the screen

i chicken out

by booking profit prematurely!

I am unable to convert my wins into

real big ones!

this is really preventing me from making it big in stock trading!"

--

the veteran trader was listening patiently to the confession of a bright trader!

he realised that the young man's problem lay in his getting overwhelmed by the sight of the profit!

he remained silent for several minutes

and then suggested

"stop looking at the bank balance

stop looking at the amount of unrealised profit

imagine that you are not trading money

but trading points

or trading the chart lines!

imagine that you are playing a game of reading charts correctly!

let your broker take care of the accounting!"

capacity

the auditorium burst

with waves of thunderous applause

by the final year students

of a reputed management institute

hypnotized by the electrifying speech

of the legendary businessman

invited to deliver the annual address!

--

immediately thereafter

open-house question-and-answer session started.

--

question after question

was put forward

only to be immortalised by the answers of

the businessman-of-the-decade!

--

after almost an hour

there was time for just one more question

--

"how do you effortlessly manage to increase

the turnover of your business

year after year

even when the sector is reeling under slowdown pressure!"

a girl student asked!

--

"when i was a child"

replied the veteran business-legend after a brief pause

"i used to accompany my grandfather to the temple.

the priest used to give me very sweet 'parshad' in my tiny folded hands.

it was so tasty that it used to be my main reason for daily going to temple!

but i always felt bad that i used to get very less of it!

my sweets used to finish too quickly!

one day, the priest noticed my sad face

and asked me for the reason!

'why do you give me so less sweets' i askedhim

'because you have so small hands' the priest told me.

that night i couldn't sleep well past midnight!

that day i had got the most precious lesson of my life

which stayed with me ever since.

i have always reminded myself

that to have more and bigger 'prashad'

from destiny

you need to have bigger folded hands to receive more!

you get only what you can comfortably hold and manage!

you get only what you are psychologically ready for...

it's not about the market-size

it's all about the basket-size!

since that day

whenever i have to increase the turnover

all i have to do is

stretch my mental barriers of reality

revise my definition of possible-impossible

upgrade the scale of my blue-print...

and that is the only constraint that i have to struggle to increase.

once that is done

everything else just falls into place

and i get the desired growth!"

'the secret' in stock trading

you must have read

rhonda byrne's

"the secret"

the book that has become a phenomenon!

--

all it says is

"you attract things".

in the words of John Assaraf

"thoughts become things"

--

seems magical!

isn't it!

atleast that is what i first thought

when i first saw the movie

and read the book!

--

but

being a science student

i wanted some logic

to believe the law

and understand the philosophy!

--

recently

i got my logic

and i want to share it here!

--

to me

the law means

"what you are searching for

whether good or bad

positive or negative

your eyes locate

and mind recognises!

what you aren't looking for

you miss all!

even if it is right in front of you!"

--

let's understand this with an experiment

--

look at something which is at a distance of about 10 meters

from where you are sitting!

look at it carefully for 5 seconds.

now bring your left thumb

in the line of your eyes and that thing!

without moving your head or thumb

look at the thumb carefully!

--

while looking at the thumb

can you see the details of the thing 10meters away?

obviously, not.

--

now without moving the thumb

can you focus at the distant thing?

yes, you can!

but while focusing on the distant thing

can you see the details of your thumb?

again, you can't!

--

that is why

"what you are searching for

whether good or bad

positive or negative

your eyes locate

and mind recognises!

what you aren't looking for

you miss all!

even if it is right in front of you!"

--

this way

"we attract our destiny and everything on the way!"

and

"thoughts become things"

--

now,

using this law

can we attract profit

in stock market?

also,

if we are attracting loss as of now

what are we focusing at?

what's in our thoughts?

--

i leave the answers on you!

why we don't trigger stop loss

there are two reasons

why you will pull the trigger of the rifle

in the jungle

in front of a lion!

one

to protect yourself.

second

to hunt the lion.

the lion is likely to get killed

in both the cases

but

there is hell of a difference

between the two motives!

in one

you are defensive

in other

you are on the offensive

one is full of fear

other is full of confidence

similarly,

every trader has two reasons to trigger the stop loss

one

to prevent loss

second

to gain profit

again, there is hell of a difference between the two!

if first one is the motive

you will not trigger the stop loss

because your amateur mind will not be ready to bear even the small loss till that time!

and as far as the second reason

to pull the stop loss trigger is concerned

an amateur trader won't understand it!

he fails to see how triggering the stop loss

can gain him profit!

this is the fundamental reason

why amateurs don't honour the stop loss!

in the words of Harv Eker

the rich play 'to win'

the poor play 'not to lose'!

Monday, December 27, 2010

did you fall in trade?

how do we choose our life partner?

we fall in love with somebody

we decide to marry

and when parents come into picture

we start looking for reasons

find some good ones!

but the fact is

we are always decided much before

we start thinking!

(probably, that is the reason they call it

FALLING in love!)

--

just like the sales maxim

"customers decide emotionally and justify logically!"

--

similarly,

how do we invest or trade?

we like a stock or situation

we decide to marry (i.e.trade)

and when parents (i.e. logic, left brain) come into picture

we start looking for reasons

and indicators,

find some good ones!

but the fact is

we are always decided much before

we start thinking!

(probably, we should start calling it

FALLING in trade!)

one way to move forward despite losses

one way

to stand up

once more

and

move forward

despite losses....

...

...

...

...

...

...

...

...

...

...

...

...

...

...

...

...

...

...

...

...

...

...

...

...

...

...

...

...

...

...

...

...

...

...

forgive yourself

for the trading mistakes!

a gift cheque for you!

u spend

hundreds every day (if not more)!

--

a good portion of this is totally avoidable

some portion is a clear wastage

and some part is sheer carelessness!

what to talk of the amount we can save by negotiation and planning!

--

if we just consciously save 10 bucks everyday

out of

the waste, careless and avoidable expenses only

(not difficult i hope!)

we would have saved

300 a month!

not a big amount, isn't it!

--

now if u put this 300 in a mutual fund

thru SIP route every month

for 35 years from the age of 25 to 60

and

assuming a return of 20% pa

and inflation of 7% pa

do you have any idea what would you have saved?

--

25,02,076/-

AFTER providing for inflation!!

TAX-FREE!!!

============







terminal value of the 420 instalments at the end of 35 years (420 months), starting from last instalment and going backwards

300 303 307 310 313 317 320 323 327 330 334 338 341 345 349 352 356 360 364 368 372 376 380 384 388 392 397 401 405 410 414 419 423 428 432 437 442 446 451 456 461 466 471 476 481 486 492 497 502 508 513 519 524 530 536 542 547 553 559 565 572 578 584 590 597 603 610 616 623 630 636 643 650 657 664 671 679 686 693 701 709 716 724 732 740 748 756 764 772 780 789 797 806 815 823 832 841 850 860 869 878 888 897 907 917 927 937 947 957 967 978 988 999 1010 1021 1032 1043 1054 1066 1077 1089 1101 1112 1124 1137 1149 1161 1174 1187 1199 1212 1225 1239 1252 1266 1279 1293 1307 1321 1335 1350 1364 1379 1394 1409 1424 1440 1455 1471 1487 1503 1519 1535 1552 1569 1586 1603 1620 1638 1655 1673 1691 1710 1728 1747 1766 1785 1804 1823 1843 1863 1883 1903 1924 1945 1966 1987 2008 2030 2052 2074 2097 2119 2142 2165 2189 2212 2236 2260 2285 2309 2334 2360 2385 2411 2437 2463 2490 2517 2544 2571 2599 2627 2656 2684 2713 2743 2772 2802 2832 2863 2894 2925 2957 2989 3021 3054 3087 3120 3154 3188 3222 3257 3292 3328 3364 3400 3437 3474 3511 3549 3587 3626 3665 3705 3745 3785 3826 3868 3909 3952 3994 4037 4081 4125 4170 4215 4260 4306 4353 4400 4447 4495 4544 4593 4643 4693 4743 4795 4846 4899 4952 5005 5059 5114 5169 5225 5281 5338 5396 5454 5513 5573 5633 5694 5755 5817 5880 5944 6008 6073 6138 6205 6272 6339 6408 6477 6547 6618 6689 6761 6834 6908 6983 7058 7135 7212 7289 7368 7448 7528 7610 7692 7775 7859 7944 8029 8116 8204 8292 8382 8472 8564 8656 8750 8844 8940 9036 9134 9233 9332 9433 9535 9638 9742 9847 9954 10061 10170 10280 10391 10503 10616 10731 10847 10964 11083 11202 11323 11446 11569 11694 11820 11948 12077 12207 12339 12473 12607 12743 12881 13020 13161 13303 13447 13592 13739 13887 14037 14189 14342 14497 14653 14812 14972 15133 15297 15462 15629 15798 15968 16141 16315 16491 16669 16849 17031 17215 17401 17589 17779 17971 18165 18361 18560 18760 18963 19168 19375 19584 19795 20009 20225 20444 20664 20888 21113 21341 21572 21805 22040 22278 22519 22762 23008 23256 23507 23761 24018 24277 24540 24805 25072 25343 25617 25894 26173 26456 26742 27030 = 2502076 Total

why u trade decides what u get!

why are you into stock trading?

obviously, for money

but what seems obvious

is not so obvious at the root!

at the root

the reason for coming to stock market may be

- to recover lost money

- to earn some extra bucks

- in search of financial security

- to overcome the poverty

- to gain wealth

- to "prove yourself"

....or any other reason!

--

- if you took to trading to recover lost money, you have brought with you fear and frustration of having been the 'victim of loss'! your subconscious will find ways to prove that you were 'a
victim'! and what better way to prove this than showing you as a victim again! nothing can really happen till you come out of that psyche and trade not to recover, but gain normally!

- if you have come here for that "side income" for "extra bucks", you have reached here with a
baggage of realisation that "it is difficul to making money". your obedient sub-conscious will try its best to defend your belief that it is really "difficult to make monay"! consequently, i won't be surprised if you face so much of difficulty that you don't gain but lose "extra"!

- if you have taken to trading in search of relief from financial insecurity, your psyche is full of fear of insecurity! whatever you earn in stock market, you are unlikely to get that "secure" feeling! your discomfort might increase actually increase! from the insecurity of less money from the insecurity of too much money! the only way left to get security would be to lose this "too much money" and get some relief!

- if you have become a stock trader because you want to come out of years of poverty or financial distress that you and your parents have had to go through, then you have started with an anger against lack of money! whatever money you make in the stock market, is likely to make you remind this anger! rather, the more money you make the more the anger will be there, courtesy that fear of losing it all again. finally, in bouts of psychological stress, your subconscios is likely to land you in losing trades that somewhat relieve you from the pressure!

- if you have started trading to become wealthy you are carrying a strong belief and grudge that
wealth has been eluding you and it is not your fault! your sub-conscious will prove that your
belief is justified. and it is likely to prove this by showing that wealth is still "eluding you"! i am sorry to say that the grudge and belief are here to stay till you nourish them!

- if you are here "to prove" yourself, then i have no hesitation to say that whatever be your
performance you will always have the feeling that you have not "proved yourself enough". this
belief is likely to wrongly influence your decisions which will result in loss that will justify
that "you indeed have to prove yourself!"

--

why do i say all that?

less so because i have experienced one of this myself!

less so because i have seen many around me go thru some of these states!

but more so

because

our minds work that way!

--

whatever is your reality paradigm

whatever is your frame of reference

whatever you think

your subconscious will be out to prove it!

and attract it!!

everything which tallies with your belief world is accepted

everything else is ignored

your subconscious proves what you believe!!!

--

so, what if you have entered the dalaal street with the above reasons?

do you still have hope?

yes!

absolutely!!

but there is a condition!

you have to approach the market with a positive approach!

with a positive reason!

with a positive psyche.

without any negative baggage!

--

remember, if the motive or driving force behind

your taking up trading is

negative

your fate is sealed even before you start!

--

instead

whatever your past

make sure that you are in the market for positive reasons

of aim or ambition or passion or happiness

with darkness behind your back

and your face brightly lit with sunshine!

Sunday, December 26, 2010

snake of loss!

many traders jokingly say
"i will start making money in trading
the day i start taking positions
opposite to what my head asks me to do"
i see pain hidden in this self-joke...
the statement seems to be an utterance in frustration
but in my opinion
is not a bad idea at all...
seriously....
--
why do i say that?
because these traders are almost always wrong
and the opposite of their trades is almost always right!
--
why does this happen?
"negative approach!"
these traders desire profit
but keep thinking and fearing of loss!
consequently
they miss every signal of profit.
what starts in search of profit
ends up a hide and seek with loss!
--
why?
just read this first...
--
once a snake was spotted in the thick bushes
at the end of the lawn in front of the house
the family searched for it frantically
but couldn't find it!
that night they could hardly sleep.
next day they searched again
without any success
"it seems to have gone!" everyone thought
but the fear of snake stayed back.
they kept the light in the verandah on
to scare off the snake
in case it was still around!
none could have a sound sleep that night also
next day they decided that enough was enough
so they set the dry bushes on fire!
all bushes were reduced to ash
and there was no snake!
all family heaved a big sigh of relief!
they expected to have a sound sleep that third night
but somehow they couldn't
the fear of past 48 hours refused to go away immediately!
so they kept the verandah light on for that night too!
night passed off peacefully
next morning
when the lady of the house opened the door of the bathroom
she was welcomed by the snake!
what had happened was that
the burning of the bushes had resulted in the snake being rendered homeless
and hence running out for another shelter
since none existed in the cemented neighbourhood
the wandering snake saw the movement of rodents in the verandah
which were attracted by the light
left 'on' to ward-off the snake.
snake reached the verandah and found the way in!
the very steps to ward-off the snake
resulted in the snake landing directly into the house!
--
fear can do strange things
it can distort your decision making process
and provoke and instigate you to do
exactly what you shouldn't have done
it pushes you in the trap
instead of taking you away!
--
as superbly underlined by rhonda byrne
in the masterpiece revolutionary book
"the secret"
we attract things by thoughts!
--
our compulsive obsessive fear in the head inevitably always shows up!
--
so
don't go after the snake of loss.
he is not after you.
rest assured!
when he appears by sheer chance
just change your path
and leave him alone!

Saturday, December 25, 2010

mind v/s indicators

who makes the trading decision

you or your mind?

obviously your mind.

you are nobody

your mind is the real you

and what is your mind?

is it the hardware which is mind

or the software in it?

obviously it is the software

if hardware were the mind

all minds in the world would have been the same

and you would be making money in the markets as much as

the most succesful trader having the same hardware!

so,

it is the software that is the mind

and it is this software which is trading

not you!

if you are losing more than you are winning

then the culprit is the software!

who programmed this software?

was it programmed in C++ or Java or VB?

how much time would it have taken to develop this software?

well, no programmer programmed your mind's software!

this software was programmed

through a lifetime of

conscious and subconscious learnings and experiences!

whatever you think

is not you but the the software in your mind that is thinking

on the basis of its likes and dislikes

preferences and biases

fears and greeds

lessons and prejudices

programmed into it till date!

--

everyday

during trading hours

this software is pitched in a direct fight

with the logical signals of technical indicators!

do you have any idea who wins this fight

day after day

everyday?

it's your mind's software!

T.Harv Eker has also strongly endorsed this in his classic

"secrets of a milionaire mind".

the poor logical technical indicator is always vetoed

unless he is saying what is same as the programmed mind is saying!

is it surprising any more that you have been losing despite knowing indicators?

--

and for heavens sake

now don't start flogging mercilessly your mind!

it's not his fault!

start reprogramming it with

"millionaire" thoughts and habits and behaviour patterns!

till date you have not been a milliOnaire

and hence your programmed thoughts are not those of a millionaire

rather, you have been hating the millionaire coterie hearts-of-hearts all these years

and hence your programmed minds are anti-millionaire

whereas your conscious mind wants to be one!

--

tell your mind that

money is not a sin!

profit is not a dirty word, loss is!

tell him gently that

it is not a crime to be wealthy!

risk is not bad but a must!

all sweet things are not profitable

and all bitter things are not bad!

tell him to be less fearful and more bold

tell him that the company of the losers is not a good thing

tell him that it is ok to be oppotunist

tell him that it is ok to profit at other's expense

tell him that it is not a sacrifice to lose in the market

.....tell him a hundred more things

ask him to dare to unlearn old things not fit in the ruthless trading world

persuade him to learn new lessons....

because what he learns

will react in your bank balance!

Thursday, December 23, 2010

ready for it - II

if being mentally not ready

is responsible for not succeeding in stock trading

here is a different but effective way to develop a 'millionaire mindset'

but to do that first i need to share with you something

--

in his masterpieces

'6 thinking hats'

and

'6 action shoes'

the great thinker and management guru

Edward de Bono had beautifully driven home the point

that every person has and needs many faces

which he shows or can show!

every face is different

and has a specific ability

suitable for a particular situation

represented by different kinds of 'shoes' or 'hats' in de Bono's books!

it is like playing different roles.

the persona has to come in a totally different avatar for each role!

the problem arises when the man plays the wrong role on the wrong stage!

e.g. if one were to sit across the negotiation table

with the mindset of 'formal navy shoes' (formal approach)

in a situation which demanded

the mindset of 'pink slippers' (informal approach)

the outcome is likely to be a disaster.

what you feel like and behave like and look like

in 'formal navy shoes'

is totally opposite to

how you feel and behave and look

in 'pink slippers' or any other type of shoes!

so, whatever the challenge

just select the right kind of 'action shoes' or 'thinking hat'

and succeed!

--

based on the above

here is the trick to develop "a millionaire mindset"

which is otherwise difficult without

a million dollars in your bank account!

--

"Act"

--

in other words

just play the role of a "millionaire"!

i know, you would say that

since you are not a millionaire

your role play will be faulty!

well, don't worry about that.

you will do it quite well

better than a real millionaire!

--

in fact

you can prepare yourself for any role or responsibility

or challenge in life

by just starting to act the role...

first play the role

then it will come out naturally!

--

feel like

behave like

act like

look like

think like

a millionaire in that very situation!

ask yourself

what different would a millionaire think in such a situation?

what would a millionaire do different in such a situation?

how would a millionaire react differently to this situation?

this way you will not chicken out of situations where you shouldn't have

this way you will have the courage to take a risk your indicators say you should have

this way you will survive the difficult situation without booking profit prematurely

this way you will book the stop loss ruthlessly like a seasoned emotionless businessman

...and so on

you will realise that the trouble used to arise

when we used to react in petty and penny ways of

"non-millionaires"!

a change in decisions

will change the results for you!

--

even if you are a rocket scientist or a surgeon or an engineer or a chartered accountant

your daily mannerism and thinking patterns and fears are different from that of a millionaire

and this is the root cause of faulty decisions

which have landed you in your present state-of-affairs!

--

in T.Harv Eker's words

by acting

you are programming your mind

to generate feelings

to create thoughts

to trigger actions

which will bring amazing and different results!

Tuesday, December 21, 2010

ready for it? (Part-I)

if you are financially well off

then this article is not for you.

but if you are not

please keep reading.

--

chances are that you must have tried hell of a lot

in your life till this day

to get out of the financial state

you have been

and you are in!

-

by now you must be full of frustration

thinking why are you unable to get out of this situation...

you must be having a good number of dreams and desires...

neither you are able to fulfill them nor forget them!

you have been hanging

halfway between hell and heaven...

neither here, not there!

---

the million dollar question is

why are you there where you are?

and why are you not there where you want to be?

---

if you think that is because of your qualification

then think again...

i can show you a hundred people on the street who are not even literate

but are financially well-off!

i know an illiterate man who has established a flourishing wholesale vegetable supply business worth a few crores of turnover!

i know a barely literate man who is now one of the top civil contractors of the state with turnover of a few hundred crores!

so that excuse is out of the window!

---

if you think it's because of your luck,

think again...

you have had the same opportunities in front of your eyes in the market

as before lacs of other traders!

some made profit from the same opportunity

while others booked loss!

so, don't give me that excuse either!

---

if you have a remorse that you didn't succeed because you are less hardworking

you are again wrong...

i can remind you of several instances in your life

when you had worked damn hard!

so keep that guilt atleast an arm-length away.

---

in case you are thinking that you didn't have adequate capital

you are sadly mistaken...

i don't need to remind you the amount of your money that has gone through your hands into the hands of others over the years!

i can also give you several examples where people have made it big with much lesser!

---

and i am sure you won't commit the mistake of assuming that you don't have ideas!

one of the biggest is right in your hands....stock trading!

---

if you think you didn't succeed because of bureaucracy and corrupt system

think yet again...

we all are surrounded by scores of businessmen who succeeded despite these two blessings!

rather, they saw the disadvantage as a blessing loop-hole and exploited to the full to get ahead fast!

---


so

if you think seriously and honestly

you will realise that you are left with no alibi to justify your state-of-affairs!

---

but

what if i told you

that you and me have not succeeded big time so far

BECAUSE WE ARE NOT MENTALLY READY FOR IT !!!



(to be continued...)

bravery in the market

in stock markets too

"fortune favours the brave!"

but what kind of brave?

--

1. without method and inexperienced?

= never!

(rather, u r going to get killed without the bravery medal)

--

2. without method but experienced?

= sometimes

(but net bank balance remains same or negative!)

--

3. with method but inexperienced?

= more than 'never' but lesser than 'sometimes'

(bank and mental balance always bleeding)

--

4. with method and experienced?

= more than 'sometimes' but lesser than 'always'

(ban and mental balance always growing)

---

so?

a) have a method, and

b) be less brave till you gain experience!

----

finally

what is bravery?

= doing 'it'

or keep doing 'it'

despite fears

when "you know" that it should be done!

Sunday, December 19, 2010

the game doesn't end with technical analyses - II

where were you when there was a shorting opportunity

from nifty 6200 to 2600 in 2008?

where were you when there was an opportunity of going long from march to may 2009

from nifty 2600 to 4600?

where were you when nifty rose 1000 points from 5000 to 6000

in 5 months from june to october this year?

just like me, i bet you would have been here only!

some of the biggest opportunities came and went!

we can't complain we didn't get opportunities!

so the problem is not the lack of opportunities

problem is that we are not ready for it.

problem is we fail to recognize the opportunities!

Why?

because opportunities rarely come sugar-coated and gift-wrapped!

they always come crisis-wrapped and dipped in bitter sauce!

it has been like that always

and it will always be like that only.

opportunities will always keep coming

indicators will indicate

you will be around

but you will keep missing the bus

unless you tune yourself to recognise them in their disguise!

not only that you would have to bear

fear

worry

discomfort

and

all kinds of emotions

as a cost of boarding the bus!

---

the game doesn't end with technical analyses

it just starts from there!

Saturday, December 18, 2010

the game doesn't end with technical analyses

there was a time when i thought

knowledge of technical indicators was a sureshot passport to success in stock trading.

so, i studied technical trading religiously!

while my knowledge increased manifold

it didn't show in results!

so, i worked harder and learnt more technical indicators...

but i was shattered when i started losing more and often...

i had no clue as to why i was losing more and more when i was supposed to be winning....big and easy!

infact, i was losing much more than those who knew almost nothing!

i had already "mastered" some indicators

i could foresee many moves of the market beforehand!

still my bank account kept bleeding...

---

my dreams of quitting my job for a fulltime career in stock trading went for a toss!

i must admit that i mentally quit stock trading atleast 20 times

everytime with a big heartbreak!!!

each time i swore not to come back again

each time i "finally decided" to concentrate on job and look for other avenues of making money!

but every time a graph came in front of my eyes, my mind started giving unsolicited opinion

and more often than not, that opinion was damn right!!

--

i was in a situation where i could neither quit nor stay in trading!

i badly needed help!

help was everywhere, but not the one i needed!

i realised that

while both the winning and losing traders know their technical indicators

while both had their "godfather" favourite technical indicators

there was somthing else which made "hell-of-a-difference"

something which i was missing like a big fool!

it started dawning on me that technical analyses was only half the job....rather even lesser!

--

then, one day, i got my hands on

'secrets of the millionaire mind' by T.Harv Eker

and i got my answer!!!

the difference was

"the mindset"!!!

the winner's mindset....

pattern of thoughts....

pattern of response....

pattern of taking decisions!

while both the winner as well as loser traders

use the same indicators

in the same market

at the same time

.....the difference was

in their response!

the way the winning and losing traders respond to same signals is shockingly different!!!

i realised that losing and winning traders

thought

and felt

and acted

differently

even while the indicators indicated the same indication to all!

--

i also realised that there was similarity in the thought patterns of the winners!

and not surprisingly, there was a common-thread in the thought patterns of losers!

same situation but

one buys, other waits!

one buys, other chickens out!

one shorts, other plays safe!

one shorts, other chickens out!

one jumps, other waits patiently!

one buckles, other endures!

--

the message was loud and clear.

i shifted my attention from studying more technical indicators

to studying my thought patterns...

my reactions to situations...

my response to stimuli...

the difference between what i knew and what i did...

--

my technical indicators were still the same

but my mindset was changing!

...not surprisingly, the results started to change too.

---

indicators only tell you what is likely to happen

what you do thereafter makes all the difference!!

without the right mindset

riding the false confidence generated by the steroid effect of indicators

may prompt you to take bigger positions resulting in a bigger hit!

technical indicators cannot take us beyond the first level

winner's mindset does!

the game doesn't end with technical analyses

it just starts from there!

Wednesday, December 15, 2010

high probability turning points

from my experience i have seen that price has high probability of turning at the following
signals:

level 1 signal: william%r reaches extreme, rsi still away

level 2 signal: william%r stays at extreme, rsi reaches extreme

level 3 signal: william%r and rsi together reach extreme

only a very powerful rally can bulldoze all these three levels of signals.

this information can be used to trade at specific points with stop loss.

just make sure that both rsi as well as william%r are of same duration

e.g. if u r taking rsi(14) then william(14) should be taken

and if u r taking rsi (10) then william(10) should be taken

also, same duration chart is to be taken, whether 1 month or 1 year or 5 days etc.

least painful trading method - II

(this is a sequel to part I. to understand it in the right context pl read part I and the related discussion at http://www.mudraa.com/singlepost.php?messid=74251)

here is a reasonably dependable way to successfully identify and ignore the false price crossover of sma line

in other words, this is a good way to anticipate and foresee a whipsaw before hand:

keep rsi 14 and william%r14 charts open under the main price+sma chart

if the price cuts sma from below and gives a buy signal but

william%r is near extreme overbought boundary whereas rsi is not near any extreme

square-off short position but wait for going long

9 out of 10 times price will reverse and short position will need to be taken again

if all this happens near the close of the trading day

the risk of keeping the short position open is well-taken!

---

conversely

if the price cuts sma from above and gives a sell signal but

william%r is near extreme oversold boundary whereas rsi is not near any extreme

square-off long position but wait for going short

9 out of 10 times price will reverse and long position will need to be taken again

if all this happens near the close of the trading day

the risk of keeping the long position open is well-taken!

---

even otherwise,

this is a superb way of successfully spotting reversals 9 out of 10 times

Tuesday, December 14, 2010

least painful trading method

i have studied and closely experienced many indicators and techniques of stock trading.

all are good.

but each thrills to kill

each flatters to deceive

if not, then it is too difficult to interpret accurately and timely

i love my indicators like my pets

so, i never had the heart to tell them that they were good but not ultimate.

but, hearts of hearts, i was looking for

a simple

and effective

and universal

and almost foolproof

trading method!

finally, i have one

that was always around but always ignored

that was too simple and therefore mistrusted

that is not perfect but much better than all others.

it's shortcomings?

it demands some blood during valleys and plateaus of ranges

---

it's benefits?

well! there are so many!!!

operators fear it like ghosts fear the cross!

---

and here it is:

"simple moving average"

how to use it?

when priceline cuts sma34/30min line on 1month chart from above = sell

when it cuts it from below = buy

ALWAYS be in the trade, whether long or short

even when there is blood in your hand

if you need to switch sides more than thrice in quick succession

stay away for some time

you may be passing thru range-bound turbulence

---

why have i chosen 34/30min?

whipsaws are minimum in this setting.

(this setting is allowed, rather automatic in google finance. many other software or charts allow sma 34 but not with 30min tick interval)

if you can follow the above method ruthlessly long enough

and if the brokerage is not high

then the pain of ranges will be fantastically offset by the gains of rallies!

---

Saturday, December 11, 2010

trading decisions!

5 frogs were sitting on a log of wood

3 out of them decided to jump

how many are left behind?

"2" replied the student.

"wrong! all 5 are still sitting there" the teacher shot back!

"there is a difference between making a decision and acting on the decision!" he explained!

---

the story got etched in the student's mind.

days passed

and then years....

the student became teacher

in 'School of Stock Trading'!

---

"let me tell you a story" he announced in the class

"5 frogs were sitting on a log of wood

all 5 jumped off it!

how many had decided to jump?"

students got really confused.

they had heard about the famous story where the teacher asks how many are left behind!

but this story was strange!

when nobody answered

the teacher declared

"none"

"all 5 jumped in panic without thinking"

"they were all amateur stock traders!"

day trading without indicators

my first brush with stock market

happened in 1990

when binny (aka manpreet oberoi)

my classmate in punjab engineering college, chandigarh

shared with me that his father was an active trader in stock market

besides a regular job with ballarpur industries!

he told us that his father had started trading with 10000 corpus

and during the harshad mehta saga

the market value of his father's stock positions had crossed 1 crore

(equivalent to 32 crores of 2010)!

"i can tell the state of the market from the mood of my dad in the morning!" binny told us!

i was reminded of all this when i was having a serious look at the daily calls of krishnamurthy in

mudraa.com!

his calls are amazingly but deceptively simple and profoundly effective!

since people have the tendency to take only complicated things seriously little surprise that

krishnamurthy's calls have as many critics as are the fans!

this gentleman gives "buy above-sell below" call everyday after a few minutes of market opening.

two lakshman rekhas (trigger lines)

one above and one below the spot value.

though he has not shared the exact criterea he follows to draw those lines but my study says that
he tries to identify an upper as well as lower nifty limit which if breachedn mark a decisive

movement of the nifty for atleast very short term future!

initially i thought he used "universal" support and resistance levels

but many times i realised that he was doing something else.

i also noticed that he was not playing with pivot points or using some stock level calculator.

i have come to realise that he decides the limits by seeking answer to a simple question

"what is the upper and lower nifty limit which if breached would mean that nifty has taken a

decisive direction for the day! and if not breached would mean that nifty is rangebound should be

left alone!"

for this, in my opinion, he uses

1) the previous day nifty boundaries

2) and boundaries marked by its early morning moves!

i found this technique wonderfully simple, easy and very very logical.

there are no technical indicators involved

no short-term long-term chart reading

just staying with the reality of the hour!!!

the trouble with chart and indicator reading is that

they inject the trader with an opinion

and the trader's psychology wraps that opinion with ego

and keeps clinging to it like the captain of a sinking ship!

---

in this "buy above-sell below" method

we follow what the market is doing

irrespective of whether we understand the reason or not

irrespective of whether the indicators and fundamentals and charts agree or not

just plain "follow the trend of NOW" and think later

what is happening becomes more important than what should happen!

this way, no market operator or forces can trick you!

whatever he does, u follow him!

---

but i want to add two words of caution

1) ruthlessly square-off your position if nifty retraces into the lakshman rekha (this does happen

once in a while)

2) book profit when you are getting more than you can afford to let go! (many times nifty retraces

after going reasonably far!)

---

like the mood of binny's father

the mood of nifty in the morning

reveals the immediate intentions of it!


---

i remember, i had shared similar technique in my posts (noon express and forenoon express)

but krishnamurthy's method is much more simple and effective!

Friday, December 10, 2010

future of realty sector

* any idea how many of the 120 crore people in the country have their own house?

* any idea how many of those who don't have house want to own one?

* any idea how many of those who already own a house want to own one more?

* any idea how many of those who already own a house want to own a bigger one?

* any idea how many of those who already own a house want to "invest in" many more?

* all houses on the planet will need to be rebuilt after 50-100 years of their safe life!

* and we haven't yet talked about hotels and hospitals and factories and office accomodations and schools and institutions etc.!

* and we haven't yet talked about repair, maintenance, upgradation and alterations in every house!

* and we haven't yet talked about financing the builders and financing the buyers?

* and we haven't yet talked about the designers and architects and furnishers etc.

---

there is hell-of-a-big market out there!

everyone wants a house of his/her own.

the question is who can provide one which fits in respective pockets!

the trouble is corporates don't want profit opportunity, they want profiteering opportunity!

we need assembly line of house production!

so the question is which company can mass produce?

the question is which company can keep the cost down and quality consistent?

the question is which company can come survive the mafia mentality and work with industry approach?

the question is which company can handle the land bank and debt monsters?

the question is which company understands the needs of different species of customers!

the question is which company has the technology and can innovate?

the question is which company has the leadership?

the question is

where are such companies?

Thursday, December 9, 2010

where to invest?

investing is the most profitable form of trading!

it is a myth that you invest in a company.

the reality is that you invest in a management

and

you invest in a business!!!

if the business is bad

even best management can't do anything for long!

for a moment,

let's assume that the business makes business sense.

then, there are 4 types of "managements" available for investing:

1. good management going thru bad times
= this is the best investing bet, a multibagger!
give then time and they will give you a wonderful gift!
e.g. tata motors' journey from 110/stock to 1376/stock
present example = mahindra satyam

2. good manangement going thru good times
= hold on, this is the best momentum play
stay with them till they are around
e.g. hero honda (since inception)

3. bad management going thru good times
= stand near the exit door if you can't avoid the bait!
e.g. suzlon

4. bad management going thru bad time
= stay away!

future of i.t.

* everything on the planet will eventually be run or monitored by software. so just see what all around you is still not managed by software, and you will see the scope for i.t.

* software will compete with each other.

* every software already written in the world will eventually become obsolete and hence would need to be re-written. isn't that hell of a scope for i.t.

* everything on the planet will be converted into data and squeezed to get juice of information that can be gainfully and artistically and innovatively consumed! if u can estimate the amount of data that can be produced for this analyses, then u r almost god!

* the day software is used enmass to produce ideas and solutions instead of just managing the show, it will result in next generation leap!

* from software point-of-view, the world will get more and more demarcated and "niched". each niche segment will become larger than its parent only to be niched again....only to become extinct. the cycle will continue and the universe for software will keep becoming larger.

* software will be required to improve upon everything on the planet including lives, processes, products etc.

* software will make every field converge. this will create new avenues and horizons. the entire world will have to be rewired and reprogrammed.......repeatedly!!!

* every software will need to be maintained and improved!

* every software will need to be trained on!

* every software will need an ever-improving hardware!

* and we haven't yet talked about artificial intelligence.......!!!