WELCOME TO THE WORLD OF TRADING, A WONDERLAND OF ALICE - Mahindeesh (a) Sathish: 2011-01-30

Friday, February 04, 2011

HAVE A GREAT WEEK END

FROM AN EXPERIENCE

What we call as perfection is a myth.

Stop trying to be perfect. Great trading is not about perfection, it’s about probabilities. If you go to a restaurant and order a steak, you don’t need to eat the bone, gristle and fat to enjoy the steak. And you don’t need to sell the top or buy the bottom to make a killing in the market. Just look for the sweet spot and dig into that. If you leave some profits on the table, that’s ok. You’re still going to leave the table feeling confident, in control and with a full stomach.

Trust your gut If something looks like crap and smells like crap, then chances are, it is crap. Listen more to your gut to tell you when to cut a loss and move on.

Keep it simple If something is working, keep doing it. There aren’t any bonus points for being clever. The money is the same color no matter how you make it. So do the simple things and chip away at the profits. I once had a client who felt he had to do complicated trades in order to make money. Bottom line was, he was wrong. Keeping it simple is the proven strategy for success.

Probabilities don’t lie If you’re not carefully tracking the metrics on your trades, you might as well be gambling at a casino. Make it a point to track the data on your trades and study them. That way, you can do more of what’s working and less of what’s not.

Avoid speculating and predicting I can’t begin to tell you how many times I see traders blow up their accounts because they try to speculate or predict what’s going to happen in the future. The simple fact is, no one knows. Even the best traders have a winning percentage of around 50 percent. That means successful trading is not about being right, it’s about what you do when you’re wrong. The bottom line is, trade what you see, not what you think.

“Discipline in executing each and every trade according to your trading methodology is the secret to your success. If you want to improve your trading, what you need to do is very simple. Before you enter any trade, imagine that you will have to explain this trade to a panel of your peers, by explaining to them the reason for your entry, your money, trade, and risk management guidelines, and why you exited the trade. Imagine having to explain why you chose this particular market and this particular time frame, along with how you set objectives for the trade, and how you determined where your initial protection would be. If you can truly do this, I strongly believe that you can be successful.
Just prior to entering every trade, try to imagine yourself executing the trade perfectly. Imagine how it will feel when you enjoy having made money with your trading.
Yes I know, you don’t have time to do that. Why? Because you never plan your trades ahead of time. You probably don’t have a strategy, and instead of waiting patiently for trade that meets your well-defined parameters and your thought-out plan, you just jump in the minute you think you see something that looks good.
You need to take a lesson from a spider. The spider waits patiently in his web until some unsuspecting insect flies into the spider’s trap.
Have you been flying into any of my traps? I wait for trades that meet my expectations, trades that fit my plan. I wait patiently, and being kind-hearted I don’t want any of my readers to land in my web. I’d rather the unsuspecting are readers of someone else’s newsletter. But it’s amazing how often I get to feed.”

(to be contd)

TODAY’S TRADING STRATEGY

OF NIFTY FUTURES – FEB 4

If sustains above 5532 and cuts 5540 with good volume,

watch a sure hike upto 5563-75 and after that upto 5590

If breaks 5590 too, watch non-stop hike upto 5612

Suppose, if trades below 5523 for 15 minutes and breaks

5517 decisively watch a slide upto

5504-5500 and then upto 5486-72

What if a gap up or gap down occurs or

What would happen if takes support @ 5504…?

– Exclusively to the subscribers.

PLS READ ALL THE ABOVE SAID CONDITIONS

TWICE

Day traders, swing traders, pls be very careful

in today’s session

BANK NIFTY

Buy btwn 10762-74

T1 – 10818-40

T2 – 10854-63

T3 – 10891

Sell btwn 10640-26

T1 – 10581-59

T2 – 10545-36

T3 – 10508

SHARE TIPS TODAY (FEB 4)

1) Sell BAJAJ-AUTO @ 1208

T1 – 1201.30

T2 – 1191.25

2) Sell KALINDEE @ 149

T1 – 147.25

T2 – 145.50

3) Sell MANAPPURAM @ 107.65

T1 – 106.40

T2 – 105.25

4) Sell CUMMINSIND @ 682

T1 – 675.20

T2 – 670.30

5) Sell SOBHA @ 231.10

T1 – 228.20

T2 – 226.10

Disclosure:

1. Stoploss levels, reverse trades are exclusively to the subscribers.

2. Solely I have all the rights to stop this free tips

at any moment.

Subscribe as soon as possible and earn more.

Join hands with us and enjoy pals.

A TRADING ADVICE

Don’t apply logic to the stock market
So often I see people make decisions in the
market on what makes sense to them. It makes
sense to buy stocks when the company insiders
are buying. It makes sense to buy stocks that
are making positive announcements. It makes
sense to listen to what the President has to say
about the company’s prospects.
However, all that
matters is what the market thinks of the company and whether the
buyers are more motivated than the sellers. So often, the market
does things that do not make any sense until we later learn of what
motivated the market to do what it did. Remember, the market is
forward looking, most times, what makes sense is judged on what
has happened in the past.

Never average down on a losing position
Buying more of a bad thing is not much different than continually betting on a losing horse. Winners win for a reason, and until your stock starts to show that it is a winner, don’t add more to a bad situation. If you like a company whose stock is losing you money, sell it. You can always buy it back later when the market starts to like it again.

Successful investing is not about being right, it is about making money
Most good traders are usually wrong. They will lose small amounts often and make big amounts occasionally. What matters is how much they make over a large number of trades. Don’t try to always be right, simply work to make money.

Resist doing what feels comfortable
We have a tendency to look for the market to prove our decision is a correct one before we make our move. The problem is that this often means we are too late to capitalize on the opportunity. We have to move before the crowd, and that often feels like a dangerous thing to do.

Anyone can get lucky in the short term, only good traders succeed in the long term
Don’t confuse making money in the stock market with knowing what you are doing. It is easy to get lucky on a stock or on a sector and enjoy gains that give credence to your analysis method. However, short term winners often give back all of their gains because they fail to recognize their success as luck.

Be patient with your winners, not with your losers
The natural tendency is to sell your winners too early and hold on to your losers, hoping for a turnaround. A simple, but not easy, thing to do is reverse this tendency. When the market proves you right, wait to sell on a signal that indicates the stock is likely to go lower. When the market proves you are wrong, let the trade go and take the loss.

Publicly available information is priced in to the stock, don’t rely on it to make decisions
Once information, no matter how good, is made public, it loses its usefulness to you. Public information is priced in to the stock by the market of investors. Information only has value to you if the market has not priced it in.

Make sure your trading strategy has an edge
A trading strategy is only worth trading if it can be shown that it consistently makes money. Establish your trading rules and test them over a variety of market conditions so you know that it is effective. Time spent testing a strategy to prove it is a money maker can save you a lot of money in the market.

People lie, markets don’t
I have learned the hard way to never trust what people say, their actions say much more. Learn to read the market and understand it’s message. No matter how much insight a person may have, recognize that they have a bias based on their own emotional attachment to money.

It is easier to trade with the trend than against it
Understand the mood of the market and trade with it. Don’t chase euphoria, but seek to buy stocks that are in the control of the buyers. Don’t sell on fear, but seek to sell stocks that are under seller control.

Gunn’s Golden Rules (MarketWatch)
I need to do a much better job on this – working on what counts (Gigaom)
Emerging research is showing a correlation between fat and stupidity (Weakonomics)
Give and you will receive (James Altucher)
Most people get enough calcium and vitamin D (Reuters)
Advice I want to tell my daughters (James Altucher)
Stop worrying about what others think (Open)
Goal setting: the 90 day challenge (Michael Hyatt)
Survival techniques for all entrepreneurs (James Altucher)

(Refer to ‘OUR POLICIES’ in blog archives

if you have any queries)

For further details,

Contact Admin (Analyst) @

(0)9788563656

MESSAGE TODAY

Art at its greatest is fantastically deceitful and complex.

-VLADIMIR NABOKOV, Strong Opinions

RELAX CORNER

Poor Husbands :Position of a Husband Is just like a Split AC …

No matter however Loud he is in the Outdoor…He is designed

to remain Silent indoor…”

Husband is one who is the head of the family,But his wife

is the neck, and whichever way she turns, he goes

“A man in Hell asked Devil:Can I make a call to my Wife?

After making call he asked how much to pay.

Devil : Nothing, Hell to hell is Free.

Husband: Do you know the meaning of WIFE?

It means, Without Information, Fighting Everytime!

Wife: No darling, it means – With Idiot For Ever

Wife: I wish I was a newspaper,So I’d be in your hands all day.
Husband: I too wish that you were a newspaper,

So I could have a new one every day.

Doctor: Your husband needs rest and peace.

Here are some sleeping Pills.
Wife: When must I give them to him?
Doctor: They are for you

Wife: I had to marry you to find out how stupid you are..
Husband: You should have known it the minute I asked

you to marry me.

Wife: What will you give me if I climb the great

Mount Everest ?
Husband: A lovely Push..!!!!

Meet Jay Herrod.

After you hear what he has to say on the subject

of the many mysteries surrounding women you may find yourself

wondering if he is some kind of super smart

scientist philosopher guy. He’s not. He’s just a man with a camera

that has some serious knowledge to drop on your ass.

JUST SMS TO YOUR PAL

Be nice to your kids. They'll choose your nursing home

DISCLAIMER

THE RECOMMENDATIONS MADE HERE DO NOT CONSTITUTE AND OFFER TO SELL OF A SOLICITATION TO BUY ANY OF THE SECURITIES/COMMODITIES OF ANY OTHER INSTRUMENTS WHATSOEVER MENTIONED. NO REPRESENTATIONS CAN BE MADE THAT THE RECOMMENDATIONS CONTAINED WILL BE PROFITABLE OF THAT THEY WILL NOT RESULT IN LOSSES. READERS USING THE INFORMATION CONTAINED HEREIN ARE SOLELY RESPONSIBLE FOR THEIR ACTIONS. SURFING OR USING ‘tradersharmony.blogspot.com' DEEMS THAT THE SURFER ACCEPTS AND ACKNOWLEDGES THE DISCLAIMERS AND DISCLOSURES.THE INFORMATION PUBLISHED ARE FOR EDUCATIONAL AND INFORMATIVE PURPOSE ONLY AND THE USER/READERS SHOULD TAKE ADVICE OF HIS/HER ADVISER BEFORE TAKING ANY DECISION FOR BUYING, SELLING OR OTHERWISE DEALING WITH SECURITIES/COMMODITIES OR ANY OTHER INSTRUMENT WHATSOEVER.

Monday, January 31, 2011

HAMAARAA MONDAY..HAMAARAA MONDAY..

FROM AN EXPERIENCE

“I’ve found over the years that much of what separates
the excellent traders form the average ones is not so
much their ideas ,but what they do with those ideas.
Two traders will have positions go their way and then
pull back a bit. The first trader, anticipating
punishment, fears losing his gain and takes a quick
small profit. The second trader, anticipating reward,
adds to the position on the pull back and reaps large
gains. Same idea, different outcomes, all as
result of conditioned patterns of thinking.”

Now,

How do these following values play out in our trading?

1. Truth: Truth is an absolute value. Some things are
true in all places and times. Resisting evil, for example,
is always right.

2. Justice: Justice consists of treating others as one would
wish to be treated. “Do unto others as you would have them
do unto you” summarizes this concept of justice.

3. Courage: Courage means standing up for justice.

4. Moderation: Nothing should be carried to excess.

5. Wisdom: Wisdom enables a person to know what justice
is, to recognize when courage is required, and to do what is right.

In this column, let’s explore truth as it applies to our trading.

One of the clear, clean things about trading is that
truth is immediately and finally manifested. The price goes
up or down or nowhere. Your trade or position
is profitable or not. You can’t spin it any other way.
You’re right when you make money. You’re wrong
when you lose money. That’s just the way it is..

There are also other truths involved. You just got lucky.
You have a robust and proven method for trading that you
can rely upon over time. Your methods are flimsy
at best, unpredictable at worst. You have no method or you
have a million methods which amounts to the same thing.
Your impulses frequently and easily override your methods,
or you rigidly apply your rules even when you clearly should not.

You keep clear records so you can assess what works best,
or you don’t and at the end of the day
(or the week or the month), you have no idea.
Your record of action is either clear
or murky. To correct it, it needs to be clear.

You need to tell yourself the truth as you go along.
No excuses. No complaints. No trumped up stories.
If you can truthfully analyze your trading mistakes
as well as your trading strengths, you can make
adjustments, and develop a personal style that will lead
to trading success.

Telling the truth about each day’s (week’s, month’s) trading
doesn’t mean you have to be brutally cruel to yourself
or gloomy about your trading. What it does mean is that
you don’t have to do that again, and you can optimistically
look forward to the next day’s trading. You will know the
truth, and the truth will make you free.

You want to keep your trading in true alignment with any
known or possible clues as to the on the ground truths in
relevant areas. There are fundamental truths,
technical truths, methodological truths, inter-relational
truths, and personal truths. The closer you can get in any
or all of these areas, the better your prospects.
You will seek to know the truth, and those truths will
power your trading.

Fear: A healthy amount of fear can be a good thing for
every trader to posses, mainly because it helps convince
you to cut losses early.
But fear is a tricky emotion that can cause traders to behave

irrationally.

We’ve all experienced the same feelings when a stock
we weren’t watching at the moment stages a breakout move.
When you finally notice the stock

is up a significant amount, yet you can’t shake the feeling
that it will move higher. In this case, fear has a powerful grip.
Instead of fearing losses,

you’re afraid of missing out on potential profits.
This leads to chasing the

breakout, and either severely limiting potential gains and
wasting a trade.

My solution to this problem is simple:

If you like a stock that has already

broken out, make it a rule that you cannot buy shares
until you have

waited at least one hour from the point when you wanted to buy.

If the stock pulls back to an acceptable entry point

(which shares are bound to do, especially during the
middle of the day)

feel free to buy shares. But if it continues to run, accept
that you were too slow, and move on to your next target.

With a self-imposed time limit, you will eliminate impulse
trades that can wreck havoc on your monthly gains.

Greed: Every single trader is in the market to make money.
If you’re not,then I’m afraid you’re in the wrong place.
But there’s a distinct line between

wanting to succeed at trading — enjoying repeatable profits
as the reward

for your success — and being greedy.

Greed causes overtrading, and overtrading kills profits.
Instead of patiently waiting for ideal setups, greedy traders
will jump on any stock that’s moving.

The result is usually the same every time: a ton of
commissions destroying what little profit was made.

The key takeaway here is to only trade the best patterns or setups.

You don’t always need to be buying stock just for the sake of
having shares.If it helps to limit yourself to a certain number
of trades per week, you should add a caveat
to your trading rulebook.

(to be contd)

BELIEVE IT OR NOT

JUST CONCENTRATE & MEDITATE LOOKING AT
THIS FOR 10 MINUTES BEFORE AN IMPORTANT
JOB TO BE COMPLETED THAT DAY AND
SEE HOW MIRACULOUSLY IT WORKS
WITH THE RESULT

TODAY’S TRADING STRATEGY

OF NIFTY FUTURES – JAN 31

We were continuously warning the investors, bull followers

very boldly for the past 3 months
when everybody expecting the Indian
market to create new highs, history
this month speculating,writing -
bla-bla-bla-bla

What is happening now - you all see on cards.

We see in calculations, insight much before.

Refresh your memory or scroll down to know the
attainable levels of NIFTY SPOT we mentioned
very earlier.

5560 reached in the previous session (as predicted)
and you all going to watch INDEX coming down
to 5380 in few days

Any bounce within that is merely a
DEAD CAT BOUNCE –

as always mentioned by us in this
BEAR MARKET

But remember an important factor
in SPOT

A very good support is seen @ 5380

If the index manages to bounce back
from this level
with volumes a good spurt is triggered
and the market goes into bulls hands for next few days then.

So dear investors,

watch 5380 of Nifty (INDEX) very carefully

NOW…

What is going to happen today (Jan 31) in Nifty Futures?

Day Resistances were @ 5560-70-5600

Day support @ 5500

If breaks 5500 and trade for 15 minutes

again a non-stop slide upto 5470-55 is for sure

Suppose, if sustains above 5538 for 15-25 minutes

a hike upto 5570-5596 is very much possible

So day traders and swing traders can watch these two levels

(5500 & 5538) today carefully

(Exact entry, exit, stoploss levels, reverse trades, exclusively
to the subscribers)

BANK NIFTY

Buy btwn 10735-50

T1 – 10797-821

T2 – 10836-45

T3 – 10875

Sell btwn 10608-594

T1 – 10547-22

T2 – 10508-498

T3 – 10470

SHARE TIPS TODAY (JAN 31)

1) Sell BOC @ 274.10

T1 – 272.25

T2 – 270.40

2) Sell CROMPGREAV @ 262.25

T1 – 260.15

T2 – 258.50

3) Sell LICHSNG @ 175.75

T1 – 174.20

T2 – 172.90-169.10

4) Sell BLUESTARCO @ 345.25

T1 – 341.50

T2 – 340.60

T3 – 338.75

Disclosure:

Number of free tips is deliberately reduced.

Solely I have all the rights to stop this too

at any moment.

Subscribe as soon as possible if you want to enter
in correct time (which is very important)
in every share and earn more without panic.

Join hands with us and feel free in trading hours.

EVERY THIRD INDIAN LIVING BELOW POVERTY LINE

Of 104 countries surveyed (5.2 bn people in all), 1.7 bn live in poverty. Every third Indian is living below poverty line,
estimates an expert group saying that more than 37 per cent of people are poor, ten per cent more than estimated earlier.

Among the states, Orissa and Bihar are at the bottom, while Nagaland, Delhi and J&K have the least number of poor,
says a report by the expert group, headed by Suresh Tendulkar, former chairman of PM’s Economic Advisory Council.

As much as 41.8 per cent of the rural population survives with monthly per capita consumption expenditure of Rs 447, they spend on essential necessities like food, fuel, light, clothing and footwear.

Among urban population, 25.7 per cent are poor, spending Rs 578.8 on essential needs.

Lies, Damned Lies and Statistics

According to the Planning Commission’s recent estimates,
poverty in India came down from 35.97 per cent in 1993-94 to 27.54 per cent in 2004-05.

Although the Tendulkar report has estimated the poverty at 37.2 per cent against the Commission’s estimate of 27.5 per cent, it did say the estimates are “not comparable” as the former is based on new basket of goods. It must be mentioned without hesitation, that left to themselves, the governments’ appointed Commissions and Committees, would like to proclaim, that there is no poverty in India. To say that poverty levels have come down in India, is not only twisting the figures, but a total travesty of the facts and the actual state of affairs in the country. As a regular visitor to rural areas, because of My lands, I can only say, that poor have become poorer, because of the rise in prices, which the Government has not been able to control.

PERCEPTION Vs REALITY

“It is often said by experienced investors that the equity market

discounts future events. Investors who support that contention

believe that if you wait for an event to occur before investing,

then you would probably be too late because the investment

implications would already have been priced into the

particular investment.

The notion that the equity market discounts future events

necessarily leads us to the conclusion that the equity market

prices stocks based on perception rather than on reality.

Future events that are supposedly being discounted have

not yet occurred. Therefore, stock price movements reflect
investors’ changing perceptions of what will occur,

but not what will certainly occur. If the market were able

to discount an event with complete certainty,

then we would not worry about volatility or risk.”

ZEN OF TRADING

So far the Apprenticed Investor series has discussed a lot of don’ts. Don’t do this, don’t do that; avoid talking to these kinds of traders; don’t say or think these kinds of things.

Well, it’s time to shift gears, and since trading is an active enterprise, I’ll discuss some things you should do. I plan to expand on these ideas significantly in future episodes.

Taken together, the following 10 rules will not only help you with the philosophical grounding necessary for thoughtful — and successful — investing, they will help you avoid some of the more common mistakes made by investors and traders early in their careers.

This is the “Zen of Trading;” It is more than an overview — it’s an investment philosophy that can help you develop an investing framework of your own.

1. Have a Comprehensive Plan: Whether you are an investor or active trader, you must have a plan. Too many investors have no strategy at all — they merely react to each twitch of the market on the fly. If you fail to plan, goes the saying, then you plan to fail.
Consider how Roger Clemens approaches a game. He studies his opponent, constructs his game plan and goes to work.

Investors should write up a business plan, as if they were asking a Venture Capitalist for start-up money; just because you are the angel investor doesn’t mean you should skip the planning stages.

2. Expect to Be Wrong: We’ve discussed this previously, but it is such a key aspect of successful investing that it bears repeating. You will be wrong, you will be wrong often and, occasionally, you will be spectacularly wrong.
Michael Jordan has a fabulous perspective on the subject: “I’ve missed more than 9,000 shots in my career. I’ve lost almost 300 games. Twenty six times, I’ve been trusted to take the game-winning shot and missed. I’ve failed over and over and over again in my life. And that is why I succeed.”

Jordan was the greatest ball player of all time, and not only because of his superb physical skills: He understood the nature and importance of failure, and placed it appropriately within a larger framework of the game.

The best investors have no ego tied up in a trade. Those who refuse to recognize the simple truism of “being wrong often” end up giving away unacceptable amounts of capital. Stubborn pride and lack of risk management allow egotists to stay in stocks down 30%, 40% or 50% — or worse.

3. Predetermine Stops Before Opening Any Position: Sign a “prenuptial agreement” with every stock you participate in: When it hits some point you have determined before you purchased it, that’s it, you’re out, end of story. Once you have come to understand that you will be frequently wrong, it becomes much easier to use stop-losses and sell targets.
This is true regardless of your methodology: It may be below support or beneath a moving average, or perhaps you prefer a specific percentage amount. Some people use the prior month’s low. But whatever your stop-loss method is, stick to it religiously. Why? The prenup means you are making the exit decision before you are in a trade — while you are still neutral and objective.

4. Follow Discipline Religiously: The greatest rules in the world are worthless if you do not have the personal discipline to see them through. I can recall every single time I broke a trading rule of my own, and it invariably cost me money.
RealMoney’s Chartman, Gary B. Smith, slavishly follows his discipline, and he notes that every time some hedge fund — chock full of Nobel Laureates and Ivy League whiz kids — blows up, the mea culpa is the same: If only we hadn’t overrode the system.

In Jack Schwager’s seminal book Market Wizards, the single most important theme repeated by each of the wizards was the importance of discipline.

5. Keep Your Emotion In Check: Emotion is the enemy of investors, and that’s why you must have a methodology that relies on objective data points, and not gut instinct. The purpose of Rules 1, 2 and 3 is to eliminate the impact of the natural human response to stress — fear and panic — and to avoid the flip side of the coin — greed.
Remember, we, as a species, were never “hard-wired” for the capital markets. Our instinctive “fight or flight response” did not evolve to deal with crossing moving averages or CEOs resigning or restated earnings.

This evolutionary emotional baggage is why we want to sell at the bottom and chase stocks at the top. The money-making trade — buying when there’s blood in the streets, and selling when everyone else is clamoring to buy — goes against every instinct you have. It requires a detached objectivity simply not possible when trading on emotion.

6. Take Responsibility: Many folks believe “the game is fixed.” To them, I say: get over it. Stop whining and take the proper responsibility for your trades, your losses and yourself.
Your knowledge of the game-rigging gives you an edge. So use your hard-won knowledge to make money.

We have a national culture of blame-passing, and it infected investing long ago. Enron did not cause your losses, and neither did stock-touting analysts, or talking heads on CNBC. You did, and the sooner you accept this, the better off you will be.

A Chinese proverb is particularly insightful as applied to trading: “He who blames others has a long way to go on his journey. He who blames himself is halfway there. He who blames no one has arrived.”

7. Constantly Improve: Investing is so competitive that you cannot afford to stand still. Investors should constantly seek to raise their skill level by learning as much as possible about the markets, the economy, trading technologies and various schools of investing thought. But whatever you read, you must do so with a keenly skeptical eye, while retaining an open mind (‘taint easy to do).
One way to constantly improve is to find something for which you have a peculiar natural proclivity for and develop that gift. It may be moving averages, or position sizing, or MACD, or Bollinger Bands or the Arms index. Perhaps you have an expertise in some aspect of technology, or a particular sector.

This is essential because a developed expertise yields ancillary benefits. It bleeds over into everything else, with net positive results. The specific area of expertise you own does not matter as much as having one. Those of you who have been trading for a while will know exactly what I am referring to.

8. Change Is Constant: Heraclitus was a Greek philosopher best known for his “Doctrine of Flux”: “The only constant is change.”
That doctrine is especially true in the markets. Therefore, as you constantly upgrade your skills, you must remain supple enough to adapt to an ever-changing field of play.

Human nature — especially in herds — is unchanging. But these behaviors must be contemplated within their larger context. Add a new element — PCs, lower trading costs, the Internet, vast amounts of cheap data, even CNBC — and you introduce a new factor that impacts all the players on the field.

As conditions change, you must decipher how they impact your strategy, your emotions and your trading — and adjust accordingly.

9. Learn to Short/Hedge Stocks: Short is not a four-letter word. Successful traders learn to play both sides of the fence. That’s less controversial today than it was as the market was first falling apart, but it is no less true.
When a particular strategy isn’t working, the market is telling you something. Thoughtful traders must consider whether there are bigger issues than their own trading mechanics when they enter a losing streak.

In Law School, students learn they have to be ready to argue either side of a case. You never truly knew a case until you could argue both for and against it. Only when you were able to see its warts could you truly appreciate the beauty.

The trading corollary is that you should never own a stock unless you know what makes it an attractive short. Each buy and sell decision should be an argument pro and con.

The market is cyclical; count on a bear market every four years or so. Unless you plan on sitting out for 18 to 24 months once or twice each decade — as much as four years out of 10 — you better learn to either short stocks or hedge long positions.

10. Understand Sector Strength and Market Trend: This rule generates the most “pushback” of any on the list, because it’s so counter-intuitive: Stock selection matters less than you think.
Studies have convincingly demonstrated that about 30% of a stock’s progress is determined by the company itself; a stock’s sector is equal to at least another 30% (if not more). The overall direction of the market is an even bigger factor, counting for some 40%.

If you own the best company in the wrong sector, or buy the greatest stock when the broader market is going the other way — both positions are likely to be losers. But if you see a strong sector, the market trend will help out even the weakest stock in the bunch.

So that’s the 10 rules I call the “Zen of Trading.”

Investing skills are worthless without a broader framework in which to practice them. The above rules will provide you with that frame of reference. They were as true 100 years ago as they will be true 100 years from now. Those who develop a plan and an investment philosophy are on the path to achieving trading success.

(Refer to ‘OUR POLICIES’ in blog archives if you

have any queries)