FROM AN EXPERIENCE
Taking advantage of potential major winning trades
is not only important to the mental
health of the trader but is also critical to winning.
Letting winners ride is every bit as important as cutting losses short.
If you don’t stay with your winners, you are not going to be able to pay for the losers.
is not only important to the mental
health of the trader but is also critical to winning.
Letting winners ride is every bit as important as cutting losses short.
If you don’t stay with your winners, you are not going to be able to pay for the losers.
In addition to not over-trading, it is important to commit to an exit point on every trade. Protective stops are very important because they
force this commitment on the trader.
force this commitment on the trader.
I often talk about the Battle Of Waterloo and how it relates
to trading in general and specifically strategy development.
If you don’t know the battle
(which I recommend reading about if you have time),
just listen to this once popular country song
and you’ll get a sense
to why I think this is so important.
While I’m no historian, I do think traders can learn
a lot about trading through learning about important
battles in history.
The Battle Of Waterloo offers a great example
as it offers many lessons for us to consider:
Make your planning and risk analysis commensurate with
the size of your project.
For major endeavors, contingency plans are critical.
Know when to cut your losses if necessary. Don’t let your
desire to succeed be the enemy of good judgment.
Be sure that the justification is clear for your project,
and that your entire team is sold.
Don’t become over-confident, especially after many successes.
Remember the basic principles.
Never attempt an unpopular endeavor in isolation.
Don’t make enemies. You are only as good as your allies.
Adopt leader style politics, not the Machiavellian style.
Look for the win-win.
Many of these lessons apply to good trading,
especially the ones
about the importance of having contingency plans,
knowing whento cut losses, having clear
justifications for your trades, the
importance of avoiding overconfidence and finally
how important
it is to attack from a strong position like having plenty of capital
and cash reserves.
Needless to say, every trading strategy has their own weaknesses.
So, what the most common weakness I’ve found? That’s easy –
human error. That’s right, usually most strategies that have been
backtested and proven to work continue to work well unless we do
things to either deviate from the plan and/or we apply leverage to it
rendering it extremely vulnerable. It is fairly often that I see traders
come forward with a hot strategy they’ve used and are in the process
of levering it up, creating havoc and exposing themselves to great
risk. There is good reason for the expression – leverage always kills.
In my experience, that has been true.
Beyond that, many strategies
are based on things that don’t account for the constantly
evolving nature of the market.
In sum, every strategy you employ needs to also have a list of
“warning signs” that will indicate whether you are facing a
Waterloo-like defeat. You can rest assure those in charge of the
quant trading systems have this in place already on Wall Street.
From my experience knowing and working closely with others
who do that for a living, they all have checklists every day that
tell them whether the system is
“operating within normal parameters.
” When the performance falls outside of that, the quants
know know to put the brakes on.
Do you do the same thing with your own
strategies? If so, then do you have a system in place to know
when you should put your trading on hold?
While you can show me all kinds of stats on how good a system
may be, but what I want to know is what will cause all of those
performance figures not to hold up in the real world. Bottom line
you must ask yourself what could happen potentially to cause the
strategy not to work or cause you a significant loss? Sometimes
that’s not possible to know especially when evaluating a new
strategy, but just having some suspicions when working with a
new strategy can often prove to be a true asset.
So, how do you learn its weaknesses? Backtesting can help,
but what I call forward testing helps even more. In my opinion,
nothing will replace the experience of watching the strategy day
in a day out coupled with how it reacts to different market
environments over a lengthy period of time.
That will provide you with hints when there is real trouble ahead.
Like most things, there’s nothing going to replace your experience
with the system. The experience is also necessary to build the level
of confidence you need to maintain and improve it as well and to
reject temptation to abandon it when it doesn’t perform up to your
expectations.
Remember, all traders sooner or later come to understand and
appreciate that it is only a question of when, not if, they are going
to be on the wrong side of the key trade. Strategies, even ones that
work perfect on paper, will always fail at some point sooner or later
on. The only question is how to utilize the strategy the best you can
up until that point AND to be able to pull the emergency chute
when it threatens your capital in a significant way.
So, next time you’re working a strategy that is making money
hand over first, take time to ask yourself this simple question –
Where will you meet your Waterloo? If you can always
answer that question to some degree, chances are good you never
will!
(to be contd)
to trading in general and specifically strategy development.
If you don’t know the battle
(which I recommend reading about if you have time),
just listen to this once popular country song
and you’ll get a sense
to why I think this is so important.
While I’m no historian, I do think traders can learn
a lot about trading through learning about important
battles in history.
The Battle Of Waterloo offers a great example
as it offers many lessons for us to consider:
Make your planning and risk analysis commensurate with
the size of your project.
For major endeavors, contingency plans are critical.
Know when to cut your losses if necessary. Don’t let your
desire to succeed be the enemy of good judgment.
Be sure that the justification is clear for your project,
and that your entire team is sold.
Don’t become over-confident, especially after many successes.
Remember the basic principles.
Never attempt an unpopular endeavor in isolation.
Don’t make enemies. You are only as good as your allies.
Adopt leader style politics, not the Machiavellian style.
Look for the win-win.
Many of these lessons apply to good trading,
especially the ones
about the importance of having contingency plans,
knowing whento cut losses, having clear
justifications for your trades, the
importance of avoiding overconfidence and finally
how important
it is to attack from a strong position like having plenty of capital
and cash reserves.
Needless to say, every trading strategy has their own weaknesses.
So, what the most common weakness I’ve found? That’s easy –
human error. That’s right, usually most strategies that have been
backtested and proven to work continue to work well unless we do
things to either deviate from the plan and/or we apply leverage to it
rendering it extremely vulnerable. It is fairly often that I see traders
come forward with a hot strategy they’ve used and are in the process
of levering it up, creating havoc and exposing themselves to great
risk. There is good reason for the expression – leverage always kills.
In my experience, that has been true.
Beyond that, many strategies
are based on things that don’t account for the constantly
evolving nature of the market.
In sum, every strategy you employ needs to also have a list of
“warning signs” that will indicate whether you are facing a
Waterloo-like defeat. You can rest assure those in charge of the
quant trading systems have this in place already on Wall Street.
From my experience knowing and working closely with others
who do that for a living, they all have checklists every day that
tell them whether the system is
“operating within normal parameters.
” When the performance falls outside of that, the quants
know know to put the brakes on.
Do you do the same thing with your own
strategies? If so, then do you have a system in place to know
when you should put your trading on hold?
While you can show me all kinds of stats on how good a system
may be, but what I want to know is what will cause all of those
performance figures not to hold up in the real world. Bottom line
you must ask yourself what could happen potentially to cause the
strategy not to work or cause you a significant loss? Sometimes
that’s not possible to know especially when evaluating a new
strategy, but just having some suspicions when working with a
new strategy can often prove to be a true asset.
So, how do you learn its weaknesses? Backtesting can help,
but what I call forward testing helps even more. In my opinion,
nothing will replace the experience of watching the strategy day
in a day out coupled with how it reacts to different market
environments over a lengthy period of time.
That will provide you with hints when there is real trouble ahead.
Like most things, there’s nothing going to replace your experience
with the system. The experience is also necessary to build the level
of confidence you need to maintain and improve it as well and to
reject temptation to abandon it when it doesn’t perform up to your
expectations.
Remember, all traders sooner or later come to understand and
appreciate that it is only a question of when, not if, they are going
to be on the wrong side of the key trade. Strategies, even ones that
work perfect on paper, will always fail at some point sooner or later
on. The only question is how to utilize the strategy the best you can
up until that point AND to be able to pull the emergency chute
when it threatens your capital in a significant way.
So, next time you’re working a strategy that is making money
hand over first, take time to ask yourself this simple question –
Where will you meet your Waterloo? If you can always
answer that question to some degree, chances are good you never
will!
(to be contd)
The Reserve Bank of India today told banks that the restructured
loans of companies might pose a risk of losses over and above the
diminution in the value of advances.
The RBI warning — expressed in its Report on Trend and Progress
of Banking in India-2009-10 released today — comes at a time
domestic banking is witnessing a rise not only in non-performing
assets (NPAs) but also in the proportion of doubtful and loss assets.
According to the RBI norms, an advance is classified as NPA if
interest and/or instalment of the principal amount remains overdue
for more than 90 days. Doubtful assets are those that are
non-performing for more than 18 months.
While the NPAs are an important indicator of the financial
soundness of banks, the report said there were some emerging
concerns during 2009-10.
The asset quality of banks had been improving with the declining
level of gross and net NPA ratio since 1999. The gross NPA ratio,
which stood at 14.6 per cent in March 1999, fell to 2.25 per cent in
March 2008.
During the economic crisis of 2008-09,
the ratio remained unchanged. However in 2009-10, the gross
NPA ratio increased to 2.39 per cent. The net NPA ratio rose to
1.12 per cent in March this year from 1.05 per cent a year ago.
Gross NPA ratio was the highest for foreign banks, followed by
private sector banks.
“The empirical analysis taking growth rates of gross advances and
gross NPAs since June 2000 indicated that NPA growth follows
credit growth with a lag of two years. Asset quality can get
compromised during the periods of high credit growth and this
can result in the creation of NPAs in later years,’’ the RBI said.
Banks have resorted to loan restructuring to help creditworthy
borrowers hit by unexpected and adverse economic developments.
In such cases, there is a reduction in the interest rate or rescheduling
of the repayment of principal amounts.
Banks have recently been reporting slippages from restructured
accounts. The report, however, said the improvement in domestic
and global economic conditions could help limit the extent of fresh
slippages.
Citing the deterioration in asset quality, the central bank said signs
of financial stress remained an important concern for banks in the
medium to long term.
On liquidity, the RBI said sound liquidity management involved
prudent management of assets and liabilities supported by a process
of liquidity planning taking into account changes in economic,
regulatory or other operating conditions.
TODAY’S TRADING STRATEGY
OF NIFTY FUTURES – NOV 9
Day resistance @ 6333 & 6353
If trades above 6307
for 15 minutes
for 15 minutes
Hike upto 6333-43-53
is possible.
is possible.
If 6353 too crossed,
Non-stop rally upto 6373-95
is seen on charts.
is seen on charts.
On the other hand,
If trades below 6308 for 15 minutes then
watch a slide upto 6289
And if 6289 is broken with
volume
more slide upto 6260-37 is possible.volume
A GENERAL VIEW THIS WEEK
DAY CHART OF NIFTY FUTURES
REVEALS THAT
Supports exists @ 6320-6300
And there
after @ 6276-6257-6238
after @ 6276-6257-6238
Even those breached then
We can watch a slide upto 6213-6203-6159-6114
Carefully make a note of these
levels (as targets)
when you get into short trades.
levels (as targets)
when you get into short trades.
Now let’s have a look on the
other side.
other side.
Good resistance @
6353 and 6363
6353 and 6363
MARK MY WORDS
Three consecutive closes above
6363
6363
will take Nifty Futures to
various new highs
and create new history.
No doubt in that.
various new highs
and create new history.
No doubt in that.
BANK NIFTY
Buy btwn 13197-222
T1 – 13264-85
T2 – 13298-306-32
Sell btwn 13113-087
T1 – 13045-024
T2 – 13011-003-12978
SHARE TIPS TODAY (NOV 9 )
Sell ICICIBank @ 1252
T1 – 1245
T2 – 1235
Sell Uniphos @ 210.10
T1 – 208.80
T2 – 206.90
Sell GMDCLtd @ 163.60
T1 – 162.60
T2 – 161.60
NOTE
1.THE ABOVE GIVEN TIPS
ARE APPLICABLE
ARE APPLICABLE
ONLY FOR DAY TRADERS.
2.NEVER EVER ENTER
INTO A TRADE BEFORE
THE ABOVE MENTIONED
LEVELS
INTO A TRADE BEFORE
THE ABOVE MENTIONED
LEVELS
or
AFTER THE TARGETS
WERE ATTAINED.
WERE ATTAINED.
AN ASTRAL VIEW OF MARKET TODAY
- New Year's going start time emerged ascendant Scorpio ascendant and Moon in the horoscope - Mars - Mercury is the conjunction. Rahu in Sagittarius sign in deblited sign, in 4th house Jupiter and retrograte position, Saturn posited in House of gains, in expenses and Foreign Investors House in 12th place deblited Sun and Venus own House present.
- As we mentioned in the Diwali issue, keep taking frequent entries & exits . This will help you in more gains & benefits than losses.
- Today, Sagittarius Moon and the constellation Moon the first phase Lord is Ketu.
- Chandra Rahu is going to meet, so the market can be said direction-less, but don't worry they are - different Nwamaansh but the astrologer still recommend to be careful.
- From 13:15 to 15:00, Nifty may remain soft.
- From 15:00 till the last 30 minutes, there may be a little buying trend at Nifty.
Disclaimer
On repeated requests of the readers this astral prediction is started.
Traders are advised to attain some technical knowledge before they get into trades anyway
-EDITOR
-EDITOR
WANT INDIA FOR SECURITY COUNCIL?
WE DESERVE IT WITH THE ILL-FATED
FARMERS EATING RATS AND MOUSE
FOR THEIR LUNCH AND DINNER?
FARMERS EATING RATS AND MOUSE
FOR THEIR LUNCH AND DINNER?
WHAT ON EARTH DOES TRADING
TEACHES US LIFE?
Trading is a crucible of life: it distills, in a matter
of minutes,
the basic human challenge: the need to judge, plan,
and seek values under conditions of risk and
uncertainty.
In mastering trading, we necessarily face and master ourselves.
Very few arenas of life so immediately reward
self-development–and punish its absence.
So many life lessons can be culled from trading
and the markets:
1) Have a firm stop-loss point for all activities:
jobs, relationships,
and personal involvements. Successful people are
successful
because they cut their losing experiences short
and ride winning experiences.
2) Diversification works well in life and markets.
Multiple, non-correlated sources of fulfillment make
it easier to take risks in any one facet of life.
3) In life as in markets, chance truly favors
those who are prepared to benefit.
Failing to plan truly is planning to fail.
4) Success in trading and life comes from knowing
your edge,
pressing it when you have the opportunity,
and sitting back when
that edge is no longer present.
5) Risks and rewards are always proportional.
The latter, in life as in markets,
requires prudent management of the former.
6) Happiness is the profit we harvest from life.
All life’s activities
should be periodically reviewed for their return on investment.
7) Embrace change: With volatility comes
opportunity, as well as danger.
All trends and cycles come to an end.
Who anticipates the future,profits.
9) The worst decisions, in life and markets,
come from extremes:
overconfidence and a lack of confidence.
10) A formula for success in life and finance:
never hold an investment that you would not be
willing to purchase afresh today.
The Most Expensive Investing Book
The most expensive investing and stock trading book is
Margin of Safety:
Risk-Averse Value Investing
Strategies for the Thoughtful Investor
,
, which you can pick up a new copy of
on Amazon (AMZN) for $1,749.00. The book was written by
Seth Klarman, the successful founder and president of the
Baupost Group, a Boston-based hedge fund.
The book has a rating of four stars based on customer reviews
and was published by HarperCollins in 1991.
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Contact Admin (Analyst) @
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MESSAGE TODAY
Creativity is allowing oneself to
make mistakes.
make mistakes.
Art is knowing which ones to
keep.
-SCOTT ADAMS, The Dilbert Principle
keep.
-SCOTT ADAMS, The Dilbert Principle
RELAX CORNER
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