FROM AN EXPERIENCE
Losses make the trader studious – not profits. Take advantage of every loss to improve your knowledge of market action.
1. DEVELOPING A LOW-RISK IDEA
One of the exercises Dr. Van Tharp uses in his seminars is having the
participants take the time to write down their ideas on low-risk
trades.The merit of a low-risk idea is that it combines two essential
elements:
patience (because only a small portion of ideas will qualify) and risk
control (inherent in the definition). Taking the time to think through
low-risk strategies is a useful exercise for all traders.
The specific ideas will vary greatly from trader to trader, depending
on the markets traded and methodologies used. At the seminar I
attended, the participants came up with a long list of descriptions
of low-risk ideas. As one exam-ple: a trade in which the market
movement required to provide convinc-ing proof that you are wrong
is small. Although it had nothing to do with trading, my personal
favorite of the low-risk ideas mentioned was:
“Open a doughnut shop next door to a police station.”
2. THE IMPORTANCE OF VARYING BET SIZE
All traders who win consistently over the long mn have an edge.
How-ever, that edge may vary significantly from trade to trade.
It can be mathematically demonstrated that in any wager game with
varying probabilities, winnings are maximized by adjusting the bet
size in accordance with the perceived chance for a successful
outcome. Opti-mal blackjack betting strategy provides a perfect
illustration of this con-cept (see Hull
If the trader has some idea as to which trades have a greater edge-
say, for example, based on a higher confidence level
(assuming that is a reliable indicator)-then it makes sense to be
more aggressive in these situations. As Druckenmiller expresses it,
“The way to build [superior] long-term returns is through
preservation of capital and home runs….
When you have tremendous conviction on a trade, you have to go
for the jugular. It takes courage to be a pig.”
For a number of Market Wiz-ards, keen judgment as to when to
really step on the accelerator and the courage to do so have been
instrumental to their achieving exceptional (as opposed to merely
good) returns.
Some of the traders interviewed mentioned that they varied their
trading size in accordance with how they were doing. For example,
McKay indicated that it was not uncommon for him to vary his
position size by as much as a factor of one hundred to one.
He finds this approach helps him reduce risk during losing periods
while enhancing profits during the winning periods.
3. SCALING IN AND OUT OF TRADES
You don’t have to get in or out of a position all at once.
Scaling in and out of positions provides the flexibility of fine-tuning
trades and broad-ens the set of alternative choices.
Most traders sacrifice this flexibility without a second thought
because of the innate human desire to be completely right.
(By definition, a scaling approach means that some portions of a
trade will be entered or exited at worse prices than other portions.)
As one example of the potential benefits of scaling, Lip-schutz noted
that it has enabled him to stay with long-term winners much longer
than he has seen most traders stay with their positions.
4. BEING RIGHT IS MORE IMPORTANT THAN
BEING A GENIUS
I think one reason why so many people try to pick tops and bottoms
is that they want to prove to the world how smart they are.
Think about winning rather than being a hero. Forget trying to judge
trading success by how close you can come to picking major tops
and bottoms, but rather by how well you can pick individual trades
with merit based on favorable risk/return situations and a
good percentage of winners. Go for consistency on a trade-to-trade
basis, not perfect trades.
5. DON’T WORRY ABOUT LOOKING STUPID
Last week you told everyone at the office,
“My analysis has just given me a great buy signal in the NIFTY.
The market is going to a new high.” Now as you examine the market
action since then, something appears to be wrong. Instead of rallying,
the market is breaking down. Your gut tells you that the market is
vulnerable. Whether you realize it or not, your announced
prognostications are going to color your objectivity.
Why? Because you don’t want to look stupid after telling the world
that the market was going to a new high. Consequently, you are
likely to view the market’s action in the most favorable light possible.
“The mar-ket isn’t breaking down, it’s just a pullback to knock out
the weak longs.” As a result of this type of rationalization,
you end up holding a losing position far too long.
There is an easy solution to this problem:
Don’t talk about your position.
What if your job requires talking about your market opinions?
Here the rule is: Whenever you start worrying about
contradicting your previous opinion, view that concern as
reinforcement to reverse your market stance.
In my earlier years in the business, I invariably tried to rationalize
my original market opinion in such situations. I was burned enough
times that I eventually learned a lesson.
6. SOMETIMES ACTION IS MORE IMPORTANT
THAN PRUDENCE
Waiting for a price correction to enter the market may sound
prudent, but it is often the wrong thing to do. When your analysis,
methodology, or gut tells you to get into a trade at the market
instead of waiting for a correction-do so. Caution against the
influence of knowing that you could have gotten in at a better price
in recent sessions, particularly in those situations when the market
witnesses a sudden, large move (often due to an important surprise
news item). If you don’t feel the market is going to correct,
that consideration is irrelevant. These types of trades often work
because they are so hard to do. As a perfect example, recall the
willingness of the trader in Lipschutz’s group to aggressively sell
the dollar into a collapsing market following the G-7 meeting.
Another example of this principle is Driehaus’s willingness to buy
a stock heavily after it is already up very sharply on a bullish
earnings report if he feels the new information implies the stock
will go still higher.
7. CATCHING PART OF THE MOVE IS JUST FINE
Just because you missed the first major portion of a new trend,
don’t let that keep you from trading with that trend
(as long as you can define a reasonable stop-loss point).
Recall McKay’s observation that the easiest part of a trend is the
middle portion, which implies always missing part of the trend prior
to entry.
8. MAXIMIZE GAINS, NOT THE NUMBER OF WINS
Eckhardt explains that human nature does not operate to maximize
gain but rather the chance of a gain. The problem with this is that it
implies a lack of focus on the magnitudes of gains
(and losses)-a flaw that leads to nonoptimal performance results.
Eckhardt bluntly concludes: “The success rate of trades is the least
important performance statistic and may even be inversely related
to performance.”
Yass echoes a similar theme: “The basic concept
Yass echoes a similar theme: “The basic concept
that applies to both poker and option trading is that the primary
object is not winning the most hands, but rather maximizing your
gains.”
9. LEARN TO BE DISLOYAL
Loyalty may be a virtue in family, friends, and pets, but it is a fatal
flaw for a trader. Never have loyalty to a position. The novice trader
will have lots of loyalty to his original position. He will ignore signs
that he is on the wrong side of the market, riding his trade into a
large loss while hoping for the best. The more experienced trader,
having learned the importance of money management, will exit
quickly once it is apparent he has made a bad trade.
However, the truly skilled trader will be able to do a ISO-degree turn,
However, the truly skilled trader will be able to do a ISO-degree turn,
reversing his position at a loss if mar-ket behavior points to such a
course of action.
10. PULL OUT PARTIAL PROFITS
Pull a portion of winnings out of the market to prevent trading
discipline from deteriorating into complacency. It is far too easy
to rationalize overtrading and procrastination in liquidating losing
trades by saying, “It’s only profits.”
Profits withdrawn from an account are much more likely to be
viewed as real money.
Profits withdrawn from an account are much more likely to be
viewed as real money.
(to be contd)
TODAY’S TRADING STRATEGY
OF NIFTY FUTURES – JULY 18th
Resistance today between 5605-11
Support @ 5575
Above 5575 NFut has no problem to touch 5605
If cuts & sustains above 5611 for 10 minutes it travels upto
5627-39
If sustains above this 5639 for 5 minutes then a hike upto
5647-5651-63 is possible
On the other hand if cuts 5573 and trades below the level for
5 minutes some slide upto 5564-51 is possible
Final Support @ 5551 today
A NOTE:
Its very risk to take any trading decisions between
5605 & 5575 today
&
All these levels exactly apply in a normal market
opening and in that case, very boring and
chewy market is expected till 12:45 PM today
chewy market is expected till 12:45 PM today
SHARE TIPS TODAY (JULY 18)
Scrips that have higher chances to come down below the Friday's
close or low are given below-
GTL, EXCELCROP, OFSS ,KIRIINDUS, RPOWER
Exact entry points, targets, Stop losses and reverse trades -
only to the subscribers
Join hands and enjoy friends..
INTUITION
A hunch can be trusted if it 
can be explained.
Though intuition is not infallible, it can be a useful speculative tool,
if handled with care
and skepticism.
If you are hit by strong hunch – put it to the test.
If you are hit by strong hunch – put it to the test.
Trust it only if you
can explained it. That is only if you can identify within your mind
a stored body of information out of which that hunch
must reasonably be supposed to have arisen.
Be wary of any intuition that seems to promise some outcome
Be wary of any intuition that seems to promise some outcome
you want badly.
Never confuse a hunch with a hope.
20 CHUNKS FROM "A BETTER WAY TO MAKE MONEY"
1. The secret to losing money in the market is to know why. “The losers “were ‘playing the market’, not using it intelligently. The fellow at the other end of the deal, who was using it intelligently, not ‘playing the market’, is the one who got the money.”
2. “It is an undeniable fact that indiscriminate trading in a hectic market will send one to financial oblivion quicker than any other known process.”
3. “The most careful preparation-a systematic plan-is one of the essentials of success.”
4. “Market action is not complex but surprisingly simple. Yet it is often made to appear complex by newspaper forecasters and market letter writers.”
5. “Market action is human nature in action.”
6. All market movements are based on “two deep-seated and entirely natural emotions: the desire for gain and the fear of loss.”
7. “So anxious are people to find some talisman, some magic wand, that will help them secure the hidden riches of the market, that they will try anything from coin-flipping to crystal gazing to secure the desired assistance.”
8. “What marvelous results could be attained in the business of making money if those who buy stocks would take a little time to learn a few simple facts about the market in which they are blindly reposing their faith.”
9. “Market students are continually diverted from making true evaluations of securities and commodities because they study the statistics made by prices instead of the psychology of prices.”
10. “Adopt one system of trading and stick to it, just as you employ and stick to one physician in whom you learn to have confidence.”
11. “One of the most important points in your market education is to learn as early as possible that the customary and supposedly weighty market news is of very small importance. The news only looks important.”
12. “Don’t trade just because you can afford to lose.”
13. “Practice makes perfect is an old copybook adage that works well in the market place.”
14. “If a trade fails to come out right, the error will be found in the operator-not the market.”
15. “Trading is simple another form of business. Treat it as such.”
16. “Trend to the investor is like the vein of gold to the miner, who must follow the vein faithfully if he expects to get the yellow metal.”
17. “Stocks are made to buy and sell…not to be bought and held.”
18. No matter what a thing costs, stocks or otherwise, “it is worth only what you can somebody to pay for it.”
19. People will always be prone to be extravagantly optimistic or dolefully in the slumps and “in this action is unlimited wealth for the men who realize this fact and will use it with confidence and decision.”
20. “Success is the most desirable thing in the world, but it is an eliminating contest. It may trample the thoughtless trader into the dust, but it will pour large treasure into the laps of those who work in sincere harmony with its laws.”
THE MOST 5 STUPID STATEMENTS BY OUR POLITICIANS
AFTER THE MUMBAI BLAST
A statement that neither sugarcoats the truth nor exemplifies it,
if truth indeed it is.
“Not an intelligence failure’
- P Chidambaram
“We will stop 99 per cent of the attacks. But one per cent of attacks might get through and that is what I am saying.”
- Rahul Gandhi
- Raj Thackeray
JUST SMS TO YOUR PAL
You might be mistaken if you thought people from Pakistan
and Afghanistan are flooding Mumbai.
“India is better than Pakistan where blasts take place every day, every week.”
- Digvijay Singh
- Digvijay Singh
How can a list of stupid things that politicians said not contain the King of them all?
“Terrorists had the advantage of surprise” – Manmohan Singh
You don’t say!
Gone are the balmy days where terrorists lost sleep over whether it would be discourteous if they did not drop a line in advance.
You don’t say!
Gone are the balmy days where terrorists lost sleep over whether it would be discourteous if they did not drop a line in advance.
Terrorists, these days!
MESSAGE TODAY
When we fear things I think that we wish for them ... every fear hides a wish. -DAVID MAMETRELAX CORNER
A SMART INDIAN
An Indian man walks into the New York City bank and asks for the
loan officer. He... tells the Loan Officer that he was going to India
So the Indian man hands over the keys and the documents of the new Ferrari car parked on the street in front of the bank.
The loan officer consults the president of the bank, Produces all the required items and everything check out to be OK.
The loan officer agrees to accept the car as a security for the loan. The bank president and the Loan Officer had a good laugh at the Indian For keeping a $750,000 Ferrari as a security and taking only $5,000 has a loan. An employee of the bank then drives the Ferrari Into the banks underground garage and parks it there.
Two weeks later the Indian returns and pays $5000 and the interest which comes to it $15.41.
Seeing this, loan officer says, ldquo;Sir, we are very happy to have your business And this transaction has worked out very nicely,
but we are a little puzzled. While you are away, we checked you out and Found out that you were a multi millionaire.
What puzzled us was why would you bother to borrow $5000? rdquo;
The Indian replies Where else in the New York City can I park my car for 2 weeks and For only $15.41 and expect it to be there when I return.
This is a true incident and the Indian is none other than... VIJAY MALLYA
Our Joe wants to know if your Joe will lend our
Joe your Joe's banjo.
If your Joe won't lend our Joe your Joe's banjo,
our Joe won't lend your Joe our Joe's banjo when our
Joe has a banjo
(Refer to ‘OUR POLICIES’ in blog archives
if you have any queries)
For further details,
Contact Admin (Analyst) @
(0)9788563656
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.
No comments:
Post a Comment