Thursday, June 7, 2012

Go with Market Flow

Rakesh Sethia writes:
"I follow your views ardently. over a period of time, I have come to terms with your trading style. However, I am unable to understand when should the positions be carried forward and when should those be squared off intraday. Can you please suggest some good book that covers this topic in detail?"

My Notes:

Rakesh, your words give the greatest compliment  that a trader can receive. As I perceive, you understand the reasons for my analysis, use the reasoning as one of the inputs to your own methods, then take trading decisions independently.
This is a wonderful compliment because this is exactly what I want to do - share my thoughts on TV and otherwise. 
In fact, I feel dismayed when people want to 'follow' me. Truthfully, I find it difficult to follow myself ! How can others do it? And, why should they?

The entire purpose of sharing my analysis is to tell you what I am working at. It may be right, it may be wrong, but this is what I currently believe in.  Just as a car driver may be good at driving - safe, careful. So also a trader may be good at analysis. But, we cannot 'follow' the car driver by copying all his actions. We have to develop our own driving style. So also, we cannot 'follow' a trader or analyst. We can listen to what he says, then develop our own ways of trading.

Carry Forward of Positions

Rakesh asks "I am unable to understand when should the positions be carried forward and when should those be squared off intraday."

My Notes: 
There is no mathematical formula or mechanical method to decide the issue of squaring off positions intra day. Here are some basic guidelines:

1. If the original purpose of the trade was intra day, then close it on the same day. Never allow an intra day trade to be carried overnight, no matter what the loss or profit may be.

2. If prices have seen a big range expansion in our favor, close at least a part of the trade. Short term traders should take profits when windfalls come their way.

3. If a new trend has just started, then it makes sense to carry some positions because of the expectations of gap open on the next day, plus further intraday gains also.

Then, the idea is: Is the trend likely to persist? Carry some positions.

Is the short term trend mature? If yes, then exit.

But, be careful of carrying losing positions. This is not usually a good idea.


Tarajesh Khan said...

I am a big fan of your analysis. Actually, I used to get up around 8 AM only to listen to your comments on CNBC TV18 and if I miss it, I would normally wait till around 11 AM for your second appearance. I used to follow your comments blindly and used to take positions based on your Pre-Open comments. There were times I took positions based on your Pre-Open comments and the markets swung the other way. On those occasions, I felt like Casablanca, waiting for your direction, while my position was burning :D:D:D. Instead of squaring off and minimizing losses, I used to hold the positions till you come back again i.e., around 11 AM or at the closing bell around 03:00 PM and by that time I normally would be so much into red that I just wouldn't want to exit my position even if you had strongly advised otherwise. I, invariably, used to hope instead of being fearful.

Overtime, as you have stated, I have come to realize, as Rakesh did, that I should listen to your analysis carefully, use it as the major input and open a position based on an independent decision. That way, I could exit when I think it is going against my judgement. However, the toughest part is to maintain a strict stop loss. You mentioned about the stop loss in your book as well, but it is one thing that I am yet to learn. My emotion always clouds good judgement when my position turns red. I will definitely let you know the day I truly am able to implement the art of Stop Loss.

Nevertheless, I remain a big fan of your analysis, your comments, your style and your quips. I might sound like a girl, but I really missed you during the period that you were away organizing and arranging your son's wedding.

Vasant kumar said...


Pankaj Varmora said...

Dear sir,

I want to know that why technical analysis told to buy after scrip go to 3 to 4 % upside? can you simplify open interest in simple word.


Dear Sukhani Sir,

I m your big fan and i always like to listen you on CNBC TV. whatever script u recommend for the intraday i use to keep my eyes on those stock and follow your targets and SL. However i m also a technical analysis and u believe or not but always there will be 2-3 stocks will be matching for intraday trade as the same u recomened for the day... I would like to send u my recommendation script for the next day and want to comment on those... i just want to know i can post here or not...?

Vimz said...

Hello Sir...In a previous comment you have said that you do not attach much significance to a longer term pattern (case in question M&M head & Shoulders) as they are ineffective. I was a bit surprised to read that. I try and learn from your views regularly and this was something new,as i am under the impression that longer term patterns have even better validity and power. Could you explain....Vimal

K_Vir said...

Hello. In response to query from Pankaj, I share my thoughts as below:

1. TA is based on the price (and volume) action in the market as well as level of various indicators (like moving averages , support and resistance lines etc.). Positive crossing of such indicators (say, SMA 20 or resistance line) confirm the interest of the traders / investors and that is where TA indicates that NOW the market is ready to pay higher prices (as demand for the stock is going up). Thus, TA will be able to convey only AFTER such investor / trader interest shows up on the charts. And that is where Sh. Sudarshan has been advsing us : Go with the trend... There is nothing like high price and low price in market...

2. Open interest indicates the total amount of positions for a particular instrument. If A buys 10 lots of Nifty future (and B sells 10 lots of nifty future), market has open interest of 10 lots. In my opinion, for futures, standalone OI is does not provide any clude but relative (over time) provides important clues. It indicates whether there are enough traders interested in the instrument and are ready to participate. (Like cricket match between India and Pakistan will have many TV viewes but may not be a match between India and kenya!).

Rajesh Alawadhi said...

Dear Sir,
I am the greatest fan of your analysis and your reading of the markets. I claim to be the biggest fan of yours and till date i have been the first reader of most of your posts.The most stressful trading days for me are not the ones when my positions are running in losses but the days when you dont post anything to get me back to rational thinking. I would appreciate if you could post a little more about the financial management while trading since my personal experience for last 5 years has proved that entry and exit of a trade holds a lesser degree of importance as compared to financial management. Being a high risk trader,I have survived the markets for years all thanks to your wise words which get me back to track. I also would like you to recommend me any good book which gives a trade record of a successful trader in different market conditions withg thorough analysis.
Warm Regards

Rajat said...

You and Ashwini sir are my Dronacharya and I am your Eklavya, whatever I have learnt is by myself on the technical side and by you both how to apply those in market scenario and how to follow sentiments and markets, to follow charts and not to implement my theories in market because as you always say "markets will do what they want to do and we should just follow them". I don't know will I ever become a good trader or not but you both are my Guru and I am your Eklavya, Hope will get a chance in life to touch feet of both of you and be blessed. If by any chance you or Ashwini sir provide any kind of internship Please let me know, I would be blessed to have it.

Thanks for teaching me whatever I am.

Technotrader said...

Dear Sir,
Just want to inform you that Titan shorted on 4th June on breakout but I was not in the money from last 7 days so closed my position today. I dont know my action was right or wrong. Though the stock is expected to go below 200 but 7 days is enough period to wait, you are requested to put some light on this. Thanks Sir

ankit said...

Hey sudarshan,

It's great hearing you on CNBC. The thing I like about & your analysis is you actually follows the same. Thanks for giving suggestions which actually you yourself follow.

I'm have keen interest in trading a engineer by profession & love to learn trading strategy & help friends. Would be great if you help me.

Ankit Jain

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