Saturday, March 31, 2012

Weekend Reading on Technical Trading

I know… weekends are for family and friends. Yet, if you do get time, read these.

Technical Trading: The Winners and the Losers

A Passage to India

More meaningful correction coming

Gold is not a bubble

Do you adjust your price targets

Buy Calls on Weakness

Lessons from a Master of Trading

Peter Brandt, my favorite technical trader, referred to an 1965 book, in his blog post.

The book is The Stock Market Secrets of Jesse Livermore, by C.M. Flumiani.

I wanted to buy it, but found it to be out of print. However, I did locate images of 3 pages in elitetrader.com. Since the pages are in public domain, I am giving them  here.

livermore-1livermore-2livermore-3

Wednesday, March 28, 2012

Sensible Trading Advice

Here is some excellent advice to traders from the blog – kiddynamitesworld.com. For the full post, click here.

I am giving some excerpts:

  • A good trade must be right on both direction and timing. If one of these factors is wrong, the trade is wrong.
  • I have trading rules and I must follow them. If my rules prevent me from participating in a market I correctly called, so be it.
  • Traders MUST force discipline upon themselves, even if it means a move will be missed.
  • There will always be another market. It is a sign of trouble when a trader feels he or she must be in a given market even if the set up was not right.

I try to follow these rules.  Often, I explain on CNBC that I am not having a position, or stepping aside or starting with a small position. Sometimes, I miss a move, – so be it.

Tuesday, March 27, 2012

What does a day trader want?

Dear Friends,

I am doing research for a proposed book on day trading. Your help will be much appreciated.

Please email me at sudarshansukhani@gmail.com

In the subject write - daytrade

In the email, Kindly write the answers to the following questions:

1. What information will help you to trade better?

2. What is the main cause for losses during the trading day?

3. What should be the contents of a book on daytrading

I hope to receive many emails, with a lot of ideas, comments and suggestions.

Thanks.

Thursday, March 15, 2012

Volatility is not good for traders

Many novice traders have the wrong impression that volatility is good for traders. My observation is: Volatility is the enemy of profitable trading.

Broadly, volatility is large range movements on both sides of the market - up and down. If markets are going to swing up and down both, traders cannot make money. Trading needs a trend to make money. Volatility is - Abrupt changes of direction and then large moves in the opposite direction. There is no trend. Therefore, the trader cannot take a position in anticipation of trend continuation.

Newcomers are thrilled at the idea of big moves, say, for the Nifty. When markets move 100 points up and then suddenly 100 points down, they think there is money to be made. The opposite is true. When we cannot judge the direction of the market, how can we even take a trade?

Big news days have large volatility. The best way to trade such days is to avoid trading. Think about this: out of 240 trading days, there may be 20 or 30 big news days. So even if we avoid trading, there are still 220 or 210 trading days to try our trading skills.

The first move is: keep your losses small. Avoiding trading on volatile days avoids losses.

Wednesday, March 14, 2012

Learning to Trade

Master the Gap is offering a free webinar tonight, on Your Optimal Trading Style: Mechanical, Discretionary or a Combination. Visit the site for more details.

EWI has just posted an article, The three phases of a trader's education.

Traders Psyches says " Taking the psychological risk management approach and avoiding one bad trade a week can have a significant impact on your bottom line.
Why not do it? Is it too hard to leave the screen? Maybe you will miss something? Maybe you will get out of synch? Is watching the markets so compelling that the joy of that is greater than the prospect of cashing bigger checks?

Traders Psyches again "one of the hot topics in decision making neuroscience is the reality of "mind body cognition" or the fact that part of our thinking occurs outside of our brain. Now this isn't really news to anyone who has gone down the path of trying to learn the difference between an intuitive or experiential learning feeling and an impulsive or compulsive one.
But there are a few things you can do to leverage what science now admits to. One is to get up and walk away from your screen - particularly when you are trying to decide if you should get out of a trade. Why? Research shows that "complex decisions are best made non-deliberately" AND research released last week showed that walking around in a non-linear patter - IE like through a park versus straight down the street helped people come up with answers to tough questions.

Tuesday, March 13, 2012

Nifty rally continues

The market continues to move up. Since I give my Nifty views on CNBC in the morning, then again in the afternoon, there is no purpose in repeating the same views on the blog. The rally continues. There is likely to be some volatility coming in because of three days of news events, railway budget. then RBI policy and finally the budget. My strategy is to keep buying on dips. Of course, the view will change if the trend changes.

IFTA is holding its annual conference in Singapore this year in October. Readers should plan to attend this meeting. Singapore is close by.

A surprise has been the underperformance of the cnx ot index. market has given a thumbs down to it stocks while going for high beta high volatility sectors like reality, banking and infra. How times change. In year 2000, it was the high beta sector while infra was low beta and low volatility. Each bull market gets its own favorites.

Thursday, March 8, 2012

What the world is doing on Thursday, March 8

The public choice of higher French tax rates in which Hollande, French presidential candidate proposes a maximum tax rate of 75% on incomes above one million Euros (about Six crore rupees). The public seems to support him. There will be about 3000 people in France who have such incomes, of which 120 to 150 are footballers.

Silver may be topping out, also suggesting that markets are vulnerable. A detailed analysis of the relationship between Silver, world events and equity prices suggests that Silver may have made a short term top and so have equity markets.

Robert Shiller says this might be the end game in U.S. housing prices. Shiller, who called the top in American housing, now says that the market may be bottoming out. U.S. housing has been a big contributor to the economy, so this is probably good news for the markets.

Return of the Bear in which blogger Jeff Carter wonders if the recent rally was a bull move in a longer bear market. He seems to think it was.