Buy Tatachem for Target 425 , cmp @ 411.5.
For Accurate Entry & Exit contact me
For Accurate Entry & Exit contact me
Monday, 29 June 2015
Buy Aurobindo
Buy Aurobindo Pharma for Target 1500 , cmp @ 1403.
For Accurate Entry & Exit contact me
For Accurate Entry & Exit contact me
Friday, 26 June 2015
Buy Ultracem for Target 2970,
Buy Ultracem for Target 2970, cmp @ 2915,
for more calls drop your mobile number...
Pair Trading explained with small Example
Lets say there is Long ICICI and Short Bank Nifty Signal. I will decide which has more probability. If i feel ICICI going up is more probable than banknifty falling, then I would buy ICICI fut and buy bank nifty put. I will replace the doubtful leg with option. So when ICICI goes up by 5% and bank nifty goes up by 2%, I would have made better profit then shorting bank nifty fut. On the other hand by buying put i am reducing my risk in one leg.
If I am in this position
I would buy ICICI Fut and Sell ICICI High strike
and buy one Bank Nifty Put
when using options the overall risk definitely gets reduced.
Favourite Pair Stocks for Pair Trading
So fair in last 2 years of pair trading, these have been my top 4 favorites. I have also added the backtest results.
HDFC vs HDFC Bank - 35/35 Winners - Biggest Hit - All time favorite
Colpal vs Dabur - 18/18 Winners
DR Reddy vs Lupin - 20/21 Winners
Gail vs Ongc - 32/33 Winners - nowadays lot of oil related news so i avoid
sources : Traderji
HDFC vs HDFC Bank - 35/35 Winners - Biggest Hit - All time favorite
Colpal vs Dabur - 18/18 Winners
DR Reddy vs Lupin - 20/21 Winners
Gail vs Ongc - 32/33 Winners - nowadays lot of oil related news so i avoid
sources : Traderji
Thursday, 25 June 2015
Investment Rules
Rule 1: Bulls, Bears Make Money, Pigs Get Slaughtered
It's essential for all traders to know when to take some off the table.
Rule 2: It's OK to Pay the Taxes
Stop fearing the tax man and start fearing the loss man because gains can be fleeting.
Rule 3: Don't Buy All at Once
To maximize your profits, stage your buys, work your orders and try to get the best price over time.
Rule 4: Buy Damaged Stocks, Not Damaged Companies
There are no refunds on Wall Street, so do your research and focus your trades on damaged stocks rather than companies.
Rule 5: Diversify to Control Risk
If you control the downside and diversify your holdings, the upside will take care of itself.
Rule 6: Do Your Stock Homework
Before you buy any stock, it's important to research all aspects of the company.
Rule 7: No One Made a Dime by Panicking
There will always be a better time to leave the table, so it is best to avoid the fleeing masses.
Rule 8: Buy Best-of-Breed Companies
Investing in the more expensive stock is invariably worth it because you get piece of mind.
Rule 9: Defend Some Stocks, Not All
When trading gets tough, pick your favorite stocks and defend only those.
Rule 10: Bad Buys Won't Become Takeovers
Bad companies never get bids, so it's the good fundamentals you need to focus on.
Rule 11: Don't Own Too Many Names
It can be constraining, but it's better to have a few positions you know well and like.
Rule 12: Cash Is for Winners
If you don't like the market or have anything compelling to buy, it's never wrong to go with cash.
Rule 13: No Woulda, Shoulda, Couldas
This damaging emotion is destructive to the positive mindset needed to make investment decisions.
Rule 14: Expect, Don't Fear Corrections
It is not always clear when a correction will strike, so expect and be prepared for one at all times.
Rule 15: Don't Forget Bonds
It's important to watch more than stocks, and bonds are stocks' direct competition.
Rule 16: Never Subsidize Losers With Winners
Any trader stuck in this position would do well to sell sinking stocks and wait a day.
Rule 17: Check Hope at the Door
Hope is emotion, pure and simple, and trading is not a game of emotion.
Rule 18: Be Flexible
Recognize and be open to the unexpected shifts in the market because business, by nature, is dynamic, not static.
Rule 19: When the Chiefs Retreat, So Should You
High-level executives don't quit a company for personal reasons, so that is a sign something is wrong.
Rule 20: Giving Up on Value Is a Sin
If you don't have patience, think about letting someone who does run your money.
Rule 21: Be a TV Critic
Accept that what you hear on television is probably right, but no more than that.
Rule 22: Wait 30 Days After Preannouncements
Preannouncements signal ongoing weakness, wait 30 days to see if anything has gotten better before you pull the trigger to buy. More
Rule 23: Beware of Wall Street Hype
Never underestimate the promotion machine because analysts get behind stocks and can keep them propelled in an up direction well beyond reason.
Rule 24: Explain Your Picks
Buying stocks is a solitary event, too solitary in fact, so always make sure you can articulate your reasoning to someone else. More
Rule 25: There's Always a Bull Market
It's OK if you have to work hard to find it, just don't default to what's in bear mode because you are time-constrained or intellectually lazy.
Todays Share Market explained in story
If anyone has difficulty understanding the current world financial situation, the following should help.... Once upon a time in a village in India, a man announced to the villagers that he would buy monkeys for $10. The villagers seeing there were many monkeys around, went out to the forest and started catching them.
The man bought thousands at $10, but, as the supply started to diminish, the villagers stopped their efforts. The man further announced that he would now buy at $20. This renewed the efforts of the villagers and they started catching monkeys again.
Soon the supply diminished even further and people started going back to their farms. The offer rate increased to $25 and the supply of monkeys became so little that it was an effort to even see a monkey, let alone catch it!
The man now announced that he would buy monkeys at $50! However, since he had to go to the city on some business, his assistant would now act as buyer, on his behalf.
In the absence of the man, the assistant told the villagers: 'Look at all these monkeys in the big cage that the man has collected. I will sell them to you at $35 and when he returns from the city, you can sell them back to him for $50.'
The villagers squeezed together their savings and bought all the monkeys.
Then they never saw the man or his assistant again, only monkeys everywhere!
The man bought thousands at $10, but, as the supply started to diminish, the villagers stopped their efforts. The man further announced that he would now buy at $20. This renewed the efforts of the villagers and they started catching monkeys again.
Soon the supply diminished even further and people started going back to their farms. The offer rate increased to $25 and the supply of monkeys became so little that it was an effort to even see a monkey, let alone catch it!
The man now announced that he would buy monkeys at $50! However, since he had to go to the city on some business, his assistant would now act as buyer, on his behalf.
In the absence of the man, the assistant told the villagers: 'Look at all these monkeys in the big cage that the man has collected. I will sell them to you at $35 and when he returns from the city, you can sell them back to him for $50.'
The villagers squeezed together their savings and bought all the monkeys.
Then they never saw the man or his assistant again, only monkeys everywhere!
Larry Williams's Investing Rules
1. It's all about survival:
No platitudes here, speculating is very dangerous business. It is not about winning or losing, it is about surviving the lows and the highs. If you don't survive, you can't win.
The first requirement of survival is that you must have a premise to speculate upon. Rumors, tips, full moons and feelings are not a premise. A premise suggests there is an underlying truth to what you are taking action upon. A short-term trader's premise may be different from a long-term player's but they both need to have proven logic and tools. Most investors and traders spend more time figuring out which laptop to buy than they do before plunking down tens of thousands of dollars on a snap decision, or one based upon totally fallacious reasoning.
There is some rhyme and reason to how, why and when markets move - not enough - but it is there. The problem is that there are more techniques that don't work, than there are techniques that do. I suggest you spend an immense and inordinate amount of time and effort learning these critical elements before entering the foray of financial frolics.
So, you have money management under control, have a valid system, approach or premise to act upon - you still need control of yourself.
2. Ultimately this is an emotional game - always has been, always will be:
Anytime money is involved - your money - blood boils, sweaty hands prevail, and mental processes are shortcircuited by illogical emotions. Just when most traders buy, they should have sold! Or, fear, a major emotion, scares them away from a great trade/investment. Or, their bet is way too big. The money management decision becomes an emotional one, not one of logic.
3. Greed prevails - proving you are more motivated by greed than fear and understanding the difference:
The mere fact you are a speculator means you have less fear than a 'normal' person does. You are more motivated by making money. Other people are more motivated by not losing.
Greed is the trader's Achilles' heel. Greed will keep hopes alive, encourage you to hold on to losing trades and nail down winners too soon. Hope is your worst enemy because it causes you to dream of great profits, to enter an unreal world. Trust me, the world of speculating is very real, people lose all they have, marriages are broken up, families tossed asunder by either enormous gains or losses.
My approach to this is to not take any of it very seriously; the winnings may be fleeting, always pursued by the taxman, lawyers and nefarious investment schemes.
How you handle greed is different than I do, so I cannot give an absolute maxim here, but I can tell you this, you must get it in control or you will not survive.
4. Fear inhibits risk taking - just when you should take risk:
Fear causes you to not do what you should do. You frighten yourself out of trades that are winners in deference to trades that lose or go nowhere. Succinctly stated, greed causes you to do what we should not do, fear causes us to not do what we should do.
Fear, psychologists say, causes you to freeze up. Speculators act like a deer caught in the headlights of a car. They can see the car - a losing trade, coming at them - at 120 miles per hour - but they fail to take the action they should.
Worse yet, they take a pass on the winning trades. Why, I do not know. But I do know this: the more frightened I am of taking a trade the greater the probabilities are it will be a winning trade. Most investors scare themselves out of greatness.
5. Money management is the creation of wealth:
Sure, you can make money as a trader or investor, have a good time, and get some great stories to tell. But, the extrapolation of profits will not come as much from your trading and investing skills as how you manage your money.
I'm probably best known for winning the Robbins World Cup Trading Championship, turning $10,000 into $1,100,000.00 in 12 months. That was real money, real trades, and real time performance. For years people have asked for my trades to figure out how I did it. I gladly oblige them, they will learn little there - what created the gargantuan gain was not great trading ability nearly as much as the very aggressive form of money management I used. The approach was to buy more contracts when I had more equity in my account, cut back when I had less. That's what made the cool million smackers - not some great trading skill. Ten years later my 16-year-old daughter won the same trading contest taking $10,000 to $110,000.00 (The second best performance in the 20-year history of the championship). Did she have any trading secret, any magical chart, line, and formula? No. She simply followed a decent system of trading, backed with a superior form of money management.
6. Big money does not make big bets:
You have probably read the stories of what I call the swashbuckler traders, like Jesse Livermore, John 'bet a millions' Gates, Niederhoffer, Frankie Joe and the like. They all ultimately made big bets and lost big time.
Smart money never bets big. Why should it? You can win big on small bets, see #5 above, but eventually if you bet big you will lose - and you will lose big.
It's like Russian Roulette. You may well spin the chamber holding the bullet many times and never lose. But spin it often enough and there can be only one result: death. If you make big bets you are destined to be a big loser. Plunging is a loser's game; it can only set you up for failure. I never bet big (I used to - been there and done that and trust me, it is no way to live). I bet a small per cent of my account, bankroll if you will. that way I have controlled loss. There can be no survival without damage control.
7. God may delay but God does not deny:
I never know when during a year I will make my money. It may be on the first trade of the year, or the last (though I hope not). Victory is out there to be grasped, but you must be prepared to do battle for a long period of time.
Additionally, while far from a religious person, I think the belief in a much higher power, God, is critical to success as a trader. It helps puts wins and losses into perspective, enables you to persevere through lots of pain and punishment when you know that ultimately all will be right or rewarded in some fashion. God and the markets is not a fashionable concept - I would never abuse what little connection I have with God to pray for profits. Yet that connection is what keeps people going in times of strife, in fox holes and commodity pits.
8. I believe the trade I'm in right now will be a loser:
This is my most powerful belief and asset as a trader. Most would be wannabes are certain they will make a killing on their next trade. These folks have been to some 'Pump 'em up, plastic coat their lives' motivational meeting where they were told to think positive thoughts. They took lessons in affirming their future would be great. They believe their next trade will be a winner.
Not me! I believe at the bottom of my core it will be a loser. I ask you this question - who will have their stops in and take right action, me or the fellow pumped up on an irrational belief he's figured out the market? Who will plunge, the positive affirmer or me?
If you have not figured that one out - I'll tell you; I will succeed simply because I am under no delusion that I will win. Accordingly, my action will be that of an impeccable warrior. I will protect myself in all fashion, at all times - I will not become run away with hope and unreality.
9. Your fortune will come from your focus - focus on one market or one technique:
A jack of all trades will never become a winning tradee. Why? Because a trader must zero in on the markets, paying attention to the details of trading without allowing his emotions to intervene.
A moment of distraction is costly in this business. Lack of attention may mean you don't take the trade you should, or neglect a trade that leads to great cost.
Focus, to me, means not only focusing on the task at hand but also narrowing your scope of trading to either one or two markets or to the specific approach of a trading technique.
Have you ever tried juggling? It's pretty hard to learn to keep three balls in the area at one time. Most people can learn to watch those 'details' after about 3 hours or practice. Add one ball, one more detail to the mess, and few, very few, people can make it as a juggler. It's precisely that difficult to keep your eyes on just one more 'chunk' of data.
Looks at the great athletes - they focus on one sport. Artists work on one primary business, musicians don't sing country western and Opera and become stars. The better your focus, in whatever you do, the greater your success will become.
10. When in doubt, or all else fails - go back to Rule One.
Nifty option writing
What is the strategy --- SHORT GUT : sell CALL from lower strike and sell PUT from higher strike (strike price higher than current price of underlying).
When to enter --- this is the real trick which suddenly struck me. Enter SHORT GUT in the middle of earlier month of expiry (e.g. For July expiry sell CE and PE around mid-June) and in next 20 - 25 days one can easily cover both positions about 100-120 points lower.
Example - On 20 Feb Nifty spot was 8800 so sold 8500 CE and 9000 PE for March expiry for a total premium of about 750 and by 10 Mar covered the same for 550 (profit of 200)
On 20 Mar Nifty spot was 8600 so sold 8300 CE and 8800 PE for April expiry for a total premium of about 650 and by 17 Apr covered the same for 530 (profit of 120)
On 20 Apr Nifty spot was 8450 so sold 8200 CE and 8700 PE for May expiry for a total premium of about 640 and by 20 May covered the same for 520 (profit of 120).
It so happened that in between the total premium went higher but since this GAME is for 20-25 days, one can wait patiently. But somehow if the premium remains on higher side till two days before expiry (which means NIFTY has swung outside no-loss zone), then add some capital to sell more CE or PE (as the case may be) so as to get out at least in no profit no loss manner.
So, are we game for July expiry?
It looks like till mid-July NIFTY will remain range-bound between 8000 and 8500. Thus, I am planning to sell July 8000 CE and 8500 PE late next week for a premium of about 680 - 700 points and then cover the positions for about 550 points by 10-15 July.
comments invited.
How to write option successfully
WRITING OPTIONS
Writing out-of-money options allows you to garner small and consistent returns, during adverse market conditions. Read on to figure out what these options are and how you can make a quick buck on them
WHAT are the chances of SBI touching Rs 780 by the end of this month? Not very bright, you might say.Then, why not write an SBI Rs 780 call option and earn some low risk income? This practice is popularly known as writing out-of-money options. As a result, you can hope to make some decent income in the form of the premium received on writing the option.
Writing options
First, you must be familiar with option basics. An option can be either out-of-money, in-the-money or at-the-money. A call option is said to be in-the-money if the current market value of the underlying share is above the strike price of the option. Similarly, a put option is said to be in-the-money if the current market value of the underlying asset is below the strike price of the option. For instance, if the current price of Infosys is Rs 2,100, an Infosys 2,000 call option (strike price is Rs 2,000) and Infosys 2200 put option (strike price is Rs 2200) are in-the-money.
At-the-money simply means that the current market value of the underlying asset is the same as the strike price. For instance, if the current price of Infosys is Rs 2,100, then Infosys 2100 call and put options (strike price is Rs 2,100) are at-the-money.
A call option is said to be out-of-money if the current price of the underlying share is below the strike price of the option. A put option is said to be out-of-money if the current market value of the underlying share is above the strike price of the option. For instance, if the price of Infosys is currently Rs 2,100, then an Infosys 2,200 call option (strike price is Rs 2,200) and Infosys 2,000 put option (strike price is Rs 2,000) are outof-money.
Out of money options
Logically, you should write a call option when you expect the underlying stock to stay at the same level or fall. Similarly, you could write a put option when you expect the price to stay at the same level or rise. As an option buyer, your risk/ loss is limited to the premium that you have paid. On the other hand, as an option seller, your risk is unlimited whereas your gains are limited to the premiums that you earn.
Hence, writing call and put options are considered to be quite risky as the losses can be unlimited, if the value of the underlying asset increases above the exercise price. For instance, if you write or sell one Infosys 1 month at-the-money call option at a strike price of Rs 2,100, when the cash price is also Rs 2,100, you would get a decent premium
of anywhere between Rs 50-70. But the risk
you would be carrying is quite high. If the
price of Infosys rises to more than Rs 2,400 on expiry, then you could stand to lose anywhere between Rs 220-250 per share (Since, the option is cash-settled, the loss will be the cash settlement amount, reduced by the premium).
However, it is always less risky to write out-of-money options, as the strike price is at a premium to the spot price. For instance, if you had written an April call option on SBI at Rs 740, on the March 29, 2005 (when the cash price was Rs 640), you would have received a premium of Rs 5.35 per share.The writer of such options gains because of the erosion of time value of options. As on April 11, 2005, the premium on the same Rs 740 call option falls to Rs 2.45, as the time to maturity narrows down. So, you could just wait till the option matures (at the end of April), hoping that it will expire as worthless. Or, if you feel that would be risky, then you could even square up your position, and earn a net of around Rs 3.
In the same manner, if you had written out a Rs 600 April put option on SBI, you would have earned a premium of Rs 7. As on April 11, 2005, the premium on this option was around Rs 3.5. Currently, there is a Rs 780 April call option on SBI, which could earn you a premium of Rs 1.95. Even though you stand to get a much lower premium than you would earn, by writing options quoting nearer the current market price, the risk is also much less, in such options.
Many a times, it gets difficult for investors to exit positions that they have built over a period of time. At such times, they could look at selling �out of the money� call options to hedge themselves and get an additional cushion on the portfolio values. Besides, a study of the options market shows that 80-90 per cent of options expire worthless. Hence, by following the strategy of writing out-of-money options, you can garner small and consistent returns, during adverse market conditions.
IN BRIEF
An option can be either out-of-money, inthe-money or at-the-money.
A call option is said to be out-of-money if the current price of the underlying share is below the strike price of the option.
It is always less risky to write out-ofmoney options as the strike price is at a premium to the spot price.
The writer of such options gains because of erosion of the time value of options.
Although the premium earned on such options is not much, the risk is also low.
A study of the options market shows that 80-90 per cent of options expire worthless.
Writing out-of-money options allows you to garner small and consistent returns, during adverse market conditions. Read on to figure out what these options are and how you can make a quick buck on them
WHAT are the chances of SBI touching Rs 780 by the end of this month? Not very bright, you might say.Then, why not write an SBI Rs 780 call option and earn some low risk income? This practice is popularly known as writing out-of-money options. As a result, you can hope to make some decent income in the form of the premium received on writing the option.
Writing options
First, you must be familiar with option basics. An option can be either out-of-money, in-the-money or at-the-money. A call option is said to be in-the-money if the current market value of the underlying share is above the strike price of the option. Similarly, a put option is said to be in-the-money if the current market value of the underlying asset is below the strike price of the option. For instance, if the current price of Infosys is Rs 2,100, an Infosys 2,000 call option (strike price is Rs 2,000) and Infosys 2200 put option (strike price is Rs 2200) are in-the-money.
At-the-money simply means that the current market value of the underlying asset is the same as the strike price. For instance, if the current price of Infosys is Rs 2,100, then Infosys 2100 call and put options (strike price is Rs 2,100) are at-the-money.
A call option is said to be out-of-money if the current price of the underlying share is below the strike price of the option. A put option is said to be out-of-money if the current market value of the underlying share is above the strike price of the option. For instance, if the price of Infosys is currently Rs 2,100, then an Infosys 2,200 call option (strike price is Rs 2,200) and Infosys 2,000 put option (strike price is Rs 2,000) are outof-money.
Out of money options
Logically, you should write a call option when you expect the underlying stock to stay at the same level or fall. Similarly, you could write a put option when you expect the price to stay at the same level or rise. As an option buyer, your risk/ loss is limited to the premium that you have paid. On the other hand, as an option seller, your risk is unlimited whereas your gains are limited to the premiums that you earn.
Hence, writing call and put options are considered to be quite risky as the losses can be unlimited, if the value of the underlying asset increases above the exercise price. For instance, if you write or sell one Infosys 1 month at-the-money call option at a strike price of Rs 2,100, when the cash price is also Rs 2,100, you would get a decent premium
of anywhere between Rs 50-70. But the risk
you would be carrying is quite high. If the
price of Infosys rises to more than Rs 2,400 on expiry, then you could stand to lose anywhere between Rs 220-250 per share (Since, the option is cash-settled, the loss will be the cash settlement amount, reduced by the premium).
However, it is always less risky to write out-of-money options, as the strike price is at a premium to the spot price. For instance, if you had written an April call option on SBI at Rs 740, on the March 29, 2005 (when the cash price was Rs 640), you would have received a premium of Rs 5.35 per share.The writer of such options gains because of the erosion of time value of options. As on April 11, 2005, the premium on the same Rs 740 call option falls to Rs 2.45, as the time to maturity narrows down. So, you could just wait till the option matures (at the end of April), hoping that it will expire as worthless. Or, if you feel that would be risky, then you could even square up your position, and earn a net of around Rs 3.
In the same manner, if you had written out a Rs 600 April put option on SBI, you would have earned a premium of Rs 7. As on April 11, 2005, the premium on this option was around Rs 3.5. Currently, there is a Rs 780 April call option on SBI, which could earn you a premium of Rs 1.95. Even though you stand to get a much lower premium than you would earn, by writing options quoting nearer the current market price, the risk is also much less, in such options.
Many a times, it gets difficult for investors to exit positions that they have built over a period of time. At such times, they could look at selling �out of the money� call options to hedge themselves and get an additional cushion on the portfolio values. Besides, a study of the options market shows that 80-90 per cent of options expire worthless. Hence, by following the strategy of writing out-of-money options, you can garner small and consistent returns, during adverse market conditions.
IN BRIEF
An option can be either out-of-money, inthe-money or at-the-money.
A call option is said to be out-of-money if the current price of the underlying share is below the strike price of the option.
It is always less risky to write out-ofmoney options as the strike price is at a premium to the spot price.
The writer of such options gains because of erosion of the time value of options.
Although the premium earned on such options is not much, the risk is also low.
A study of the options market shows that 80-90 per cent of options expire worthless.
Option writing for Delivery shares
BUY LOT QUANITY IN DELIVERY
HOLD ON DELIVERY
FIX A TARGET PRICE
SHORT CALL OPTION OF TARGET PRICE
EXAAMPLE IF ANY BODY LONG IN HINDALCO AND HIS TARGET PRICE IS 130
THEN SHORT 130CALL AND ENJOY PRIMIUM AS DIVIDEND OF JULY MONTH
Wednesday, 24 June 2015
June 2015
Totally three calls this month
Sell Hindalco 115 CE @ 6.9 , SL 9, profit +6K
Sell Nifty 8600 PE @ 220 profit +1k
Sell Dabur 260 ce @ 12, SL 16 loss -2k
Total profit + 5K
Sell Hindalco 115 CE @ 6.9 , SL 9, profit +6K
Sell Nifty 8600 PE @ 220 profit +1k
Sell Dabur 260 ce @ 12, SL 16 loss -2k
Total profit + 5K
Tuesday, 23 June 2015
Wanna become successful trader, follow these..
To become a trader , this is enough,
1.A sytem with more than 60% accuracy.
2.proper money management method
3.good risk reward ratio
4.Discipline
5.Sticking to these rules
If you follow this you too can become succesfull trader
Learn the Basics
Yes this is a simple one but it has to be said. A man has the pleasure of talking to scores of new traders on a daily basis. If there is one thing I have learned it’s that most newbies forego the basic training and jump straight into the warzone. This is of course a fatal error, on their part, so if you’re a newbie LEARN THE DAMN BASICS!
Yes this is a simple one but it has to be said. A man has the pleasure of talking to scores of new traders on a daily basis. If there is one thing I have learned it’s that most newbies forego the basic training and jump straight into the warzone. This is of course a fatal error, on their part, so if you’re a newbie LEARN THE DAMN BASICS!
You Won’t Get Rich Quick, Experience Makes You Rich
If you’re here to get rich quick you’re just a clueless tourist. Don’t be naive. Trading is all about experience. As is the case with any career, the longer you do it the more efficient you become. The journey to becoming a trader is a long one so be prepared to stick it out for 1-3 years before you’re consistently profitable. Always remember, Forex/any trading is a career not a get rich quick scheme.
Do Your Own Analysis
Continuing from the last call, blindly following others will make you blind. Your goal should be to become a successful trader, not a pigeon following others around for scraps of information.
As a trader you need to pick a method and learn to analyse the market. Being able to do your own analysis will bring you closer to being a pro trader. Doing your own analysis allows you to:
Continuing from the last call, blindly following others will make you blind. Your goal should be to become a successful trader, not a pigeon following others around for scraps of information.
As a trader you need to pick a method and learn to analyse the market. Being able to do your own analysis will bring you closer to being a pro trader. Doing your own analysis allows you to:
- Be self reliant.
- Actually learn to trade.
If you choose to blindly follow some self-proclaimed guru all you are is a pigeon. How will you make the money when the guru stops giving CALLS or the CALLS stop working? Will you even understand why they worked in the first place and why they no longer work
Stick to Your Method
Every trading method has its ups and downs. No trading system, method or style will be 100% profitable, all year round. My method, for example, has on average an 80% success rate. Some periods of the year I will win only 6 in 10 trades (60%). Other periods in the year I win 100% of trades for a month or two.
I know each year, I will have some bad periods in which case I lose more trades than normal. I do not lose faith though. I stick it out and keep on trading. The problem with most newbie’s is they will give up on a method after its first bad week.
Keep It Simple
This is an easy one. Keep it simple!
There is no reason to complicate trading. For example, my trading method is extremely simple yet extremely effective. I spend 2-5 hours per week trading and the rest of the week enjoying life.
Your method does not have to be incredibly complex to work. Keeping it simple will allows you to:
1. Work much more efficiently
2. Work less
3. Speed up your learning (KISS)
If you remember nothing else from this article, remember this…..
Important Investing Tips
Never invest more than you are prepared to lose
As a starting point, you should never commit more than you are prepared to lose when investing capital. It is therefore important to fully appraise your financial circumstances before making a commitment, paying careful attention to: the chosen vehicle for investment, your disposable income levels, and any potential returns. Failing to adhere to this rule will create a debilitating cycle of debt and loss, and may eventually force you to take ill-advised risks in the quest to recoup your capital.
Get Rich for Beginners
1. Have longer term view
Buffet says money doesn’t grow overnight. ” No matter how great the talent or efforts, some things just take time. You can’t produce a baby in one month by getting nine women pregnant. ” So your investment planing should be done by considering longer terms goal. People go for futures & options with the hope of making quick money but they are actually the one who loses more money than average investors. All the big names who have made good money from the market are long term investors only. Buffet never did intra day or positional trading. Buffet also says if you cant own the stock for 10 years don’t even own it for 10 minutes.
2. Prefer quality stocks than cheap stocks
Lot of investors buy stocks just because they are cheap without understanding that cheap is not always better. Buffet learned from Charlie Munger that “it is far better to buy a wonderful business at a fair price than to buy a fair business at a wonderful price.” Chances of losing money in cheap stocks are very high comparing to investment in a fairly valued stock.
3. Have Contra View
Warren Buffet says “be fearful when others are greedy, and greedy when others are fearful.” That means buy when there is panic in the market when everyone is bearish. Sell when everyone is bullish on the market. Most of the people fail to follow this because of excessive fear when the market is going down and excessive greed when the market is going up. When the market is going up everyone speaks only about the positive side which increases the greed that makes people to carry their long position and also to take fresh position at higher levels. Fall from the higher levels is always very intense and most of the traders lose money.
The same goes when the market is falling down. During panic all experts and media talks only about the negative side. They speaks as if the market will always continue to fall forever. People keep waiting for the stocks to become cheaper and ultimately miss the right opportunity to buy.
4. Don’t invest in any company whose business you don’t understand
Many people invest their money just by hearing anything good about the particular company from others. By understanding the business, you can determine if there will be any associated financial problems in the future. There are many companies in the stock market whose business can be understood by any normal people.
5. Think like an owner
Evaluate stocks exactly the same way as if someone offered to sell you the entire company. Thinking like an owner changes your whole perspective on stock investing. If you are going to own a new car, you will think about its fair valuation, you will think about its features and you will compare it with cars offered by other manufactures from the same segment. Then after checking everything you will decide which one to buy. Like wise you should have same prospective with stocks.
6. Stay away from hot stocks
Some stocks always remain in news and grabs the attention of many. Stay away from such stocks which are highly volatile. Warren Buffett once said, “Most people get interested in stocks when everyone else is. The time to get interested is when no one else is. You can’t buy what is popular and do well.
7. Don’t keep the loss making shares.
When the share price has fallen down by 50%, many people choose to wait. They convince themselves and others by saying “It will definitely come back”. And many times people quickly book the profit when the stock price goes up by just 10% . If the fundamentals of the stocks become poor, exit it immediately don’t wait for anything and never average it. And stay invested if the fundamentals and future prospectus are strong. Don’t be in rush to book small profit in such stocks.
8. Avoid Borrowing
You can buy anything by taking loans and borrowing money, but you become rich by living on borrowed money. People initially think that they can manage their debts but not everyone can do so. One needs to have a solid plan to pay the debt back and not become its lifetime slave. A debt-free life is the best life. Buffet says I’ve seen more people fail because of liquor and leverage – leverage being borrowed money. You really don’t need leverage in this world much. If you’re smart, you’re going to make a lot of money without borrowing.
9. Spend you money wisely
Money saved is money earned. Warren Buffet says If you buy things you don’t need, you will soon sell things you need. Humans have the urge to have all the luxuries of the world . Every rupee spent on unnecessary urges contributes to lost wealth. Before spending money on anything ask few questions to yourself. Do I really need this? Am I overspending? Can I save some money without compromising on the value I want from a particular product/service?
10. Always be prepared for the worst.
Stock market is a place where nothing is certain. So always be prepared for the worst. Many tragedies can happen overnight that can destroy your capital. Problems doesn’t gives any warning before coming. Always save some funds for emergencies and never expose your full capital in any investment option.
By Warren Buffet
Trading With Bollinger Band and RSI
Bollinger Bands
Bollinger bands are an integral part of just about every charting system I have ever seen but many traders are unfamiliar with how to use them. In this lesson we will cover the basics of Bollinger bands and one particular technique which I have found to be very reliable.
History
Bollinger Bands were invented by John Bollinger as a means of determining what could be considered as high or low around a give price.
The bands are plotted at a standard deviation (statistical term for measuring volatility) around a moving average. Typically the standard deviation used is 2.
The bands appear on charts as 3 bands.
A simple moving average in the middle. Most charting software defaults to a 20 period moving average.
An upper band calculated around a simple moving average plus 2 standard deviations.
A lower band calculated around a simple moving average minus 2 standard deviations.
For our examples we will use the most common setting of a 20 period simple moving average. This will give us 3 bands, the middle band of a 20 period simple moving average and the upper and lower bands calculated around the middle band with standard deviation of 2. The closing price is most commonly used to calculate the moving average.
Bollinger bands can be used to generate buy and sell signals but that is not their primary use. The main purpose of the bands are to:
To identify areas of high and low volatility.
To identify periods when prices are at an extreme and possibly ready for a reversal.
To identify a trending market.
See Chart Below
The Squeeze
The squeeze (tightening) is a period of low volatility and often happens before a big move. It can also help identify potential breakout areas.
The squeeze (tightening) is a period of low volatility and often happens before a big move. It can also help identify potential breakout areas.
Reversal
In conjunction with other indicators you can identify potential reversal points.
In conjunction with other indicators you can identify potential reversal points.
Trending Following
Although Bollinger bands will not tell you when the trend has started if you combine it with certain indicators they will confirm the trend. It is also easily identifiable visually.
Although Bollinger bands will not tell you when the trend has started if you combine it with certain indicators they will confirm the trend. It is also easily identifiable visually.
My Use Of Bollinger Bands
As I mentioned earlier Bollinger bands are not really meant to be used as a signal generating indicator but in conjunction with another indictors can be very useful.
As I mentioned earlier Bollinger bands are not really meant to be used as a signal generating indicator but in conjunction with another indictors can be very useful.
I like to use Bollinger bands and RSI together to generate possible buy and sell signals or to confirm overbought or oversold areas.
I normally set the RSI at 14 and when it reads over 70 and price is at or pushing through the upper band then I know we are overbought and ready for a reversal. I will either start thinking about shorting the market or if I am already in a long position will start to cover.
When the RSI reads below 30 and price is touching or pushing through the lower band then I know we are oversold and I will either consider buying the market or close existing short positions.
See Chart
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