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How to do SIP (Systematic Investment) in Stocks?

“History is written by the winners” -Napoleon Bonaparte I won’t be writing about the SIP which is already covered in the public doma...

Monday, September 19, 2011

Im Not Afraid.. Very Soon This Will All Be Just a Dream

[EMIN∃M:]
Yeah, it's been a ride
I guess I had to, go to that place, to get to this one
Now some of you, might still be in that place
If you're trying to get out, just follow me
I'll get you there
Warning: uncensored full video song


[Chorus:]
I'm not afraid (I'm not afraid)
To take a stand (to take a stand)
Everybody (everybody)
Come take my hand (come take my hand)
We'll walk this road together, through the storm
Whatever weather, cold or warm
Just lettin you know that, you're not alone
Holla if you feel like you've been down the same road (same road)

Warning: uncensored full song lyrics ahead..


[EMIN∃M:]
You could try and read my lyrics off of this paper before I lay 'em
But you won't take the sting out these words before I say 'em
Cause ain't no way I'ma let you stop me from causin mayhem
When I say I'ma do somethin I do it,
I don't give a damn what you think,
I'm doin this for me, so fuck the world
Feed it beans, it's gassed up, if it thinks it's stoppin me
I'ma be what I set out to be, without a doubt undoubtedly
And all those who look down on me I'm tearin down your balcony
No if ands or buts, don't try to ask him why or how can he
From "Infinite" down to the last "Relapse" album
he's still shittin, whether he's on salary paid hourly
Until he bows out or he shits his bowels out of him
Whichever comes first, for better or worse
...

...
...

[Chorus]

And I just can't keep living this way
So starting today, I'm breaking out of this cage
I'm standing up, I'ma face my demons
I'm manning up, I'ma hold my ground
I've had enough, now I'm so fed up
Time to put my life back together right now! (now)

[EMIN∃M:]
It was my decision to get clean, I did it for me
Admittedly, I probably did it subliminally
for you, so I could come back a brand new me you helped see me through
And don't even realize what you did, believe me you
I been through the ringer, but they could do little to the middle finger
I think I got a tear in my eye, I feel like the king of
my world, haters can make like bees with no stingers
and drop dead, no more beef flingers
No more drama from now on, I promise
to focus solely on handlin my responsibilities as a father
So I solemnly swear to always treat this roof, like my daughters
and raise it, you couldn't lift a single shingle on it!
Cause the way I feel, I'm strong enough to go to the club
or the corner pub, and lift the whole liquor counter up
Cause I'm raising the bar
I'd shoot for the moon but I'm too busy gazin at stars
I feel amazing and I'm

[Chorus]
Full song lyrics @ AZLyrics


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Monday, August 1, 2011

Revisiting Two Stocks: PAPERPROD & PETRONET

On July 5 I had posted about two stocks that could be potential cadidates for short term. It's been almost a month now. But these two proved to be exceptional performers and validated my picking strategy. They were really 2 good bets!
Two Stocks for Two Weeks PAPERPROD & PETRONET

Now I will summarize the progress in these stocks as of now.

PAPERPROD was at 75 when I posted. On 29 July it is at 89. It never closed below 20 DMA.

About 18.7% gain in share price!


PETRONET was at 139 when I posted. On 29 July it is at 172. It too never closed below 20 DMA though had a jerky low in the white candlesticks (which is not trustable).

About 23.7% gain in share price!

I wish I had traded these shares. I had these in mind but was caught by too many stocks as can be noticed from other posts afterwards. But I never monitored any of those stocks except for INSECTICID which I was watching for four months and made about 6% gain (before brokerage cuts) only. It was a psychological bet. I learned I should not feel psychological attachment to stocks that I pick with respect to their order. However INSECTICID is still on its own, diverging from the market and showing good gains since the last week. That too was a good enough bet!



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Saturday, July 9, 2011

9 Golden Rules for Trading Stocks

In my quest to get a practice into trading stocks first by playing on chartgame.com before putting real money at risk, I had learned several strategies which I found to be not working after a day and also faced massive frustration each time profits evaporated and losses went above  90%.

It was time on last Sunday that I looked at my post on July 1 and tried to observe things from the perspective of the lessons learnt from the book (How I Made 2 Million in Stock Market). I gradually began to notice consistency in my results after following those lessons or rules. If I did not remember them before I start on a new chart @ Chartgame.com, I was immediately going into negative spiral. So these became mantra of stock trading. Hence I decided to summarize the 9 golden rules for trading stocks and imprint them deep in my memory.



9 Golden Rules for Trading Stocks

Objectives: 

  1. Right Stocks
  2. Right Timing
  3. Small Losses
  4. Big Profits

Weapons: 

  1. Price and Volume
  2. Box Theory
  3. Automatic Buy-order
  4. Stop-loss Sell-order

Unobtanium (highly important) Rule:
 
Despite following above 8, there is no such thing as gaurantee in the stock market. We can go wrong anytime on any stock. So keep losses small, take breaks often, chillax & develop high frustration tolerance with the willingness to learn all the time, from all mistakes/losses.

Because the learning curve never ends for a stock market operator.


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Friday, July 8, 2011

Moneycontrol Price Trigger Alerts for 8 July 2011.

MC Price Trigger Alerts for 8 July 2011. Not all are for up trend. Some are for checking support after pullbacks.



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Thursday, July 7, 2011

17 Stocks for 7 July 2011 With Price Trigger Alerts


These 17 stocks are picked for having large white candlesticks and after crossing previous day's high. I am studying these by placing price trigger alerts on Moneycontrol. Actually Insecticides India is not similar to other stocks. I just had a trigger alert already which is still waiting.

The upper price trigger will be the automatic stop buy. If executed the lower price trigger will be the stop loss trigger that needs to be placed immediately after the buy stop trigger alert.

I would be paper trading with 10000 capital divided into 5 parts with 2000 for each. On margin (as this is for swing trading and diversification across stocks) I might go upto 34000 maximum in case all 17 are triggered. I think this is rather too much to start first. I didn't want to spend more time shortlisting down to 7 or 8 stocks.
Let me study how they do in next few days.

In the last two days, POLARIND had gone up by 10% in three consecutive sessions as it has a circuit breaker at 10%. It had gone up by more than 30% since it is discovered and 87% in a month. This shows how rewarding penny stocks can be at the same time with huge risk.

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Tuesday, July 5, 2011

10 Stocks to Watch for Intraday and Short Term

Volume and volatility are the important criteria for intra-day trading. Below are some stocks screened for volume and volatility from icharts.in. All these stocks may also show a second leg upwards after this first one fades as these are all above 10 day, 20 day & 50 day moving averages but most potential may be RELINFRA & SEINVEST.


DISHTV

DLF

HEXAWARE

KRBL

MRPL

POLARIND

REIAGROLTD

RELINFRA

SEINVEST

TTML





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Two Stocks for 2 Weeks : PAPERPROD & PETRONET

Below are two stocks I discovered through certain criteria using EOD screener on icharts.in. Both are potential candidates to rise if they cross above high of yesterday. 50 day EMA or the last day's low (whichever is closest to LTP) is a good point for stop loss.


PAPERPROD


PETRONET







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Monday, July 4, 2011

7 Stocks to Watch for Intraday Today

Below are 7 stocks I got from EOD screener from icharts.com using a set of criteria. Let us see how they will perform today.

BANG
Bang Overseas Limited


DEEPIND
Deep Industries

PATINTLOG

PEACOCKIND

PFOCUS

POLARIND

PUNJABCHEM




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Friday, July 1, 2011

Revisited: How I Made 2 Million Dollars in the Stock Market

As I mentioned in previous post I have been trying to get back into stock market since then. My desire to trade or invest has grown considerably in the last few weeks. Especially after I read my most favorite book the second time. It is “How I Made 2 Million Dollars in the Stock Market”.

The book is not only a classic; it is also packed with very powerful advice and analysis. As I was reading it second time I had noticed certain things that I had conveniently ignored when I read the first time. First time, I had only focused on things that I had just learned at that time and that matched pretty well with bull market and my few exceptionally successful trades – 154% in RNRL, BHUSANSTL 13%, POWERGRID 15%, ARVINDMILL 14% in that year. There are other very few swing trades in my portfolio that resulted in profits but not so much.



As the bear market started in 2008, I really didn’t have a particular strategy for entry or exit. I somehow ignored the main strategy taught in that book and got excited about short term profits through swing trading. These profits were neither many nor large enough to cover the losses of failed operations in a down trending market. My profit-loss worksheet is full of the losses that followed this time and their total overshadowed everything mentioned above. The deepest loss was 90% in SELMCL.

As I read the same book again this time I was able to notice the most important analysis and reasons for both entry and exit strategies for the only best way (long term) to gain in the stock market.

Nicolas Darvas wasn’t just some dancer cum investor. He was reported to be awesome at whatever he does. Atleast I learned he was “super” awesome at stock market investing not just for pulling 2 Million Dollars in a 18-month period but for the powerful analysis behind his moves. I should have learned this atleast two years back. Now I sincerely regret this.

In his 7 year long investing journey, Darvas summarizes below points as he develops his famous box theory after first 5 years.

My objectives in the stock market:

Right stocks

Right timing

Small losses

Big profits

My weapons:

Price and Volume

Box theory

Automatic buy-order

Stop-loss sell-order

The entire 200 page book could be summarized in those 10 lines. But it was not all. The most important and most often repeated advice was that we can go wrong despite all our analysis and strategies. There is no such thing as guarantee in the stock market. This is very powerful information at times to let us avoid small losses from turning into large losses. You must have heard yourselves saying, “no way this can be happening”. For those with little or no experience in stock market, this might appear like something at hindsight but for the serious investor it is like a universal law and makes a lot of things clearer.

Now suddenly a lot of things became clear to me. Why it was felt so exciting to trade for short term (a week to a month), later why I got caught up in false swing traps, etc. But every time I made the decision to stop investing, after a string of losses, was the only right decision I had made since the beginning. I should also have avoided diverting attention away from stock market. I can just spend time sharpening the saw if I got fed up with a string of losses.

“Small losses and big profits” was the most striking idea of Darvas. It is easy to know it at hindsight but difficult to apply in practice. That is why he adds other objectives and weapons. When all of these are combined one can develop a powerful strategy. For a long time I wasn’t able to understand one of the Q&A at the end of the book (you bought smack in the middle of a trading range). It was on page 184. This time I was able to get the reason behind this answer.

I am taking these 9 points from Darvas’ book and trying to materialize my own trading/investing strategy that can improve consistency. I liked this book a lot not only because of insightful analysis but also because it is entertaining like a novel. I made a point to keep reading it from time to time.

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Tuesday, March 1, 2011

IN RETROSPECT: Past Four Years into Trading Stocks!

It has been about four years since I had first started investing in stocks in the Indian stock market. I can clearly remember the losing trades of the first financial year and the only one high profit trade I ever had along with moving from long term investing to short term trading before making a wipe-out trade for the bitterest experience I ever had.

When I started investing money in stocks it was a humble beginning. Nobody gave any encouragement. I have noticed many people starting trading stocks directly, after so many years of getting into a job with the same capital that I started with early on. Folks just follow the famous rule: invest money you can afford to lose. And you will certainly lose if you can :)


I would say the time that I spent investing into stocks for almost first two years was the most exciting in the last four years! Ever since I stopped buying or selling (it was like bringing a fast car to a grinding halt), I had really lost the excitement in life. I remained passive for the two year period (2009-2010) during which, one medium term but a fantastic bull market had run in the markets, which was like a short preview of the longest bull market (2003-2007) and a window of opportunity.

Looking back I didn’t have an easy way. I was gradually moving from long term investing to short term trading. I certainly felt over-confident when I was betting on junk stocks in bear markets using techniques that should be applied on momentum stocks in bull market times. These are what I had experienced one after another making it difficult to comprehend what was going wrong:
• A near complete wipe-out trade (~90% loss wiping out 50% of total profits of two years in three months time frame)
• Buy & hold in bear markets (to get over short term mindset simple trades failed)
• Trapping at false highs (everytime I buy at high and stocks retreat till I sell at low, losing rest of total profits)
• Grinding halt trade (four stocks all going wrong just because I was a little late for a pullback trade and too early for the bull market, digging losses into original capital)

I wasn’t very much worried about the last one except that it turned my +ve position onto the –ve side. Even while I was holding bleeding shares of selmcl I wasn’t really serious about losses. I remember during that time as I told a friend (Vinay) that I was holding it to see how the pain feels. I realized that it was not only a bitter experience but it made me realize that the pain of losses is always same. This one stock still looks like a black mark in my experience and made me realize one every important lesson: “no matter how much profits we make, a single 90%-99% loss can ruin everything”.

Certainly loss isn’t something anyone would want to hold onto unless he is novice and holds out of hope. I wasn’t having any hope though. As Michael Douglas says in Wall Street “Nothing ruins my day more than losses”. That is always true for any stock investor.

At the end of all this, I wasn’t sure of what is happening and I wanted to correct myself before I get back again. I tried to find answers to these failures. Unfortunately there wasn’t a simple answer. They got interlinked.

All these losses (including the worst bear market) just started with those “trap at false high” trades. One buys at price above yesterday’s high to make sure to buy only if the stock were to rise and not get trapped in otherwise case. It actually works well on charts. When I discovered this trick of making significant profits in just a week’s time in strongly trending stocks, I almost thought I had found the Holy Grail of stock trading. Suddenly everything became crystal clear. All stock charts, all time periods seemed to follow one consistent pattern. But what I failed to notice was its practicability in real world.

We can’t trade on thin margins. Little or no loss also means loss due to great brokerage charges. I certainly didn’t have time or confidence to place stop orders for entry/exit as often as this strategy demands. The worst thing is that it isn’t Holy Grail after all in bear markets but it is in bull markets. This made it practically dangerous in bear markets or near the onset of bear markets. I have so many such trades that I am scared to buy stocks at high prices just because the price gap to the stop loss point is high.

This resulted in next set of losses. Before that, I was able to do atleast one good trade in the list of bad ones, in Moserbear, making 10% gain, buying closer to the low and selling after a quick pull-up. Later it rose as much as 30%. That made me even more confused at that time. So in the last one (grinding halt trade), when the market had turned around sharply I was already late for the party but trying to buy on pullbacks and not above highs. This had perfectly trapped me for the big losses as the market gave up all the gains of sharp turn around and resulted in huge stop loss. The mistake was not to buy closer to low, not to buy above high, but intermediate point (with huge stop loss margin) when it wasn’t really clear what is going to happen. The market really dived down to its lowest level after this but that was the lowest ever since. I was actually right about the turn around of the markets but was a little early for the long term trade, a little late for the short term.

A simple lesson from all these failures is that what worked easily for the long side (not the short selling side) in bull markets, will not work, but works against, in the bear markets. In bull markets you can even buy a stock at its highest and hold very comfortably on as it bleeds for short time and then see it go to even highest levels within no time. In bear markets it works so only for the downsides. A stock that retreats from lows, will eventually fall back down to lowest lows. Looking at how things reverse from bull market to bear market is a bit confusing for a single hand trader (that cannot do short selling).

But more importantly the Holy Grail that I thought I found wasn’t correct. There is no Holy Grail to stock market investing. I just had to read last few para’s of a book I stopped out of excitement at that time. There it says, this buy above high strategy works less than 50% of the time which means losses have to be cut short at any rate. If stop losses have to be larger than comfortable level, then better to avoid. There the truth comes from an experienced trader (the author of the book).

Now the truth is known, I think my confusion is cleared. We can’t make consistent profits with strict rule based trades. Rules are for money management that is deciding capital allocation and reducing losses by cutting them short. For closing or entering trades we have to rely on “gut feeling”.

Recently I started playing on chartgame.com. This is an amazing website that helps practice virtual stock investing without actually trading. It is better than trading and virtually as best as real trading practice.

I played it a year back too but with the Holy Grail idea :). I was able to practically see its failure. But it got shaded with the fact that this game at the time didn’t incorporate the short selling feature. Though initially I was able to beat the market over large number of stocks, I was losing. It went worse. Also around that time any random sampling of a stock price history more often resulting in a bear market period. This too made it difficult to see where I was going wrong.

In the last week or two, I played again. This time I was able to beat the market more often. I learned it was easy to make losses. There are almost infinite ways to lose. But there are only few ways to make profits. All the 250 ticks while playing the game in one stock, I had to be carefully to cut losses short and take profits when they are there and follow the stock movement all the time to finally notice that I did better than buy & hold. When I get into relaxed mode and just ignore few ticks, it’s a gone case. But it can be corrected after some loss (or loss of opportunity).

I can summarize all of this experience in three points on how to make profits consistently investing in stocks:
1. Always cut losses short. A loss never tastes sweet. It is always painful (small or large) and feels bitter.
2. Take profits when they are there. How to decide? When happiness seems to come at a faster rate with time, then it is time to take profit.
3. Follow or feel the rhythm of the stock price movement. Keep monitoring shares of interest periodically (daily or weekly) and avoid monitoring all stocks, all markets or broader market. Stocks can move independently and most of the profits are made by following its unique and independent rhythm.

One thing I had not mentioned here but learned long time back and followed even in worse bear markets is this:
• Don’t make random entries or on the urge buying (unless it is bull market)

Although I didn’t summarize these to be final list till now, I still had almost got it when I made two small profit (but no loss) trades one in 2009 and another in 2010.

In 2009, when RNRL was retreating after down trend, I bought it through the rise and followed it constantly and felt its rhythm before closing it in two orders, one for profit and another for zero. In this I had felt its rhythm and accordingly made moves. I had cut losses (short even before losses started as stock fell down to lowest levels since selling off). I had followed money management by reducing exposure in two chances when things are not very clear about its further upward trend.

In 2010, (from the return of the stock trader PIPAVAVYD), again I followed its rhythm and though I didn’t take available profit, closed it in small or no profit. This stock too plummeted (and the current bear market set in) just after this sell-off.

Interestingly in both of the above cases, the stocks were giving only one last chance before turning around into oblivion. It is important to note this because this is where all the investors get trapped into long term large losses and stop trading for long time. I won’t boast that I am good at this. It is a result of following the four points mentioned above. Four years of trading experience isn’t gone waste and it will prove its worth more with next good bets.

Now I can’t wait to get started this time. I know I had lost touch with the market. So I will start small (very small). But the fear is that it is way into bear market right now to consider long positions. May be I will wait but keep following the market till the next turn around.

RBI’s Gambling on Dollar-Rupee Exchange Rate
Sensex Crossed 20K Again! Nifty Crossed 6K
The Second Wave of Great (Deep) Recession is Around the Corner
The Three Parameters of Stock Trading: Entry Time, Exit Time & Seletion of Stock
Stocks vs. Gains: How Much can You Expect to Gain from the Stock Market? 
Is There a Hidden Treasure in the Stock Market? 
Does History Repeat? This is About Average Stock Market Returns
Why You Should Sit Tight to Make Big Money from Your Bets? 


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