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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...

Thursday, November 29, 2012

What is Life - EMIN∃M

Life.. by Marshall Mathers
What is life?
Life is like a big obstacle
put in front of your optical to slow you down
And everytime you think you gotten past it
it's gonna come back around and tackle you to the damn ground

Warning: Uncensored full song lyrics ahead..



Life.. by Marshall Mathers
What is life?
Life is like a big obstacle
put in front of your optical to slow you down
And everytime you think you gotten past it
it's gonna come back around and tackle you to the damn ground


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What is money?
Money is what makes a man act funny
Money is the root of all evil
Money'll make them same friends come back around
swearing that they was always down
What is life?
I'm tired of life
I'm tired of backstabbing ass snakes with friendly grins
I'm tired of committing so many sins
Tired of always giving in when this bottle of Henny wins
Tired of never having any ends
Tired of having skinny friends hooked on crack and mini-thins
I'm tired of this DJ playing YOUR shit when he spins
Tired of not having a deal
Tired of having to deal with the bullshit without grabbing the steel
Tired of drowning in my sorrow
Tired of having to borrow a dollar for gas to start my Monte Carlo
I'm tired of motherfuckers spraying shit and dartin off
I'm tired of jobs startin off at five fifty an hour
then this boss wanders why I'm smartin off
I'm tired of being fired everytime I fart and cough
Tired of having to work as a gas station clerk
for this jerk breathing down my neck driving me bezerk
I'm tired of using plastic silverware
Tired of working in Building Square
Tired of not being a millionaire

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I'm tired of being white trash, broke and always poor
Tired of taking pop bottles back to the party store
I'm tired of not having a phone
Tired of not having a home to have one in if I did have it on
Tired of not driving a BM
Tired of not working at GM, tired of wanting to be him
Tired of not sleeping without a Tylenol PM
Tired of not performing in a packed coliseum
Tired of not being on tour
Tired of fucking the same blonde whore after work
in the back of a Contour
I'm tired of faking knots with a stack of ones
Having a lack of funds and resorting back to guns
Tired of being stared at
I'm tired of wearing the same damn Nike Air hat
Tired of stepping in clubs wearing the same pair of Lugz
Tired of people saying they're tired of hearing me rap about drugs
Tired of other rappers who ain't bringin half the skill as me
saying they wasn't feeling me on "Nobody's As Ill As Me"
I'm tired of radio stations telling fibs
Tired of J-L-B saying "Where Hip-Hop Lives"

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You know what I'm saying?
I'm tired of all of this bullshit
Telling me to be positive
How'm I 'sposed to be positive when I don't see shit positive?
Know what I'm sayin?
I rap about shit around me, shit I see
Know what I'm sayin? Right now I'm tired of everything
Tired of all this player hating that's going on in my own city
Can't get no airplay, you know what I'm sayin?
But ey, it's cool though, you know what I'm sayin?
Just fed up
That's my word

for complete lyrics

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Saturday, November 17, 2012

Ten Basic Rules of Stock Trading

I believe just this kind of listed rules is not good to follow. There is a heirarchy for rules. For money management, trade management, filtering stock lists and loss management. After these some more rules for emotional management. Separating that way will make a good foundation for every trader/investor.

One simple but very crucial rule is to pay ultra caution to a position for which you have huge exposure. If your exposure is not much to the market or a particular stock, let it swing as much as it can. This is very important and should be integral part of your trading psyche. Once you master this one, the below ones will show their positive effect.

Ten basic rules of stock trading:
  1. Always follow stop losses. 3%, 5% or 20% or 40% based on your strategy. Never let a fast moving stock get past the loss limit. If you keep thinking, you will be made to wait longer before a recovery if there were any and the longer you wait for recover, the longer you will be expected to wait. So be early, the loss is just a number. But the loss of time is real –ve number. Just like unexpected loss, believe that unexpected profits too come.
  2. Don’t buy on dips
  3. Never do averaging down
  4. Average up as the stock trends upwards
  5. Always avoid stocks at all time lows (or those that have fallen a lot)
  6. Avoid stocks that have fallen below moving average and off by 30% or more from recent highs (unless the stock starts moving up fast)
  7. Follow the pace of the trend. Uptrending stocks should move fast up. It doesn’t matter if it happens rare but we should wait as long as the stock doesn’t move down by a big % in a single day. We wait tolerating daily little % moves up/down/concurrent till it makes a single day big % gain. The idea is to never miss these big +ve days and always avoid big –ve days even if it means to exit a good stock. It doesn’t matter if it goes up or down afterwards. This is the logic of the stock market. You can certainly avoid big drawdowns, if you always quit stocks that go down badly (big –ve %) in a single day.
  8. Always stick to stocks that are at all time high. This is another logic of stock market. How would you see a stock in its early days of uptrend before you know that has gone up to greatest heights? Every time it goes up it keeps making new highs and it looks like it is at all time highs. History is made after the fact. But a stock trader doesn’t gain anything after the events, but only journalists, news websites and Moneycontrol/TV18 does. A stock trader takes chances while the situation is developing. A journalist’s goal is to capture an event without becoming a part of it. But a stock trader’s goal is to capture an event by becoming a part of it. You participate in one big event and you get to talk about it for the rest of your life.
  9. Don’t do second-guessing after the events happened. Losses and missed opportunities cause lot more pain that goes over and above the compensating experience of +ve trades. This happens because of second guessing. We keep thinking if I didn’t do that, if I sold it there, if only I avoided buying there etc. The only way to get over this is to convince yourself what you did could not be avoided as per your strategy. There is no way one can do well in all situations, unless you are a superman or are on NZT. So get over second-guessing and move on to next good bets.
  10. No matter what kind of market you face any time, always keep your commitment to trading with all above rules in mind. You do not need to give much of dedication but the commitment to act when the time comes, the time windows can even be very short for you to take decisions, so be committed to be on alert. It won’t cost your time. If you avoid second-guessing you will also not get mental fatigue. Always keep in mind that once you get into a lucky streak, there will be no looking back.

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Saturday, November 10, 2012

My Second Quarter Trading (Q2FY12-13) and Some Lessons from It

I had a dramatic stock trading cum investing experience in the last quarter (Q2Fy12-13). I haven’t traded in more stocks than in Q1 but ended up with more sale transactions and the buy-above-high-and-sell-for-stop-loss trades, that pushed me down in the first month itself. Those trades costed 1300 in losses and more than 300 in nsdl charges (each sale transaction has a fixed nsdl charge, so it is better to sell all in one go when trading low quantities). In between there was annual maintenance charge for Sharekhan. Not sure how that is deducted. Lets assume it is approximately 400. Nevermind, all these fixed charges don't scale if the capital is scaled.

Looking at the transaction report till date (its hard to separate q2 alone now, I haven’t hired an accountant :) ), my gains before fixed costs stand at 3093.48. Apart from the above mentioned fixed charges, some money went somewhere. Those could be more fixed charges which would be insignificant as capital grows to higher levels in the coming quarters. So I didn’t yet check them out. May be these all eventually make the case for hiring an accountant. Let us see.

Note: Recently a friend pointed out the low value of capital in my trading. Well, once upon a time, I traded what could be considered a lot of capital by my friends at work. I thought about starting where I stopped, but the more I thought, the more I realized that once you take a break from trading, you should not start with the same capital that you paused at. You need to get back on track by following systematic investment plan and scale capital as profits grow. Note that in all Ponzi schemes it is the early birds that gain the most. But that doesn't mean if you start now you are going to be the bottom of the pyramid. When you can't tell if it is the end or the middle, you should take on a systematic scaling plan. Scale your exposure based on your recurring tolerance of loss as well as increasing profits. The recurring tolerance of loss is suited for jobbers who get steady income which is not a privilege of full time traders. However for any trader, the systematic scaling strategy (getting back to business) is to increase exposure only when profit increases, step by step. This ensures in case you were starting at the top of the bull market, you don't get caught by a bloody surprise. Blood baths don't happen all the time in the market but when they do - there's no need to talk about it (2008 showed what it was).

Meanwhile, the real profit based on incoming and outgoing flow of cash, is lesser than the larger figure above. It stood at 1239 for the combined quarters or till date. Discounting net gain of last quarter 989, it is about 250. I wish I could show better. But there are no ways to cook books here. Atleast I showed bigger figure in the previous paragraph. Of course that’s one way to cook. I don’t have stakeholders or shareholders here, that’s why I comfortably share this third paragraph. However one should note that this is small profit because of fixed costs. As the capital scales, the larger profit (3093) is scalable and at one point is the real profit (as the fixed costs become insignificant).

Average capital for the quarter was 50k, 150% up from last quarter :). The capital infusion rate per quarter remains the same as per my systematic investment plan. It is going to experience some dramatic jumps in the future as per my unsystematic investment plans but it won't immediately go into stocks. Or may be not as I rethinking about unsystematic plans to convert into systematic. Also percentage-wise Q2 net gain doesn’t make much of a story. Also I haven’t bothered to separate the stocks traded in this quarter, so no relative comparison table. Those are the not the important things anyway, so lets move on to important stuff.



The Distribution of Gains

There is no better way to evaluate a stock trader than plotting the distribution of his/her gains vs. their frequency. I have plotted below my distribution graph for the two quarters combined.

There were lots of losses around 250. That’s the black body of the last quarter experience. As July progressed, the bull market that started with the second bottom of June continued into the second quarter. From my earlier experiences, I felt the urge to increase the exposure as the market continued the uptrend. Only the scaling strategy was wrong. There was still more to learn about trading and the markets (broader and inner). It wasn’t too many trades, just few. But I wasn’t clear about my strategy yet.

My gains in the first quarter were dominated and predominantly determined by one stock - Varun Industries. The strategy there was bottom fishing. You can only bottom fish before the bottom happens. Once market went into uptrend, the opportunities are gone. Then I went onto new high stocks. You just can’t shift so fast between strategies. It needs skill. Skill to identify the really strong ones from those that are just moving up because of the broader market winds. The rest of the quarter revolved around changing my strategy dramatically from bottom fishing to the best strategy I followed till date (I did that in 2007 too) and finding the best ways to filter the stocks to trade for the chosen strategy.

In between I got introduced to reading books by Nassim Nicholas Taleb, the hero of randomness. His books Fooled by Randomness and The Black Swan, are very intellectually entertaining. When I say they are amazing, you can bet on their face value. There are no coincidences in life. Its all random. Random doesn’t mean chaos. Random because it is beyond our capacity to predetermine the entire sequence of outcomes. Well, the world is the way it is. We try to think we understand it, but we don’t. It is what it is. It may be multidimensional and non-orderly world. But we try to map it onto one dimension and make it simple and try to find order. These books have given me the perspective I needed for a long time.

I had eventually switched from bottom fishing strategy to pyramiding strategy. Stopped watching stocks that are going down to hell and started watching stocks that are going up to heaven. I found the statistical justification for the latter and practical justification for the former. Now my strategy has become more robust. I also understood the reality of non-linear gains. Earlier I perceived the market to have randomness of Gaussian distribution, but my perception now switched to randomness of Mandelbrotian distribution which is more realistic for the today’s world. However I could see that on a lower scale, like intra-day trading, one could still distribute one’s gains to Gaussian distribution with positive mean. However if you remember what I have written in last quarter report, I wasn’t trying just to get a shifted Gaussian distribution but rather a Mandelbrotian distribution which has most significant gains on the extreme right and all insignificant ones scattered anywhere around the center. Well, actually its not exactly that distribution but a one sided version of it (+ve sided). Of course, I am open for further evolution of my strategies and distributions as time passes. But only for evolution, not for change. Change is like a circle - merry-go-round, evolution is like a spiral, each time you make a round you arrive at a new level.

The distribution, however doesn’t look as good, having booked single largest loss from a stock so far. It was 675 in Varun. I had to end it up with a loss because I just couldn’t know its upper limit on profit. Its more likely to continue downtrend. But things got better by the end of the quarter by following the new strategy and buying into Shasunphar and Bergepaints and few insignificant others. The gains have merely shifted from one stock to another. As we are already in the middle of the 3rd quarter (sorry for the delay in getting Q2 report out), I could tell that those gains too are merely shifting from Shasunphar to other stocks. I am out of Bergepaint though with a little gain. This way, I would be booking losses most of the time, so hopefully I might not have to file these in my ITR again, unless losses are too large and I want to take the benefit of offsetting them against future gains.



On MC Tracker

This is how my portfolio looks on moneycontrol tracker as on the first trading day of this quarter. My greatest profit was in one stock that had also gained most in %. In between you would notice Atul with 15% which is a side effect of trying a short term trading strategy on 52 week high stocks. I will write about the details of strategies later. I got a bit of surge to scale up the position in Bergepaints too early before it proved its hold-worthyness. That was a classic mistake, though it wasn't costly. However I am now seriously continuing with my strategy. I still see the effects of broader market winds on the elasticity of trends in individual stocks and sector rotations and all kinds of strange things that keep happening randomly in the stock market. Random because I don’t have the capacity (nor tried) to determine its order. The overall gain looks too positive because unlike the first picture from Sharekhan, it doesn’t show the closed trades.

From here on my performance wouldn’t be based on net gains as they are very much influenced by the continuation of the trending stocks which in turn are influenced by the sector or broader market winds. Hence my goal is to focus on getting the distribution right without getting let down by the rare and significant negative events. After a pair of rare and significant positive & negative (in any order) events happen, then you can see the true score.

This quarter I have taken some very good lessons. I have to correct some of the last quarter ones as well. But I feel too lazy for that now. I will continue that in the next post that will come soon.

Update from Q3 (time travel): Things are looking better in Q3. Also I discovered some new effects of my systematic pyramiding strategy that I myself hadn't expected.

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Sunday, July 1, 2012

My First Quarter Trading (Q1FY12-13) and 12 Lessons from It

I had a modest stock trading experience in the last quarter (Q1Fy12-13). It had been a long time since I had such number of trades in a quarter. Overall from 1st April till 30-June I have traded in 16 stocks (including few stocks for intra-day trading experience in the previous post) and an option trade which is solely meant as a test to determine the brokerage rate and see how options expire worthless. That was painful though, especially because I was trading on a small capital and few hundreds of loss for option testing is equivalent to few percentage points loss on the total capital. But nothing beats the practical experience as it would give you the perspective you need for your own method of trading.

I have ended the quarter with a realized loss of 142 rupees and unrealized gain of 1879 rupees. I have discounted option trading loss and few brokerage and nsdl charges which probably would take it to another 700 or 800 rupees of loss. I have discounted these as they would be negligible for a larger trading capital of 5 or more times the current capital used. Nevertheless net gain is definitely affected. Based on difference of balances (in and out flow of money), the net gain stands at 989 only :)

Anyway that’s not bad considering the quarter itself. Below picture shows the detail of performance in 16 individual stocks traded and the one after that shows the values of NIFTY (stock index) and the 16 stocks as on 1-April and 30-June to get an idea of the change in them during the quarter.




Relative to the Stock Index which is a good indicator of most of the market wealth, my performance is much better. I have started with 10k in April and kept adding 10k in subsequent months. On average it is 20k. So the average gain in my portfolio is like 4.9% compared to NIFTY’s -0.3%.

The average of the changes in individuals stocks together during the same period is -12.4%. This value is highly dependent on the stocks being picked. As you see there are 3 stocks that did extremely well during the quarter while there were 5 stocks that did extremely bad. I made losses in 2 of those good 3 stocks and major gain was from one of those bad 5.

An interesting picture emerges when we look at distribution of profits and losses through the whole quarter of trading. As can be seen from below, profits are skewed to the right with one of them being the odd one at the far right. While the most of them are like noise around zero canceling each other, the odd ones at the right are the ones that determine our net gains. By hindsight, it can sound like so many stocks being traded when just one could’ve been enough to make the same amount of gain as the net gain. But it is not so straight-forward like in engineering. What looks like a good stock (Bergepaint, BataIndia etc.) gave me losses, while the bad one (Varun, SUZLON) gave me profits.


Although I have deterred from my arbitrarily set plan for trading, I feel that I am getting to the mindset required for trading as well as investing into stocks for varying time periods. Sitting through painful periods in some stocks like VARUN and ARSSINFRA and then sitting tight through their momentous rises reminded the good old days of 2007/8. The difference is the experience of cyclical market trends.

For the upcoming quarters, I am taking below lessons for trading:
  1. Trade only through discount brokerage firm so that stop loss can practically be applied to minimize losses early on.
  2. Don’t hold stocks for too many days when daily lows are falling consecutively. Bergepaint was a silly loss.
  3. Don’t swing between expectations of the trade. While experiencing more than 5% loss in Bergepaint, I was fluctuating between taking stop loss vs. surviving the pain as the capital is anyway small.
  4. Take profits for atleast a fraction of the holdings when expected target is met. I should’ve done this on Varun to sell 100 when it crossed 40. At 42, I almost went up to place the sell order but then I changed mind as if I was trading a fundamentally strong stock which will bounce back quickly if it falls off its highest price.
  5. Study charts of atleast those stocks which are recently traded or held in portfolio and those in watchlist. I missed the momentous move in Ajantpharm because I wasn’t looking at charts.
  6. Position management is the most important part of the trading process. Once we enter a trade, all that matters to us is the result of the trade when we exit it. We close our mind for everything else. This is a hard to overcome survival instinct and requires discipline and can be learned through practice. I can say that most of my trading performance is attributable to position management than stock selection or timing.
  7. DOT – Do not OverTrade. Overtrading is trading on margin (excessive margin) or trading leveraged through debt or derivatives. Most of the trading careers end because of overtrading. While it always feels good to recalculate what would be the potential gains if I had used 20x times the capital, the expiry dates, margin calls and other factors would not allow us to do effective position management under monetary pressures.
  8. I wouldn’t like to diversify. But the reason I have not used my full capital on any single trade is because it is akin to overtrading especially when I have just started first time after a long time. Though it appears to be diversification, all I have done is capital allocation per trade based on risk I am willing to take. I sure can take huge risk if the reward is good (like in Varun) but still I didn’t. Because I may not be comfortable handling the same kind of percentages if my capital were 100x of the present.
  9. Be more active in trading. I am coming to the conclusion that though there are plenty of opportunities in the stock market (stock market is the amalgamation of all kinds of businesses), there are practical limitations to realizing or squeezing most of the potential returns. One of those is the activity rate of the individual trader. Alternatively one would think of overtrading on few stocks infrequently. But the risk involved and the lost time in waiting before entering the trades is not worth the alternative. With 7 & 8 applied, the potential returns from the market are greatly reduced. Though it still looks better than saving in surefire markets like debt/FDs/Bonds (depending on trading distribution), it is still not the best of what the market can give. Hence one should get active in trading, which of course leads to next lesson.
  10. Find next good bets. Of late, I do not like the term bet. However, one should always be on the lookout for next good entries into stocks already being traded, held or prospected or yet to be discovered. This also means one should track market statistics, explore economy and industry news (I am not there yet), use proprietary scanning programs, etc.
  11. Avoid stocks with large spreads and low floats. I used to like stocks like Varun that give 100% kind of returns just from a dead cat bounce trade. But I was able to learn about how volume plays in these stocks because of the large spreads and low floats. Low float implies less number of market participants. A single institutional investor would move the stock all the time. So whatever he/she decides to trade the stock at, will be the best price we can enter or exit. Rest of the time these stocks will be difficult to enter or exit as they get to the circuit limits without matching orders. Also large spread stocks are difficult to exit on stop loss if the trade fails. That results in more loss than anticipate. On a rapid fall, the stop loss may be triggered but may get skipped past. This requires little more effort than looking at market statistics and stock charts. That which is finding out their float percentage (can be done after-hours) and finding spread gaps between orders in Level 2 quotes which can be done only during market hours. Make a list of your chosen stocks in all MidCap and good part of SmallCap segment and keep checking their spreads during market hours and sort them. Also note that spreads can vary with time just as volume does.
  12. Trade on momentum. A trader with good position management skills will most often ensure that he/she trades a stock through atleast one momentum period, it is not enough to patiently sit through tough times if one wants to make the most out of the stock market opportunities. Hence one should constantly look for momentum trading opportunities. Those high percentage trading opportunities that last from few days to few weeks. Don’t be patient when trading on momentum. Exit on the signs of fading momentum or lack of momentum.

That’s all for this quarter. I don’t think I will be able to share so much of data in the coming quarters as I won’t find time nor comfort as the capital increases and trading activity reduces free time to make this much detailed posts.


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Thursday, May 31, 2012

My Day Trading Experience Today And 15 Lessons From It

 I had a modest day trading experience today. It has been a really long time since I ever did day trading. Last time I remember was in the first half of 2008. Out of less than 10 such days, I used to trade only in one or two stocks all through the day. In that aspect today was a good development as I traded in four stocks and at varying times. Earlier I used to make entry at the start of the day and close later for profit or loss.

Yesterday I got notification in office that office will be closed for today in observance of nationwide strike for petrol price hike. To make sure there is also no national holiday, I checked for trading holiday list on NSE. Then I decided I must use this rare opportunity for day trading. My preparation entailed only finding high volume stocks that have potential for big swings and for which my broker allows upto 10X leverage for intra-day. It was quite tedious task to go through 200 such scrips. I got bored and stopped after checking few stock charts. I noted about 17 of those stocks (arvind, ifci, mtnl, relcapital, sail, essaroil, godrejind, hcc, apollotyre, itc, jublfood, mrf, ofss, pantaloonr, gmdcltd, rpower, divislab). It was clear I wasn’t up for day trading. I decided to watch a movie or two for the night before and slept late. After watching Limitless (2011) for yet another time, I had decided to do some trading whenever I wake up.

I woke up at 10:45 and didn’t feel like trading at all. I thought “Anyway, how much can I do with low capital?” But I had bought a NIFTY option yesterday as a test to find out brokerage rate. I got the idea of checking whether limit orders are possible for options. This had excited me to stop sleeping and get a start with trading. I was able to place a sell order for option at 11 rupees while it was quoting at 0.15 rupees. That was amazing as it is beyond 100%. Earlier I had mistakenly assumed that there is a 20% range around cmp within which we should place limit orders. Wildly swinging option prices shouldn’t have such limits. Otherwise it would require me to monitor the option price all through the day. Thankfully, there are no limits so it opens up lot of possibilities.

After placing an option order, I had logged into Power Indiabulls software and Sharekhan browser based terminal. The market gapped down already as expected as US markets fell by more than 1% across the board. That was also one reason to lose hopes on day trading and selling my about to expire option. Nevertheless I had decided to try atleast to explore day trading. I had created a new watchlist in Power Indiabulls with those above 17 stocks and began checking intraday charts of stocks one by one ordered by alphabetics and percentage changes for the day.

I ended up looking up ARVIND (first on the list), SAIL (last on the list), HINDALCO (opened by mistake from NIFTY list as it also rose by 4%), DELTACORP (as it was already in my delivery portfolio). Now I don’t remember exactly why I bought ARVIND but I bought 100 shares at market price. While it was quoting at 77.8 the broker did its worst to buy above 78. I noted down my first lesson for the day!




ARVIND had already bounced twice from its lowest price for the day so I thought it is worth trying its upside. I had placed alerts at 77.5 and 78.9 and a limit sell order at 78.9. Now I had time for other stocks. I looked at order book of DELTACORP and noticed it steadily rising 0.10 every minute and stopped at 59.2. I had decided to short-sell at 59.2 and buy back at 58.25. I placed orders for these in Sharekhan which gives lower brokerage rates. I had placed alerts in PIB and stop loss buy order for covering the margin trade. I was watching SAIL and HINDALCO. HINDALCO was already up 4% and was not sure if there is further upside to it.

I had repeatedly watched all the four stocks LTP, % change, order book, intra-day charts along with checking out MTNL and OFSS as well once in a while. Intermittently I had completed my morning ablutions (but in the afternoon  :)) and decided to go for lunch. It was already 13:00.

Then HINDALCO was at 1.5% which meant it retraced by 2.5% from its high price for the day. So it looked like a good intra-day opportunity and what is better than following the trend? Like the saying “trend is your friend”. I had placed a buy order for only 10 shares (as I didn’t want to take time to calculate how much margin is left in Indiabulls) at 115.9. My Sharekhan margin was already over as I had portfolio holdings and crossed 10X margin already for the day with the DELTACORP orders. I felt I was screwing up but didn’t care as the primary concern was to eat some food. I checked ARVIND, DELTACORP again and again for 15 minutes, as they didn’t move an inch I went out for lunch. Before going I had placed a stop loss sell order at 115.4, just in case. I had ARVIND without protection because it was clear it won’t move much for the day and is off its lows for now.

After half an hour I was back and had a pleasant surprise from HINDALCO. It was up to 117.6. As I was deciding to sell it crossed 118. I sold the shares at 118.15 but regretted for not buying for as much worth as I did for ARVIND. That is when I dug into margin reports and experimented with changing open positions from cash to intra-day and vice versa to see their impact on margin utilized. That was a good learning opportunity. My margins for delivery for 40% while for intra-day were 10%. By default orders are for delivery (or cash segment). While placing buy or sell orders, if I choose the order type to be Intra-day instead of cash (default), my leverage would be upto 10X. On fast moving days, there won’t be much time to change open positions or learn these stuff anew.

The rest of the time till 14:30 no movement happened in ARVIND or SAIL. But DELTACORP reversed trend, crossed upper limit and stop loss order got triggered. As its position got closed and the stock was well off its lows, I had placed a buy order in cash segment for 32 shares mainly to check how long margin is allowed for delivery trades in Sharekhan. I had 1000 rupee margin, so I bought for more than that. I will know whatever happens in 6 days. If margin is allowed for 5 days, I can forever stop trading with Indiabulls as they are adamant at not reducing brokerage rates.

Sometime around 14:45 or so, SAIL was showing strength. I bought 40 shares (this time with intra-day margin) at 94.65 and watched it jump up and down. After few minutes ARVIND started moving up from its average price of 77.8. I had watched both of them compete for sometime. I had a sell order for SAIL at 95.9 and alerts at 94.9, 95.25. ARVIND crossed its intra-day high and was struggling to go up further. From 14:55 to 15:00 it was full of suspense like those last few Overs in Cricket. After 15:00 intra-day square-off can begin at any time so I wanted these stocks to reach my targets before that.

I thought there may be few minutes before square-off begins. But my intra-day sell order got cancelled already. Luckily just a minute before 15:00, I had converted ARVIND and SAIL from intra-day to cash segment. They were within 40% margin limit. I had removed all sell or stop loss orders to be within 40% margin limit.

Now all the open positions were risky and they will go for delivery and lurk in my portfolio for many days. I had checked their EOD charts to see if there is hope for holding them overnight. As I wanted this to be a pure intra-day experience and the stocks not being too strong on EOD charts, I decided to sell them before 15:30. First off SAIL was doing good, so sold it at 95.55. ARVIND went up to 78.75 and quickly started falling down, on huge volumes. I was looking for a break but it wasn’t taking any. I thought it was enough when it reached 77.5 and sold at market order. Once again the broker did its worst to sell it at 77.4 while the quote was at 77.5. This one stock ruined my feeling for the whole day.

Anyway, when I looked at the consolidated details of the four day trades, I had noticed some improvements to my day trading. Instead of just looking at one or two stocks, I had explored more stocks and traded four this time. Of them, two were closed with stop losses and two were profitable.

My profitable trades had more percentage profits than losses. However the capital allocated was less. This had turned the net gain to the negative side. I am taking below lessons from this day-trading experience:

  1. Don't place market orders unless the stock is moving fast and the strategy is pyramiding. The broker do their best to get worst prices for our fills. Hence study order book and place limit orders.
  2. Overnight preparation alone is not sufficient for day trading. Some stocks must be followed a week or two before the day.
  3. Indiabulls was charging exorbitant brokerage rates. I would reduce these charges significantly by using Sharekhan alone.
  4. Net gain was -70 rupees. If brokerage was reduced and all trades are allocated as much capital as for ARVIND, it would’ve been +90 rupees. I could spot opportunities, but I need to do better money management as well.
  5. Capital allocation: till I can feel the weight or strength of different stocks, it is wiser to allocate same amount of capital for each stock. Following Tony Oz’s advice, one should not allocate more than 1/3 in one stock. Which means I can go upto 2.5/3 (cash segment), or 10/3 (max trade) times the available cash.
  6. Orders should be placed with type Intra-day to avail of maximum margin. However this reduces the time available by half an hour. Close the max trades before 15:00 to avoid being squared-off.
  7. Find stocks that have gone up or down by large percentage. Such stocks are likely to reverse or continue the trend, with large percentage swings. These are the best candidates for intra-day trading. It is random to find a stock which will break out from narrow range but it is more certain to expect wild swings in stocks that have just done a wild swing. Top gainers and losers of the day before provide a good list for this.
  8. Be patient; don’t just keep watching the same stock all the time. Place alerts for each stock being watched and move on to explore other opportunities.
  9. In day trading not all days are profitable. Especially the one like today where the broader market swing was narrow the possibilities are limited. Don’t take a bad lesson from this.
  10. Place stop loss orders with intuition. The idea is only to reduce losses as much as possible. It is okay to get stopped-out with profits as well.
  11. Don't just jump into any stock for the sake of day trading. Wait till a compelling opportunity presents itself.
  12. Sometimes do scalping if stock is bouncing in a range. Do with the broker giving lowest brokerage rate.
  13. Study the direction of a stock for which there is huge volume. For ex, if a stock suddenly rose occasionally during the day and the volume supporting that short time was higher than other times, then trade for uptrend and vice versa.
  14. Buy the strength, sell the weakness. All of my trading now revolves around this. Rulistic strategies won't work under many circumstances. Hence I study a stock's price movement to determine its weakness or strength. If it is strong, it will fall lesser than broader market while rise faster.
  15. Trade divergences. Divergences are the best opportunities. I look any stock that is diverging away from general market trend.

This wasn’t too bad. After many years, it was still possible to apply day trading rules. Good to know that it was still possible despite lack of enthusiasm or motivation or enough preparation. It just needs more practice to get to the professional level. I will keep that for the upcoming post-meltdown days.

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Saturday, April 28, 2012

My Stock Trading Plan

Without a definite plan it is difficult to make fast progress in any endeavor. I have decided to set out my plans or goals, whatever, so that I can go on autopilot. The more things I do on auto pilot, the lesser I would feel like I am busy. Daily plans can make a huge difference after a prolonged period of time.

There are certain tasks that can’t be done in one sitting and need many days for completion. That doesn’t mean they require lot of time everyday. They just need little of our time everyday. Actually there are many things in our life in that way. Even academic education is like that. It is not easy for kids to learn one subject in one month and complete their six subjects in six months or even 8 months with revision. Instead they would be given one chapter in each subject per day or week and all subjects would be taught by giving an hour for each subject per day. This should make them less stressed. However the current scenario of academic education is totally screwed up (with tuition business, grading and all).

There may be certain activities that we need to do occasionally which don’t fit into a routine, but we can have a master plan for a longer period say weekly plan. Then these also get into autopilot mode. In my career, goals are set every year and one of such goal may include making a patentable invention one per year (I wish I had thought this way long time back). Once all your activities are on autopilot mode, you would begin to feel that you are free every day and every week at least for a small amount of time per day/week.

While stock trading seems like a chaotic endeavor, this too can be modeled like that. For less active stock traders, there won’t be excitement in trading without a scheduled plan. If they have a plan they can look forward to doing that everyday. They can also continue other parallel endeavors such as a job or business.

For a long time I used to think that I must get out of the rat race so that I can fully dedicate my time for trading stocks. I have experienced, though few times, how exciting short term trading is. The risk remains either way and there is no question of getting out of the rat race in the foreseeable future. Once I accepted that I looked at my options and started solving hurdles for cutting losses. I wrote a script that fetches CMP of any stock periodically and sends me an alert and email whenever a price trigger event happens for the particular stock (with tolerable delay). This should distract me from whatever I am doing so that I can place the stop loss orders either to buy or sell. This is easier done than said.

Most of my best trades happened with stop orders atleast for one of entry and exit. That’s the best way to avoid becoming like Ivan Pavlov’s dogs (conditioning). Let me get this straight, if you say you don’t have time to trade stocks, you are simply putting technology to shame. So much for all the technological progress (I too was like that for quite a while). Armed with the alert script, alerts from Moneycontrol and Yahoo Finance (for diversification of alerts to make sure I am alerted in a span of 15 minutes no matter where I am), I can now create a master plan for trading.
  • One intra-day trade every week. Atleast one.
  • One delivery based trade every two weeks. This is because of T+2 settlement delay problems with Sharekhan. I will make it one per week if I go with Indiabulls. But for now one per fortnight.
  • One margin based delivery trade per month with margin up to 50%.
  • One maximum margin intra-day trade per month with minimum margin of 25% and up to 10%.
While setting this kind of action plan would look like useless as this can may create pressure to trade regardless of market conditions. That's why I never got around to making such plans. So I am allowing such flexibility into my plan to skip trades during major market events.

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Tuesday, April 24, 2012

Enterpedia Answers the First Question.. The Why of Entrepreneurship?

Why do you want to become an entrepreneur?

Very soon after graduation and into my first job I began to realize that the next big thing after acamedics is the entrepreneurship. You can't forever go around saying you want to pursure entrepreneurship without answering the why of it. I myself wasn't sure of anyway of answering or if I wanted to be one. But on one Sunday I had visited the best book house and found this book - Enterpedia. I bought it after reading some of the text.

I won't tell if it is a good book or whether buying is worth or if it is better than Rashmi Bansal's series. But I can say that it has relevant and timely information for entrepreneurship in today's very very fast paced world. Unfortunately I had never gotten past the first chapter. Actually it is organized into steps not chapters. I never got past the step 1. Because the answer to "why entrepreneurship" gave me a much needed paradigm shift. Though I had briefly read parts here and there and felt it has valuable information.

Influenced by few older entrepreneurs I used to think the reason for entrepreneurship must be to make lots of money.. or to get rid of annoying boss.. or to work whenever I want - the freedom. But these would never get me anywhere. Enterpedia counters these mythical reasons with amazing explanation that fits well with reality.

To make lots of money

The money part of it doesn't work because money should not be the reason it should be the result. If you want to make lots of money (and likely fast), you are likely to cut corners and compromise on the quality of your produce and service. For years, you could wonder why you are not heading anywhere. It just doesn't work that way. Only when you come outside of time then you will notice that money will flow with time and it shouldn't be the motive for entrepreneurship. The best thing I liked from Enterpedia on this was - just like there are people who want to become entrepreneurs to make lots of money than jobbing away as slaves, there are others who stay from becoming entrepreneurs because the opportunity cost is very high to leave lucrative jobs that are offered these days. Talk about offers and 25 lakh per annum, 45 lakh per annum are norm for the few top paid employees from IIMs or top ranking institutes. I don't know about you, but if I am offered such pay I would be in a very difficult situation to decide and most likely go with it. With increasing uncertainties in the world economy, fast pace of change it has become increasingly difficult to start out on your own. The opportunity cost is just high even if you are an average fresher from a commonly reputed university.

To be my own boss

Some IIM students opt out of placement season and get ready to board their own ship right out of college. I don't know how they think, but if you are not one of them, everyday you would go to a job and think "Why the hell am I still here? Life is getting boring with same routine everyday.. I don't like to be supervised.. I don't want to stick to 9-5 everyday.. I don't like deadlines (that would anyway change at the end :)..) I don't like to be rated.. I don't want to worry too much about finishing and delivering."

Enterpedia says these are all myths. As an employee you had only one boss to manage, but as entrepreneur you have many. Unlike in a job there is no one to shield you. You cannot really do whatever you please. The world outside is much harsher than you would ever dream. In Enterpedia's words ".. the way your customer holds the gun to your temple, he will make your nastiest boss look like Santa Claus." This is the best line I liked in this entire book! I tend to very much agree with that line though I didn't have a nastiest boss, I did experience nastiest customers second-hand.

Freedom

You won't really have freedom as an entrepreneur, as you would expect while being a slave. In a job, you worked 9-5 or its flexible variation with fulltime weekend breaks. But as an entrepreneur you are at it 24/7. You will be directly interfacing with nastiest customers that don't wash their mouth with Dettol before they yell at you. Rather your boss does (if you were employee). You can't take holidays whenever you want. Assuming you want to get results and avoid going bankrupt.

Layoff

On the sacking part when you couldn't deliver, Enterpedia introduces a British phrase "vote with your feet". Again your customer can be very nasty walking away from you into the loving arms of your competitor. Atleast when you get sacked as an employee, your boss tries to sugarcoat it and wouldn't tell you what a jerk you were. When a customer sacks you off, he not only empties your job but also of your self-esteem and your future.

The three best reasons, based on Enterpeida, in order are:
  1. I want to define my identity
  2. I want to create meaning in society
  3. I want to see respect for me in the eyes of my people

Now that was just enough for me.

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Sunday, April 22, 2012

Outsourcing to Another Dimension TIME from The Man from Earth (2007)

I had just watched this movie and I don’t want to say anything about it as it would spoil the experience for those who are yet to watch it. The movie, I agree with one reviewer on IMDB, a film that reaches to the stars and does not depend on CGI. Well, that’s the great thing about the movie. A lot of it is about the way the movie is made in the simplest manner at lowest cost, with all story happening as a conversation between a group of people sitting on sofas in a house. But I will share about some things that I have learned from this movie and its making.

This movie doesn’t use CGI like Avatar but entertains the (knowledgeable) audience to as much level though not in the same way as Avatar did. It is like a more exciting one than any good bed time story that I listened to as a child. The story like this which is set in talking is basically like ourselves having a curious conversation about curious subjects on a Saturday afternoon or listening to a bedtime story narrated by your uncle who puts such elements in the story that you as a child would have had no limit to imagine.

I learn something new from this movie about outsourcing. The common understanding of outsourcing is in one dimension. That is you outsource some of your work to other PEOPLE who are mostly professionals at it or for cost advantage like the BPO Industry is involved in. But the makers of The Man from Earth show that you can outsource your stories to TIME dimension. This is altogether a new way of looking at things that are anyway done for ages in local settings. Really the current times offer very exciting possibilities.

Nevertheless outsourcing to time requires that you have to narrow down your subject or in other words the area of your work. In this particular case, you have to string your story with elements that are popularly known and well known. Otherwise you would target lesser number of audiences. But for an experimental artist it doesn’t matter.

The movie also solidifies the reason as to why personally narrated bedtime stories are better for children than showing them movies or tv serials on your or their favorite tv channel. Watching movies or tv shows end to end for hours on end is a big bad mind numbing activity. When we outsource bedtime story telling to the tv shows we are limiting their imagination. It may still be okay to outsource this to those tv shows where there is only talking without visual 2-d or 3-d show. Basically similar to stories told on radios.





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Friday, April 13, 2012

FY 2012-13 Happy New Trading Year!

Wish you many exciting trades for the new trading year 2012-13!

I am so happy to start the new trading year. I waited out the last two months counting each day to close the old financial year without having to record any balance in ITR-X/Y/Z forms. I used to postpone about learning how to fill and/or fill that form every year and avoided trading (basically exchanging stocks). But I will bother about that next year now that a year is over.

Even the new years are not starting well one of these days. Indiabulls Securities introduced AMC (Annual Maintenance Charges) from new year. The only reason I didn’t close that account since Nov. 2010 was because it didn’t charge AMC. I sent a mail asking them to close again but they only asked why and never got back to start the process. I have the closure forms. But anyway, I decided not to login to the site forever (atleast if I don’t get a good service from other brokers). I am excited to start the new year with Sharekhan who offered half the brokerage rates as Indiabulls did. New things are always exciting.

It is certainly exciting with Sharekhan. At first I was not comfortable with trying new brokers as Indiabulls service too comfortable. But Sharekhan is not at all bad. It is different. But it allows placement of orders after-hours which is a high priority for jobber-cum-traders and it also has longer session time. So no need to relogin to its browser based session every few minutes. The best part is the brokerage rate (although atleast one friend gets even lesser brokerage rate but I am almost there).

I just started off today with an entry price evaluation trade in LOVABLE making a loss of 25 rupees. In this the brokerage was only 2.76. It turned out to be less than 0.1% brokerage rate. I never had such an experience with Indiabulls. It would have been minimum 0.3%. Even with a 0.7% loss, the brokerage is still insignificant compared to the loss. This is what I wanted for a long time. I am not sure if tax rates have changed for intra-day trades or I have to wait for T+2 settlement period to see the final brokerage rate. Anyway, 0.1% hair-cut opens doors for highly leveraged margin trading experiences for once in a quarter opportunities.

After I noticed the exit trade from LOVABLE, my head was almost spinning wondering about spirals of share price pullbacks with increasing time periods and how many such trades will be required before I can end up with the perfect entry price. It may be easy for a fulltime trader. Or may not be. But after 5.5 years I realized I can’t make those excuses anymore. I should get realistic and focus on only maximizing trading strategies that involve less number of transactions with each one counted and less time monitoring them.

That means I will stick to my favorite trading style – pyramiding. Multiple entries and single exit trading strategy. It doesn’t matter which way you trade. Loss always happens. Earlier I used to do single entry, single exit with buy on stop orders. It almost always failed with losses in upwards of 10k per trade in those bad days of 2008. The problem then was with not understanding the conclusive meaning of stop loss and making a single entry without diversifying across time.

With low brokerage rate and multiple entries, the loss per trade is significantly reduced. Only problem is to place the stop loss order immediately after each entry into positions. I would need a blackberry or a real-time alerting mobile device that also helps quickly place stop loss orders without needing me to go through a maze of pages from login to order confirmation. Do we have any such device (other than a laptop or iPad)?

I certainly can’t expect to monitor order executions frequently through the day. Atleast not with multiple stocks. Moneycontrol sends free email alerts for price triggers. But sometimes the mail gets delayed. Gmail gets delayed for long time into hours. Ymail gets delayed by 15 minutes or more or sometimes less. Sometimes it is also lost (I have tested & it is lost all the time if office mail is used). If this delay has to be modeled as a margin of error, then I may be back to old brokerage rates or even worse. Atleast I wouldn’t have to monitor all day.

May be Sharekhan gives longer enough session durations to take care of this problem with a page reload as often as possible. 5 years of work experience tells me that everything is possible once you decide to consciously develop a habit. No question of lack of time, conflict with work, divided attention or heads spinning!




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Thursday, March 22, 2012

Money As Debt

If you don't yet know how money is exploded in today's economy, this is a good documentary to start with.



Someday all balloons are going to burst because everything that is man made has an expiry date. For long the expiry date was evaded by spreading it across. Now money has to explode till the day that expiry date which is expiry date for everything that is money.
(Expiry date relates to derivatives which have it as one of the last few days of every quarter)




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Tuesday, March 20, 2012

How our Financial Wizards Fool the World

All the academic degrees and financial experience of our ministers that control the economy systematically and so deceptively, are applied to fool the world. What is worse than this news?

How can you reduce poverty line when inflation is rampant in the coutry? Once upon a time we used to have inflation of 6% (five years back) and that used average for decades on end.. This itself was bad compared to developed countries which do not let it cross even 2%. Now in the last five years we are consistently facing benchmark inflation in double digits.

Ruckus in Rajya Sabha over lowering poverty line



The true value of any currency can be found out from the value of Gold in that currency. Gold was at 9000 rupees 10 years back. That is near the millenium time. Five years back it was at 14000 or so. Now it is at about 28000 rupees. In just five years it had doubled in price which means rupee value had become half of its value in five years. In 10 years it became 1/3rd of its value. And we are talking about growth. The currency had already touched its all time low, only recently. How can you have the weakest currency if you are reportedly growing?

This is not the way the developed countries of the west have grown. Nor did the east. A developing economy always upholds the strength of its currency. If not for the intervention, we wouldn't see rupee depreciating. I mean intervention (by RBI controlled by Pranab or whoever) during good times to stop it from appreciating but less intervention during depreciating times.

Anyway, now with the lowest value of rupee, any 7th class student will say that the poverty line needs to be corrected upwards not downwards. If one lived on 30 rupees per day in 2000, the same person will live on 90 rupees per day in 2012 to maintain the same lifestyle and hygiene. But this is not the case. The government fools the world by employing such fools for planning commisions and letting them reduce the poverty line year after year. Like some annual results that the listed companies in the stock exchanges report every year and quarter. Poverty population count has only become such a result to show for the government.

So you reduce the poverty line and bring down the count of people below poverty line. Someone rightly said. It is no longer poverty line, rather starvation line. Whatever bulls-h*T crap.

Oh.. I missed the subsidies. So you get rice for 1 rupee. Good. Povertyline can be reduced to 1 rupee. Nobody in the world will starve anymore. Everyone can become like those malnourished African kids.

And there are some blokes who point out the mistakes of the opposition and ttheir complaining is nothing but a way to divert attention. Nice time blokes. One's mistakes doesn't imply that they should keep quiet and not complain. Or the world would be a better place if everyone commmited their own mistakes? No complaints.. Ah?

I have crossed the break-even barrier for living. Why do I have to worry? I too should focus on some export business.

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Saturday, March 17, 2012

How to Decide How Much to Bet on a Trade?

There are multiple ways to decide depending on your trading style. But the key idea behind the right decision is to get comfortable with thinking of having lost the money the moment a position is opened in a stock. Investors and gamblers should assume that entire money is lost while traders should assume a percentage that they are giving as wiggle room for stop losses.

Most often traders aren’t comfortable with this kind of thinking. They keep thinking that the CMP determines their current capital value. One should get over this and think that one has already lost the money invested and whatever is at current price is their bonus.

For Investors and Gamblers

If you are looking at your stock market operation as a gambling bet or an investment like Warren Buffet does, you should be ready to lose the entire capital invested into the stock. This is a no-brainer. You should only bet that much amount that you are ready to lose and more importantly the amount that you feel comfortable to assume to have been lost already the moment you open your position in the stock. Don’t get into mood swings after you enter the stock. If you did, the amount was higher than your comfortable level. It is apparently common to experience mood swings when your money is on the table even for the least amount invested, but you can discipline enough to overcome this.



For Active Traders

Stock traders, who take advantage of the liquidity and flexibility, to switch stocks, that the exchange provides, should decide based on wiggle room they give for a stock before one exits a position to stop losses. This can be in absolute number or relative number.

Those, who fix the absolute loss per trade, should have an upper floor for the total capital, just to avoid doubling the absolute loss in the event of knee-jerk reaction. But the price point by which one exits the holdings to limit losses should where one's fixed loss amount is reached. I don’t understand why anyone would comfortably follow this. May be in US, it is common to calculate in dollar terms.

My Practice

Those, who fix percentage loss per trade, should decide that amount of which one is willing to lose 10%. I used to follow this one. For a given position, I used to decide the percentage loss based on the volatility of the stock (or beta value). For example you can compare VikasGlobalOne with WelspunCorp. The former has more beta than the latter. So you may decide 10% stop loss for the first and 5% for the last. Or may 4% and 2% respectively, depending on how active your trading style is.

If the percentage loss you decided is 10, then you multiply the amount that you are okay to lose by 10x and use that much. If you are very alert during the day and can check & exit the position at any time of the day, you can reduce the percentage loss (or wiggle room) and bet even more capital. After all, more active traders expect more gains and more gains come with more capital but with fixed loss per trade.

Consider it Lost

In all of the scenarios, the loss is only to account for the unexpected outcome. But the trader should master the skill of assuming the loss is made the moment the position is opened. This way there won’t be any mood swings no matter where the price trades. Exception would very rare days when stocks make deep knee-jerk reactions. But such days are followed by sympathy rallies for which one should plan to take advantage of.

Also this per trade loss is important practice. If you do pyramiding, then your total loss is a variable. In such case you should apply probability and find out how many trades will be profitable out of how many total trades. Then calculate and distribute the loss back to individual trade. This requires even more discipline as trader should think beyond one trade. More often traders get stuck or get distracted in the middle of few trades. Probability best applies for multiple samples, the more the samples the better. But it also requires pattern recognition skills to first determine probabilities out of volumes of historical data and add seasonal trends (which are like conditional probabilities) on top of that. Pyramiding is altogether a different but most exciting stock trading operation. But it is the surefire way to make biggest gains in a short time, though it is also difficult to decide the capital to bet.

Now that the 2008 recession has changed the way the world thought about investments, one should not decide the amount to loss in stock market to be equal to the amount one is okay to lose in life (combining all losses from all ventures). It should be less than that. Atmost 50%.

Any other way of deciding the amount of investment may lead to under-trading or over-trading. Under-trading is a waste of time as you won’t feel the gravity of the game with lesser capital and on the other hand over-trading leads to financial hell! Atleast be ready to like either consequence if you are a random operator and then move on without whining.

How do you decide how much to bet on a trade?

Old and Gold


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Friday, January 20, 2012

My Chartgame Records

Chartgame had played an incredible role in helping me solve the riddle of the stock market. The advantage of the game is that it lets us try out our ideas on real data (albeit historical) in a virtually real time manner accelerating days into seconds. This accelerated mode actually takes us into accelerated learning phase by letting us experience stock price movements very fast. In reality as it takes weeks to play with each stock, the lessons learnt from each transaction lose their weight by the time we start another trade. If one is not a day trader, but pre-occupied with another profession, trading takes a backseat. Despite years of experience it can still look like a mystery as to what makes the individual stocks move.

In the first two years of my stock market operations I had few moments when I felt I found the best way to bigger profits. The white candlestick idea was one such moment. After looking at many stock charts and by also emulating real time experience by loading multiple charts differing in their last day, I noticed that a white candlestick indicates the strength and two such consecutive ones indicate possible upside in the following days. Stop loss was there for the worst case possibilities. But I had never done an analysis to see how effective stop losses can be or what happens if stop losses become random because of various possibilities. This had caused me lose a great deal consistently that too during the worst ever meltdown period in 2008.

Everytime I got a new idea I used to focus on the postive sides of it and ignore any downside risks. But Chartgame shattered all of my myths and hope that there must be some strategy to consistently beat the market. Stock price movements turned out to be totally random madness. All kinds of possibilities that one can think of have showed up after playing one stock after another. By accelerating the experience (an experience for those who have learned up to feel this game as much as a real experience) it helped me learn those things that would have taken decades to learn. Once can waste decades of life, just to learn that stock market is simply a random game. But from this experience I realized what it takes to succeed in this game and also decided never to suggest direct investments in stock market for the innocent, ignorant and the weak-hearted.

Thanks to its creator Matthias Wandel, we now have the opportunity to evolve our trading habits without spending money. It is very useful to practice despite not mimicking the intraday stop orders that are possible in real trading.
b>My Chartgame Records

When we play at chartgame.com we should note down the code in the tail of the URL which has so far been (since 2008) 6 characters long. This helps us review the performance later on, not only giving an overall summary of total gain over total number of traded days comparing with buy & hold performance but also including viewing details of the trades executed in each individual stock, date & price along with the stock chart highlighting the period of play.

My best record is the one where my capital plunged from $10,000 to $90 but after that I had applied 5/9 golden rules to return back upto $11,387. There is a beauty in this particular record if one looks at the distribution of gains and losses from $90 after Marsh & McLennan Companies, Inc.  (MMC). Its code is qwekfw. Below is the full URL:
http://chartgame.com/trackrecord.cgi?qwekfw

My latest game is recorded at : http://chartgame.com/trackrecord.cgi?1kpy95

The older ones:
http://chartgame.com/trackrecord.cgi?mp2aes
http://chartgame.com/trackrecord.cgi?qtamjh
http://chartgame.com/trackrecord.cgi?qgevaw
http://chartgame.com/trackrecord.cgi?qx1wcx
http://chartgame.com/trackrecord.cgi?qk7dk7-1
http://chartgame.com/trackrecord.cgi?bscbnv-1
http://chartgame.com/trackrecord.cgi?qwekfw-1
http://chartgame.com/trackrecord.cgi?qwekfw-2
http://chartgame.com/trackrecord.cgi?qwekfw-3
http://chartgame.com/trackrecord.cgi?qwekfw-4
http://chartgame.com/trackrecord.cgi?qwekfw-5
http://chartgame.com/trackrecord.cgi?roob8x
http://chartgame.com/trackrecord.cgi?tjer2s
http://chartgame.com/trackrecord.cgi?wgcbdf
http://chartgame.com/trackrecord.cgi?1afgww
http://chartgame.com/trackrecord.cgi?qxkbek
http://chartgame.com/trackrecord.cgi?wj6cvt
http://chartgame.com/trackrecord.cgi?1egjj4 (played last week)



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