Wednesday, December 30, 2009

The Blatant Truth

  1. On an average there are 240 trading days in an year
  2. If a day trader makes just 5 points, every trading day, he makes 1200 points an year
  3. On an average it takes 600 points to double your money, if trading in futures
  4. A trader who begins trading with 1,00,000 and assuming he has no drawdown since he doesn't carry any positions overnight, doubles his money in first 6 months, assuming he neither redeploys the earned profits nor withdraws them
  5. So after 6 months he has a capital of 2,00,000!!!!!!
  6. After doubling his capital he starts trading with 2,00,000, instead of initial 1,00,000
  7. At the end of the year he has 4,00,000 (at the end of the 5th year he would have made 10 Crore, ignoring taxes, and the fact that much before 6 months he would have the ability to increase his position size:::so no need to worry for taxes!!!!)
  8. This corresponds to a profit of 300% per year
  9. Can't you make net 5 points per day or just net 25 points per week, consistently?
  10. Think about it

Saturday, December 26, 2009

weekly outlook

  1. Nifty would present us with some fabulous trading opportunities in coming weeks
  2. These opportunities would be tapped by those who are humble, steadfast and daring
  3. The Overbought level is 5312, and Oversold level is 4839.
  4. The Phantom Price Line is at 5075, and BSAR is at 4941.
  5. The half yearly, quarterly, and monthly values in the table on the right, would be updated on the New Years Day, Inshallah.
  6. I am gearing up for Direct Market Access Trading, now available with NSE, trying to develop my own platform on *NIX framework, and for DOW, which should be available in next 5 years or so, which means that I have practically no free time left
  7. I do not provide any trading advice/calls other than those appearing on this blog, which is practically my thought process and trading ideas.
  8. Also I do not intend to start an advisory service/Asset Management Company, as I had thought earlier, simply because I don't have time and or inclination, and also because Almighty Allah has been very kind to me.

Monday, December 21, 2009

weekly outlook

  1. The Overbought Level is 5259, the Oversold Level is 4789
  2. The Phantom Price Line is at 5024
  3. The BSAR is at 4939, use it strictly to decide your trade direction
  4. As long as weekly closing is above 4939, Nifty would be bullish
  5. The next move would be in the opposite direction to the following BIG move
  6. These market conditions aren't favorable for novice traders
  7. As a rule of thumb, as long as Nifty is above 4800 it could slaughter bears, so be very careful if you go short
  8. Cdr VPB ji, I would post an article on Squeeze Set up in the VFM Forum shortly
  9. Thanks VK ji, welcome back

Saturday, December 19, 2009

The objective of technical analysis

  1. The purpose of technical analysis is not to predict where and when the market will go, as many traders think. The main goal of analysis is to define in advance the critical points or levels (PIVOTS). Then, based on this research, you can build a trading strategy for the next trade
  2. So here is a serious attempt: The Objective of Technical Analysis is ,
    1. To Understand and Identify the Overbought and Oversold price levels as derived from using all the historical data available;
    2. To Identify reversal patterns that might occur in overbought or oversold regions, so as to profit from contra trend trades;
    3. To maximize the gains from all sorts of trading activities, and minimise risk and losses arising from such activities;
    4. To identify the price levels where chances of a profitable trade are less, and recognize 'price-patterns' in and at such levels if and when they occur to avoid such trades;
  3. I hope I have been able to put things in right perspective

Saturday, December 12, 2009

weekly outlook

  1. The greatest people in this world were those who cultivated their characters and their intellects
  2. The weekly Overbought level is 5282
  3. The weekly Oversold level is 4803
  4. The Phantom Price line is at 5042
  5. The important Pivots between the Oversold and Overbought levels are as follows:
    4854, 4894, 4951, 4986, 5042, 5099, 5134, 5190, 5231,
  6. Please tighten your seat belts for the Roller Coaster, and trade using BSAR which is at 4921,
  7. EXIT ALL POSITIONAL LONGS, INVESTORS IT'S TIME TO BOOK PROFITS, WAIT FOR OVERSOLD LEVELS TO RE ENTER
  8. Where is VK Bhai, hope all is well with him
  9. The Title of the blog has been altered to reflect correctly the area of my study

Principles of Trading

  1. Determine the trend by drawing trendlines
  2. In an uptrend the trendline is drawn beneath the price bars
  3. In a downtrend the trendline is drawn above the price bars
  4. The trendline should merely kiss at least three bars
  5. Trendlines merely indicate the higher probability of market direction in the very short term
  6. The Stop Loss should be placed a little below/above the trendline
  7. This technique works best in trending markets, and is overall profitable
  8. Modern Statisticians have replaced trend lines with moving average lines
  9. The best Moving Average line is considered to be 7 EMA Closing
  10. If traded consistently, could give handsome returns over a long period of time, say 1 year

Thursday, December 10, 2009

Black Belt Trading

Trend or Range Bound Market

The Average Directional Movement Index (ADX) line helps determine whether a market is in a trending or range bound phase. It measures the degree of trend or direction in the market. A rising ADX line suggests the presence of a strong trend. A falling ADX line suggests the presence of a trading market and the absence of a trend. A rising ADX line favors moving averages; a falling ADX favors oscillators. By plotting the direction of the ADX line, the trader is able to determine which trading style and which set of indicators are most suitable for the current market environment.

Tuesday, December 8, 2009

Paper Trading: Is it Useful?

(Article by Richard L. Muehlberg)

On June 10, 2008, I opened a simulated futures account. My starting total was $50,000. Twenty-three trading days later, on July 11, my total reached $158,404. If you would like a JPEG copy of my July 11 statement, I will email it to you.

I opened the account because these words kept coming into my mind: "If you are a bad trader, why aren’t you a good trader? If you are a good trader, why aren’t you a better trader? If you are a better trader, why stop there?"

For years, I had been toying with the idea of opening a simulated ("paper trading") account. On the one hand, I felt that opening a paper trading account was something I should do. On the other hand, I was not convinced. Because I was actively trading, I did not see the point in opening a paper account while my real accounts were keeping me busy enough. But, those words "If you are..." kept coming back to me.

Then, on June 10, I made the move. I accepted that it was okay to have a paper account and real accounts at the same time. The idea of training is familiar to me. I keep a trading diary as a training tool. I study the diary to help me trade. I reasoned that trading money in a paper account would be another training tool. I would be able to compare what I was doing in my real accounts against my paper account.

I knew that the "fear factor" would be different with a paper trading account; you do things with simulated money that you might not do with real money; you might trade the way you are supposed to without letting emotions / fear overrule you. What I did not expect but soon realized was how seriously I would take my new paper account. The simulated money took on its own reality.

Now, when I read an article saying paper trading is a waste of time I wonder if the person who wrote the article has any direct experience with paper trading.

If you are new to trading and want to explore how trading feels, I recommend opening a paper trading account. Do a web search using the keywords "simulated trading account + paper trading account + stocks + futures" or some combination of those keywords. Create a short list of the websites that appeal to you. Some paper accounts are free. Some cost a small fee.

One alternative is to open a single account. Another alternative is to open two (or more) accounts through separate sites. Use one account to test one trading approach and the second account to test another.

Even if you are an active trader, I still recommend a paper trading account. Trade the account alongside your real accounts. You may be surprised by how mentally reinforcing the experience can be. Sometimes, you need to learn things by having someone else teach you. Sometimes, you need to learn things by having yourself teach you. Using a paper account, where the pressures are different from what they are with your real accounts, may help you show yourself just how much better you can become as a trader.

So how did I triple my paper trading account?

I followed the same trading approach I follow with my real accounts. (I am a day trader as a rule. My approach is to follow a consistent group of futures and ETFs and attempt to day trade no more than one or two of those futures or ETFs at a time.) I traded when I saw a low risk / high reward situation. Each day, when I made what I felt was enough money for one day, I stopped trading for that day. I did not let myself become overconfident.

At the end of each day, I looked over the trades in my simulated account and remembered why and how I made each one, just as I do with trades in my real accounts.

Paper trading is helping me in a lot of ways, but most especially with my discipline. If my answer seems too easy, then open a paper trading account and see first-hand what is possible.

Gold, 11-Day Chart, eSignal

Look at this linear regression intraday 11-day chart for August 2008 gold futures. The price bars are 180 minutes. See the action on July 10 and July 11? Would you have had the nerve to ride those two days on the long side using your real accounts? Would a paper account have helped? What if you had used both accounts? Do the math. Imagine just a $30,000 paper account on the long side of the July 10 / 11 move.

Look at your own charts tonight. Review the trades you wish you had made. Ask yourself if you might have made those trades if you had had a paper account. If the answer is yes, then open your own paper account. Next time you see a trade you want to make but don’t want to risk with your real accounts, use your paper account. Get some part of you in the game. Build yourself up in steps.

If you are experiencing a winning streak in your real accounts, then shift most of your trading to your paper account; let it absorb some of the "emotional high" that comes with winning. The "high" of winning can lead to overconfidence and recklessness. Your paper account can help protect you.

If you are experiencing a losing streak in your real accounts, then restrict yourself to your paper account. Once again, your paper account can help protect you. Get your rhythm back. When you are "back in the zone", start trading small in your real accounts; then, gradually increase the size of your real positions.

A trader is an athlete; you never lose the need to train, no matter how good you get. Trading is a competition. You are competing against other traders. You win money from them. When you lose, they win money from you. An athlete who does not train gets outclassed.

What do you think happens to traders who don't train? A trading diary can help you train. A paper account can help you train. Become that better trader.

*Reprinted (and modified) with permission from Richard L. Muehlberg (richardmue@yahoo.com, a contributor to Futures magazine and an active day trader of his own account using linear regression channels and intermarket analysis. His daily trading diary entries are available on www.DayTradingWithLinesInTheSky.com. Also, see his January 25, 2008 eSignal Weekly Trading Education article, "Is the Advice to Keep a Trading Diary Good or Bad", and his February 15, 2008 article, "What Is the Goal of Trading?"

Saturday, December 5, 2009

weekly outlook

  1. Nifty would be Ovebought above 5252, and Oversold below 4757
  2. The 5 EMA Weekly is at 5005
  3. The 14 Period TRIX is at 4924
  4. Nifty has to close above 5172 to regain it's uptrend
  5. And it has to close below 4676 to start a downtrend
  6. The 29 Weeks SMA is at 4689, and Upper Bollinger Band is at 5271
  7. The corresponding W%R reading is -4.84, suggesting uptrend (29 weeks = 7 months roughly).
  8. The 7 Weeks W%R is in the region of -11.35
  9. Warning:The Nifty could do a quick 4000 followed by 5200
  10. Tip:Sell When Overbought keep the target as the 5 EMA and buy when Oversold target again 5 EMA or use BSAR for exit
  11. Thanks Alnesh, for reminding me, Rajan ji, Mohid ji, Vaish ji, Jayant ji, Amit ji, Sunil ji and everyone else for your constructive comments

Thursday, December 3, 2009

Nifty at a glance

Welcome Friends,
You must have noticed that I have included a table of all the important pivots on the bar on the right hand side. It'd be updated regularly. Remember to Short in the Overbought region and go long in the Oversold region. I have also included Biased Stop and Reverse (BSAR), my own implementation of Stop and Reverse, to be implemented on closing basis(like at 3:25 pm). Only for those who have an IQ reading of greater than 100. Rest can search for Sunil Saranjame. He is the leader of those who could only KISS (Keep it Simple Stupid, the Great Motto of Simpletons)and do no more. All the Best

Wednesday, December 2, 2009

من كونت مولى، فى علين مولى

  1. Gold touches 1216
  2. I had expressed the same views here
  3. I am sure no forum reader would remember what I said in last December
  4. مہر مرے ٹوہ ہم مرے ورنہ مرے ہماری بلا سچے گر کا بلکہ مرے نہ مرا جائے मैहर मरे तो हम मरे वर्ना मरे हमारी बला सच्चे गुर का बालका मरे न मारा जाये Hazrat Ameer Khusro Rehmatullah Alaihi

Tuesday, December 1, 2009

a letter from a critic

Akhtar bhai, I hope yu would recall that a couple or so months back, u were sure nifty will not breach 4793 ( in vfm when I questioned khosboo's call of short selling around 4570-4600). Don't take it otherwise, but my own sense is nifty will comfortably breach this level of yours and even breach the previous top of 6357 in the next six months appx. After that my expectations of a slow and steady fall to 3650-3920 and miay be even 3150. As regards 21000 in the next 7 yrs on breach of 5480 appx levels, I see it a very very remote posibility as even 10-15% compounded growth in nifty EPS can't take it beyond 17000-18000 levels. Thx n regds Sunil

My Answer

Dear Sunil ji, Greetings! Why would I not recall what I had said on that thread, advising people to use SL for that short call? I guess you should try some brain enhancing tonic for that. Son, I have seen many people here who had a sense and later lost it, leaving their family in utter distress, so my friendly advise is: don't have a sense that is bound to leave you pennyless. Only time would tell whether I am right or wrong, but what if I am right and you are wrong? I make money. What if you are right and I am wrong? I make even more money! How? Read this blog, I write it in simple English. With Warm Regards, Javed P.S. I enjoy foolish comments more than the intelligent ones. I can't help it. BTW I guess that stupid forum owner is also lifting off my ideas and posting as his own, these days. To Mohan: Greetings! Boy I am straight, so that I don't enjoy the "touch". If you have a question, post it here, in comments section.