Making of a Trader/Investor

Discussion in 'Words of Wisdom' started by anil_s_trivedi, May 13, 2014.

  1. anil_s_trivedi

    anil_s_trivedi Well-Known Member

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    Hi Friends,

    The purpose of this thread will be purely, focussing on small but important block of investment and trading styles. The ideas discussed will be of some of good traders and every word carry its significance.

    The thread is also about sharing some of distinctive thing i read somewhere and everything which i as a investor feels important.

    Feel free to share your ideas, so that others can learn from it.
     
  2. anil_s_trivedi

    anil_s_trivedi Well-Known Member

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    Many questions raise during the times of high volatility or uncertain events, what is the best thing to invest into.

    I asked many traders, and read some books also for a hint to get answer. Its purely for investment style purpose. Not for F&O trader.

    What i observe is, one should focus on stocks having low ATRs. If stock is trending and having low ATR then its a significant fact that smart money is going into without making noise.
    And as soon ATR starts expanding one should exit such stocks.So stocks with low volatility and trending i the thing one should look for.

    Still searching for some other methods, but this one is most i liked as of now.
     
  3. amitrandive

    amitrandive Well-Known Member

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    Thanks Anilji

    Looking forward to this thread and many learning's from it .
    :clapping::clapping::clapping:
     
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  4. anil_s_trivedi

    anil_s_trivedi Well-Known Member

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    If there is a sudden range expansion in a market that has been trading narrowly, human nature is is to try and fade that price move.

    When you get range expansion,the market is sending you a very loud, clear signal that the market is getting ready to move in the direction of that expansion.

    ------ Paul Tudor Jones


    These are golden words from a trader, who had astonishing success rate.
    We are focussed on two words here ' Range Expansion'...

    Yes...this is what every day trader/ investor want to latch quick returns need to learn this. This is period when market undergoing slow period of range bound trades, and a sudden rush by one side to assert there predominance.

    So as a trader/investor one should focus on the stocks which are under contraction, and we as a trader focus on higher timeframe to see likely breakout direction, and then just take the trade in that direction. so simple as that.

    If you can daily scan for range expansion you will find many such opportunities. Not every range expansion candidate is a buy. The context of range expansion is important. If the range expansion is preceded by a period of range contraction and a momentum pause, then it is a good setup.

    Many in these forums are in love with NR4/NR7 trades. so they are basically fall into this category.
     
  5. anil_s_trivedi

    anil_s_trivedi Well-Known Member

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    THE PSYCHOLOGY OF FOLLOW THROUGH DAYS...


    A follow-through day, reduced to its essence, is a simple technical heuristic (a rule of thumb) that works like this: As a market index is in the midst of a downtrend or bear phase it will eventually try to find a low and bounce off this ultimate low, starting a short rally that may extend a few days following the point at which it puts in a short-term low. Once the market has bounced and remains in an uptrend off the lows of a few days, any day on the fourth day or later in which one of the major market indexes rallies a specified percentage (the threshold percentage) is a follow-through day.

    From a statistical standpoint, the reality is that most follow-through days fail.But the fact is, when understood within the context of unfailing and everpresent uncertainty, the follow-through day is a useful contextual tool in determining when the market may be changing direction from bear to bull. When combined with the assessment of other uncertain factors, such as the behavior and action of potential leading stocks in coincidence with the follow-through day, the follow-through day indicator is a demonstrably useful investment heuristic.
     
  6. anil_s_trivedi

    anil_s_trivedi Well-Known Member

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  7. anil_s_trivedi

    anil_s_trivedi Well-Known Member

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  8. amitrandive

    amitrandive Well-Known Member

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  9. anil_s_trivedi

    anil_s_trivedi Well-Known Member

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  10. anil_s_trivedi

    anil_s_trivedi Well-Known Member

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    I received a query by a new trader, How much risk one should carry and how to come about position size.??

    Lets take you have a capital of Rs.1 lac. And i have my rules which says you dont need to bet not more than 1% of your capital. So for 1 lacs it comes around Rs.1000.

    Suppose you wanna buy, stock - ABC limited CMP:100 and stoploss according to your system coming around Rs. 96.2 So thats a 3.8% stoploss. Ideally i would not prefer stoploss more than 8%, a rarest case 10% for a stock.

    SO Rs.100-Rs.96.2 = Rs. 3.8

    Divide your risk Rs.1000 by 3.8 comes around 263 round it off to 260.

    So you need to buy 260 shares of Stock ABC @ Rs.100 With stop at Rs.96.2

    Incase your stoploss got triggered you will have loss of Rs.3.8 * 260 = Rs. 988

    Another thing to remember, if you buying 260 shares @ Rs.100 you are blocking Rs.26000 of your capital, unless you are trading on margin.

    This is what risk limiting and position sizing means...

    Offcourse, in coming future we will dealt with position sizing in R multiples and more intricacies...

    For beginners this will do...

    -------------------------------
    Having a discipline to stick to your stoploss is more important than whole process of investing...
    -------------------------------
     
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