Trading Nifty

Dear Ashish,

You have got my thinking almost right. Let me correct a few things....

I did not think that the market had discounted the CRR hike. What happened was that the market after the initial fall, came back to 4460 level very quickly. As the market was expecting a 25 basis point CRR hike, the actual hike of 50 basis points was totally unexpected. As a student of economics (I prefer to call myself a student, even though i teach the subject at a Business School), i was very surprised at the quantum of the hike.

To be honest i was not anywhere near the terminal, when the hike was announced. i got the news on phone from one of my friends (i have a network which will give me relevant news when i am not online). The initial shock and the fall to about 4410 levels was on expected lines. But what does one do in such a situation? Instead of booking a loss which would have been 120 points, i waited for the market to recover, which it did. My pattern analysis meant indicated that the market should come back to 4460 odd level before it goes down. So if i had to exit from my long position that should have been the level.

But another thought crossed my mind, that the market was poised for 4700 levels prior to the CRR hike announcement. this meant that the market pattern prior to CRR hike would also hold value and may take the market up to 4550 levels. Of course that could not be certain. So instead of exiting the long position and shorting, i simply hedged at 4460 levels.

Next of course i should have exited my long position before the close when the market hit 4530 on the nifty future. However, i thought that there was a strong possibility of the market hitting 4550 in the morning next day in the first few minutes before falling. As i said earlier that was a mistake in the hindsight.

Once the market opened with a huge gap, had i exited my long position i would have booked a loss of 150 odd points. You would note that the maximum the market lost after that is another 100 points in intra day trades, with the market closing above 4300 levels every day or a 200 points M to M. this is what i had studied overnight. In my view the market seemed unlikely to go below this level. So instead of booking a 150 point loss i prefered to wait. Had it been 50 points instead of 150 odd, i would have booked the loss.

You have correctly understood that i did not want to take a decision in intraday trades and waited for the close. This is because i had analysed that the market is bound to return to 4500 levels this month. In any case, many decisions taken during intraday trades dont work for me ( i prefer saying that instead of saying intraday decisions are often wrong, as day traders would be up in arms against me). I have done my share of day trading and abandoned it.

Finally , i could have exited and shorted, but i was anyway holding a short position (in the form of a hedge) which i covered 100 points down and booked a profit. So effectively, i brought the price of my long position down from 4530 level to 4430. Since then i have managed to get the effective cost of my nifty further down by another 100 points. Now the obvious question would be why this rather than exit totally and short?

The answer is that i still believe we shall see markets at 4700 levels and yes even 5200 levels. So i prefer to be long rather than short. Had i seen a level of 3500 from the patterns i would definitely have reversed positions. As of now you can read it this way that i am effectively sitting on a long position acquired at a net cost of 4330 odd (having booked 200 points profit in the meantime)

Finally, Dow has moved up 286 points today. What if nifty opens up sharply and does not look back? With a long position, i am well poised to take advantage of this situation, where as those who have exited all long positions may have to buy at higher levels.

Finally the final word, it took me 7 years of learning to figure all this..The biggest benefit is that i no longer require to sit 5 1/2 hours on my terminal. I go out without fear. For about 20 days in June i was touring, without my laptop and the only thing i used to do was to call up my broker in the morning and give him instructions. My friend network would just sms me 3-4 times a day to give me an idea of how the market traded..I was in a position to do decide without the use of all the tools like TA (even though i do use TA also as a tool).. what it did mean that in June i was not able to make as much money as i would have had i been online, but still its a far cry from the days when i used to fear leaving the terminal even for 5 minutes.

Hope that answers everything.

With best wishes,

Gaurav Kumar

Dear RKKarnani,

Discipline need not make one rigid.. that is what i learnt at some cost..
Let me tell you over the years i have been in and out of futures in the first 7 years of investing experience.

There was a stage when despite being able to predict the market well i had stopped trading futures as i had lost a lot ,thanks partly due to the SLs that kept getting trigerred. everytime it would appear as the market would fall to just my SL level and then rise leaving me with a loss even though my analysis was right.

After having lost everything i had earned, i traded only cash segment and made some money. This i did with a longer horizon in mind rather than intraday trades.

Finally, i started applying the same principles to F&O. The only modification is that i had to take into account sharp market falls. Once i studied that nad developed control, there has been no looking back.

It would interest you to know that i am holding ITC futures at a price from the price of 155 for about three months now with a price target of 200+. The only trades i do is to roll over every month. And the returns would be much higher than what i would have made if i had traded it. In effect i should get 150% plus returns in less than a year. I hope that kind of return is good enough for all traders...

With best wishes,
Gaurav Kumar

today market nifty trade positive but donot forget to buy put at the end bcos long term trend is still negative,us market bounce is temporary so keep both call and put option till market stablize.

Dear Friends,

We should expect the reverse of yesterday's moves to happen today. The market should open with a big gap up. Let us see where it opens.

If it opens below 4400 , say 4370, we may buy for a target of 4400.

If it opens around 4440 (cash), or goes to that level, we shall short september series and cover 20 points lower.

What we really expect is that the market after a very strong opening shall progressively fall a bit. It may ultimately close around 4400 levels (cash).

With best wishes,
Gaurav Kumar

http://www.traderji.com/106390-post141.html

Thks for sharing your views.Plz stick to your comfortable time frame ,all through out ,when this is giving you money,(unnessary to advise you,you are well aware of this & you yourself sorted out the negative),still this is heart felt,seen my guys falter sometimes.

Dear Friends,
We have taken a nifty future at 4345. we plan to sell at 4380 odd to remain on the safe side.

Gaurav Kumar

To me just like honesty, i.e one can either be honest or dishonest, there is nothing like "not that honest" or not that dishonest. Similalrly there can only be 'discipline' or indiscipline. There cannot be a 'flexibility' in discipline.

Well SL are there to safeguard one against any counter move. If used at proper levels are really effective. Though I agree that many times they get triggered and from almost that level we find the trend reversing in our direction. But if the ratio of SL that kept u out of a profitable trade and the SL that saved you from BIG LOSS is in your favour you are bound to win. Lately I find that if 10 of my SL are triggered alomost 4/5 SL moved me out of a profitable trade but the remaining 4/6 also saved me from huge losses thus making the strategy really positive to my overall strategy.

Dear Ashish,

Agreed with what you say. That is precisely why i advised that people should do paper trades before trying my methods.

What "traders" do not take into account is that market does not fall like a stone. It yo yoes, which gives you opportunities to exit. "Traders" often take decisions in a spur of the moment and lose money. At least i was not successful. So i switched to this method.

You would notice that at any given time i have enough back up to handle a sudden fall, so cannot falter easily. Yes, i would agree that for a new trader, it would require nerves to handle waht i do. I have taken years to overcome fear. That of course was without guidance. Now i do guide others and i find that on an average it takes about three months for a person to overcome fear under guidance.

With best wishes,

Gaurav Kumar

PS the target of 5200 on Nifty is in the long term, so it is not that i am planning to hold this position till then. But what it does mean is that i do think twice before holding a short position, whereas i dont mind holding a long position

Dear RKKarnani,

Lets figure this out finally. I have my view on SL and you have yours. I have given my logic for not using SL and you have given yours for using the same.

As i have said earlier, if you are making money you are a king. I have nothing against that. Similarly, if my method works for me you should have nothing against that.

Since we have both voiced our opinions on the subject several times, lets leave it at that. It should be obvious to both of us that we cannot influence each other to change our viewpoints which are borne out of our experiences, which are different.

Lets just follow the thread and if you have a question, please ask.

I request that the issue of Stop losses not be raised again. I am tired of responding again and again on the same issue. Next time i shall ignore it.

With best wishes,

Gaurav Kumar

Ok entered the entry point in paper trade. We sell at 4380.
When do we enter more qty. or hedge??? any levels in mind or we decide whether to cross the bridge or not only when we come to it.
What i mean to ask is :
DO WE HAVE ANY PREDETERMINED LEVELS FOR THIS ACTION.
I feel comfy only when i know my actions at certain levels of the mkt.