Skits from VV thread...V.Imp.

[Czar]

I have gone thru all his 43 pages & please please read following before making fresh trades:

Market Commentary:
What I didn't want to happen, it happened. The markets trend line is broken. We are in for correction. I will hold this view, till it comes back to the trend line or forms another trend. But, I sincerely suspect. Market is going to setup for First Thrust pattern. Meaning, selling follows by more selling. At some point, it will be in oversold condition. Then, there may be couple of days of buying, which will be followed by more selling (by those who missed selling now). Given this view, I suggest avoid buying till we see better conditions in market.

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Last edited by vvonteru : 16th May 2006 at 02:44 PM.

For All:
Remember, We can always make money. But, never make adjustments on how We do business. What I mean is, never move stops. If we do and lose money, we are not just losing money. we will lose confidence. This will affect the outcome of decisions on other positions.

See, there is no right or wrong in analysis. It is just my view versus Ur view. I may be right one time, U may be on another occation. But, if U base Ur analysis on a set of principles (methodology) and trade, there are high chances that U will be right more than U are wrong. If U don't after a while, U need to modify/change Ur principles. Most the people try/think they can get it 100% right. Its not possible.

Imagine U have fallen from 10 steps. U are trying to recover. U are about to get up. But, U see this gush of wind in the proportion of cyclone. Can U guess what will happen to U. Will U get up or fall down. If U do fall down, how long will it take to get up again after that hit.

The reason I gave U that analogy is, the market had a bad hit today. It has come back to the previous trading range. This is bad. When market loses so many points, these beaten down stocks get killed more. At this point, its just not this stock, avoid entries to all stocks. I will cover this further below.

Market Commentary:
When it had 2 days pull back, I thought, this is what I wanted on Friday night. But, looking at world markets, I had a bad feeling on Sunday evening. But, I did give benefit of doubt to Indian Bull Market. I can't say I was not surprised the way it happened. At this point, lets adopt wait and see approach for couple of days to get better understanding what today's price action means. Hopefully, 50 day EMA will act as support for Nifty and Sensex. If U have existing positions, take partial profits or/and trail Ur stops to make Urself comfortable. Avoid new entries for now.

This stresses the importance of not buying directly into a stock. Try to buy at a point where U feel the stock really has scope for turning back. This is called, 'No Ticky, No Tacky'. Its like saying to the stock, 'If U don't perform, U will not get rewarded with my money'. Ofcourse, there will be times, where Ur buy point will be hit and then the stock comes down. Didn't I say in my previous reply that there is no full (fool) proof method. We just do the best.

It is in the first day of pull back. There may be 1 or more pull backs. U have to sit tight. This should be a lesson for U not to catch something which is going up. Wait for pull back. I know it is hard to see something flying and U are not part of it. The waiting is hard part. But, what is other option. U buy at high point, see the stock going down and U are very uneasy about it.

Correction:
A loss of 7 to 10% can be regarded as correction. This can happen in 5 to 10 days. There after, the market or stock can continue to lose points or start a new trend. From our point of view, we need to avoid new positions, take profits and trail stops for existing positions. We just need to differentiate between normal profit taking verses sell off.


Currently, how many people predicted correction in the market (I was effected by that talk too). Every Tom Dick and Harry was expecting correction. I was talking to my brother-in-law who doesn't know ABCD of stocks. He was talking about correction. What happened? No correction. It is so much better not to heed to the news. Just observe the price action. If the price action gives the signal (based on Ur methodology) to buy, go ahead.

About the news, somebody asked me to buy INFOSYSTCH on good news after earnings. I gave the above advise to avoid the news. Didn't it go down after those wonderful news. So, news shouldn't be our criteria for stock buy signal.

Note: The above explanation was directed to all readers. I don't want U to get offended or something. A while back, somebody did get offended by my general comments.

Bottom Picking? Please don't.


Now, if U have already took positions in these stocks, there are couple of options.
1. Exit for profit if the stock chart is really bad.
2. Gracefully exit for no loss no profit.
3. Give a stop for last chance for the stock to make it.


Lesson: Stocks give you at least 1 chance to get out (in my observation). Lets say you did not honour Ur stop (I don't want U to do that). The stock will give you another chance to get out. But, in most cases, we don't get out. We get greedy and think there will be follow through. My suggestion to you guys is, when in doubt, execute 25% or 50% of position, either on the sell side or buy side. Atleast U will not be 100% wrong. Don't try to get every thing right. Don't be hard on Urself. Accept the fact that there will be mistakes made (even if U are a pro) and we will learn from them.


Tracking 5 to 10 stocks:
For beginners that should be it. Just track them. Wait for pullback and enter. Don't go around 100s of them. U go around and comeback, these 10 are gone (Isn't there a saying One rabbit in your hand is better than 10 around the bush). Once U get hang of it, I suggest use a scanner to program patterns U like the stocks to exhibit. Once U get the result of the scanner, U should be able to judge based on the charts.


--- Please. I have said in most of my recent replies to look at the MARKET (NIFTY/SENSEX). They are falling as rocks right now. Wait for them to improve. If not, you will be catching a falling knife. Do not make new entries. We will have lot of opportunities


Ideally, you want the market to test the support successfully. "Successfully" is the key. We want the market to test the support, pull up and pull back but not go below the support. When it pullsback, thats when you would enter above the pullback. Ofcourse, I am talking about my methodology.

So, the lesson is, don't use news as the reason for trading signals. You signals should be entirely based on your methodology. No exceptions. Even if you know U can make money easily if U can make 1 time exception. U should not.

Money (greed) should not drive your signals. Your methodology should. This is required for your long term survival. U should come into this market thinking that U will be there for long time to come. You should accumulate money slowly. Do you know how many get busted in the 1st year? Do you know why? Greed!!!!!


Before we delve into anything below, I want to touch on the market in general. Please avoid new positions for now. We will have to adopt wait and see approach with the market. Stick to the stops you have (for traders). Don't move them as the market approaches your stops. Elder calls them losers, who move stops down.


What I meant about the statement is, make trading simple. When you start trading initially, we come to the market with some pre-concieved notions. That you can easily make money and fast (read greedy). When you don't, you think people who are making money know something you don't know. They are using indicators and waves etc etc which you are not using. Thats the reason you are losing money. If you didn't have this thought, thats fine. I am talking in general.


My Methodology?
Basic underlying pattern is pullback. The question is after what scenario the pullback is of interest to me? I can give you one scenario which is useful in the current market. 52 week high and pullback. Ofcourse, clean chart with a trending stock.
When I enter, I never enter directly in to stock. I enter with a buy stop above the yesterday's high (given that there was a pullback). The value above the high depends on the stock price and volatility. Once I enter, I determine my risk and initial profit target. I keep them same amount value. The risk depends on the stock price or chart pattern.

Once the profit hits, I sell 50% and move the risk stop to where I bought. At this point, I am breakeven and will be playing with table's (read other's) money. As the stock goes up, I move the stop. When, I do this, I don't move the stop close to the current price. I use bases to move the stop up, giving lot of room to the stock. This should be ok since we are already in the profit. Our goal should be to get the max out of the stock. Therefore, you choose not to micromanage at this point. So, thats the reason, I am more of a intermediate player.

Book the profits ...
In most cases, I don't sell all the shares directly. I sell in chunks when there is huge movement in the stock. For example, from the above you know I will sell 50% when the initial profit hits. Then, on further movement, if I decide that the stock has run good enough, I may sell 10 to 20%. I trail the remaining 30% with a stop. This may continue.

[Czar]

By the way Dear VV I know you will say I took a fat chance but I made big time on the heavy shorts on siemens...please forgive my obsolence...

[srisara]

nice article. much needed at this hour..

satya

[amitjindal06]

your views are interesting...do keep on posting views like this as they can be of great help to us....is there any other way of minimising the losses

[Czar]

Originally Posted by amitjindal06

your views are interesting...do keep on posting views like this as they can be of great help to us....is there any other way of minimising the losses

not my views they are from the vvonteruji's thread.... I cannot imagine myself being so wise....

minimising losses ? why ??? go with the trend short the market on a rise with stop losses why cannot you do reverse thinking.

Say you like reliance and you buy at 700 with view that market will reach 12K you hold it even if it falls a little....same way if I feel the market is highly over (you have to think yourselve, not listen to 10 people) then you short sell...eg. I sold siemens few lots at 5900 it went to 6150 after news of being included in MSCI index & all other noise but the pattern definately was H&S...I covered at 4950 on friday...I can see unimaginable profits on the down side but patience is required....

imagine it took more than 1.5 months to go from 5K to 6K but 3 days to go from 6K to 5K....

Other thing since 10.5K levels I have being day trading in shorts only cause I knew the trend will change soon...initially I made a mistake of going behind nifty & lost quite a bit, then I left nifty & did shares like satyam , siemens, tatamotor, maruti, etc... 70 % of the time in that rising market I made money & got out...only on days where the market did a 300 pt rise I lost... I believe those who knowshorting always make much more money the going long & that to much faster...

No share can go straight up but mostly all go straight down...

[vvonteru]

Originally Posted by Czar

By the way Dear VV I know you will say I took a fat chance but I made big time on the heavy shorts on siemens...please forgive my obsolence...

My friend was quoting professional trader other day. Do we want to be right and lose money or just make money. I know all of us say, yes, make money. But, looking deeper, making or losing money is related to time. Today ('s date), we may say, hah I made money, forget about being right. Fast forward (>>) 1 month. U lose money for following the wrong way. What do think now about the trade U did 1 month back?

I am not suggesting U did wrong in siemens. Its been a while we discussed it. I just remembered a discussion with my friend. Things have changed so much. Definitely, the market is set for shorting for short to intermediate time frame. When U do short, do not short into oversold market (U know the fools theory). For example, right now the market is in oversold condition. Wait for couple of upticks. I know U know it better.

[Czar]

ofcourse sir...cover friday afternoon & am long for a day or 2 in cement....I think it will give relief after a week long thrashing...

[vvonteru]

Originally Posted by Czar

ofcourse sir...cover friday afternoon & am long for a day or 2 in cement....I think it will give relief after a week long thrashing...

I often suggest Elder's books. One of my friend has DVDs of his campers meeting. I watched them. This is how it went.

Dr. Elder said, 'When in uptrend, we should wait for value/pivot/pullback point to enter. This is because, the stock cannot continue to go up. It comes down once in a while'.

One student asked the question, 'In this case, when the stock goes up, should we short it, because, it has to come down right?'.

U know what Elder said, 'Don't try to out smart the market. When in uptrend, don't go short. When in downtrend, don't go long'.

Hope U got the point. If not, here is Jesse Livermore saying, 'There is time to buy, time to short and time to go fishing'. Here is my saying, 'There is time to buy, time to sell, time to short, time to cover and time to stay aside'.

[Czar]

lol you spooked me again...your knowledge has no boundaries sir..for every action you have a appropriate quote...This time i will follow...

[Czar]

Some of my views posted somewhere else...for the new guys who think prices have fallen a lot so good opportunity to buy:

1)what happened to the brilliant software IT companies of 2000 - you must be aware how they kicked 1000's of jobs after the worldwide crash...this is DEJA VU !

2) India was & will keep growing we have always been conservative grower unlike other asian countries who have seen boom to dust in a zap due to trying to grow very fast...

3) yes the team of FII & other high end people invested in 2001 when your sensex was 3K...even if they massacre the market now & take it to 4K they will be earning billions already...dont buy such nonsense...

If we assume faber dint enter at 6K (ASSUME because they say so..being an investment guru - he decided to rest this time...who are you kidding - these guys have multi facet operations...its like saying Dhirubhai is not buying but anil & mukesh are) so we assume he dint enter but you know now how the market tanked what if he shorted the market...see the prices of 2001 before you assume things, eg. acc - Rs. 95, grasim Rs. 250, our darling tata motor - Rs. 60, Tisco - Rs. 70...now tell me if they bought then sold & shorted & if IT crash deja vu happens & prices go back there 2 way earning will be a dream to us...