Timepass's notes

Some posts worth saving. I do wish Pradeep would open a thread (or won't mind one of opening a thread of his posts), so that these posts can be copied there. Meanwhile, this is just a temporary storage.

@Raj354u
I follow my system, that I have built. It does not have a stellar record, but it serves my needs.
I have understood that in making a career in stock market there are 2 distinct stages of development, i.e. the Trader Stage & the Investor Stage.
In the Trader Stage, the focus is on building corpus - so this stage involves risk taking. As an investor - the focus is on wealth preservation, a la Warren Buffet. I am in my Trader Stage, since I took a serious plunge in 2013.

As a trader, I have read most of the books on Stock Markets - the usual suspects (Livermore, Wyckoff, Darvas, Tom D Mark, Mike Douglas etc.) and more notably Deepak Parekh. What I have gathered is that, like me, others would also have tread the same path. And, the information available would be exploited by experienced people to feed on newbies like me. So how would you survive... think hard & you would know the answer.

In trading, you would have noticed that everything you know seems to work, but somehow it goes wrong in the end!

Now, is this because someone else is reading your mind/trading terminal. I would say, this has a lot to do with belief systems - individual & collective. In case you have been following today's market... around 8.30 am you would have expected a gap-down & down day like Friday - most of Asia is Red, US dialed the devil (666) last week. Budget is bad, news bad etc. The market obliged, but since most of the folks were bracing for a down day, the market would move sluggishly for most of today & frustrate traders to lose patience & make mistakes.

Most folks would enter the market around 9.30 (because they have read that professionals don't enter the market at Open :)...). These folks and their belief systems would tie them to the screen for most of today. In reality, anyone would have made as much money from 9.15 - 9.20 as from 9.30 to 11.00. It is common belief that we should work hard for making money - and it is true in stock markets. But the quantum of money is in the region of 100 crores. For few thousands, smart & quick work will just as well do.

When I started deconstructing my beliefs, I saw a new way.

Cheers!
@Raj354u

I will not share my Ledger to prove I am successful. What will you guys do with it anyways. And if I don't share my Ledger, you would say I am another trader who lies!

No issues with that too!
I know I don't need to prove to anyone how successful or not I am. End of the day, I trade, I eat, I live!

Now, if this business were a con job - you would not find governments supporting it. Neither will you have dedicated TV channels. I mean, have you come across a TV channel for Roulette or Horse Racing... those are gambling & hence not encouraged.

Your view is that you tried for 12 years and could not succeed,HENCE Trading is all BS. May be you are not meant to be a trader - not everyone can become a soldier or a monk. Accept that & find your true calling.

In case you still feel you can or want to trade, ask about good practices. I am sure all successful traders here will share them. Please know that this business is worth 100's of crores; hence sharing an idea or practice does not make me poor - there is lots for everyone!

Once again, trading is like playing violin - you need knowledge, skill & creativity.
Cheers!
I had quit my job in 2013, with only one intention – establish & grow as a trader in stocks/futures. Why? In my opinion, a job is a person’s greatest risk & liability. I had learned it the hard way… my company was taken over & folks like me (old & high paid) had 2 options – take a severance and leave or work for new terms & conditions.


Since I did not have much liability, I had the good fortune to observe how my colleagues behaved – some of them went for another job (after taking severance pay), some others opted to stay back. And why did they do this? All of them had home loans or other monthly liabilities. Since all had families – a logical option seemed to be: “Let me compromise, so that my family does not suffer!”


While it was tempting to do what others did – and logical it seemed. I was thinking, what if I can create enduring wealth, so that me and my family can have a good living – whether I have a job or otherwise.
I wanted to do some business, but I realized that all business don’t grow exponentially with limited manpower & thus limited efforts. The ideal business where income is not directly proportional to efforts & where increase in efforts leads to huge increase in income was stock trading. And this was one line where my interaction with outside world is more in my control & hence discreet – unlike a shop or service establishment.
Thus, I became a trader!
Like all of us, I too evolved every day. I will put my thought process of my early days & now, as succinct as possible:
CNBC, ET Now
  • Earlier it was for general market analysis by experts. Global market views. Company Results and various trading ideas. And Flash News!
  • Nowadays, I watch to get a quick snapshot of global markets between 08.30 and 08.45 a.m.

Candlesticks

  • Earlier, I used to think this is the tool for price action & trading. Read Japanese Candle Sticks, Chart Patterns (Suri Duddella, Tushar Chande, Toby Crabel, Tom De Mark et al).
  • Nowadays, I don’t use candlesticks patterns

Technical Indicators
  • Earlier life was around RSI, Stochastics, MACD, EMA/SMA/TMA, Ichimoku, Bollinger Bands, Alligator, GAPO, TRIX, CCI, SuperTrend. I used to try various combinations and parameters for all these indicators, but somehow it did not work consistently :)
  • Nowadays, after understanding how these indicators were developed, I use them very rarely.

Volume & Market Profile
  • I spent quite some time taming these 2 monsters and found that these can be easily misinterpreted & can quickly make one go astray.
  • Now I have my own volume based analysis tool that I use to determine support or resistance levels.
Pivots
  • Earlier it was Camarilla, Woodies, De Mark and Fibonacci Pivots that determined my entry and exits
  • I have trashed them all nowadays

Money Management
  • This was the ‘Dude’ stuff to master. Having a high RR was paramount in identifying trades. Risking 2% was key :). Van Tharp & R multiples were just the right thing.
  • Today my MM has matured quite a bit. I risk 5% across all open positions and keep a healthy win ratio, so that my instantaneous risk is around 3%. This subject is quite interesting. As for RR, I trade 1.5 to 2 RR.
So, what led me to becoming a trader from a green-horn?
  • Keeping the trade strategy simple
  • Keeping fixed entries and exits for each trade
  • Questioning my belief system & changing my point of view
  • Focusing on sustainability instead of profitability
  • Not thinking at all while trading, just focusing on trade signals from the system & following the plan
What was the turning point?
Well, I had blown up 6 accounts. The first 3 were typically 'fresher accounts', costing 1L each. After losing 3L, I felt I should reduce my account size. So the next one was 45K.
Then after vaporizing 45K, I did 2 important things:

  • NO MORE F&O TRADING, till all losses are recovered.
  • No more funding on loss making strategies/techniques
The next account was 5K, this was used to sharpen my entry & exit on equities. I grew this account to 25K and then blew it!
Again I started with 5K and grew it to 20K. Then I added 5K more - logic being, increase exposure when strategy is giving positive results. The pressure to make money made me over trade & blew this one also.

Then last year, I took a break, polished my strategy and came back with 1L funding. I trade only cash segment & only intra-day. My overall risk for a day will not exceed 5K, and I trade 4-10 stocks per day. I monitor 150 stocks daily. My net RR is around 1.25 to 3 times daily risk cap.

I am earning & learning :)... touch wood!
 
Continuing the above ....


Thank you. I wanted to post this...I average 50k/Monthly with a 1L account and 15x Leverage. I do only intra day. I close all positions at 1510hrs & always keep a stop loss and take profit level. My trade strategy has a 30% loss probability... in the sense you will not lose 70% of time, but I do not win (reach target price) 100% of time.
Please read the above statement to fully understand how I view MM, and RR in particular.
I need to go out... will come back in 1 hr

OK... the 5 wise men are correct! Money cannot be made from trading in the long run.
Please tell me have you understood the way I view Risk, especially when considering leverage. Put forth your views, I am sure it will help all here to grasp this simple point.

And I will not show my ledger, neither do I need to see yours.

TP, what purpose does looking at other's ledger serve? You know that the only purpose would be a ego boost or ego bruise. Instead let me show a practical application of leverage (may be this will help someone):

Lets assume 100 Rs. as fund available & 10x as leverage.
Now assume we trade SAIL today. The previous close was 84.8. Since market is down, we expect to short at open which is 78.

Method 1:
Cash available: 100
Margin available: 100 x10 = 1000
No. of shares = 1000/78 = 12.82 or 12 shares
Max loss =10
Hence SL = 10/12 or .83 Rs. away (at 78.80)

Method 2:
Entry price: 78
Stop Loss: 78.8 (or 1%)
Max Loss: 10
No. of shares: 10/.8 = 12.5 or 12 shares

Question is, which is correct Method 1 or Method 2, in determining the position size.
In my earlier post, I had asked which method was correct in determining the position size. Now add this twist:
The capital is 1000 with 10x leverage
Minimum 3 positions to be taken
Max risk on capital not to exceed 5% or 50

How would one split the risk between positions and arrive at the individual position sizes?

I am trying to help others understand this subject. Please pour in your suggestions.
Lets consider 3 stocks, SAIL @ 78, SBI 285 & RELCAP @ 421, how do we split the Risk of 50 Rs. between these stocks.
One of the option is to divide the margin (1000x10 = 10000) between 3 stocks equally - but is this correct?

The other is to split the Risk (Rs. 50) equally. But, would this be correct?
I will not try to prove anyone wrong. No body can make money trading.
However, this is applicable only when you use or follow existing methods or tools. To win this business, you need an EDGE.
I don't use bespoke applications and techniques. But, my system is based on NSE EOD data - which I consider as 'TRUE DATA'. This is how my system looks:
View attachment 23958
View attachment 23959

Interpretation - SBI above 289.75 is in Up Trend, Key Levels are 291, 303. Ideal long around 294. The Level Strength, indicates where the Stock can hit on mean reversion & also the Key Supports/Resistances.
Like this I do for all stocks I trade.
View attachment 23960

This is my dashboard.
In my last post, I have shown almost real-time assessment of 25 stocks. Of the 150 I track, this 25 made to today's list.
Now, I can trade all 25 stocks with a risk of 300Rs. and Reward of 500Rs. Do the math, as all positions will not be open all at once - trades will be done only when the Trend and Signal matches the EOD level assessments. Assume I have a 10% win ratio - as someone pointed out. In reality I have a 30% loss ratio.
30% Loss = 8 Trades x 300 = 2400 Loss
10%Win = 3 Trades x 500 = 1500 Win
70% Break even, so net loss of 900. Not bad at all, considering I traded 25 times with a lousy win ratio of 10%.
 
http://www.traderji.com/community/threads/self-talk-for-trading.107004/page-3#post-1315020

I am a disciplined trader. I trade on the --- minutes chart. I limit my trades to two a day.


I use stop loss. I keep my stop loss at the recent swing high or low.. I take a screen shot of each trade. I record each of my trades. At the end of the day, I review my trades to find where I went wrong and how to improve.

I check the risk and reward of each trade. I enter a trade only if the risk to reward ratio is equal to or less than 0.5.

After my initial target is reached, I trail it by moving the stop.

I use money management. I keep my total risk less than 5% of my total margin in a trade. That is, if the risk is more than 5% of my margin, I avoid that trade.


I read at least a page of the same trading book everyday till I complete it.


I do yoga/exercise every day. I prepare myself for each trading session by warming up with some light exercise. I am moderate in my lifestyle- eating, drinking, sleeping etc.

Before and after a trade, I erase all previous trades from my memory- wins and losses.


I avoid trading just before a news release.


I read positive thinking books.

I trade only one instrument and one strategy and one time frame until I feel comfortable using the strategy.

I memorise important price levels- these are usually the previous highs, lows, and congestion areas. Today's open, high, low, and previous day's close are also important levels.

I always trade with the trend. I confirm a trend reversal only when price breaks the trend line, and retests the previous high or low. I enter only on pull backs to the EMA.

I avoid taking counter trend trades until after:
  • The break of an important trend line, and then
  • One more move to re-test that new high/low, and then
  • Wait for prices to move to the other side of the EMA

In break outs, I wait for a retest of the high or low.

I avoid buying or selling the break out of a trading range. If the trading day is a larger trading range type day, then I fade all breakouts. However, if it is a trending day, I wait for the break out to fail and start to pull back. Once the pullback slows down, I look to join in if prices turn back with trend again.

I avoid trading when I am not well - emotionally or physically.

The market is a speeding train. I avoid standing in its way, but try to catch a ride when opportunities present themselves.


If I am winning, I do not increase my capital overnight. I increase it gradually, or I use only the profits to reinvest.


By strictly following the entry rules, I might miss some entries (e.g- when pull backs don’t happen)--but this minimises my losses if and when a trade fails.

Trading keeps me intellectually fit and alert; but I keep my mind free to live life fully each moment. In other words, I try to find joy in each and every task.

x-x-x-x-x-x-x-x-x-x-x-x-x-x-x-x-x-x-x-x-x-x-x-x-x-x-x-x-x-x-x-x-x-x-x

Newtrader101's post
 
Investing in Index Funds through SIP.. posted by Einstein


https://www.traderji.com/community/...ith-into-investing.91042/page-93#post-1326057


Hi TP,

Index funds are available in two types, ETFs (exchange traded funds) and open ended index funds (the typical mutual funds that we buy).
Index ETFs have to be bought through brokers on the stock exchange, so you need to have a demat account to trade in them. The costs would be marginally lower than open ended index funds, giving you slightly better returns. However, you cannot do a SIP (fixed amount every month) in ETFs, because you have to buy whole units only and as NAVs will change every month, you will buy in different values every month. In the case of ETFs, it can also happen that the market price is different from NAV, sometimes lower than NAV, which you will not see in open ended funds. Lastly, at the moment ETFs do not have much liquidity, hence buying and selling them in decent quantities can take some days, plus you cannot predict the average price you would pay or get.

Index funds of the open ended category do not require demat accounts. They can be bought in typical SIPs (fixed rupee amounts), as these funds allow fractional units to be transacted. You transact at NAV, there is no different market price as you may see in ETFs. So irrespective of the quantity of units, you will pay or get a uniform price for your investment.

Currently open ended funds may be better due to liquidity and price stability.Below are few..

The Best Index Funds for 2018
Index funds, as the name suggests, invest in an index. These funds purchase all the stocks in the same proportion as in a particular index. The scheme will perform in tandem with the index it is tracking, save for a small difference known as tracking error.
the performance of the index. Here’s the best index fund available in :
ICICI Prudential Nifty Next 50 Index Fund
This is an Index Mutual Fund launched in June 25, 2010. It is a fund with high risk and have given a return of 12.65 % since its launch.
Returns per annum over the years from this fund are:
Duration
Returns
1 year
17.64 %
3 years
12.87 %
5 years
19.41 %
  • This fund has been rated as a 5 star fund by Groww.
  • AUM of close to ₹ 157 Cr.
  • Age is nearly 7 years. So its performance can be easily judged.
  • Has consistently outperformed its benchmark Nifty Next 50 TRI since its launch.
  • The top portfolio holdings of the fund include Titan Company Ltd., JSW Steel Ltd., Bajaj Finserv Ltd., Motherson Sumi Systems Ltd., Britannia Industries Ltd., Godrej Consumer Products Ltd., CBLO (CCIL) etc.
  • The holdings are balanced across various sectors with maximum weightage given to Consumer Goods ( 27.5 % ) followed by Financial Services ( 17.9 % ).
The objective of the fund is to invest in companies whose securities are included in Nifty Junior Index and to endeavor to achieve the returns of the above index as closely as possible, though subject to tracking error. The fund intends to track only 90-95 % of the Index i.e. it will always keep cash balance between 5-10 % of the Net Assets to meet the redemptions and other liquidity requirements. However, as and when the liquidity in the Index improves the fund intends to track up to 100 % of the Index.
UTI Nifty Fund
This is a Index Mutual Fund launched in February 14, 2000. It is a fund with moderately high risk and have given a return of 10.98 % since its launch.
Returns per annum over the years from this fund are:
Duration
Returns
1 year
14.59 %
3 years
5.64 %
5 years
12.35 %
  • This fund has been rated as a 5 star fund by Groww.
  • AUM of close to ₹ 716 Cr.
  • Age is nearly 17 years. So its performance can be easily judged.
  • Has consistently outperformed its benchmark Nifty 50 Total Return since its launch.
  • The top portfolio holdings of the fund include Reliance Industries Ltd., HDFC, Tata Consultancy Services Ltd., ITC Ltd., ICICI, Infosys, Kotak Mahindra Bank Ltd., Maruti Suzuki India Ltd., Larsen & Toubro Ltd.etc.

    The holdings are balanced across various sectors with maximum weightage given to Financial Services ( 36.5 % ) followed by Energy ( 14.7 % )
  • Minimum SIP = ₹ 500
  • Equity share = 99.3 % , Debt share = 0 % and Cash = 0.7 %.
  • Large Cap share = 100 % , Mid Cap share = 0 % and Small Cap share = 0 %
  • UTI NIF is an open-ended passive fund with the objective to invest in securities of companies comprising of the Nifty 50 in the same weight age as they have in Nifty 50. The fund strives to minimize performance difference with Nifty 50 by keeping the tracking error to the minimum.
HDFC Index Fund – Nifty Plan
This is a Index Mutual Fund launched in July 17, 2002. It is a fund with moderately high risk and have given a return of 18.17 % since its launch.
Returns per annum over the years from this fund are:
Duration
Returns
1 year
14.37 %
3 years
5.58 %
5 years
12.48 %
  • This fund has been rated as a 4 star fund by Groww.
  • AUM of close to ₹ 312 Cr.
  • Age is nearly 15 years. So its performance can be easily judged.
  • Has consistently outperformed its benchmark Nifty 50 since its launch.
  • The top portfolio holdings of the fund include Reliance Industries Ltd., HDFC, Tata Consultancy Services Ltd., ITC Ltd., ICICI, Infosys, Kotak Mahindra Bank Ltd., Maruti Suzuki India Ltd., Larsen & Toubro Ltd.etc.
  • The holdings are balanced across various sectors with maximum weightage given to Financial Services ( 36.4 % ) followed by Energy ( 14.7 % )
  • Minimum SIP = ₹ 500
  • Equity share = 85.9 % , Debt share = 0 % and Cash = 14.1%.
  • Large Cap share = 100 % , Mid Cap share = 0 % and Small Cap share = 0 %
The objective of this Plan is to generate returns that are commensurate with the performance of the NIFTY, subject to tracking errors.
HDFC Index Fund – Sensex Plus Plan
This is a Index Mutual Fund launched in April 03, 2008. It is a fund with moderately high risk and have given a return of 16.60 % since its launch.
Returns per annum over the years from this fund are:
Duration
Returns
1 year
44.19 %
3 years
21.21 %
5 years
25.14 %
  • This fund has been rated as a 4 star fund by Groww.
  • AUM of close to ₹ 117 Cr.
  • Age is nearly 10 years. So its performance can be easily judged.
  • Has consistently outperformed its benchmark S&P BSE Sensex since its launch.
  • The top portfolio holdings of the fund include Reliance Industries Ltd., HDFC, Tata Consultancy Services Ltd., ITC Ltd., ICICI, Infosys, Kotak Mahindra Bank Ltd., Maruti Suzuki India Ltd., Larsen & Toubro Ltd.etc.
  • The holdings are balanced across various sectors with maximum weightage given to Financial Services ( 34.1 % ) followed by Energy ( 14.2 % )
  • Minimum SIP = ₹ 500
  • Equity share = 100 % , Debt share = 0 % and Cash = 0 %.
  • Large Cap share = 90.1 % , Mid Cap share = 9 % and Small Cap share = 0.9 %
  • The scheme aims to invest 80 to 90% of its assets in the companies that form the Sensex and between 10 and 20% of the assets in the companies which are not included in the Sensex.
 
Something to take note of, if there is any problem about taxation :

https://www.traderji.com/community/threads/limited-scrutiny-notice.103031/page-11#post-1327400

Update: Received assessment order with nil demand but a lot happened in between which i am sharing for reference of fellow trader buddies who might face this situation in future, so here it goes:

After uploading my response to notice u/s 142(1) nothing happened for a month and in last week of july Assessing officer directly called up my CA to visit him as there was some "requirement" , on his visit he was asked for long redundant form 10db and STT transaction statement followed by "How much?" My CA told the officer that form 10db and STT statement will be submitted but there was no question of "How much" since his client (me!) has paid his taxes honestly and does not believe in "How much" . There after my CA submitted online under e proceeding : Form 10DB and STT form and a letter which mentioned that officer had asked for these documents to be submitted physically where as i have opted for e proceeding. All these documents were also sent in hard copies to the officer which he refused to acknowledge for the obvious reasons. After a week this time i received a call form the assessing officer himself asking me to visit him personally to which i replied since he called up my CA directly he should deal with him only. He called me 2/3 times again which i didn't pick up.
Thereafter nothing happened until September last week when perhaps to intimidate me i received yet another notice under sec 142(1) informing me that my case has been transferred to Assistant commissioner and i shud submit all documents online under e proceeding which i had submitted earlier under sec 142(1) Which was promptly done by my CA. After a month or so my CA received a call from assistant commissioner's office to visit for some " requirement". When he visited he was asked to submit Global report which is nothing but Profit Loss statement which i had already submitted 3 times on e proceeding site and also confirmation of loan taken from my father which i also had returned in the same financial year. T His time my CA went personally to submit the hard copies but the Asst commissioner was on leave and when contacted by his assistant on phone told my CA to submit the documents online under e proceedings which was promptly done by him. Now on the same day i received a call from Asst commissioners office to visit personally to which my reply was the same: you directly called up my CA so deal with him. After a few days again i received a call to visit this time i asked them to give me in writing for what purpose they are calling me to visit. Thereafter they called up my CA again and asked him to visit to which he also asked to give in writing for what purpose they want him to visit to which the reply was there was no "requirement" as such they just want to "discuss" something. Anyway my CA went to visit the Asst commissioner and asked him if there is any further requirement to close this case and Asst commissioner told him no requirement but send your client to visit to which my CA told him that his client has paid his taxes honestly and he doesn't think i will visit anyway.

I was never under any fear or intimidation at any point of time as i had paid my taxes honestly and my return was also audited this time. Cheers !
https://www.traderji.com/community/threads/limited-scrutiny-notice.103031/page-11#post-1327400
 
Hi

Great job on dealing with this. Being a CA I just know how the IT dept works - better than the indirect tax dept but still disgusting for any person with some integrity..

You really should escalate cases like this to higher authorities through formal mails I think. I don't think anything will happen but there is an outside chance that a good officer in a higher post will make note and that can result in some structural changes in the long run.. And you already wrote all that, so just might as well forward it - you can get the mail ids of higher powers in the Income tax websites if you dig through

However, there are risks to doing this as the concerned officers will try to avenge you if there is an impact on them, which is low probability, so be warned..
 

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