Very Important notes for newbies traders.

[OMSAI]

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...

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Having a discipline to stick to your stoploss is more important than whole process of investing...
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Courtesy:anil_s_trivedi, member of TJ

 

[OMSAI]

Day Trading:

Also known as 'Intraday',.... positions are usually entered & exited within the same trading day... Obviously scalping fits into this category. Traders in general are interested in quicker, smaller amounts and making multiple trades per day.........

Swing Trading:

Swing trading is typically a short to intermediate term trend following system lasting anywhere from 1 to 30 days.... Traders who swing trade typically look for trend reversals & retracements for their entry/exit points...

Position Trading:

Position trading, also known as 'trend trading', can best be described as a 'buy and hold' method. Positions can be open for a few days, a few weeks, a few months or longer. They are also held during periods of minor retracement with the expectation that they will eventually continue trending in the desired direction................

With that out of the way, let's look at some of the pros & cons of each of these types of trading.....................

Intraday Trading

Pros:
- Smaller take profit target = Smaller risk per trade.
- Because of the amount of trades being placed, compounding has a greater effect on your overall profits.
- You can make money faster.
- Makes you 'Feel Good'. Can be a rush! (Is this really a pro?)
- Allows you to always be actively participating in the market (Is this a pro?)
- Because of the last two, traders can exhibit addictive behaviour (gambling).
- Because most positions are closed out at the end of the day, able to take advantage of interest earned in their account.
- Risk control - positions are closed out overnight so unexpected market changes will not affect your bottom line.

Cons:
- Spread has a larger effect on your overall profits.
- You can lose money faster.
- Very difficult to learn - by some estimates less than 5% of traders become successful.
- Time consuming - very difficult to trade properly if you have a full-time job.
- Fast pace & necessary concentration can make day trading very stressful.
- Extremely Risky! Traders can lose a substantial amount of money in a very short period of time.
- Discipline, proper money management, risk/reward and a profitable system are a lot more important when day trading. Even a small mistake can result in a huge loss.
- Can be harder to predict the market.


Swing Trading

Pros:
- Manageable take profit and stop losses.
- Easier to learn than day trading - higher success rate than day trading.
- Spread has less of an impact into overall profits than day trading.
- Less time involved in actively trading - it is not necessary to 'babysit' your trades.
- Can be worked around a regular job - a couple of hours per day should suffice.
- Less stressful than intraday trading.

Cons:
- Can be difficult to learn and become profitable.
- While it requires less time than day-trading, preparation and analyzing the markets is still necessary and can be time consuming. Tending your positions daily is a must!
- Some traders have a tendency to develop emotional attachments to a trade.
- Discipline and keeping emotions in check are very important. It is not uncommon to exit on a retrace or trend change only to have the market immediately change back and head in the original direction.

Position Trading

Pros:
- The most forgiving type of trading - small mistakes are more easily absorbed in market movement and the size of your eventual profit.
- The easiest to learn. It is estimated that up to 25% of position traders learn to become profitable.
- Less stressful than intraday or swing trading.
- Easier to become successful with smaller startup capital.
- Much easier to predict the market as in general you will be following the overall trend.
- In general position trading is the most profitable.
- Less time consuming than day trading.

Cons:
- Compounding has a lot less effect on profit than both intraday and swing trading.
- Because positions can be highly leveraged and trades remain open for extended periods of time, unable to reap consistent benefits of interest.
- There is inherent risk in keeping positions open over night. It is quite possible for drastic changes to occur in the market while you sleep.
- Money can be tied up for an extended period of time. This can prevent entry into new positions as they arise.
- Because of the length of time involved in position trading, traders can experience significant drawdown with the expectation that it will turn around and start trending back in the desired direction. Psychologically this can have a very negative effect.......



SUMMARY

While position trading is more profitable, day trading is less risky....... The emotional element (discipline and self control) is also of more significance while day trading. The higher the time-frame, the better the chance to succeed and become profitable overall..............

 

[OMSAI]

My Learning & Rules (I will keep adding/modifying it to have one final list)

R1- Book profit as price comes close to your target, don't wait for exact rate.
R2- Taking quick action is the key of success in day trading.
R3- Stop trading for the day, if already got good profit for the day, don't be over confident
R4- Don't trade in a particular scrip/index if you are not confident about the move. It's better not to trade rather than trading wrong.
R5- Don't trade if risk reward ratio is not favorable.
R6- Ready with your trading action plan in advance. Market timings are for action not for planning, one miss can be a big opportunity loss/trading loss.
R7- Move with the market & don’t expect the market to move with you.
R8- Fear & Greed, both are psychological weakness, play with it and don’t get played by it.

L1- Keep a stop loss or a close watch, if your trade move confirmed in negative direction, take exit immediately.
L2- Focus on trade, opportunity can come at any time, don't miss trading opportunity, even a small opportunity can pay you big.
L3- Don't regret if you miss the opportunity, wait for the right one to enter.
L4- Trade patiently, quality of trade matters not the frequency/numbers.
L5- Stop trading for the day,if your most of trades are resulting negative for you. Remember, everyday is not your day.
L6- Trade with your independent due diligence,learning & thoughts, don't get influenced.Trading on someone else tips is like crossing the road as a blind man.
L7- Believe in results, it is only the result that matters.
L8- Don’t target the Market as you are always on the target of Market, play defensive & play safe.
L9- The longer the duration your trade remains in negative direction, the higher is the risk in that trade. Good “Day Trades” turn into profits mostly in short duration.

Courtesy: Whisky, tj member...........

 

[OMSAI]

The Problem, as I see is, we tend to feel that "WIN" is outside ... Actually it is not ...
It is inside .... it is "I" ... I'm The Winner ....

That is the reason, I strongly Believe that Trading is more about the Psyche of the Trader ... FA, TA, TF, Analysis are all inside this "I" ...

Otherwise, how can you interpret ... Two people looking at same charts ... from same school of thought ... But still 1 sells and the other buys ...

It is The Interpretation ... and who Interprets .... "I" and ONLY "I" ...



Courtesy:Galts Gulch, TJ member.......

 

[OMSAI]

I posting this view of my TJ friend......he is Forex trader.....



FX Trading Rules ... FOUNDATION SKILLS

1. Demo trading ... To be familiarize yourself the terminal, lot sizes, currency pairs etc, demo trade between 1 month and two months, depending upon how much time you can dedicate every day. Lots of people will advice to demo trade for minimum 6 months. Irrespective of the end result of a demo trade, the emotional, financial and psychological aspects (Greed to earn more / Fear of losing) will be missing on demo accounts. Therefore, I do not advice demo trading more than absolutely necessary. But, till the time you demo trade, treat it like a Live account. Apply same strategies / Money Management rules, emotional discipline etc just like the way you will treat a Live / Real account. Once you open a real / live account, treat it like a demo account, without any attachment. Remember that Trading is just like any other source of income. DO NOT BE ADDICTED TO IT. Do not trade because you have a live account. Trade because you have Trade-able set up and you have high chances of making profit.

2. Choosing a Broker ... There are two types of brokers ... Market makers (infamously known as bucket shops) trade directly trade against you and therefore all you losses will be their profits. And they will use all Technological tools at their disposal to make you loose. They will have slippages, their terminal will hang more, they will use spikes to hunt your stop loss levels and they will stoop to any level to make you loose. ECN / STP brokers will just provide the trading terminal and all the trades will be executed directly with a bank, which quotes the least for a particular pair. They should be The Chosen One.

3. Trading Strategy ... There is nothing called as Holy Grail system / strategy / indicator. Stop searching for ONE. Practice and stick to one strategy for a minimum one year. Changing strategies will never ever take you anywhere. Do not just Google / read / listen. Practice on your charts. Learn hands on with your strategies. Remember what famous Bruce Lee said "I never worry about an opponent who knows 100 kicks, but I always worry about an opponent who has practiced one kick, 100 times. If something is good for Great Lee, it could be better for us also. Do not run behind automated strategies / Robot’s / EA’s. Any Robot can work like a magic in a trending market, but will fail miserably in range bound market. Remember that a Robot can understand only “0 and 1” and they are coded and programmed to work under few circumstances. That is Static, where as market is always dynamic.

4. Trading is not gambling. Though it is a speculative market, there are Art and Science attached to it. Treat it that way. Respect it that way. The more you learn, the more surprises, it will spring on you. Be prepared. Remember "Better equipped is half battle won". Do not just Google / read / listen. Practice on your charts. Learn hands on with your strategies.

5. Account size ... While demo trading, start and learn with the smallest account size possible. Lots of difference between the practice and real battle ca leave you high and dry. While most of the strategies that work wonders on a big account, fail miserably on a small account. But if you can make consistent profit on a small account, handling a bigger account will be easier one.

Advanced Trading Rules will follow soon …

Haazir hote hai break ke baad …

Courtesy: Galts Gulch tj member

 

[OMSAI]

Know about SGX nifty.............it's very important....for our trading....

Singapore Stock Exchange (SGX)

SGX is Singapore Stock Exchange and is one of the leading stock exchange markets in whole of Asia. It implies that the Indian CNX Nifty is traded in Singapore exchange. In fact, it allows foreign investors to take position in Indian Market and hence, it is a very popular derivative product. Singapore Exchange does not allow Indian stocks to be traded but it allows trading of future products like SGX Nifty Futures.

With the live quote of SGX Nifty Singapore future, it becomes possible to predict Indian stock market behaviour more correctly. Singapore stock exchange is opened about 3.5 hours before the opening of Indian stock market. Hence, the price of nifty future at Singapore exchange can tell you about Indian stock market as well. Nifty future trading is allowed only in F & O segment.

Singapore Stock Exchange facilitates futures trading of NSE Nifty index. And so, Singapore Nifty is settled on the basis of the closing price of NSE (S&P CNX Nifty) Index price.

In SGX, there are two types of Contracts with different settlement periods. One is SGX Quest (T) and the other contract is SGX Quest (T+1). The settlement of the first contract is done in the same day. The trading timings are Monday to Friday from 9:00 AM to 6:15 PM. The settlement of the second contract is done after one day and the trading timings are Monday to Friday from 7:15 PM to 1:00 AM. The different trading timings enable the traders to trade in SGX even if the market is closed. FII’s who wish to invest in Indian future contracts do it through SGX Nifty. SGX in Singapore opens at 9:00 AM which is 6:30 AM as per Indian time. This makes possible to predict the initial direction of Indian Stock market by tracking Singapore Nifty.

SGX Singapore nifty has increased for all Indian equities. It has been trading on profit and has been able to cover several short coverings. With a heavy 14 point discount, SGX nifty has brought many good opportunities for short term sellers.

There is a difference between Singapore Nifty (SGX) and NSE Index (S&P CNX Nifty). SGX-Nifty product is denominated in dollars while Nifty Futures are denominated in rupees. SGX Nifty provides direct currency protection to foreign traders or investors while traders in Nifty futures have to combine position on Nifty futures with a position on the dollar-rupee forward market. Also, the margins at NSE are higher than that of SGX products. COURTESY NET.....

 

[OMSAI]

I believe in Trading Psychology not in method.....what ever method you apply if your Trading Psychology weak you can't survive in this market......specially day traders.....I am not teacher I am still learning from this forum...and Increasing my Trading Psychology .....and some post also helping me......its may help you also............so I am sharing their post.....

Do traders subconsciously really want to lose? view of Galts Gulch.............tj Member

Making Winning ..... a Habit

I have reference many times my travails early on in my trading career whereby fear caused me to expect a loss – completely manifested as the result of my bad habits. How was I eventually able to overcome and change?

Think about some of your own bad habits – especially the behaviors that create the internal dialogue “I know better” or “I’ll never do that again!” The problem is that most of the time your internal dialogue is not supportive of your desired outcome. In order to change those bad habits and behaviors, you must commit to change them.
Commitment – that is the key word. Most traders think they are committed. They spend hours studying charts, asking every question under the sun, and trying to nail down some form of certainty to overcome their fears. However, they are always looking for some external resource to solve their problems.
The commitment that is most vital is the commitment to look inward; to explore the psychology of why you are fearful, why you repeat the same mistakes while knowing they are sabotaging your success.

We know that we must build a belief in our trading plan and trading system. With that we must also build trust in ourselves. That trust comes from having realistic expectations, understanding time is required to become an expert, and working smart.
Happily, I get many emails from traders telling me they are now starting to get it. They are beginning to see the light – working through their psychological challenges. The single greatest revelation is that they all have calmed down and redirected their focus on the process. This is the beginning of positive change. The process as outlined through complete Trade Plan Development is the road map to success. In short, process will lead to profits.
The other great discovery is that they now know they can not trade $500.00 into $1 million. They are no longer counting on pipe dreams and wishes. They are treating their trading as a business, allocating appropriate capital and applying sound principles to their money management. They are developing the patience to seek and execute the best trade signals; following their trade plan and rules.

These are the signs of true commitment; of professionals – and real professionals make money. These milestones build confidence and self-trust.
Now, what once seemed impossible becomes a good habit – a winning habit. The defining moment is when you realize that winning is really not difficult at all. In fact, you will expect it!

So many traders are mystified and curious – somehow still assuming that I am afraid or reluctant to post losing trades. But at this stage of my trading, I just don’t have that many. I have tried to illustrate how winning is possible using thorough preparation; Top Down Analysis, market structure, valid signal choices, patience, discipline and not over trading – all learnable skills! But all skills that required a true commitment on my part!
Remember in My Story that I emphasized that I had to work on me. That’s when things began to change for the better.
My habits changed, from fearful to controlled. I stopped acting like a loser and began acting like a winner- a professional. From there, it became more fluid and simple.
Winning became a habit.

If you don’t have the fortitude or the heart to make the commitment, you are going to struggle. If you do, you will struggle at the outset, but will eventually be successful.
The fact is that most people simply do not want to expend the effort or energy to do what it takes – at anything. That’s really great for those of us who do.
Remember to make an honest assessment of what you are doing and why. Make the commitment to change and follow the process. You will soon find winning the norm, not the exception.
“Long-lasting change that will help you create new habits and actions requires an inside-out approach, as well as two very important tools: the mirror and time.” Darren L. Johnson



Courtesy:Galts Gulch

 

[OMSAI]

What is Sector Rotation? reply of Oilman5


Detail is ton worthy writing ,only hints r given. (No fund manager tells it, as its their bread & butter)
1] Market up starts with banking sector.
2] Cement/steel - 1st sign of economic boom. followed by infra structure.
3] when transport works , infra structure ok- Power sector moves.
4] then starts consumerism - FMCG etc. Common people think of bull market .
5] official growth factor data publish - future looks bright . hotel/tourism moves.
6] With money flow automobile sales up- the sector moves up.
7] All looks good - service provider IT/pharma moves & shifts money as doller appreciated. So safe money starts to move out- dumping to fools.
8] money moves from stock to fixed/Gold etc .
9] Report some problems by media- common people understand , though some corrected - still continue slow price fall.
10] people understand recession/inflation - but broking is still ok( as short possible)- Pharma fund / FMCG in demand as defensive -all r dumped.
...........................
Again a good hope brings up some yrs later.
IF U LOOK SECTOR ,AS MENTIONED IN NSE/BSE AGAINST WEEKLY CHART OF INVERSE CORRELATION up vs down - u can get , this intermediate term trade plan .
for intraday it not suits, some think misnomer - pair trading , for upbias buy/ equal value down bias SELL .
Hope it helps.

Courtesy:Oilman5

 

[OMSAI]

Guys looks Galts Gulch tj member is stock market trainer....So don't think I am promoting him.....if any body ask money for training/method /tips......I am against of them......I don't like paid GURU...... A real Guru work for mankind...not for....money.........

 

[OMSAI]

I always against of Commodity Trading.....because commodity trader have to...direct enter in college..... ...there is high risk.....in Commodity Trading....here is good reply a Tj member....

If equities have the power to wipe out a person's capital in 1 month,

commodities will do that in 15 days.

mcx volume is shrinking day by day, soon it will be shut down .

Except crude, nothing left in mcx to trade.

crude lot size is higher for a new-bie. .

Try to trade in cash segment as low quantity as possible.


Courtesy: ram2010 tj member