Thread: The eldergulls dairy

date 09/05/07 time 1.58 pm

Hi all,
i am continuing my posts in the form of replies as i dont know how to make anew post under my name seperately frrom my previous post. At the outset let me clear my idea in writing this column. I wish to help people who want to learn to trade, and while doing it i want to be with them through their trades. Over a long life in the markets i have found people who prescribe without being in themselves are missing some essential characteristics, namely discipline, sound huuman logic and above all money manegment principles. Its one thing to tell somebody to do something and completely another thing to do it for him. my idea is to not only tellbut show them the way as to how to do it.
When i started learning the marlets way back in 1989 with a broker of repute, i learnt my first few and dare say the most valuable lessons of my life in these markets they are as follows

1] 97 percent of the people lose money in these markets i.e only three percent of the peope come out succecsful trading. Yet i am a full time trader
2] Every brick of the stock exchange building is made out of sucking the life time earnings of one family.
3] Unless u have a good trtading plan dont even comtemplate trading.
4] to develop a good trtading plan u have to be very good with numbers.
5] discipline in trading is extremely important and can be broken down into small measureable actions. ( i will show u how when i start trading with u all )
6] greed and fear r one and the same ( i know u all will be smiling they all tell u this, but then it is a rule i learnt here )
7] Keep doing it only till such a time that u find it fun. The day u stop finding it fun. For heavens sake do something else and i mean it do anything but dont come near the markets
8] The markets are like a mother ( to the 3 percent who make it ) nd like a draculla ( for the 97 percent who dont ).
and some others which i will post later as of now there is nothign that could be done in the markets today. i for one follow the top 14 nifty weight stocks only so they r: bharti: bhel: hll: icicibank: infy: itc: lt: ongc: rcom: reliancec: sbin: tcs: tatamotors: wipro and nothing else. and yes abviously not required to memtion the nifty too. i follow them both on the cash segment as well as the futures segment too. i was looking to buy into ongc today if it closed above 837.55 in cash. It ruled above it in the opening of the day today above this level but has come down subsequently. so had time to write all this from now on i will be consistent with my posts as i have saved the site in my fav and will be using it as a trading journal for indian currencies i trade on the forex market essentially.

date 09/12/07 time 6.44 pm

hi all,
i am extremely sorry as i could not write this week as i was finalising the mode of writing here. i wanted to develop a simple yet effective way of communicating with u all in numbers and the aim has now been achieved. Excuses they say is the mother of all liars lol, so i wish and pray that u dont think me to be one.
so here are a set of rules that i follow in my trading style.
1] i never trade against the main trend of the market.
2] i never trade against the main trend of the stock.
from rule one and two we logically arrive at the conclusion that we cannot trradee in securities whose main trend is not in line with that of the market or vice versa.
3} our entry and exit points have to be predermined.
4] entrty and exit points apply to both money ( price ) and time. ( how much time we stay with the trade.
NOTE it is very important to understand this point and ingrain the principles involved in it.
5] never enter the market without a plan. the plan has always to be decided before market hours not during market hours.

so much for now

date 09/14/07 time 4.06 pm

hi all,
yesterday i.e on the 13th surprisingly the market gave a buy signal. i say surprising because this buy in the markets was not accompained by any buy signal in the top weight index stocks. This is surprising when this happens it is clear sign that there is something amiss. Hence we will see how it has fared today. Monday onwards my posts will be trru;y regular telling all thos who read this column what i am going to do. so happy reading and learning. ( And for those who have the guts to do what i do happy trading too )

date 09/14/07 time 5:22pm

Hi all,

since its the week end now and we r away from the line of fire here are some questions i asked myself before i started trading and here r what my answers were.

Q Whay do so many traders who join the market lose everything eventually?
A i thought that that biggest problem with most of the traders who join the market is that they think themselves to be bigger then the markets. They dont tend to fear the market place, and they lose sightof their discipline and hardwork ethic. Yet we all seem to be working very hard to achieve our goals of being profitable, then there is something amiss here in us not the market. This is the most important lesson of this answer. what it is is for each one of us to identify. It could be discipline or lack or hardwork, or both.

Always respect the market. Never take anything for granted. Do your homework. Recap the day. Figure out what u did right and what u did wrong. That is one part of homework, the other part is projective. What do i want to happen tomorrow?. What happens if the opposite happens?. What happens if nothing happens?. Think through all the what ifs. Anticipate and plan, rather then react.

Q What are the characteristics of a losing trader?
A The composite profile of a losing trader would be someone who is highly stressed and has little protection from stres, has a negative outlook on life and expects the worst, has a lot of conflict in his/her personality, and blames others when things go wrong. Such a person would not have a set of rules to guide their behaviourand would more likely be a crowd follower. In addition, losing traders tend to be disorganised and impatient.They want action now. Most losing traders are not as bad as the composite profile would suggest. They just have part of the losing profile.

Q What is the biggest misconception the public has about the markets?
A The idea that the market has to go up for them to make money. You can make money in any kind of market if u ahve the right strategies. With futures , options and the underlying markets, there are enough tools available to set up a game plan for any situation.

date 09/14/07 time 9.10 pm

HI all,
I know I don?t know. No matter what information I have, no matter what I am doing, I can be wrong. I have learnt two very important lessons in this market. 1] If u never bet ur lifestyle, from a trading standpoint, nothing bad will ever happen to u. 2] if u know what the worst possible outcome is, it gives u tremendous freedom. The truth is that, while u cant quantify reward u can quantify risk.
I knew a friend who was a supplier to one of Indians bigger companies and hence thought that he knew the company inside out. He understood the line of business of this company very well and he was once talking to me when I was short in this particular stock. He kept telling me that what do I know about the company that makes me go short when he was sure it was going to go up. I told him I knew the risk. He, over that lunch which lasted for three hours, told me to be aware of what I was doing as he was a friend and five times over I told him I knew what the risk was.
Three months later I came to know he lost a fortune being long that scrip.. He obviously dint understand my message. Do u know something guys? He really understood the company more then me and the line of business even more then I can tell the back of my hand. But the point is that he dint know what was the risk. Risk is a no fooling game, it does not allow for mistakes. If u do not manage risk, eventually it will carry u out of the market and with a bloody nose at that.

date 09/14/07 time 9.18 pm

Hi all,
A trader is defined in Websters as
A person who buys and sells (as stocks or commodities futures) in search of short-term profits.
It is clear from this definition that someone must buy and sell a security and they do this in order to make money. It is also clear that the time frame is defined as short-term. That's pretty simple and straightforward.
Of course if it were that simple, we would all be traders. Probably what is needed is a definition of a successful trader. That might look something like this:
A person who buys and sells (as stocks or commodities futures) and consistently makes short-term profits.
All traders desire to make profits and most do, at least occasionally. To consistently make profits, however, is not what most are able to do. The key to trading, just as in any other profession is to determine the successful keys in that field of study. Just like in most other professions, there isn't just one set of keys either. There are many successful methods ... proven methods that make money over time. A number of books have been written detailing the habits and methods of consistent winning traders? and as you can imagine, the strategies, thoughts, preparation, and execution are all very different from trader to trader. There is no one right way to trade ... any one right answer. There are many ways, both successful and unsuccessful. The key is to find a way that fits with your style, your temperament, your time frames, your desires and definitions of success ... then to practice, practice, and perfect.
From the definition of a successful trader we have now identified our trading goals
1. The need to both buy and sell securities
2. To consistently make money in a short-term time frame

date 09/14/07 time 10.25 pm

hi all,
One of the most common mistakes of would-be-entrepreneurs is to short change themselves when entering into a new line of work. In the trading business, one area you cannot skimp on is starting capital. The reason for this is that trading is a game of probabilities and any good theorist understands that you can have a string of losses that doesn't disprove your approach but which can put you out of business if you are not sufficiently capitalized. Anyone who has been around the lottery ceentre in mumbai has seen the straggler who sits down at a Rs5 minimum bid lottery and cashes in Rs20 to play. Now, consider to yourself, what are the odds that this player will last more than a few hands before they lose their Rs20? Trading is no different. Anyone who says it isn't a game of probabilities is either sorely mistaken or lying through their teeth. Trading boils down to someone parting with their hard earned money for part ownership in some company. Naturally, the hope is that, sometime in the future, the value of that position increases. The key word here is future. Anything that is future is probability based because it is unknown. It's really that simple. It's really the way you have to approach trading.
So how much money is needed? Well, like anything else, that depends. Certainly with brokerages offering margin, you can start with less than would otherwise be needed, but there is a cost of doing business that way. The costs of margin is that you must pay interest on the margined money and paying interest increases your cost of doing business. That's ok in certain cases, but not something you generally want to do day-in and day-out unless you are a really good trader and the leverage pays for itself day in and day out. For this reason, you should not count margin money into the general equation for sufficient capitalization.
Another often overlooked point is whether you plan to trade for a living or in addition to your regular job. If you are trading for a living, then you will end up drawing monies from your capital base on a regular basis to pay your living expenses. In such a case, you will need even more capital than otherwise would be the case since, as a beginning trader, it will take you longer to become consistently profitable and you will thus be drawing down your capital base.
So, let's assume you are trading on the side, working two jobs so to speak. In such a case, a good starting number might be something like Rs 500000. With 500000 you can take a large enough position to where brokerage costs are reasonable on a per trade basis and yet you are not concentrating too much money in one or two stocks.
If you trade regularly which results in day trades (opening and closing positions the same day), then you run the chance of being labeled as a day trader. If this occurs, you currently need to have a capitalization of Rs 25,0000 or more in order to continue trading this way..
Another part of the capital equation is that you do not want to put too much of your capital base into trading one stock or even a group of stocks in the same sector. The point here is that if you put all your eggs into one basket, you are living dangerously as you are too concentrated. Since trading is a game of probabilities, there are no assurances that even the most certain of your trades will not encounter some unfortunate timing and the trade will turn against you both in speed and magnitude. If you are too concentrated, you can end up losing 20% or even 30% of your capital base overnight. One bad earnings report or preannouncement can do that. Capital preservation is dependent on some level of diversity and a sufficient amount of capital to sustain you during a bad run.
A good rule of thumb would be to never put much more than 25% of your capital base into any one trade or group of related trades on a regular basis. By group of related trades I am referring to buying or selling more than one stock that will typically move up or down in tandem. Stocks in the same sector tend to move in the same direction although in varying magnitudes and speed.

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ADMIN

date 09/16/07 time 4.33 pm

hi admin,
thanks a lot for allowing me to blog on this site. Prior to this i was blogging on a forex site even for the indian markets. This gives me the chance to maintain my blog where the action is. I have already named my blog " atmevaha" which means "ourselves alone". For others who take the trouble to ream my thread i will be posting my entries here and in the blog too, but after a while i guess it will save me the trouble of posting twice and hence i wish to shift to my blog totally. i do maintain a written record of how all my trades panned out. that work will now be done not on the forex blog that i was using but this site. So all of u who r reading this thread can now view my blog in stead. Thanks once again to admin for giving me a blog of my own here. And before i wind up my thanking speech {lol} i assure u admin that it will be worth the faith u have shown in me, trade by trade.