Category: General

This is a guest Article from a fellow blogger friend and a very good Technical Analyst, Nooresh Merani. This is an interesting article where he presents how a profile of a Day trader looks like.

A part of this article was published in May 14th Issue of Money Today Magazine. I hope it would be a good read for everyone , Even If you are not related to Trading , you will come to know what is Day trading and how it can be a full time profession and very rewarding one . Read the article Below .

THE JOB = Day Trading

Job description: 6 hours a day / 5 days a week which requires hardly any physical activity apart from grunting or swearing in anger or thumping hands, tables and chairs in happiness.

Desired Profile: The desired candidate should be good at accounts and quick at using the computer keyboard or mobile keypads. No formal education or age bar.

Company Profile: It’s one of the oldest organizations (BSE is formed in 1875!) which is open to all candidates provided they have capital to trade with.

Remuneration: The salary has no upper limit but the candidate has to forego a small amount as brokerage/ taxes on the transactions.

The above job description seems a dream job!!

The profile of a day trader is not as rosy as it seems as they don’t have a fixed salary, instead they have to risk a security deposit (trading capital) paid up with the company (exchanges/brokers) which may be blown off in few hours, days or weeks or years.90% of Traders pay salaries for the rest 10%.

Trading is one serious business and a highly disciplined profession but, a large section of traders who don’t have this attitude get thrown out of the system very quickly. A trader learns from the mistakes, accomplishments through his trading career and by honing his technical and intuitive skills.

Initial grind:

Every traders goes through the initial grind (sometimes recurring) of losses, depression, self -realization and more.
A must Quote for every traders’ desk, “People who learn from their own mistakes are Wise, People who learn from others mistake are Wise and Lucky and, those who do not learn at all are Traders (Suckers)”

So, to be successful in trading, the most dynamic profession, where even a richest man can’t afford an hour’s lunch break (the Gujarati Thali would cost somewhere in Lakhs!!), one needs to learn, evolve, adapt and be disciplined. Always learn from the past, apply it to the present so that you can gain in future!!!
A Traders Day!

Pre-Morning work:

First thing a trader checks is how Dow Jones, European indices performed overnight and the current situation of Asian markets. SGX Nifty in Singapore opens up much before India so a trader gets hint of Nifty opening.

The trader makes modifications to the stock lists and observations made for the day. Technical, Pivot and data traders are ready with a list whereas system traders rev up their mechanical engines which generally don’t deliver much.

Trading Hours:

Although every trader has to see the ticker on his computer monitor for prices, but, there is a section of traders who only rely on ticker reading, which is a study of price & volume fluctuations. For best results, a combination of intuition, ticker reading and knowledge of technical analysis is a must.

Indian markets are one of the most volatile ones and it’s a common saying out here – Nazar hati durghatna ghati (Moment you get your eyes off you will meet with an accident). So a trader has to be attentive and nimble footed to make split-second decisions and follow the personal trading style/rules.

Post Trading Hours:

This is the best time for the trader to catch up on a snack or freshen after finishing of the calculations and noting down the open trades or the profits made in the day.

Analysis and Self-Evaluations:

The amateur traders don’t realize that this part of a trader’s life is equally important. Technical traders go through their charts; mechanical traders test their system to come out with a list of possible stock trading ideas for the next trading session and evaluate the current positions.

Trading as a profession has the most ups and downs with terribly bad trading sessions and equally high performance sessions. Every trader needs to keep evaluating, modifying and optimizing their trading styles to stay in the loop or the market knows a way to kick you out.

Latest Experience with the Screen!

Although I and many of us traders do follow the above plan but human nature is frail and one does make mistakes. One thing I have realized with experience is if you make a cheap mistake (small loss) early you would make a killing next time around by not repeating it.

The last mistake I made off late was to pre-empt and anticipate a big down move in 2nd week of March which didn’t come but luckily got saved because of stop losses and the screen. The next time around I did the simpler thing of re-acting to the ticker sense.

My one such encounter with markets was on 15 April 2009 when Indian indices outperformed global indices.

Many traders were yet again caught on the wrong side of the trade by watching the performance of Dow Jones overnight.

The index opened lower and drifted lower. But, ticker did not show signs of weakness and out of index counters continued to gain strength. What lot many traders missed out was, that Hang Seng (Hong Kong) was up 600 points on 14th March, the day Indian markets were closed due to a holiday.

Any technical analyst would confirm Hang Seng bears the closest co-relation statistically with India. So, this simple observation kept my bias bullish though the index was negative to start with.

The ticker was purely biased towards the mid cap segment in the last few sessions so my focus was on them.

We kept on holding to the previous open positions (namely Crompton, ks oils, guj nre, gtl infra, ghcl).

Also, seeing the momentum, added on to my technical picks Dishman Pharma, Everonn & Crompton for the day at higher levels then opening which gave awesome moves of 10% + in the day!!

Sensing that the up move was backed by nervous morning sellers squaring up, we booked out of previous positions to reduce the risk exposure and raising stop-losses to cost to conserve gains. A combination of aggressive buying along with disciplined money management did the trick as index closed 200 points lower the next day.

The learning from above experience was “Respect the Screen & Markets are Supreme”. A Trader looks for intuitive hints from the screen and doesn’t ask why it’s performing so, but, just follows it on the path to making money.

Above all would like to end this with few words of wisdom in Gujarati – Market Ni kamai market ma samai – (Money made in the market, stays in the market). A wise trader makes money and takes it home regularly!

Happy Trading!

Nooresh Merani , Analyse India

Blog: https://nooreshtech.blogpost.com

Website: www.nooreshtech.co.in
Email: [email protected]

Numbers and Graphs Speak.

I thought of starting my articles from some Analysis on Akruti City Crash .

In this article we will learn , how can we before hand get some idea about events like this and have clear picture of whats going on .

See my previous posts on Warning about Akruti City : Post 1 , Post 2 , Post 3

– Lets see 2 yrs old chart first

If you see the chart you will see the steep rise in prices in last month , you can also see that its was not a normal price movement , when compared with previous movements .

For a closer view , lets see 3 months charts

If you see the chart you will see ,that prices moved up crazy and then crashed in two stages .

First Downmove : This happened because of the news that SEBI is excluding it from F&O segment . (If you dont know F&O , dont worry) .

Second Downmove : Second downmove came near 25-26 Mar , when it was F&O expiry . What happened ? Lots of positions were built up in F&O and after a sharp upmove , everyone rushed to get out as fast as they can , at any price . So selling pressure came in and prices tanked 45% .

See High Volumes in the month of March (3rd half of the graph) . Suddenly there was so much participation . Most of the buying which was happening on this stock was not for long term basis (delivery basis) .

What is Delivery Basis : delivery buying means , people actually get the stock in there demat accounts , it simply means its delivered physically to there account , But when you buy in the morning and sell the stock in evening , then its not delivery basis . you just make profit or loss same day .

Lets understand an important concept called “Deliverable Percentage” , which simply means , percentage of shares out traded shares which are actually delivered .

So if its higher , it means that most of the buying and selling is happening for delivery basis and people want to keep it with them for some time , When its too low , it means lot of trading (speculation) is going on to catch the pie in the price movement and hence its not sustainable most probably .

Example :

So , for some XYZ company , if volume is 100 shares and and deliverable % is 50% , it means that 50 shares where delivered and 50 were speculated , which is normal ..

But if its 20% or 10% , then things are fishy , there is no value buying happening and shares are just exchanging hands from one to another where each one wants to sell it at higher price , also there are people who want to buy the shares at higher price , because they know that there will be some idiot who will buy from them at much higher price to continue the madness .

And when it ends then what happens , There are no buyers !! , every one has sold at lower prices and then suddenly the selling madness comes in and the bunch of people who get out first (at higher prices) make the most money . And in this pressure everyone is ready to sell at a lower price than someone else .

You can easily imagine that day price movement , see 26th Mar downmove of 45% crash .

So how do we find out that this is happening , Is there some place we can get data from , and the answers is nseindia.com website , it has all the information on needs to know .

Source : https://nseindia.com/content/equities/eq_scriphistdata.htm

Go here , choose 3rd radio button (Security-wise Price volume & Deliverable position data) , and choose share name and dates for which you want data . You will get all the data .

You must see “Price” , “Total Traded Quantity” , and “% Dly Qt to Traded Qty”, you will get good idea at looking it .

But I will not leave you with boring looking numbers . I have taken the AKRUTI data for 3 months (Feb 1 – Mar 27) and then smoothed it with 5 period moving average for each of them and then plotted it on graph , so that you can get the picture pretty well .

The points do not represent the actual value , it only shows you the relationship of each other . see the below graph .

If you enlarge the chart , you will see this relationship

Price : Prices picked up and start moving up . (Orange line)

Traded Quantity : You will see how it started moving up wildly and picked up a pick high speed in March (3rd half portion) (RED line)

Deliverable % : you will notice that it started going down and down , which indicated that even though Traded quantity is going up and up , the delivery is not happening , which means lots of speculation , which is an indication of a building of Bubble which can burst anytime .

So whats the learning , If you see Price movement in one direction and see Rising Traded Quantity and falling Deliverable % , you should suspect the move . It is normal to some extent , but an extra ordinary move is truly suspectable .

And whats happening now to Akruti ?

from last some sessions there is no buyer , only sellers are there and from the peak price of 2100 levels , its now down to 380 (at the time of writing) . I had already warned of this long back , dont take it as any success in prediction of stocks 🙂 .

If you see the current Volumes of Akruti , it was 2137 on NSE , where as average volume was at 4.5 lacs !! , Which means that this down move is not supported by volumes , (watch volumes in 2nd chart , you will see nothing) .

Its just the fear of handful traders who have no idea why they are selling . So we can again expect some wild moves on upside in future when prices starts picking up .

Conclusion : When you see prices moving in one direction without any great fundamental change or significant news , You can use the numbers and see there relationship and you will see something which most of the people have no clue about .

Disclosure : I had learned this technique from Mr. Sunil Saranjame blog , timamo.blogspot.com , an excellent market reviewer as per my thinking . So credit goes to him .

Please join jagoinvestor google groups , see the upper right area at the start of the page , I will be sending instant notifications about the post and we can also share options trades there or some other stock trades when there is good opportunity . Also who all have not left there comments/suggestions , please do so on the suggestions/comments post

I also Introduced my self in the last post , see My Introduction

“People who take some pain eventually Gain”

Have you invested in the peak of bull run (Nov Dec 2007 or Jan 2008) or in middle of this downturn (Mid of 2008) and now sitting on heavy losses.

In this article we will discuss how and why should we avoid it. This article mainly covers investors who invest there money in some share for relatively short term like 6 months to 2 years, even though its applicable for all kind of investors.

Robert bought 100 shares of Jaiprakash Associates around May 2008, at Rs.300. His reason was simple, The stock has fallen “a lot”, “how low can it go? “, ” What if I don’t buy it and it goes up again, I will miss the profits”.

Does it sound similar?

Then stocks moves upto 350, and he is so furious that why he didn’t out more money. within some days stock comes down to 250. Now he feels that he probably made a mistake and made investments at right decision. He was sad that he is now in loss , he says to himself, that he will get out at cost once it moves up to 300.

Now it comes down to 200, He is not thinking why didn’t he get out at small loss? He is not ready to get out at 250, and he is determined to get out. But it never happens and stock tumbles down to 160, Now he tries to play a trick with market, and wants to prove his point that he is also smart.

He triples his shares by buying additional 200 shares by buying the share at 160 and averages his price to Rs.207, He can now get out once shares move to Rs.200 or 210 and he can get out at cost price or may be he can make some profits also.

But stocks still goes low and reaches low of 45-50. At the time of writing this article, the price for the share is around Rs.90. Probably it will take at least 1-2 yrs for this share to reach Rs.200 levels and that will happen once overall markets stabilizes.

Does all this sound similar to you?

What are the wrong decisions Robert made?

1. Trying to Time the Market :

The one reason was that he was trying to find out if share has made a low. He believes that share has lost a lot of value and will not go further.

Learning : There is an old saying, “Dont catch Falling Knives”, When a share has started its down move, the chances that it will move more down is more than its going up. The overall mood is bad. There is no MRP of shares, there is only market value. Prices are governed by emotions and sentiments, Don’t try to get in middle buying them. Rather short sell it or wait more.

2. Patience :

The other problem was no patience, Just imagine if this person had more patience, What if he waited for stock to go as low as possible and then start its journey upwards and then buy it. I am not saying, its a right time to buy, but current scenario provide much better risk/reward ratio.

Learning : Don’t go against the trend, if markets are falling like hell. don’t mess with it by buying in between. Have patience, No profits are better than losses I guess. Always try to be with the trend, A stock has more chances of going in the same direction of the trend rather than counter trend.

On the day Satyam bad news came in, I don’t know why people bought shares in between it was falling, It fell from 170 to 40-50, But people bought it in between around Rs 120 levels, thinking, “How low it can go”. Eventually some people bought it at 20-25 levels and many have doubled there money in weeks.

Patience helps.

3. No Stop loss or Targets set :

Often people emotions come in between there trading or investing. “If only it comes back to Rs XYZ I will get out”, Once it goes up by Rs PQR more, I will get out”.

People invest without knowing there risk capability, They don’t invest with some target, once your shares rises by 20% in 1 month, you may often think, what if it goes up to 50%, then I will miss out those profits.

They also don’t want to take losses, they only want profits, once prices go against them, they are not ready to get out at small loss. They want there money back. Then prices move a little more down and then this vicious circle of “If only it comes back to this point, I will get out” continues

Learning : Do you invest to be right or to make money. What is your goal? I guess its to make money. So don’t feel bad if you are wrong some times, it happens with everyone. The most important thing is to not let it become so big, that it becomes pain.

Have a stop loss, When you buy something at 300, say to your self that if it comes down to 250, I will take Rs.50 loss and accept I was wrong and move on to find out a new opportunity. And also tell yourself that if it moves to Rs 500, I will get out, take my “excellent profit” and then find out some thing else. Don’t be too greedy.

It hurts in long term. “just a little more” is a not a good idea.

You can read a similar article where I discussed 5 mistakes of my First trade.

Watch this video to know why no Retail Investors make money in the Stock Markets:

Conclusion :

The main idea of investing is to make money, don’t try to prove market that you were correct and no one can make you wrong, keep your emotions at home, If you are wrong, you are wrong, Just accept it, take small loss and try to find out new opportunity. Don’t waste time with the losing trade and give all your time and effort in that.

Know some rules and stick to it. Mainly this is applicable to traders whose time horizon is very less like day or a week, but this also applies to investors. Even if you are investing for long term like 10-20 yrs. Buying a share at low cost can have dramatic affect on your corpus. Just imagine this :

Ajay invests 1 lac in Unitech at Rs.150 just after it fell from 900 levels in Jan 2008. His investment after 30 yrs was 66 lacs.

But Robert waited patiently to let this share go as much down it can be and after markets shows some strength and signs of recovery bought it at Rs.30, His corpus would be Rs.3 crores.

Just imagine the difference of having some patience and respecting some ground rules of investing. It pays .. believe me.

Keep coming to the blog as in coming days I will post an article about how a common person can use basic technical analysis to make his investments more powerful and less risky.

Question for readers : What do you think Robert could have done better? Or How what are the other mistakes which I have not mentioned?

Please post your views/comments/questions. Make it interactive.
I hope you have read my article on : How to use your losses to reduce your taxes

That’s all for now.

Akruti crashed by almost 45-50% today . This happened inspite of strong global clues and strong rally in markets which touched 3100 levels on nifty .

From the levels of 2250 some days back , today its near 900-950 levels .

This crash was due anyways … Some days back I had warned that there was a Evening Star seen on this stock charts and It should be seen as a shorting Stock on every rise . read it here : https://www.jagoinvestor.com/2009/03/akruti-city-plunges-25-in-early-trade.html

Read my previous post how to invest in this market

Evening Star shows you the shift of power from bulls to bears . Markets were near expiry and all the punters who were holding the stock from the time of strong rise which started , had to clear there positions and hence a sharp selling was expected . No Surprise that it happened today , As markets were rising , every short term long holder wanted to clear his positions , this resulted in panic selling and stock went down so much .

Now it has come to its normal levels and with this strong rally , it has good chance to move up in coming weeks . Dont over invest incase you want to invest .

You can put 10% of your capital in this and liquidate half position after you are in 20-30% profit . It can give some quick gains later . Dont be greedy , sell in profit once you are in 50%+ profit . otherwise one fine day again it will drop heavily and you will be left crying .

Why am I now suggesting to invest in this , last time I said stay away ?

Investing or trading should be done on high probability trades . This stock went up heavily and then corrected a lot to come back to normal levels now . This is a ideal time to take calculated risks , The risk/reward of this trade would be worth taking .

It does not mean , you cant loose from here , why not !! , but its worth taking that risk , because profit potential is very good . Have a logical stop loss and once its hit , get out with loss .. first loss is the best loss .

Did any one make profits or loss on Akruti ? Share it with other readers , so that everyone comes to know about it .

Read my previous post how to invest in this market