[sid1509]

Originally Posted by Altaf Petiwala

Lets stop cribbing and lets discuss some strategies to make money here.
=====================
PS: I am going to teach on how to trade the Nifty futures only.

Hi Altaf,

Count me in. Will love to make some money.

Cheers, Sid

[DoNotHorn]

Altaf I am in.
I suggest you start and people will follow later.

TIA

[Altaf Petiwala]

Thanks for the response Guys!.

Let me outline what we would be interested in doing.

The markets are one wild animal to tame. While trading in equities, its allways the problem, that the sectors that you are holding on to, never seem to perform. And when the markets go up, your scrips many times do not go up correspondingly. And when the markets come down, your scrips come down at double that speed.

Meaning, unless you have identified the right industry, and even in the industry, the right company, you may not be rewarded evenm when the markets move up significantly.

Case in point being companies like GMR Infra and RCOM which actually went down in value, whereas the Nifty rose by about 1000 points from 5300 levels to 6300 levels.

Believe me, it can be very frustrating when such a thing happens.

Also, suddenly, one fine morning, there is some news about a particular industry and kaboom! your stock is driven below the ground.

To counter such things, professionals prefer to trade in Nifty Futures, which is a basket of 50 stocks.

So, the upside to this are.

No heavy overnight fluctuations... as you have a basket of 50 stocks.

You are assured of making money when the markets go up.

You are also assured of making money when the markets go down, as we can also short the Nifty.

The downsides to this are.....
You may not be able to make 5 and 10 % returns on a daily basis which happens when the markets just fly.... and scrips fly along too. Nifty is a tamer animal, and will not move as fast as companies. This is assuming you were on the long side, in the right industry, and in the right company, and were able to sell at the right place too. Too many assumptions I would say.

This is a highly leveraged instrument, and you might be tempted to put on too large a position just because you can.

Also, I need to know, are people here well versed with terms like
RR Ratio
Win Ratio
Win/bkg ratio
Expectancy per trade
Drawdowns.
Fixed fractional Trading
Optimal F
Fixed Ratio
Probability Ratio
Equity Curve
MAE
MFE

Believe me, to trade like a professional, you need to be able to blabber about these terms even in your sleep.

All in all, I am a big fan of money management and system trading.

If you have even a modest system with an average of about 4 winners in 10 trades, and if your risk.reward ratio is about 1:2 meaning you make 200 rs per 100 rs you loose, you can make a hell of a lot of money, being right just 40 % of the time.

This is how professional who trade for a living, trade.

People with knowledge about technical analysis please raise your hands.

[Captain Slow]

Altaf Iam in too.
Im very new to this. Thank you.

[Altaf Petiwala]

Originally Posted by Captain Slow

Altaf Iam in too.
Im very new to this. Thank you.

My friend, I would count your inexperience as a plus point when starting, as you wont have to unlearn some of the things that most people have accepted as the blind truth in trading.

Its much easier to teach a new person, that to teach a person who has prior knowledge, as that knowledge may be misleading, but the person has been following it for so long, its second nature for him.

How many time have we seen people buying a stock, and watching in horror as it drops to half the purchase value.

Then to add insult to injury, they purchase more of the stock at those levels, because if it was a good buy at twice the price, its a bargain now!!!!

Now, comes the tricky part.

If the market bounces and they manage to make money, they consider themselves as smart, and now a very very bad habit has been rewarded. Consider that trader as doomed, because he may have made money doing this onbce. He may make money a few times more by taking such a risk, but believe me, the market will catch up one fine day and beat the hell out of him.

Moral of the story... NEVER AVERAGE YOUR LOSSES.
In fact, dont keep you loosing trades for too long. You tend to develop a sense of attachment to it.

My 2 cents...... If you dont know where you will be exiting a stock, dont enter it.

[Altaf Petiwala]

The power of compounding and reinvestment of profits.

These 2 things will be the foremost in our trading campaign.

[carboy]

Originally Posted by Altaf Petiwala

Thanks for the response Guys!.

Let me outline what we would be interested in doing.

One request. Could this be done in a new thread in Shifting Gears (with a link posted in this thread)? This is so that people who are interested can subscribe to the other thread, but people who aren't need not.

[BaCkSeAtDrIVeR]

altafji, I am not much into technicals, I usually buy and hold for 6 months and above.

I should confess that all those terms you mentioned are new to me. Any online resource which will explain them?

[carboy]

Originally Posted by Altaf Petiwala

How many time have we seen people buying a stock, and watching in horror as it drops to half the purchase value.

Then to add insult to injury, they purchase more of the stock at those levels, because if it was a good buy at twice the price, its a bargain now!!!!

If I buy a stock at a price at which I think it's a bargain & it falls to half & I don't see any changes in my original analysis, I will 100% buy it again. I would be stupid not to.

Benjamin Graham (Warren Buffet's teacher) says this

The typical investor would be better off if his stocks had no market quotation at all because then he would be spared the mental anguish caused to him by other people's mistake in judgement

In the book Intelligent Investor by Graham, Jason Zweig has this commentary

Stocks are crashing, so you turn on the television to catch the
latest market news. But instead of CNBC or CNN, imagine that
you can tune in to the Benjamin Graham Financial Network.

The image that fills your TV screen is the facade of
the New York Stock Exchange, festooned with a huge banner
reading: “SALE! 50% OFF!” As intro music, Bachman-Turner
Overdrive can be heard blaring a few bars of their old barnburner,
“You Ain’t Seen Nothin’ Yet.” Then the anchorman
announces brightly, “Stocks became more attractive yet again
today, as the Dow dropped another 2.5% on heavy volume—the
fourth day in a row that stocks have gotten cheaper. Tech
investors fared even better, as leading companies like Microsoft
lost nearly 5% on the day, making them even more affordable.
That comes on top of the good news of the past year, in which
stocks have already lost 50%, putting them at bargain levels not
seen in years. And some prominent analysts are optimistic that
prices may drop still further in the weeks and months to come.”
The newscast cuts over to market strategist Ignatz Anderson
of the Wall Street firm of Ketchum & Skinner, who says, “My
forecast is for stocks to lose another 15% by June. I’m cautiously
optimistic that if everything goes well, stocks could lose
25%, maybe more.”

This para doesn't convey it more generally, but if you read through the book, if Graham likes a stock at Rs X & it falls to Rs X/2 & the fundamentals haven't changed, he would buy twice the amount when it falls to 50%.

Unrelated to the above - for those who are new to technical analysis - please read the flip side before putting your money on it.
This is what Warren Buffett said about technical analysis.

I realized technical analysis didn't work when I turned the charts upside down and didn't get a different answer.

If past history were all there was to the game, the richest people would be librarians.

[recshenoy]

i am in too.

After 2007 crash from peak losses i was waiting to re-enter the market. i was sitting with cash for long time thinking "today i will invest, no tomorrow" daily. Finally bought when MOIL opened and it messed up my life my stupidity is to be blamed. now my situation is "twice bitten third time very shy".

Waiting for F&O for MOIL to open so that at least in selling PUT I can make some money.

Any idea when will a stock available at F&O counter? is it after 3 months from listing?

[Altaf Petiwala]

Originally Posted by carboy

If I buy a stock at a price at which I think it's a bargain & it falls to half & I don't see any changes in my original analysis, I will 100% buy it again. I would be stupid not to.

Benjamin Graham (Warren Buffet's teacher) says this
In the book Intelligent Investor by Graham, Jason Zweig has this commentary

This para doesn't convey it more generally, but if you read through the book, if Graham likes a stock at Rs X & it falls to Rs X/2 & the fundamentals haven't changed, he would buy twice the amount when it falls to 50%.

Unrelated to the above - for those who are new to technical analysis - please read the flip side before putting your money on it.
This is what Warren Buffett said about technical analysis.

I totally respect your views.
You are a true investor.
We belong to the class of traders that sell on the way down, and when it bottoms out, maybe buy twice the quantity in the same amount of money. Repeating this at least 3 to 4 times every year, traders tend to make a much much ( I just cant stress enough how much ) than what an investor would have made.

I will showcase an example. A friend of mine had a sizeable quantity of sterlite tech. Bought at around 320 near the top of the market. According to my system it was a sell at around 290. It went all the way down to 80 odd rs in the next 1 and a half years. Then after march 2009 it started rising again, and my good friend managed to sell it at around 360 rs, making a respectable profit.

Compared to that there were about 12 opportunities in the 18 months period where we could have made an easy 30 % going both long as well as short. Sometimes as much as 100 % returns in a matter of 2 to 3 weeks.

Now compound that over 12 trades. Of course of those 12 trades 4 were loosers too. Still we could have managed a few 100 percent returns. Compared to some 15 % return managed by my friend.

This is a true case, and that friend has since turned trader from an investor.

As for your quote on technical analysis, I would say that a few trillion dollars are involved in actively trading with the help of technicals. Even the biggest of funds in the US use technicals to time their fundamental decisions.

I am sure DLF was the same company at 1200 that it was in 4 months at 400 in the year 2009. I doubt the company went bankrupt. But if warren buffet sees the chart of dlf and says he cannot see the difference, I would refer him to my opthalmologist.

[Altaf Petiwala]

I realized technical analysis didn't work when I turned the charts upside down and didn't get a different answer.

I am just amazed at this line. I am sure all the hedge funds and mutual funds are crazy people who use technicals to trade. Are you aware of the term quant funds? They move billions of dollars per day based on technical analysis. And the guy who codes the system is called a " quant " and earns in excess of a few million of dollars per year. Thats before bonuses.

[Altaf Petiwala]

A request to moderators. Could these posts be shifted to a new thread, titled "Learning Technical Analysis "

And could a link be posted here please?

[carboy]

Originally Posted by Altaf Petiwala

I totally respect your views.
You are a true investor.

I am not anything. I am a fool who tries hard not to lose money, that's all.

Originally Posted by Altaf Petiwala

I will showcase an example. A friend of mine had a sizeable quantity of sterlite tech. Bought at around 320 near the top of the market. According to my system it was a sell at around 290. It went all the way down to 80 odd rs in the next 1 and a half years. Then after march 2009 it started rising again, and my good friend managed to sell it at around 360 rs, making a respectable profit.

Compared to that there were about 12 opportunities in the 18 months period where we could have made an easy 30 % going both long as well as short. Sometimes as much as 100 % returns in a matter of 2 to 3 weeks.

Now compound that over 12 trades. Of course of those 12 trades 4 were loosers too. Still we could have managed a few 100 percent returns. Compared to some 15 % return managed by my friend.

This is a true case, and that friend has since turned trader from an investor.

I am sure DLF was the same company at 1200 that it was in 4 months at 400 in the year 2009. I doubt the company went bankrupt. But if warren buffet sees the chart of dlf and says he cannot see the difference, I would refer him to my opthalmologist.

Here is an article by Buffett about how some one's method may work because of pure luck & the guy suddenly writes a book about it.

The Superinvestors of Graham-and-Doddsville

You need to figure out how many people the method doesn't work for.

Originally Posted by Altaf Petiwala

I realized technical analysis didn't work when I turned the charts upside down and didn't get a different answer.

I am just amazed at this line. I am sure all the hedge funds and mutual funds are crazy people who use technicals to trade. Are you aware of the term quant funds? They move billions of dollars per day based on technical analysis. And the guy who codes the system is called a " quant " and earns in excess of a few million of dollars per year. Thats before bonuses.

Sadly, I am very much aware of quants. Here -> The Quants: Formula for a Financial Crisis - WSJ.com

[carboy]

Originally Posted by Altaf Petiwala

A request to moderators. Could these posts be shifted to a new thread, titled "Learning Technical Analysis "

And could a link be posted here please?

If the mods don't respond, I think you can yourself start afresh with a new thread - there isn't much you have posted in here.

Please note in pointing out dissenting opinions on technical analysis, I am not trying to run you down - I am very much interested in your technical analysis course & will subscribe to the thread once you start it. I posted the various links & opinions just so newbies are aware of risks.

Here are 2 very respected people - Taleb & Malkiel who don't believe in either technical or fundamental analysis.

James K. Glassman on Nassim Nicholas Taleb’s Fooled by Randomness and Investing on NRO Financial

A Random Walk Down Wall Street - Wikipedia, the free encyclopedia

Taleb's belief is this
- No point in picking moderate risk investments, because our analysis of why it's moderate risk is probably wrong.
- He suggests putting majority of your money is super safe stuff (like insured bank deposits) & a small percentage (say 20%) in super super risky stuff.

Burton Malkiel suggests putting your money in low cost index funds (these don't exist in India as yet).