The markets are in troubled state as every body knows but now the governments coming forward to take part in rescue measures. This is offering a fill-up but don’t buy for the immediate gains of further 20% but for long term it could be one of the chances offered.
The markets are temporarily bottomed out by all means but the buying at the lower levels has not happened enough to hold the bottom. So either there should be a huge buying or the price shall make a journey above the resistance levels. The either case is pending.
The Nifty is good above 2600 as first support and it shall not trade below the 2480 level but the resistance at 2880-95 level then it will go to 3200 level. The markets will considered stabilized when the RIL is above 1380-85 level and the ONGC is above 785-91 level.
For today the Nifty is good for long so long it trades above 2716-25, the low shall not breach the support of 2622-18 level but the ONGC results effect and the RCOM results will through some guidance to the markets as the earnings pressure is mounting even though much was discounted.
Friday, October 31, 2008
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How Disciplined Traders Measure Risks
Kurt J. Eckhardt has been trading since 1982 when he began his career as an active floor trader in the CBOT Treasury Bond pit. Kurt is President of Eckhardt Research and Trading and its subsidiary Agility Trading. Agility offers both individuals and funds cutting edge technical strategies along with high performance instruction. For more information go to agilitytrading.com.
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The recent volatility in stocks, currencies and commodities has certainly caused most traders, even investors, to focus increasingly on self-discipline. Seasoned traders are long aware that success is less predicated upon what the market is doing than what we are doing.
Individually we hold little control over future economic events. Even the best of us have little prognostic capability to anticipate those events. Further, even when we correctly forecast aspects of the future, we never know for sure how the market will respond.
For example a few months back, I posed this question: If you'd known 3 years ago that gold would be $1000 an oz, oil at $140 a barrel, corn at $6 a bushel and the Dow at 12,000, what yield would you expect from 30-year Treasury Bonds?
Naturally all agreed that a sub 5% long bond yield would have seemed VERY unlikely. Perhaps even 8-10% would have been in the ballpark. The point is even if we know, we still know very little.
Hence it's foolish to over bet on something both uncontrollable and unknowable. We're here though to make money and only through risk can gains be achieved. So first let's examine ourselves and identify how much risk we can afford.
Each of you must ask yourselves pertinent, probing questions. What do you want economically? Do you want or need money for something that's missing in your life? Are you trading speculative capital or retirement funds? Is your goal to earn undramatic yet steady returns or are you trying to turn a small stake into a small fortune? Are you trading/investing in the right products? Are the strategies you're employing the correct mix for your skill set?
Because this is perhaps a book in the making we're going to take some extra time working on these issues together. We've all heard the old adage, "don't wish too hard for what you want, you might just get it." If you're trading for money to buy something that you really can't cope with attaining, you'll eventually lose...miserably.
Most of us fail in various arenas because of self-sabotage. Now you all know me better than to think I'm just going to throw some pop-psycho babble at you without fully explaining. None of us should confuse a conscious want (money) for a sub-conscious desire (change). Believe it or not some of the best available research is on dieting. Think about it. Isn't a boom-bust trader pretty similar to a dieter who sheds unwelcome pounds only to binge them back on? Why do we do that?
Let's say you're a shy girl who's always been uncomfortable with attention from men. Perhaps you subconsciously put on weight to hinder your attractiveness as a defense mechanism to ward off those unwelcome advances. Finally you may get to a point where for health or business reasons you decide to diet. You perform research, decide on a plan of action, execute it and the pounds disappear. Eventually though you'll be "rewarded" with those unwelcome glances or social pressures of engagement and retreat back into the safe shell of obesity.
The relationship between men and money isn't much different. We may think we want to be rich but if we perceptively anticipate how money will change our lives we can easily bristle at the thought. Many of us are trading to get the right girl or lose the wrong one. To impress our family or to get even with them. To show our friends, former classmates, teammates or workmates that we've graduated to the major leagues of speculation. I'm not the first to remind you - it's usually about more than money.
For the rest of you - those grounded, committed souls who're trading for more noble pursuits like your kid's education, your retirement or to stay diversified in an anything can happen socio-political-economic environment - your discipline problems are easier solved. One of the traits I noticed of the most successful floor traders was an almost imperceptible confidence not just in their trading ability but in their personality.
Traders like athletes need an inner belief system convincing them that they're the "go-to" guys in the clutch rather than chokers. The mortals among us may still huge unresolved conflicts inhibiting our habits. What we're going to do is break down our analysis into a few sub-groups of market participants. Depending on capital, goals, available time dedicated to trading - us traders come in a myriad of sizes. We'll look at a few common individual "profiles" and I'll throw some ideas at you. As in athletics method breeds confidence.
The Under Capitalized, Over Leveraged Short Term Trader:
When you don't have a lot of money you can't help but to be over leveraged. I can hardly suggest to a one lot trader that he trade smaller. I can tell a two lot trader though to trade only one contract or a ten lot trader to trade only 3 lots. In this environment, cut it down. Way down. Money is bullets. You're in a shootout against an opponent better armed than you. You need to make every shot count. No longer can you safely risk 1.5 E-mini points trying to make 4. Wider stops mean smaller size and less frequent trading.
Ok, now you're going to be small and selective. That's half the battle. Next, where are you wrong? I'm sure more than a few of you have painfully realized that positioning without hard stops but instead waiting for a contrary system signal to be generated is a poor discipline choice in big range markets. Hourly bars are now larger than the ranges in previous years. If your crossover or divergence system doesn't allow for hard stops then you better either figure out how to incorporate stops or trade smaller than usual.
Here's how two different traders approach the same idea. Bill and Ted both fade short term volatility. Each will tell you that they're the type who "buys when everyone else is panicking." Each has enjoyed success in choppy, mean reversion markets. While Bill is methodical and technical in his approach Ted considers himself more of an intuitive gunslinger.
On a sharply lower open both Bill and Ted become buyers. Bill though has analyzed prior gap down opens and knows his thesis is violated if prices break down more than a few ticks below the opening range. Bill then places a sell stop at an appropriate level. Bill is merely playing the odds. He realizes you "win some lose some" and he's confident enough in his methodology that no matter the result of any individual trade, over a wide enough sample he'll be profitable. Bill also knows that a single huge loser can wipe out weeks of small, steady profits.
Ted on the other hand lacks a cohesive plan. If the market goes lower after his purchase he'll rely on anecdotal observations. "Yes I'm stuck long higher but the markets already had a historic break. A rally is certainly due. If we plunge further I'll just buy a bit more. Besides the Fed could ease at any moment."
While Ted is hoping an unpredictable event will still bail him out, Bill is flat after taking a small inconsequential loss. Bill is now in a detached frame of mind allowing him to wait for another measured opportunity.
In real life we know that at the end of the day it's quite possible that Ted's wild adventure will work out to his short term advantage. In fact Ted may even console Bill, "Sorry you took that loss off the open. I knew this stuff was over done so I added to my longs. I don't let bad prices drive me out of a position." The seeds of further problems have been sewn. While Bill views his loss philosophically - he wouldn't do anything different, even in hindsight, Ted also isn't going to do anything different. He is emboldened by his experience.
So a few days later when the market gaps lower once again both Bill and Ted will be buyers. This time Bill treads lightly. He'll recognize that buying dips is no longer the strong odds play it had been and accordingly he'll cut his size back and tighten his stop. Ted though may even trade bigger this go around. After all the last session it worked beautifully. This time is different though.
As the Dow trades at -500 or -600, Ted is thinking "no way does the Fed or they allow the market to close at -800. If I sell now for certain I'll be selling the low of the move." Ted continues to buy and hold as the market closes on its low of the day, down 750 points. That night Ted's brokerage house informs him that he's on margin call and that his positions will be sold out for him on the next day's open. Because of the heavy forced liquidation by Ted and his ilk the market once again opens sharply lower.
This time instead of being a buyer when "everyone is panicking", Ted is forced to sell his holdings. Who buys them? Bill! Bill will once again do as he always does. He'll fade the open with a prearranged stop loss. This time instead of being stopped for a quick loss like the prior couple of times the market does indeed make its low on the open and Bill not only recoups his two small previous losses but makes a good deal of money on the subsequent rally. Two traders, two similar methodologies but a world of difference in strategy.
The lessons we all need to learn is anything can happen. As I write this the price of Volkswagen has just risen fivefold in Frankfort and for a brief moment Volkswagen is the biggest company in the world! All on the back of short covering by funds who've lost billions of Euros on the move.
Every trade no matter how innocuous must have an uncle point. Be it a stop on equity or a technical level at some point you must enter survival mode. A few days from now we'll examine how longer time frame participants can stay disciplined even though they're already less leveraged.
Call girl aide to catch criminals
- 230 escorts brought into the detective department fold
SAMARPAN DUTTA
Taking a leaf out of a New York Police Department programme, Calcutta Police has expanded its network of informers to include an ?unofficial? escort services wing. About 230 call girls have been brought into the detective department fold to provide information about people suspected to be involved in crime, said an officer.
?We decided to seek the help of call girls as criminals have a tendency to spend time with them. In several cases in the past, information about criminals on the run came from red-light areas like Sonagachhi and Kalighat. The call girl wing was being planned for a couple of years,? the officer revealed.
The police brass had approached officers of the women?s wing to pose as escorts. Few had agreed, saying that they hail from decent families and did not want to get close to undesirable elements to fish out information.
?From the middle of 2003, professional escorts, in batches of five, were trained for three months on self-defence, use of firearms and how to pass on information about suspicious characters to the sleuths. Some of the call girls in the wing know each other, but have no idea about the officers involved in a particular mission. All the escorts have been given fictitious names. They have been instructed not to divulge their real name under any circumstance,? the officer added.
Calcutta Police have also teamed up with a mobile service provider to provide cellular phones to the escorts. The phones are meant to be used only to pass on information to the cops.
?The call girls are entitled to a monthly allowance of between Rs 2,500 and Rs 3,500. Though their appointment is not official and they cannot be considered a part of the police force, they are being paid a decent amount to keep them on the job,? the officer observed.
?I am allowed to carry on with my work. This allowance comes as an extra income, which I can save. If I can pass on information that helps police to nab a criminal, I get an incentive. The job has an element of risk attached to it, but since I am not in a particularly pleasant profession, I have no complaints,? said an escort working for the police.
According to the officers, since these escorts are not officially a part of the police force, they cannot be paid from the funds allotted to the department by the state government. ?We have to arrange for the allowances of these girls through other means. We have assured them of timely payment and have not defaulted till now,? held an officer.
?We get information from various sources, including from those who chance upon acts of crime. Our sources are not restricted to call girls only. We have enough funds to pay our informers,? asserted deputy commissioner of police (detective department) Gyanwant Singh.
VERY INTERESTING PRINCIPLES LAID DOWN. THE FACT IS EVERY BODY IN THE MARKET KNOW THESE BUT SELDOM FOLLOW DUE TO LACK OF CONTROLE OVER THE INSTANT EMOTIONAL FORCES THAT FORCES TO TAKE THE DECISIONS.THE STRENTH OF TICKER INFLUENCES THE TRADER APART FROM THE GREED AND FEAR.
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