Trading Strategy for Nifty Future -11th March’10

There are typically three stages an investor goes through before they become successful. Building discipline starts with an understanding of these points:

  1. Easy Money: The first stage involves thinking there is easy money to be made. This is the thinking of a newbie. Often, after a big stock tip gone wrong or a couple great broker recommendations that lose serious money, you enter the second stage.
  2. I need a plan: The second stage begins when an investor or trader decides a plan is needed to win. The problems begin when the search for a plan becomes a search for the Holy Grail. And we all know there is no Holy Grail. What is needed is more than just a “system”. What is needed is you following the system. This leads to stage three.
  3. I’m responsible for my success: Stage three comes when the investor or trader realizes that success comes from inside the person, not outside. To achieve true success you must understand the market is not responsible, you are. There is no one to blame or compliment but yourself when it comes to trading. So find a solid plan and follow it.

5144 & 5184 are Hurdles.

From last two days if u had seen (Iam writing not in Braille )3&7 DEMA will act as support levels.

*From last two days kissing 3 DEMA and taking sharp U-turn.

Now crucial support at 5106 ,5090 level.If breaks 5090 with volumes will take to 5058-5036 level.

*Hurdle at 5148-5161.Crossover will take to 5190-5200 in Intraday trade.

*Higher it is moving…More Dangerous sign.

-Trade with eye open

-Always read twice the levels mentioned.

I will update more During trading hrs to our SUBSCIBERS.

Updated at 7:57/11th March/Baroda

12 Trading Rules

121. Loss of opportunity is preferable to loss of capital

2. Picking safe, readable, and ultimately high probability trades is the way to go

3. Use logical profit objectives for all positions. Know your exits and stick to them

4. Markets are squirrelly animals – make your trading plans ahead of the market

5. Don’t buy new highs or sell new lows – wait for the market to come to you. Buy retracements. If you miss the train, don’t beat yourself up – another one will come by shortly

6. Above all, follow your own trading plan and no one else’s

7. Trade quietly – with the exception of a mentor, tell no one about your positions, profits, or losses. This is especially true for those who are close to you, like your wife, husband, or friends. This self-gratification process or sharing process will put you under psychological pressure to win on every trade and can be a primary reason for failure to follow your plan

8. Don’t carry a sizeable position when traveling. The market will always catch you off guard at the most inopportune time

9. You are only one trade from humility. A swelled head does not belong on a trader’s shoulders

10. Add to your knowledge before attempting to add to your wallet. Newbie traders think they can become pros with little more than a computer and hope. In this business, hope is a four letter word. Show me a humble trader, and I’ll show you someone ready to learn

11. Develop your sense of humor – you’ll definitely need it

12. Help other traders whenever you can. This is more practical than philosophical – giving keeps the ego in line and when you need help, and you will, you’ll find it.

Jack Schwager on Market Sense and Nonsense

This is Jack as analyst, not as trader interviewer. I think the insights herein will benefit investors especially over traders, although both are served well. Jack totally destroys the EMH in this book. He also debunks a great deal of conventional wisdom for the investor, which I think will be shocking at first. Why? Conventional wisdom “feels good” and to go against the grain so to speak as an investor takes a great deal of emotional intelligence — and a strong inner voice — which most investors don’t have. Good trading and investing oftentimes does not “feel” good at all. It’s much easier for a newbie or amateur to go with the crowd and succumb to one’s emotions. What feels safe is normally not a proper risk management decision for the untrained.

At the end of each chapter, Jack delineates several “Misconceptions” that I believe are worth the price of the book. One in particular deals with when it’s NOT a good idea to just blindly buy the S&P 500 after it’s gone up a certain amount.

Market Sense and Nonsense is an objective take on popular investment themes that is backed with a great deal of data to support its claims. I think the conclusions in this book will surprise most of its readers and that’s a good thing. At least they will be armed with strong arguments to bring up with their advisors.

A million fragments

My definition of learning is that it is the slow accumulation of a million fragments of experience that begin to connect to form understanding. Understanding occurs when a piece of acquired information connects directly to a relevant experience.

For instance you may read about support and resistance (the intake of information), but only when you attempt to trade based on that knowledge will you begin to generate what are firstly disjointed fragments of understanding.

When approaching any subject as a newbie we may start off knowing literally nothing, and then this accumulation begins. The fragments we collect are small; the reading an entire book on trading may yield perhaps two or three definite single connections and the rest appears to vanish into the “realm” of the subconscious.

If we persist, we make more and more connections and our understanding begins to grow exponentially as we verify and counter verify previously experienced fragments of knowledge. It is my belief based on observation that real learning occurs when the mind recognizes a link between two pieces of information (usually something new plus something remembered) and then generates a third. These “aha” moments seem to bond something in the mind that is more permanent – the information then becomes OURS. Due to this it is also possible to make new connections from the same information, thus it never hurts to read a book twice or more, as you may often see deeper and deeper meaning in it.

In time we reach a point where the mind contains enough understanding on a subject to be able to generate new information and connections within itself. The critical components in this process are of course the constant intake of information (study) married to real life experiences (practice) over a long enough period (time) to build up the result (understanding).

There you have the formula for mastery :

Study, Practice, Time = Understanding

The Process of Invention

When inventing your own trading system or strategy as I prefere to call it, you are constantly asking questions. In a sense, you enter into a passive relationship to the market where it is telling you about itself – thats the big change in mindset from being a newbie. When you are a newbie you want the market to do what you want (i.e. “my system says it should go up, so GO UP!”). At the same time as demanding, you are hoping – your WILL is involved.

When you enter this frame of mind I’m talking about, you have no more demands of this nature, but rather are trying to get ‘in step’ with what the market is and how it behaves – you subordinate your will to the will of the market; it speaks to you if you shut up and listen. For instance, the market suddenly turns on a dime and you give back all your profits. The market has spoken to you and said “sometimes I have unexpected price shocks and it looks like this”.
Instead of cursing this event a question suddenly arises in your mind such as “Hmmm….. I need to think of a way to deal with price shocks.” You ponder this like a puzzle – you try some things, and think about it. This is the process of invention.

Believe me, when at the end of this you have a way to deal with, for instance, sudden turns in price action you will NOT struggle to force yourself to stick to the “rule” – this rule is not imposed on you from outside, you created it. The process was also interesting, challenging and enjoyable; you are a creative trader who is genuinely interested in the subject.

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