Risk - Willingness & Unwillingness

Success involves taking calculated risks. Risk taking does not mean gambling foolishly and behaving irresponsibly. People sometimes mistake irresponsible and rash behavior as risk-taking. They end up with negative results and blame it on bad luck.

Risk-taking is relative. The concept of risk varies from person to person and can be a result of training. To both a trained mountain climber and a novice, mountain climbing is risky, but to the trained person it is not irresponsible risk-taking. Responsible risk-taking is based on knowledge, training, careful study, confidence and competence which give a person the courage to act while facing fear. The person who never does anything makes no mistakes. However, he doesn't realize that not doing anything is his biggest mistake. Many opportunities are lost because of indecision. It is habit-forming and contagious. Take risks but don't gamble. Risk-takers go with their eyes open. Gamblers shoot in the dark.

Once someone asked a farmer if he had planted wheat for the season. The farmer 

replied, "No. I was afraid it wouldn't rain." Then the man asked, "Did you plant corn?" The farmer said, "No. I was afraid of insects eating one corn. Then the man asked , " what did you plant ? " The farmer said, "Nothing. I played it safe." 

                                                           ---------from You can Win by Shiv Khera.

One can correlate the above message with the stock market trader, if we can adapt this trading psychology to our trading system, we may realize, are we trading or gambling?

Option trading using Volatility

Now here are the thumb rules for using options

1. if we expect the market to be in an uptrend in near future, and IV is less than HV, we shall BUY a call

2. if we expect the the market to be in an uptrend and IV is more than HV , we shall SELL a put

3 .if we expect the market to be in a downtrend, and IV is less than HV, we shall BUY a put

4. if we expect the market to be in a downtrend, and IV is more than HV, we shall SELL a call

"SELL HIGH VOLATILITY, BUY LOW VOLATILITY"

                    ................. more on option to continue

Myths about long term Investing

Successful investing involves two basic area of distance
1).what to buy and sell.
2). When to buy and sell.

It is not how much you make money that counts, it is how much you manage not to lose.

Let's start considering real time example,

Nifty had made a all time high on 20th January 2020 at 12440, then the market started falling, bear market started with the news of spread of Corono Virus, and index down to the low of 7550 on 23rd March 2020 almost a loss of more than 40%. Today the market has risen almost to 9600 from 23 rd March lows that is nearly more than 20% from the lower levels.

Where did the long-term investor (Buy & Hold) stand at this point ?
Very much still nearly 25% down from the January high of 12440.

To make up any loss taken in the stock market you have to achieve greater percentage gains than such  losses entail.

For eg.
 if you lose 40% of the value of an asset you have to make 50% on the reminder to make it break even.

So capital preservation is by and large more important for successful long term investment than securing an Occasional large profit.

-------------------------ManojKumar @markettoday

WHAT IS THE MARKET?

WHAT IS THE MARKET?

What is the reality behind market symbols, prices, numbers, and graphs?

When you check prices in your newspaper, watch quotes on your screen, or plot an indicator on your chart, what exactly are you looking at? What is the market that you want to analyze and trade?

Amateurs act as if the market is a giant happening, a ball game in which they can join the professionals and make money. Traders from a scientific or engineering background often treat the market as a physical event. They apply to it the principles of signal processing, noise reduction, and similar ideas. By contrast, all professional traders know full well what the market is - it is a huge mass of people.

Every trader tries to take money away from other traders by outguessing them on the probable direction of the market. The members of the market crowd live on different continents. They are united by modem telecommunications in the pursuit of profit at each other's expense. 

                       

          "The market is a huge crowd of people. Each member of the crowd tries to take money away from other members by outsmarting them. The market is a uniquely harsh environment because everyone is against you, and you are against everyone."

Stock Market - Journey to be followed for Long term success

Stock market long term Journey

1. Decide that you are in the market for the long haul- that is, you want to be a trader even 20 years from now.

2. Learn as much as you can. Read and listen to experts, but keep a degree of healthy skepticism about everything. Ask questions, and do not accept experts at their word.

3. Do not get greedy and rush to trade - take your time to learn. The markets will be there with more good opportunities in the months and years ahead.

4. Develop a method for analyzing the market- that is, "If A happens, then B is likely to happen." Markets have many dimensions -use several analytic methods to confirm trades. Test everything on historical data and then in the markets, using real money. Markets keep changing-you need different tools for trading bull and bear markets and transitional periods as well as a method for telling the difference.

5. Develop a money management plan. Your first goal must be long-term survival; your second goal, a steady growth of capital; and your third goal, making high profits. Most traders put the third goal first and are unaware that goals 1 and 2 exist.

6. Be aware that a trader is the weakest link in any trading system. Go to a meeting of Alcoholics Anonymous to learn how to avoid losses or develop your own method for cutting out impulsive trades.

7. Winners think, feel, and act differently than losers. You must look within yourself, strip away your illusions, and change your old ways of being, thinking, and acting. Change is hard, but if you want to be a professional trader, you have to work on changing your personality.

        --- excerpts are form the book "Trading for living" - Alexander Elder

Back again - lot of changes n challenging times ahead

"Go out and face your fears by taking actions, making a mistake, learning from the mistake and growing mentally, emotionally and physically stronger from the process."😊

Moving Averages

Moving Average

Weekly chart - 26 WEMA (nearly 6 Month data)

Daily chart - 22 DEMA (nearly 1Month data)

Trading Signals

1). Direction of the slope

Pointing Upwards => Bullish => Go Long

Pointing Downwards => Bearish => Go Short

2). Buy near the EMA,

Place the stop loss below the EMA for long & Vice versa for shorts.

3). Dual EMA to identify trend and enter position.

Longer EMA indicate trend = > 22 DEMA

Shorter EMA indicate to enter position => 11 DEMA.

A). Buy when EMA rises and price closes above it,

Sell when Price closes below EMA.

B). Short when EMA falls and price closes below it,

Cover the shorts when price close above EMA.