OBJECTIVE SUBJECTIVITY IN TRADING
THERE R ONLY 2 SET UP IN TRADING -SWING & BREAKOUT(MOMENTUM)
SWING= BUY LOW SELL HIGH, BREAK OUT= BUY HIGH SELL HIGHER .
(sell high buy low for short, sell low later buy lower - similar with opposite premises,can be seen by flipping the chart)
SWING = AN PLAYING INSTRUMENT IN A PLAYGROUND ,WHERE A CHILD RIDES IN AIR . A SEVEN YR SITS , PRESSES LEG ON GROUND -TAKE THRUST AND MOVE TO AIR. IT HAS A LOWER PT NEAR GROUND AND HIGHER PT IN AIR ,FROM WHERE IT RETURNS AUTOMATICALLY. NOW THE CHILD PRESS AGAIN IN GROUND TO TAKE THRUST TO MOVE UP AGAIN.
SAME THING IN TRADING -MOVE FROM LOWER THRUST PIVOT.
LOWER PIVOT= SUPPORT, IMP GAP UP START PT
some toddlers are protected by parents , come on holiday . Papa arranges and tell toddlers hold tight the chain/side bar. Now gives push -baby moves up and enjoy the air .IT MOVES UP BY PAPA'S STRENGTH - BETTER ECONOMY ,BETTER COMPANY FUNDAMENTAL , BETTER GREED DRIVEN MONEY FLOW LIKE FII.
PROBLEM IS BABY ENJOYS THE RIDE - AND WANT TO DO THE SAME ON REGULAR BASIS ,EVEN BY SELF -WITHOUT REALISING ITS BY PAPA'S STRENGTH ENJOYED THE RIDE ON HOLIDAY.
CONDITION OF ECONOMY /MONEYFLOW FROM OUTSIDE CREATES THE FEEL GOOD- set up for break out - not always exist in market. One trend wonderer r loser at market top,without realising condition can change -economy /business has its cyclicity.
BREAK OUT IS PLAYABLE ON BETTER ECONOMIC FACTOR+ MONEYFLOW. if any one of non existent ,it is bound to fail.MEDIA creates hype so fund manager can made quick money ,with vested interest.SO IF U UNDERSTAND PROPER VALUE WITH A STD P/E ,U KNOW THE DUMPING PT. if u can read orderflow/greed - excellent money earning opportunity as u buy early and sell later.VALUATION WHICH IS RELATIVE , actually imp basis for breakout, this present value is not justified,because of new fundamental addition is prime reason for greed driven opportunity visualised by a lot of traders at the same time, a screen player advantageously encash it.
Once u understand the logic behind this 2 approach =swing and momentum , depending upon market condition ,u can use PULLBACK BUY IN UPTREND, OR A RETRACEMENT ENTRY IN REVERSAL.
if fear force is more a swing can go down to 2 yr low, but if holds - u know accumulation starts now.
YES A TYPICAL STRONG IMPULSE MOVE STARTS ONLY AFTER FLOAT IS CONTROLLED BY STRONG HAND, another way to look when downday occurs the sp. stock is not falling ,example RAJESH EXPORT.
BUT WHATEVER U DO , A STOPLOSS IS MUST FOR ANY STYLE OF TRADE AND DONT SELL EARLY A GOOD UPTREND STOCK (THE BABY MUST GET PAT WHO IS SELF RELIANT)
Last edited by oilman5; 17-03-2015 at 07:51 AM. Reason: add
basically applied in sideways/range bound market. So use nifty to define range bound, at lower end of Nifty band , stocks which r showing upbias can be traded for LONG.
alternately- reversal bar at bottom/support =entry setup.
confirmation by price = entry tactics, below low of tail= stop
reward/risk and high probability always seen before + confidence(comes from practice)
Use of zig-zag or wave locator improve odd.
BREAK OUT STRATEGY (LONG)
MUST BE IN UPTREND MARKET , SO A FILTER MUST BE THERE TO CONFIRM UPTREND CONTINUATION.
when from a tradezone price starts to move MARK up, pl join. MOMENTUM FILTER OR VOLUME IS KEY.
if momentum is losing stream= get out
So u understand consolidation, then be ready when CONSOLIDATION ABOUT TO END ,now join at start of trend. trend defined as higher high , higher low- so when price forming to break -new high , join.
Caution : dont join extended trend at TOP, instead wait for pullback, then in narrow range bar, at upside break JOIN.
yes u have to do daily market analysis EOD for nextday plan ,which sector showing new strength, where its over extended.New strength for long/over extended for short using
CV's list- then correlate with todays's market open- if expect to trade long, just do that.
If nifty showing Down tendency , just SHORT in over extended counter - this is how to use sector rotation.
Bear engulf at resistance =short setup.
STRATEGY requires thinking ,an ability to visualise future,analytical skill and to take well informed decision after collecting data and analysing info.Next come its implementation.
Normally we say an issue is strategic ,when it requires top management involvement,commitment of major resources or an longterm impact.
design,planning and positioning model....................doing SWOT,thoroughing analysis of sector and then visualise and see from perspectives.
POWER MODEL :at micro level involve in bargaining, persuasion and confrontation.at macro level use power over its partners,joint ventures and network relationship .
ENVIRONMENT MODEL :HERE WE COPE WITH ENVIRONMENT .strategy is a response to the challange/ situation perceived /imposed by external environment.
configuration model : AN ORGANISATION DO MOVE FROM A STATE TO ANOTHER AS PER REQUIREMENT , PLASTICITY IDEA TO TAKE ITS SHAPE .......FITMENT .
ECONOMIC GOAL OF AN ORGANISATION
3STAGE.....SURVIVAL,PROFITABILITY AND GROWTH. firm has to survive first[also applicable to any budding trader]dont take it as granted.reckless shortterm oriented decision,complacency.......quick fix idea to tackle larger root cause problem is the reason failure.
PROFIT TO BE SEEN WITH SUSTAINABILITY.PROFIT FROM CORE BUSINESS NOT BY A/C MANIPULATION.
GROWTH, PRECISELY PROFITABLE GROWTH IS AIM. IF COMPNY NOT ABLE TO GRASP OPPURTUNITY TO WIN OVER COMPETITOR,EXPANDING MARKET SHARE,DEVELOP NEW PRODUCT ........IT WILL MARGINALISE.
STRATEGIC PLANNING:VISION AND MISSION...........FUTURISTIC VIEW AND STATEMENT
CORE COMPETENCE:TANGIBLE AND INTANGIBLE ASSET COMPANY HAVE & COMPETIVE
ADVANTAGE OVER OTHER COMPETITORS
VALUE : CULTURE AND ETHICS.
STRATEGIC OBJECTIVE : TARGET IDEA TO MEASURE KEY PERFORMACES LIKE MARKET SHARE, CUSTOMER LOYALTY, QUALITY SERVICE HUMAN CAPITAL ........ITS WORTHINESS
Business environment needs to be analyzed carefully before a strategic plan is prepared.2 environment..........remote and operating . remote environment includes .......political factor, economic factor,social factor,industry factor.OPERATING ENVIRONMENT MEANS how a company sells its product/service profitbly..........competitive position,reputation in labour market,credit worthiness,creditors view.operating environmnt is under the control of company,........where as for remote environment it has to adjust.
DURING THE PLANNING STAGE IDENTIFY KEY ISSUE.............WEAKNESS OF PRODUCT/SERVICES.........WHERE LIES OPPURTUNITY .CHANGE NEEDED IN COMPANY TO SUPPORT STRATEGY.........PRESENT SKILL AND RESOURCES.UNDERSTAND EFFECTIVE IMPROVEMNT...............some key issue r cost, service,new market,products,expansion, acquisition,organisation structure, core competence,new technology,info system.
ANY STRATEGIC PLAN ALSO MAXIMISE PRESENT RESOURCES ,SKILLS AVALABLE ,TRAINING NEED TO FACE CHANGE, NEW VIEW OR ORIENTATION .....AND OVERALL COMPATIBILITY.
STRATEGIC MANAGEMENT APPLIES TO VARIOUS LEVEL........CORPORATE LEVEL DECISIONS R MACRO AND COCEPTUAL IN NATURE ........LIKE CHOICE OF BUSINESS , GROWTH STRATEGY ,CAPITAL STRUCTURE.BUSINESS UNIT LEVEL R MORE SPECIFIC........DISTRIBUTION CHANNEL ,INVENTORY LEVEL OF A FACTORY.
STRATEGIC IMPLEMENTATION................ITS THE KEY.TRANSLATE INTO ACTION.....TIMELINESS,RESOURCE NEEDED,X-FUNTIONAL COLLABORATION,DEMAND IDENTIFICATION WITH ANNUAL OBJECTIVE .
SAY ........ANNUAL OBJECTIVE IS ..........to reduce employee attrition by 10%in the end of year,to reduce time ........from order receipt to order execution by 20%.to get quality certification within 6month.
FUNCTIONAL STRATEGY: SAY FOR PRICING ...........which segment to be targeted........mass market or premium product,how much price discrimination be allowed in various customer segment......cost structure vs. actual pricing, discount factor.....for push sell,competive price or ........premium concept
POLICY R THERE WITH CLEAR STATEMENT .........FOR OPERATION MANAGERS TO ENSURE DISCIPLINED DECISION MAKING WITHOUT NEED OF INTERVENTION BY TOP MANAGEMENT..............METHOD IS STANDARDISATION......WITH DEFINED ACCOUNTABILITY.
ACCOUNTABILITY AND RESPONSIBILITY GOES TOGETHER.
ANOTHER FACTOR BY INDIVIDUAL IS CONFIDENCE.HOWEVER EFFECTIVE COMMUNICATION IS KEY TO IMPLEMENT STRATEGY
EFFECTIVE COMMUNICATION DERIVES FROM COLLECTIVE RESPONSIBILITY.......BY RATIONALISING COMPANY STRATEGY /CORPORATE STRATEGY TO STAFF LEVEL,IMPLEMENTING THE PLAN ........WHAT SHALL HAPPEN [CONSEQUENCE] IF IT FAILS .
CHANGE MANAGEMENT CONCEPT................SHARP DECLINE IN FINANCIAL PERFORMANCE..........CALLS FOR DRASTIC CHANGE ..........WITH A CLEAR VISION WHAT TO BE DONE..PREFERENCIALLY PUTTING AN OUTSIDER AS CEO.
NORMALLY PEOPLE HATE CHANGE..........hence counceling/mentoring is given to fit old workforce before retrencment.
strategic control...................suitable midcourse corrective measure is reqd as demand of situation ,internal or external.4aspect to be seen........
1]premise control.................whether assumption made at start hold good,if they r changed.........reevaluate........change plan and act accordingly.
2]implementation control...........overall strategy to be changed in view of new scenario[external environment]...........reqd milestone review.........fullscale reassessment of strategy...........study major resource allocation.
3]strategic surveillance...............monitor broad range of event,internal /external ..........which may influence original strategic implementation.spl alert concept to quickly fix the problem ..........firms strategy in unexpected event.....contingency plan.
4]lower level control.........with set performane std vs actual performance.......identify deviation and corrective measure in it.......without involving top managment.following a budget allocated plan......however deviation to be regularised from competent authority.
EVALUATING AND REWARDING PERFORMANCE..............QUALITITIVE VS QUANTITIVE MEASURE,EXPECTATION VS REALITY.GIVE PRIORITY TO INDIVIDUAL WHO R READY TO LEARN,WORK TOGETHER AS TEAM.............UNDERSTAND CORE COMPETENCE.
so milestone is fixed.........and try to achieve it.,......reward must be given for good performance.
ROAD AHEAD..................CLASSICAL STRATEGIC VIEW GIVE PRIORITY ON UNDERSTANDING INDUSTRY STRUCTURE, CAPABILITY OF A FIRM IN RESPECT TO COMPETITOR.BUT PRESENT SCENARIO SUGGEST PRIORITY ON 1-2YR SHORT TERM OPPURTUNITY,.......WHICH IN NATURE BASICALLY REACTIVE.......MODERN VIEW OF .....STAY FOCUSSED.hence an intermittant view on short term,independent of long term view r called for.acronym..........FAST
FOCUS..........LONG TERM POSITIONING,SPECIALISATION AND CAPABILITY IN CHOSEN FIELD.
ACCELERATE..........moving fast in small time frame.
STRENGEN...............to move faster,building trust,appropriate quick info to act right...network,remove administrative road block to improve speed of work,
TIE ........put it all together
SUPERIOR DECISION MAKING SKILL
1.GATHERING INFO ON REAL TIME BASIS/EARLIER THE BETTER
2. DISCUSSING WITH OPEN VIEW WITH CORE COMPETENT PEOPLE.
3. TAKE A DECISION WITHIN A STIPULATED TIME ACT ON IT.
4.KNOW WHEN TO DECIDE AND DELIBERATE AND WHEN TO FREEZE.
5.A CLEAR FIXATION OF RESPONSIBILITY
MODERN GROWTH OF KNOWLEDGE MANAGEMENT
2 IDEA...........3S VS 3P
STRATEGY,STRUCTURE ,SYSTEM ........VS,....PURPOSE PROCESS...PEOPLE.
INSTEAD OF COMPLIANCE FOCUS ON COOPERATION OF PEOPLE.
..........MUST ESTABLISH A PURPOSE WITHIN COMPANY
GIVE PRIORITY TO INTERPRENAURSHIP MINDSET .......DO DEVELOP FULL POTENTIAL WITHIN INDIVUAL, HOWEVER HARMONY WITH COMMON STRATEGIC GOAL.
SENIOR MANAGER SHOULD PLAY THE ROLE MENTOR.
study porter competitive strategy
..........understand modern concept of applied FLEXIBILTY in strucural growth of an organisation
As Academic we give priority to Fundamental
Fundamental analysis is the process of looking at a business at the basic or fundamental financial level. This type of analysis examines key ratios of a business to determine its financial health and gives you an idea of the value its stock.
Many investors (longterm holders) use fundamental analysis alone or in combination with other tools to evaluate stocks for investment purposes. The goal is to determine the current worth and, more importantly, how the market values the stock.
It’s all about earnings. When you come to the bottom line, that’s what investors want to know. How much money is the company making and how much is it going to make in the future.
Earnings are profits. It may be complicated to calculate, but that’s what buying stock of a company is about. Increasing earnings generally leads to a higher stock price and, in some cases, a regular dividend.
When earnings fall short, the market may hammer the stock. Every quarter, companies report earnings. Analysts follow major companies closely and if they fall short of projected earnings, sound the alarm.
While earnings are important, by themselves they don’t tell you anything about how the market values the stock. To begin building a picture of how the stock is valued you need to use some fundamental analysis tools.
Fundamental Analysis Tools focus on earnings, growth, and value of a stock in the market.
Earnings per Share – EPS
Price to Earnings Ratio – P/E
Projected Earning Growth – PEG
Price to Sales – P/S
Price to Book – P/B
Dividend Payout Ratio
Return on Equity
No single number from this list is a magic bullet that will give you a buy or sell recommendation by itself, however as you begin developing a picture of what you want in a stock, these numbers will become benchmarks to measure the worth of potential investments.
One has to observe all the ratios over a 3-5 year period and observe how they are increasing/decreasing.
One should also compare all with different companies of the same industry to get a good relative idea. For example the P/E ratio can be compared to the p/e ratios of other companies and p/e ratio of industry.
Another parameter is capital:Free reserves which makes the company a suitable bonus candiadate. Free reserves are out the the earnings of the company and not revaluation of assets.
Stock prices are determined in the marketplace, where seller's supply meets buyer's demand. There is no clean equation but now we r trying to understand from
In an efficient market(which is rarely true), stock prices would be determined primarily by fundamentals, which, at the basic level, refer to a combination of two things: 1) An earnings base (EPS, for example) and 2) a valuation multiple (a P/E ratio, for example).
An owner of a common stock has a claim on earnings, and earnings per share (EPS) is the owner's return on his or her investment. So, when you buy a stock you are purchasing a proportional share of an entire future stream of earnings. That's the reason for the valuation multiple: it is the price you are willing to pay for the future stream of earnings.
Part of these earnings may be distributed as a dividend, while the remainder will be retained by the company (on your behalf) for reinvestment. We can think of the future earnings stream as a function of both the current level of earnings and the expected growth in this earnings base.
the valuation multiple (P/E), or the stock price as some multiple of EPS, is a way of representing the discounted present value of the anticipated future earnings stream.
Although we are using EPS, an accounting measure, to illustrate the concept of earnings base, there are other measures of earnings power. Many argue that cash-flow based measures are superior. For example, free cash flow per share is used as an alternative measure of earnings power.
The way earnings power is measured may also depend on the type of company. Many industries have their own tailored metrics. Real estate investment trusts (REITs), for example, use a special measure of earnings power called funds from operations (FFO).
The valuation multiple expresses expectations about the future. As we already explained, it is fundamentally based on the discounted present value of the future earnings stream. Therefore, the two key factors here are
1) the expected growth in the earnings base, and
2) the discount rate, which is used to calculate the present value of the future stream of earnings.
A higher growth rate will earn the stock a higher multiple, but a higher discount rate will earn a lower multiple.
What determines the discount rate?
First, it is a function of perceived risk. A riskier stock earns a higher discount rate, which in turn earns a lower multiple.
Second, it is a function of inflation (or interest rates, arguably). Higher inflation earns a higher discount rate, which earns a lower multiple (meaning the future earnings are worth less in inflationary environments).
In summary, the key fundamental factors are the following: the level of the earnings base (represented by measures such as EPS, cash flow per share, dividends per share); the expected growth in the earnings base; and the discount rate--which is itself a function of inflation and the perceived risk of the stock.
(now economic growth indirectly contributes to earnings growth.)
• Inflation - We mentioned inflation as an input into the valuation multiple. But inflation is a huge driver from a technical perspective as well. Historically, low inflation has had a strong inverse correlation with valuations (low inflation drives high multiples, and high inflation drives low multiples). Deflation, on the other hand, is generally bad for stocks because it signifies a loss in pricing power for companies.
• Economic strength of market and peers - Company stocks tend to track with the market and with their sector or industry peers. Some prominent investment firms argue that the combination of overall market and sector movements--as opposed to a company's individual performance--determines a majority of a stock's movement. (There has been research cited that suggests the economic/market factors account for 40%weightage) For example, a suddenly negative outlook for one retail stock often hurts other retail stocks as "guilt by association" drags down demand for the whole sector.
• Substitutes - Companies compete for investment dollars with other asset classes on a global stage. These include corporate bonds, government bonds, commodities, real estate, and foreign equities. The relation between demand for U.S. equities plays an important role(as FII may move out to put money there)
• Incidental transactions - Incidental transactions are purchases or sales of a stock that are motivated by something other than belief in the intrinsic value of the stock. These transactions include executive insider transactions. Another example is an institution buying or shorting a stock to hedge some other investment. Although these transactions may not represent for or against the stock, they do impact supply and demand and therefore can move the price.
other factor: 1) middle-aged investors are peak earners who tend to invest in the stock market, while 2) older investors tend to pull out of the market in order to meet the demands of retirement. The hypothesis is that the greater the proportion of middle-aged investors among the investing population, the greater the demand for equities and the higher the valuation multiples.
lower p/e ratio coupled with high book value is very good for LONG term investments. Whereas if the scrip is a FANCIED scrip, even with high p/e, it may quote more. those scrips may be good for short term. hence, companies with low p/e ratio which are not fancied may take a long time to appreciate. but they are worth investing for long term
as per The Little Book That Beats the Market
Contrary to efficient-market naysayers, Greenblatt (You Can Be a Stock Market Genius), a Columbia Business School adjunct professor, touts a "value-oriented" approach that looks for bargain stocks whose share price is cheap relative to the company's profitability. His version is a "magic formula" that ranks stocks on the basis of two variables—the earnings yield and the business's return on capital. Greenblatt offers lots of statistical proof of the formula's success, but emphasizes the importance of faith in seeing the investor through inevitable short-term downturns:
In indian market context, i think FII net purchse & sale trend should also be considered.
PEG is the ratio of the Price Earnings Ratio to the expected Growth of the companies earnings per share.
PEG < 1 is a great Buy
A very high PEG means the stock is overvalued.
A PEG=1 implies fair valuation
Try to read 'Investment Valuation' and 'Damodaran on Valuation' by Aswath Damodaran.
Characteristics of good investor: following rare traits...
1)The vision to identify breakthrough products, leaders, and brands
2)The knowledge to spot an undervalued gem in a sea of glass
3)The courage to buy and hold when others are running scared
4) The courage to not get depressed when everyone around him is making money and he is not (the investor is not envious).
Warren Buffet doesn't ever needs charts he buy & holds onto a stock as long as he finds value in it
To see result use www.indiaearnings.com. Registration required.
Investors love companies that produce plenty of free cash flow (FCF). It signals a company's ability to repay debt, pay dividends, buy back stock and facilitate the growth of business – all important undertakings from an investor's point of view. In the past we have given our readers a perspective on valuation parameters like price to earnings (P/E) and price to book value (P/BV). While both these valuation parameters reflect the present earning capabilities, they do not signal the ‘future’ prospects.so we introduce FCF
what of FCF ?
The formula for calculating Free Cash Flow (FCF) is as:
Net Profit + Depreciation – Capital expenditure – Changes in working capital – Dividend
FCF takes into account not only the earnings of the company but also the past (depreciation) and present capital expenditures, capital inflows and investment in working capital. Growing free cash flows are frequently a prelude to increased earnings. Companies that experience surging FCF due to revenue growth, efficiency improvements, cost reductions, share buy backs, dividend distribution (from subsidiaries) or debt elimination can reward investors in the future. Better free cash flows are therefore a reason for the investment community to cherish.
On the other hand, an insufficient FCF for earnings growth can force a company to warn for its debt levels. Even worse, a company without enough FCF may not have the liquidity to stay in business.
From a company’s point better FCF definitely indicates better efficiency on the part of the company. But what is pertinent for investors to note is that simply assessing the FCF on the basis of its absolute value is not prudent. It is imperative to also assess as to what components have contributed to the same.
Let us take a hypothetical example of two companies, A and B, both of which have garnered the same FCF for the current financial year.
Estimated free cash flow
(Rs) Company A Company B
Net profit 75 120
Add: depreciation / amortisation 20 5
Less: Capital expenditure 5 15
Add/ (Less): Decrease /(Increase)in working capital 10 (10)
Less: Dividend 20 20
Free cash flow 80 80
Prima facie although appearing similar, if you delve a little deeper there is a sharp difference in their performances. While company ‘A’, despite having lower earnings has benefited by adding back depreciation and decrease in working capital,
company ‘B’ has invested in capex and working capital. This indicates that while company ‘B’ is investing for future growth, company ‘A’ is not sufficiently geared up for the impending challenges. This also means that investors in company ‘B’ can expect ‘ better future return , if management views materialise.
Forming sector’s point of view
As explained , cash flows are dependant on the capital expenditure and working capital liabilities borne by the company. This however, differs as per the dynamics of the sector in which the company is operating and should be seen in that light. While sectors like banking require minimum expenditure on capex (as a % of their turnover) those in pharma, engineering, FMCG or commodity sectors require to invest a substantial amount in R&D and capacity expansions. Thus, you would find SBI trading at a very attractive price to free cash flow valuation of 3 times, while an equally competitive Infosys is trading at 40 times (due to lower cash flows)- u cant compare apple with orange.
FCF is not only a mirror image of the present but also a sneak preview into the future. The implications of cash flow may not be explained in the annual reports, but is left to the investor’s prudence to diligently scrutinize the same and try to read between the lines.
The legendry investor Benjamin Graham once said, “The individual investor should act consistently as an investor and not as a speculator.Which means that he should be able to justify every purchase he makes and each price he pays by impersonal, objective reasoning that satisfies him that he is getting more than worth his purchase
By establishing how much cash a company has after paying its bills for ongoing activities and growth, FCF is a measure that aims to cut through the arbitrariness and "guess estimations" involved in reported earnings. Regardless of whether a cash outlay is counted as an expense in the calculation of income or turned into an asset on the balance sheet, free cash flow tracks the money.
To calculate FCF, make a beeline for the company's cash flow statement and balance sheet. There you will find the item cash flow from operations (also referred to as "operating cash"). From this number subtract estimated capital expenditure required for current operations:
Cash Flow From Operations (Operating Cash) - Capital Expenditure = Free Cash Flow
To do it another way, grab the income statement and balance sheet. Start with net income and add back charges for depreciation and amortization. Make an additional adjustment for changes in working capital, which is done by subtracting current liabilities from current assets. Then subtract capital expenditure, or spending on plants and equipment,this will give u cash flow.
The gap between Cash Flow and Earnings has to be seen in light with that during the previous financial years as well as the average for the industry. Besides, year end window-dressing will certainly not generate any cash flow for the year but current year's Cash Flow will certainly include cash generated as a result of window dressing which took place at the end of the previous year.
A wide gap between cash flow and earnings may indicate that all is not well for the company but one can't jump to the conclusion only on the basis of this gap that the accounts have been manipulated.
Once u know academic aspect,APPLICATION OF FUNDAMENTAL ANALYSIS can be done.
Choose a list of good management company , sector preferably u have some knowledge.
i told u to think strategically.pl understand typical constraint what makes a business failure in reality.btw i find rarely people know fa.......those whom we see r parrot........an mba/cfa..without vision......maximum they produce a report for a company.....on a structured format.
order getting is actually affect profitability of a company- so use it for nimble trade.
For 4 quarter result out, it impacts price definitely as perception of value get changes ,so lies opportunity.
for higher profitability continuation, use break out style.
If result failure temporary - no macro problem,- buy at imp swing pt.
If nifty depressed - build up longterm portfolio , out of exceptionally good company .
I also trade on loss making when turns to profit, as after 2nd quarter consequently profit MF buy them.
Market sentiment refers to the psychology of market participants, individually and collectively. This is complex topic and Market sentiment is often subjective, biased, ........, you can make a solid judgment about a stock's future growth prospects, and the future may even confirm your projections, but in the meantime the market may myopically dwell on a single piece of news that keeps the stock artificially high or low. And you can sometimes wait a long time in the hopes that other investors will notice the fundamentals.As senior traders we know - we are participating in a game of prediction what majority shall think. where they shall put money (though often they will be wrong)
So we have our own tools to play consistently in a particular timeframe where this guess/strike rate is about 60-80% right, use discipline to stick only in it.
Market sentiment is explored by behavioral finance. It starts with the assumption that markets are apparently not efficient much of the time, and this inefficiency can be explained by psychology and other social sciences. The idea of applying social science to finance was fully legitimized when Daniel Kahneman, a psychologist, won the 2002 Nobel Prize in Economics. Many of the ideas in behavioral finance confirm observable suspicions: that investors tend to overemphasize data that come easily to mind; that many investors react with greater pain to losses than with pleasure to equivalent gains; and that investors tend to persist in repeatable mistake.
Only Some investors/trader claim to be able to capitalize on the theory of behavioral finance and sentiment study and the majority, however is feedstock for former .
To explain in day trade light i will give an old post.
yesterday i have put some comments ,which i think tremendously effect my trading ,so is put forward for benefit of all.
“The riskiness of an investment is not measured by beta (a Wall Street term encompassing volatility and often used in measuring risk) but rather by the probability – the reasoned probability – of that investment causing its owner a loss of purchasing-power over his contemplated holding period. …Investment possibilities are both many and varied. There are three major categories…
a)Investments that are denominated in a given currency include money-market funds, bonds, mortgages, bank deposits, and other instruments. Most of these currency-based investments are thought of as ‘safe.’ In truth they are among the most dangerous of assets. Their beta may be zero, but their risk is huge. …Under today’s conditions…I do not like currency-based investments.
b)The second major category of investments involves assets that will never produce anything, but that are purchased in the buyer’s hope that someone else – who also knows that the assets will be forever unproductive – will pay more for them in the future. …The major asset in this category is gold
c)My own preference…is our third category: investment in productive assets, whether businesses, farms, or real estate. …I believe that over any extended period of time this category of investing will prove to be the runaway winner among the three… More important, it will be by far the safest.”-Warren Buffet
Confirmation bias is the tendency to search for and overweight evidence that supports one's own position. This can be a major problem in trading, as it leads traders to become overconfident in their positions and stay in trades well after they should be abandoned. A simple example occurs when traders are in a position and then focus mainly on the indicators or market behavior that supports staying in the position.
In such instances, the stop loss for a position will not be a planned set of criteria. More likely, the stop loss will be pain: the position will only be abandoned when it becomes impossible to sustain a confirmation bias. Quite often, that point of pain will be an obvious point of disconfirmation, such as a break to new price highs or lows.
Trading with pain as a stop-loss is not only bad for the trading account; it makes it difficult to sustain a sense of confidence in one's work. It also leads to the kinds of frustration that can generate subsequent poor trading decisions.
Losing less is more important then winning more. it's a long process of becoming a winner from a loser and psychology plays a major role. losing less gives us more confidence while trading and therefore resulting in better decision making abilities WHILE carrying a position. if we are trading with higher risk during the process of becoming profitable, we will mostly beat ourselves before the market beats us. we can't trade in fear and to minimize the fear, we need to minimize the risk. we cannot get over our emotions just by asking ourselves to do it. we need to understand those factors that trigger these ' greed and fear
The longer I’ve been trading, the more humble I’ve been forced to become. I don’t consider
myself to be a great trader. Whenever I havebeen tempted to feel this way, I have been on
the brink of making a catastrophic trading mistake.
a trader has to fight in 3 place........self , other trader and ofcourse MARKET.
understand past suggests WHAT NOT TO BE DONE. but trading/investment really deals in future, So study on PROBABILITY ,SQC ,programming idea develops objectivity in u , strategic thought process,and psychologically cool sharp mind to decide under stress without damaging skill ......is requirement.
yes behavior modification takes 10yr+ to be flexible enough to do what NEED TO BE DONE NOW.
ANY FUND MANAGER TO WORK INDEPENDENTLY atleast takes 5+ yr,pl add his experienceof dual degree + execution skill learning and understanding marketing hype.
Nothing is irrational in the markets... Markets can do whatever it wants, whenever it wants....
Never ever blindly trust what people write in the forum's/ blogs/books..... Not alway's they are telling you what they really believe in and their real market perceptions...
Bottom line of your account is not determined by how well you can read the markets but how well you can trade them.
As traders, we cannot afford the luxury of wishing and hoping because it puts us in a passive relationship with the markets. When we wish and hope, we are shifting responsibility on to the markets for making something happen instead of confronting the conditions and doing something about it ourselves. If we find ourselves wishing and hoping, it is an excellent indication that we don't know what is going on and as a result need to get out of the markets.
....... the problem with amateurs, they only have half a plan, the easy half. They know how much of a profit they're willing to take, but they don't have the foggiest idea how much they're willing to lose. They're like deer in the headlights, they just freeze and wait to get run over. Their plan for a position that goes south is, "Please God, let me out of this and I'll never do it again, but that's bullshit, because if by chance the position turns around, they'll soon forget about God. They'll go back to thinking that they're geniuses, and they'll always do it again, which means that they're sure to get caught, and get caught bad.
What most people fail to understand is that while you're losing your money, you're also losing your objectivity. It's like being at the craps table in Vegas, and the fat bleached blonde in the sequined dress is rolling the dice, and you're losing, and you're determined that you're not going to let her beat you. What you've forgotten is that she doesn't care about you, she's just rolling the dice.
Whenever you have jealousy as an emotion, or greed, or envy, it distorts your judgment. The market's like the bleached blonde in Vegas, it doesn't care about you. That's why you have to put aside your ego and get out. If you have trouble doing that, as most people do, be like Odysseus: tie yourself to the mast with an automatic stop and take your emotions out of play.
Without specific, clear, and tested rules, speculators do not have any real chance of success.There is always the temptation in the stock market, after a period of success, to become careless or excessively ambitious.It is inseparable from human nature to hope and to fear. In speculation when the market goes against you, you hope that every day will be the last day—and you lose more than you should had .
And when the market goes your way you become fearful that the next day will take away your profit, and you get out—too soon.
Fear keeps you from making as much money as you ought to.
The successful trader has to fight these two deep-seated instincts.
He has to reverse what you might call his natural impulses TO DO IMPULSIVELY
-He must fear that his loss may develop into a much bigger loss,
-and hope that his profit may become a big profit
There are many successful approaches and techniques for managing risk. The real difficulty is finding one that works for you. It could be systematic or discretionary, but it needs to suit you in order to protect you from yourself, that is, from your natural biases and your predispositions to act in a self-sabotaging way.
The average trader focuses too much on big payoffs. This is a stock market mentality, i.e., buy it and ride it to the sky, or sell it before the crash. Trading is not about predicting and catching the "big" moves. This is "fantasy" trading. It is the "lottery" approach to trading which, in the end, pays off only for a very, very few. Trading is about "seeing" momentum and positioning with it, "seeing" trend and following it.
Most investors remember and learn from what has occurred in the recent past. Investors must realize that they must learn from periods that might extend beyond their own memory. Market cycles can last a long time, and people have too much at stake to make all the mistakes themselves, so they must learn from market history
In this business if you're good, you're right 6 times out of 10. You're never going to be right 9 times out of 10
The average trader relies too much on feel, on intuition. The possibility that any one of us is a natural market genius is realistically somewhere between zero and none. Accept that you will never be a world class athlete, sing a perfect musical note, or find a theory beyond relativity; and neither will you ever reliably predict the future. But be aware that you can know the past and see the present.
Most traders and potential traders are looking for rules-based trading systems or approaches. Using rules to make money is, of course, incredibly appealing; however, such cut-and-dried rules are seldom accompanied by the most important rule - a rule to connect, manage, and harmonize all the other rules.
Every trader will be tested emotionally, mentally and monetarily to varying degrees in his career. Most times, it’ll be extremely unpleasant and you’d most likely want to quit right there and then. Only those who can endure this kind of hardship, learn from their mistakes and persevere on will make it.
Trading with confidence has to do with having a method which you have proved yourself, and which you know will win over time if you follow it consistently. That means being able to recognize the conditions which allow you to trade, and only trading when they are all present. This is comparatively easy with hindsight: when we're actually there, we can see when all the pieces fit. But beforehand, we don't know that all the pieces are going to fit
"It is very important to visualize the many ways in which the market may unfold, rather than trying to forcast or predict how it will unfold. With a market understanding, you can begin to visualize each possibility, and what each would indicate to you about the market and your position."
I'm sure there are highly profitable pros somewhere who trade wave patterns, moving averages, chart formations, and the like. In several years of working hands on with such traders, however, I have yet to meet one who uses these methods. The pros do, on the other hand, care very much about who is in the markets and why markets are moving. The principles provide a framework for making sense of market behavior, which then can be used to filter the setups provided by charts, cycles, and the like. The really good traders understand markets; they don't just predict them.
Don’t think about what the market’s going to do; you have absolutely no control over that. Think about what you’re going to do if it gets there. In particular, you should spend no time at all thinking about those rosy scenarios in which the market goes your way, since in those situations, there’s nothing more for you to do. Focus instead on those things you want least to happen and on what your response will be.
A characteristic of a good trader is to be realistic and understand what comes from noise versus what comes from true data. Another is to understand whether you have done something stupid, or if you were too quick at judging yourself. Another characteristic of a good trader is being able to find an effective way to deal with his emotions, to set them aside.
Without the stabilizing effect of a theoretical framework of how the markets function - whether intuitive or logical built upon the trader's fascination with the inner workings and price movement - research, trading-plan development and trade execution will remain volatile.
Trading is 'teachable' but its definitely not something you can teach through seminar/lectures, there are just too many subtleties involved.
The main goal of each trade is to minimize risk rather than maximize profit. Positions are managed according to the market's behavior after we've made our trade. We can't really predict the outcome. For example, if we are trading on a test, we don't know if it will lead to a true reversal or just a consolidation pattern before further continuation of the preceding move. We are trying to achieve a "headstart" in the right direction together with a chance to put in a tight stop.
TRADING ON PRICE
We trade only price. We do not trade information. We do not trade knowledge (of the asset being traded). Nor do we trade computing power or expertise. We do not trade anything at all other than price: ie: the number. Therefore since the only factor that counts in this game is the price, it is only smart to focus all, or almost all, our attention on this number on the price and its movement; in other words, what the price has done in the past and is doing in the present. Approach the game/business of trading in this manner - an up down number game where the focus is on what the price does and not why - and you will be on the right path to succeed as a trader
You are trading against the wealthiest and most knowledgeable people and organizations in the world.Do not delude yourself, you cannot compete on their terms: information, knowledge, experience, staying power, and so on.Do not spend time and energy trying to figure out why a price moves.Focus all your attention and energy solely on what the price is doing.You are a trader. A trader does not get paid to understand or explain why something has happened. The question "why?" deals with the past. The question "what?" deals with the present and provides the best clues to the future. And never forget that you are trading "futures," not "pasts." Discovering the supposed "why" of a price move will provide you with little more than temporary intellectual comfort. Whereas observing and focusing on what the price has done and is doing will help you anticipate what the price will do in the future. Leave the intellectualizing to those paid for their words not their deeds, i.e., journalists and brokerage house analysts
The study of charts is not as some people claim, the mere identification of certain labeled patterns made by the actions of stocks. That sort of thing borders on the mechanical and does little to aid in the development of one's judgment. But when a student undertakes to read from his charts the purposes and objective of those who are responsible for a stock's action in the market, he is beginning to see, in a true light, the meaning of scientific stock speculation.
The market always tells you what to do. It tells you: Get in. Get out. Move your stop. Close out. Stay neutral. Wait for a better chance. All these things the market is continually impressing upon you, and you must get into the frame of mind where you are in reality taking your orders from the action of the market itself.
In market ,its important to know how market functions,how price behaves,but more important is how u behave with price,adjustment of self with price movement prepares you a level in which u find opportunity.
Trading is very easy,if you follow price,and trade as per plan .Right trading is nearly impossible ,if allow your emotion or others opinion to enter into your trade.
There are no certainties in this investment world, and where there are no certainties, you should begin by understanding yourself.
Trading is not group activity.Be alone, with your own plan & line of action ,success awaits for U . A dependable personality can only shine for some days.Here r lakhs of trade learners in market,but successful technical traders can be counted in fingers (consistently about 5yrs make above 50% annual return)In trading,i have success in momentum trading, counter trend swing, as well as break out................all have particular condition to succeed.AND on different condition , all of them have FAILED...its the mastery of setup/market dynamics on a particular condition makes U a successful trader.......
Sit idle , in a small range market..........join in break out side ,in the 1st symptom of breaking price barrier.
The moment when a trader is able to change from the state of "understand the principle of probability" to the state of "thinking in probability mind set", he changes his world.
In market what is NOW, is all that is important – at least with regarding making decisions. If you can put aside what should be, what could be, what ought to be, what would have, could have, should have occurred, and just pay attention to what is actually happening, the act of paying attention transforms what is. The greatest action, the wisest, the best action that you can take in almost any situation is to stay with what is, instead of jumping to conclusions or trying to come up with conclusions.
Trading is simply a transfer of accounts from those who don’t know what they are doing into the accounts of those who do. The consistently profitable trader knows whether the person on the other side of their trade is a novice trader or a consistently profitable institution.
If the market or individual stock does not act according to one's primary analysis, the market itself is trying to tell the trader to change that analysis, or at least cut losses short and get out.
"I always think market as war between two equally strong opponent Bulls & Bear(anyone can turn the table anytime, so don't be partial ). Although they have completely different characteristics. We have to thinking sensibly how market behavior is changing using these price action.
In bear markets, prices fall faster than they rise in bull markets. Down moves are sharper and rallies tend to be quicker than they are in bull markets. Due to that reasons market moves down much faster in corrections also than it moves up in rallies.
Now from the price action of last two days (along with other world markets) it is obvious that short momentum is shifting with bear. All near term support in smaller time frame charts like 30m is gone away(gave us enough big profits also ). So now it is time to look at daily(next is weekly ) chart for near term support for bulls(possible target for bears: ).
So, it is next possible boundary(doted thick blue line) where bulls have some strong ammunition to face bear.
From my experience, whenever such big fall occurs in short time(several support broken easily one by one), there is a chance of damage in short term trend, as daily & weekly charts starts affecting(if price is not reversed within few days). We have take care of this to make big profit, there is always chance of bigger profit in beginning of a trend change. That blue line can be next possible target for bears(next support for bulls).
.......now it is about Patterns using Sup/Resistance & Gap Trading Strategies.
Another important observation is 50% fibo retracement of last big move on daily charts almost coinciding with that gap up support. From tech analysis point, whenever multiple resistance/supports coincides at one point(it becomes critical), it can act as a magnet and can creates hollow zone below and above also.
so the persons can understand trading is a search for opportunity.Its a paradoxical game
losing trade may appear any time.understand hot topic black swan.
concept of hunter and the hunted.-the basic of reward/ risk...when situation is out of hand.
hopefully have seen one 1bull-bear cycle..or as a pro 100% retracement and comeback.
Then trading is within comfort level.
philosophy of trade : market is war arena..ruthless fighter can only survive
: trading offers great no of oppurtunity to pick
.A position may be oppurtunity or a trouble[loss]...nobody knows while picking,what it shall be.TIME will unfold..whether it is profit making one or take money out of you.
corollary : do i know how to trade?if yes, how to do effectively
specific method to be followed again and again[system]
system vs. individual psychology ----- TUNING
element : experience
market research and put data for validity
testing [ ofcourse u must have ability to test]
if no system : poor trade result occurs with emotional trading.
when personal psychology not match with particular style
loss of oppurtunity[ missing oppurtunity due to fear]
hence a system of timing must have
1. set up condition
3. exit...profit target
4. risk analysis
5. exit ..contingency plan
Recently i find observation - which may be useful to a trader.
A mechanical trader easily can trade a setup - as he knows as per designed system certain loass making trade will occur at random,so he wont bother when it occurs , simply get out and await for next opportunity to come.
Discretionary trader on the contrary build up more confidence after Right trade,hesitate to book loss ,when the trade is turning wrong. similarly when make some consequitive loss ,hesitate to enter . Only + side of discreation is use sentiment analysis, so take adjust in position size ,but do execution mechanically.
(similarity like football/cricket match at own turf , -similarly u know some sector very well, strength of a company -when in moves - u can do better trade in new low/new high zone.)here JJ is doing excellent work on sector rotation ,how money is moving in/out - pl understand correlation - may check myfno also.
in actual trade learning arena different school of thought exists- going down from higher timeframe. i learnt this way.
take a trade and quickly (some day hold)book profit and loss.Since i made good money to regular basis to run family , i tried to improve further HOLDING TIME -SO tried logic of investment, BUT ON THEORY IT SHOWS BETTER PROFITABILITY but not actual. AS BEING A PRO -INVESTOR , PSYCHOLOGICAL MAKE UP LITTLE DIFFERENT . so correspondence chess,is difficult(i find 6hr play boring,1 hr best -05 hr ok)
though i play well 10 min clock set ok,its not so good .(maggie trade has its exhausion in mind )
BUT STRONG WELL THOUGHT MORNING TRADE IS VERY WELL RETURN WISE, ALSO VERY GOOD 1430 HR - INTRA DAY MOMENTUM SWING.
but similar btst not good,ALSO WHEN I PLAY WITH LONG HAUL FUND MANAGER'S GAME -LOGIC OF INVESTMENT THEME FALL AWAITS ,SUFFERING PORTFOLIO.
on the contrary keeping simple basic fundamental , using certain ta logic coupled with price action as unfolding HIT RATE IS EXCEPTIONALLY HIGH- SO I HAVE STICK TO THIS AS MY TRADING BUSINESS . as life is limited,so is capacity based on safe principle SWING VALID ACTION TO BE THERE TO RUN 30% ANNUAL RETURN(main fund allocation 60%).by increasing same set with option return treble to 90%.
SO OTHER GARBAGE LIKE PORTFOLIO LONGTERM FUNDAMENTAL ,I AM THROWING OUT AND concentrate on simple future ,fresh nifty opportunity + midcap logic green driven 20-30 day move trendtrade .
this to be taken only(discipline)
there is a lot of difference to talk with fan, vs. sharing life/bondage with closed one
Last edited by oilman5; 26-06-2015 at 08:36 AM. Reason: add