Stock selection for Day Traders

One of the important decision day traders make is selection of stocks for the day. As the saying goes "we are only as good as the stocks we trade ".

1. I try to trade stocks in play ( SIP). Stocks which are having fresh news.
2. Business papers like Business Standard, Economic Times report stocks in news which are good candidates for day trading.
3. Most active securities for the previous day and the trading day.
4. Breaking news stocks on Business channels like  CNBC, ET NOW
5. Earnings season offers number of stocks for Intraday opportunities.
6. NSE website has a tool called  STOCK WATCH which gives comprehensive picture of many stocks and sector along with their 365 day and 30 Day movements which can help the trader on over performance and under performance of stocks.
7. Stock screeners on websites like ICharts.

Some problem trading patterns in Intraday Trading

Day Trading places more emphasis on the psychology aspect. The trader has to take fast decisions under stress which is relatively less in swing or positional trading. In the heat of trading,the trader is prone to errors.
some of the problem trading patterns I have observed and trying to control in my intraday trading are

1. Placing impulsive, frustrated trades after losing ones.
2. Failing to take good trades after a losing period by becoming risk averse
3. Taking more unplanned trades after becoming overconfident during a winning period
4. Increasing trading size to make up for prior losses
5. Trading for excitement rather than to make money

Market Overview 10/12/2012

As markets gain energy ( with huge volumes) I am trying to be active once again !

1. My approach more or less follows the detailed description given here.
2. Nice blog where the conceptual approach to trading decisions is provided.
3. I look to closely follow MCDOWELL and PANTALOON RETAIL for Monday.
4. Will there be a Lobogala in MCDOWELL ?

How to learn "real" Trading ?

My interactions with new traders  and enthusiastic learners of markets come to a standstill when they ask me about the real trading .

1. people believe that there is something beyond technical analysis,fundamental analysis ,risk management that will enable them to trade markets succesfully .
2. it should be born in mind that succesful trading of markets is about risk management rather than maximising profits .
3. various tools we have like technical analysis ,trading psychology,risk management provide a framework for understanding and thinking about the markets . 
4. DR.Brett Steenbarger provides comprehensive tool kit for beginning traders . 
5. VICTOR NIEDERHOFFER views all trading as falsification of hypothesis in a popperian fashion  

Investments - BKMM- A commendable book

I find the book INVESTMENTS - Bodie, Kane, Marcus, Mohanty  highly commendable in its thorough coverage of basic tenets of modern finance and also its flavour of Indian Markets.

1.  The book is predicated on the premise of  Near- Informational efficiency of Well developed Securities Markets
2. This is highly important as many naive  market participants are not aware or ignore this.
3. The effect of transaction costs is very significant as it is very tough to overcome the VIG.
4. Related article on the high levels of STT in Indian Markets here.
5. Another significant tenet of the book is that  Higher expected returns come only at a price. As investors are aware the higher returns are realized for bearing the tail risk ( The case of SATYAM comes to mind)

Open Learning & Free Course Ware

The era of open learning appears to be on the rise. Wide variety and rich course materials are available on the web for free.

1. MIT's course ware available for free download here.   I have used their materials in part for a course on INVESTMENTS.
2. IITs have done a commendable job of putting their lessons on various subjects at NPTEL. I am glad to see my colleague Prof C S MISHRA of IIT Kharagpur, previously with VSPGS, Hyderabad on their SAPM video lectures
3. Post at Dailyspeculations regarding Open Course ware

Introduction of new products at BSE

BSE is in a hurry to introduce new products as competition is in the exchange space with the entry of MCX-SX. I am curious to note that , in recent days , BSE is able to match up with NSE in F&O turnover.

1.  MCX-SX is going to be operational shortly in equity&equity derivatives segment.
2.  Liquidity Enhancement scheme has increased substantially BSE F&O Volumes.
3. We have to watch how  NSE reacts to these new developments.
4. It is interesting to go through how NSE had overtaken BSE in less than a year.
5. Microstructure of Index construction - analysis about NIFTY
6. Interesting paper on Political economy of Indian market microstructure
7. Ajay Shah & Susan Thomas had written comprehensively on Indian Markets &Exchanges, here, here
8. Recently released NSE Fact Book- A goldmine of data about markets
9. Another respected observer of Indian Financial Markets
10. Industry bodies like WFE, IOSCO

Interesting Readings

1. Prof JR Verma of IIM-A posts on Microstructure, Statistics for finance
2.  Dr Ajay Shah, one of the top financial economists in India on The most important financial products traded in the formal sector in India -- the stock market index (Nifty) and the exchange rate (the rupee)
3. Trading Books - One of my favorite topic
4. Another issue very close to my heart - Trader Education

F&O eligibility criteria- Tightening of norms by SEBI

SEBI has tightened norms for stocks to be traded in F&O segment. It has modified norms in 1) MWPL 2) Quarter sigma order size 3) Avg monthly turnover in the derivatives segment.

1.  NSE's detailed description of criteria it follows for F&O able stocks & Indices
2.  SEBI's circular on revision of norms
3. NSE has excluded 51 stocks from F&O  from October series. This is the largest exclusion of stocks.

Fascination with Economics

I have always been fascinated by Economics particularly Financial Economics.

1. I had the opportunity to teach  Indian Economy to students preparing for  IAS at SriChaitanya IAS academy.
2. Dr Ajay Shah on the Macroeconomics reading list.
3. Very good list of understanding real world economics.
4. I had followed for MBA students Managerial Economics by G S Gupta

Observations on IITJEE

There are some interesting observations on IITJEE by Dr Ajay Shah

1. Diluting the role of IITJEE
2. My favorite physics books atr HC Verma and  GC Agarwal
3. Hita(my daughter) studying  8 th class is also very much fascinated by physics.
4. Trivial plug in problems make the students dull in Physics.
5. My friend MURALI is the no 1 in Hyderabad for solving physics problems who cracked IIT JEE in the previous format and studied at IIT Chennai.

Statistical Methods by SNEDCOR

Today I have purchased an Indian edition of Statistical Methods for Rs 270/-.

1. I couldn't resist buying after reading the recommendation by Victor.
2. Books Victor Niederhoffer would like to read.Of course I would like to acquire them for my home library if I have some money.
3. Good Statistics books from DailySpec.
4. Victor's favorite and Other books on Stats.
5. A statistical tool kit from Berkeley.
6. Interesing discussion of Range and Standard Deviation.
7. Correlation & Regression the most useful and foundation for all extensions .
8. Sequential statistics - A new framework

Intersting readings

I found the following posts interesting

1. Ten steps to become a successful speculator
2. The language of the successful trader  .
3. J R Verma on Informationally insensitive assets
4. Education in India at the crossroads

TAME program @ Hyderabad on Feb 25-26,2012

Technical analysis made easy  is scheduled during FEB 25-26,2012.

1. This is a unique program combining Global best practices with Indian Market Insights.
2. The syllabus is exhaustive and focuses on the critical points in TA.
3. I have drawn inspiration from  giants in the fiels of trading & speculation such as Victor Niederhoffer, Brett Steenbarger.
4. Technical analysis as an addon tool is being recognised by academics also.
5. ICHARTS and TAME Charting tools will be used in my course.
6. This is a rigorous program which is intended to add value to participants.
7. Interesting post on SMB Training. I have always encountered  traders who use negative language to describe their interaction with the markets. This will further accelerate their demise as market participants.
8. The program aims to build more confidence and consistency in the Trading approach.
9. A timeless article on buiding Market Intution.

FDP on SAPM @ Coimbatore

I am delighted to be invited as a resource person for FDP on SAPM.

1. The FDP is on 10th Mar 2012 at  Srivenkateswara Group of Institutions.
2. Topics I am going to cover include   Security analysis & Portfolio management and Psychology of Investing.
3. I will use   Bodie, Kane, Marcus & Mohanty for the Forenoon session
4. For psychology of investing   text by  Mark Hirschey & Nofsinger
5. It will be great to use NCFM materials to understand Market design.

MRCET GUEST LECTURE on Indian Financial Markets

Today, I had the opportunity to give a lecture on Basics of stockmarkets at  MRCET, Maisammaguda,Secbad.

1. I have found their hospitality very warm.
2. It was mostly an interactive session
3. Students cleared their doubts and very interesting questions came up.
4. I am planning to attend and present a paper in their conference.

Security Analysis & Portfolio Management

SAPM or IAPM or Investments is a popular course among students of MBA Colleges and  B-Schools.
I would like to muse over the SAPM subject as it is close to my heart.

1. Syllabus of  SAPM in JNTU and Investments in OU are well designed and it will glow in the hands of an experienced teacher.
2. The teacher needs practical understanding of Risk and Speculation. Otherwise he will not have faith in the Speculative price discovery as the soul of a market.
3. I found excellent empirical examples from NISM's EERF program. Dr K Kiran  of NISM is really fascinating in his energetic presentations of Finance and econometrics.
4. SAPM can be enriched substantially with data from BSE, NSE, MCX and SEBI

Interesting Readings

The following articles are interesting and cover wide range of issues.

1. PISA results for India. A cursory glance at mushrooming engineering & MBA colleges surrounding Hyderabad and interaction with the students  during my activities is a grim reminder of the many things in the report.
2. Accountability in Education posted in Ajay Shah's Blog.
3. Article on Valuation Metrics.
4. Dr Pitabas Mohanty of XLRI on valuation and lot of interesting posts.
5. Another good postings by Sanjay Bakshi on Valuation

SEBI's controls on IPO Listing day Volatility

 SEBI released trading controls  for Listing day IPO price fluctuations.

1.  I have earlier commented on IPO Listing day volatility.
2. SEBI has responded with lot of sensible measures to tame down the Volatility .
3. The detailed  sebi circulars relating to this.
4. A good paper on Call auctions by a respected financial economist Dr Susan Thomas
5. Whether this affects price discovery, liquidity and Broker funding for IPOs remains to be seen.
6. Research paper on IPO Volatility. The abstract seems interesting at Indian Journal of Finance

Aiming for NSE Certified Market Professional Level 5

I have taken 4 NCFM new modules on 18th,19th Jan 2012.

1. I have succesfully completed all the four modules ie IAPM, Securities Market ( Advanced) Module, Macroeconomics for Financial Markets Module, Fundamental Analysis Module.
2. This gives great satisfaction for me for getting eligibility for NCMP Level 5.
3. NCFM material is very free flowing and highly relevant for all MBA students. I would recommend to freely down load and improve the knowledge base of Finance students.

Guest Lecture @ ASTRA on India's Financial Markets

Guest Lecture on India's Financial Markets @ ASTRA

1. I am planning to give a 2-hr guest lecture on India's Financial Markets at ASTRA
2. The topics I am planning to cover are Basics of StockMarkets with latest examples
3. I plan to emphasise on Data orientation from NSE, SEBI etc
4. This will be useful for their SAPM, Derivatives also
5. Project work orientation will be provided to students.

Books on Analysing Financial Data

Financial Markets always fascinated me. In my search for books about analysing financial data I came across many jewels some of which are available on the net for the motivated student of Markets.

1. Analysis of Financial Data by Gary Koop
2. Financial Market Analytics  by John Teall
3. Financial Time Series     Tsay
4. Market Models  by Carol Alexander
5. Basic Econometrics  by Gujarati
6. Financial Econometrics by Fogler and Ganapathy
7. Econometric Modelling of Financial Time series by Terence Mills
8. Elements of Forecating by Diebold
9. The Econometrics of financial Markets  Campbell, Lo, Mackinlay
10. Introductory econometrics for finance by Chris Brooks