Notes on Insider trading

These are further observations on Insider trading.

1. In depth post on Insider Trading


2. I held a view earlier that Insider trading improves price discovery and infact compiled an article for Analyst magazine of ICFAI way back in 1996.


3. Now I lean toward Prof . Gordon Haave's point of losing an edge to insiders.


4. Insider trading is so rampant and considered as common place like corruption in Markets like India, many market players are not surprised about it.


5. Average players should take care not to foray beyond well covered stocks ( Nifty Junior), where there may be risk of Insider trading and pump and dump schemes.


6. I have seen traders taking pride on their inside info and connections to operators in a stock as their edge and source of folowership.


7. Retail traders I discuss with cannot digest the futility of trying to gain inside info and the wisdom of concentrating on liquid and index stocks basing their views on market generated data.


8. Rampant trading by promoters of small companies through fronts and benami names are not considered as a surprise in emerging markets like India.


9. Broker-Promoter nexus before fund raising, creeping acquisitions,major corporate announcements,squeezes are well documented in India.
   

Identifying Significant Price Levels

One of the challenges faced by beginning or junior traders approaching the market is identifying significant price levels. These levels give a reference frame to understand price action. When I started to trade I am unable to place market movement in a framework and make sense out of it .However tentative it may be it provides a discipline and allow the trader emotional control.

1. As I gained more experience and paid the market for the tution and education I found more resources which helped me to find the reference points.


2. Following Dr Brett , I reduced the data visible on my screen to Open, ATP, %Chg, Volume. I am trying to focus more on PDH and PDL rather than day high and day low .


3. VFMDIRECT is another resource to identify significant levels like PIVOT POINTS, R1,R2 and S1,S2. Moving averages are also given.
4. JustNifty gives lot of data to understand price action for Nifty. These levels and their explanation puts into perspective the apparently random movement of the market.
5. ICharts is another good resource for various screeners and price levels. When I chat with traders they repeatedly assume and express their feelings without reference to objective levels or data points. I may feel the market is gioing down or up but unless data ( MAs, Trendlines, Sector strength etc) coorobarates my view I am simply hallucinating and acting randomly.
6. My inspiration for this post comes from the God of Modern Trading Psychology
7. The concept of hard vs Soft levels in trading using volume traded at that level at SMB Capital. I think experienced traders distinguish betwwen levels like a shepherd distinguishes between each of his sheep where as for an external observer all sheep are alike.
8. Round numbers also provide mangnetic attraction. Watch round number 5000 on Nifty and stocks like HDIL at 400. More on round numbers from my friend and DailySpec member and author .
   

Insider Trading and Research

For a brief period I have worked as a Equity Research analyst in the sell side for a Brokerage House. Some of my Observations are

1. This is relevant in the context of allegations of insider trading by Galleon Hedge fund managed by Raj Rajaratnam.


2. Information is the most precious commodity in Dalal Street or Wall street.


3. Infact Satyajit Das mentions in his interesting book " Traders , Guns and Money " how Brokers at BSE wonder about maing money without previeliged information.


4. In my experience what is most important for the analyst is his contacts with company managers and excutives. Networking abilities were found to be more in demand than analytical abilities.


5. Because only incremental information affects the stock prices what is not discounted is valuable to the analyst.
   

Educational programs for Traders

I am working on putting together a training program for active traders in Hyderabad.

1. My inspiration for educational program for traders here from Dr Brett
2. I wanted to integrate real time reasoning in the market rather than power point presentation.

"This is enough for a technician to say: “See? This setup works!” (I always wondered how can technicians give training courses using – at least in Brazil – only Power Point presentations… I.e. only selected material!)

(In our training program, we don’t use Power Point – we use the real chart software – so the student can see by himself other data than the “selected”.)

So, it’s always easy to collect anedoctal evidence to support any trading idea."

- Newton Linchen

3. Ongoing dialogue and discussion between the trader and trainer is one important component in the educational program.

4. Dr Brett on structured trading curriculum

5. How to find the best Teacher by SMB Capital

Monday's Trade in OFSS

Some of my notes regarding my trading on Monday 12thOctober

1. I had a Nifty Short position carried over the weekend on the premise of weakening breadth and sectoral weakness. My stop loss was hit at 4970 which is around friday's ATP
2. I had entertained a view of strong market above 5020 which is PDH
3. Breadth measure ( A-D) were strong from the open.
4. I had entered an impulsive trade in the open seeing softness in OFSS at 2090 . My execution is poor as I had to put my trades through phone . Opening session speed and volatility need to be taken care where slippage is hurting me.
5. Stopped out at 2150. Saving grace is only one fourth of my trade size. OFSS hit a day high of 2198. Seeing the broad market strength I hesitated to take a trade till 12 am.
   
6. OFSS continued to slowdown and traded below ATP around 1255. My idea here is that stock made a high for the day and showing that it cannot make a higher high. Naive contrarian traders ( Me included) trying to sell previousday's 7% move were squeezed out.
7. This morning high can give a reasonable stop and typically market makes Dayhigh / low in the first hour and highs or lows made in the afternoon tend to sustain in the last hour in the same direction on an average.
8. As the Vol of the stock is high ( High-Low range of 110 or 5%) I had kept a SL of 2165. Entertaining the idea that ATP should not be taken out and Volumes were high only in the morning.
9. Seeing the stock's softness relative to Nifty arond 1.30 added to my position. Further added after stock retraced to 2i44 from short swing upto 2160.
10. Overall the afternoon trade exploited stock's divergence from Nifty. Closed the position around 2120. As it is my full position I could bring it to breakeven.
11. Moral of the story is I should avoid fading against the Intraday trend.
    

Stockmarket through the lens of Scientific Method

Markets can be viewed and traded in hundreds of ways. Participants can choose and manufacture their own risk and time frame. Ultimately the instruments we trade facilitate us to express our opinion with in the chosen risk parameters.

1. My understanding of markets and price action remained hazy till around 5 years ago without any real education .
2. I came across the Giants in the field of markets & Speculation Victor & Brett which opened my eyes to Scientific method & Counting and I started an endless journey.
3. My interest and fascination to understand statistics started from DailySpec and EdSpec
4. Interesting and educative in the tradition of DailySpec by NewtonLinchen
5. Quantitative and Systemic thinking from SohamDas. Fascinating reading . In his words Mathematics appears like Literature.
6. I believe for a starter 2 readings of Investments, Trading& Exchanges, EdSpec will provide solid base of operations to have a framework for viewing the markets.
   

Innovation at StockExchanges

I am pleasantly surprised at the information available for the independent investor at free or very small cost.Exchanges are improving their service for the benefit of investors & traders.

1. Excellent and further simplified trade verification from NSE. You can also download to Excel. I routinely use this to verify my trades. It brings transparency and all traders must utilize this.
2. Colorful view of sector strength, best and worst performers in the sector. Yet another visualization tool from NSE.
3. Useful data from BSE . This shows the democratisation of financial markets where tools available only to institutions are within the reach of independent investors at free of cost.
4. Stockwatch from BSE to get comprehensive information.
5. Live Sensex view from BSE
6. Interesting charting application from BSE. Though I could only get line charts. I would prefer Candlesticks.
7. NSE's charting application available only to member brokers. I think they will release to investors at a later time.
8. Though this is not related to exchanges another useful tool from Volumedigger. Here you can see heatmaps of sectoral indices as well.
9. Market profile like charts here.
10. Real time Advance - Decline chart here . This is one data point I use for assessing the day structure . The day developing structure of Trendiness or Ranginess can be gauged to some extent by this information.
    

Stock Selection for Shortterm Trading

Most active traders face a dilemma regarding choice of stocks for Trading. With experience they may gravitate towards their favorite sectors or familiar names.

1. Useful stock screener at Icharts
2. Most actives list at NSE on the previous day
3. I personally prefer stocks fronm Nifty as midcaps may have wild movements intraday
4. Atleast if the stock is in F&O there is some sort of balance through options
5. Significant news on the stock. I try to avoid trading on the breaking news unless I already have a position and a view on the stock.
6. If the stock behaves whackily , try to avoid it for intraday trading ( eg Everonn, Educomp)
7. I try to distinguish between morning, afternoon, evening movement in the stock.
8. I try to fade extreme reaction of the stockspecific news ( Extreme is gauged by 2 sigma movenent of the stock's return in the previous 250 days )
9. Avoid small and midcaps as they are jerky and force the trader to shift timeframes
10. In the earnins season, I have to be careful of trading the results announcements after 2.30 pm ( I had a bad experience trying to fade JSW Steel at Q1 results )

Trading in harmony with the market

"Instead of focusing on what we're doing wrong and trying to prevent ourselves from doing it (which only keeps us problem-focused), we instead craft solution patterns out of our best trading." - Dr Brett Steenbarger

I am trying to identify when I trading with positive approach to the market.

1. Well prepared before the market Opens :Reviewing previous day's market action, Analysing NIFTY Chart for S&R ranges, Significant levels ( Chart based pivots),Volume action,Price wrt 20DEMA,50DEMA,200DSMA.


2. Waiting for the right spot : Patience to let the opportunity present itself, waiting for good prices. I have learned not to fade intraday highs unless there is good volume and market made a identifiable top on the chart ( Lower highs, Lower lows, at least one candle in my time frame ) . Taking into account the time of the day ( most important for intraday traders)


3. Establishing Stoploss levels : I am most comfortable when I have logical stops to execute against ( ATP, Open, Chart based pivots, Volume spikes, Signals of traders caught in one direction)
   

NCFM vs Trading Course

Many students of financialmarkets queried me on the difference and suitability of NCFM and Trading course such as the one offered by me.

1. NCFM deals with Market Structure and Market Design
2. NCFM is mandatory for employment in Brokerages/ Subbrokers
3. NCFM does not deal with market decisions
4. Trading course teaches one what and when to Buy/ Sell
5. NCFM gives additional knowledge and strong base of Operations in trading the market.

One to One Mentoring for Traders in Hyderabad

"The challenge for the trader is not so much one of making market predictions as refining trading hypotheses as market data unfold. The effective trading mentor models this reasoning process, but eventually needs to let junior traders try out their own reasoning, with prompt review of solid and flawed reasoning. That is why sound mentoring has to occur during the trading process, just as effective training of physicians has to occur at the bedside or in the clinic." - Brett Steenbarger

How to implement the idea of modelling the reasoning process by hand holding beginning traders in Hyderabad? I came up with this idea after attending some trading seminars where the speakers are discussing Charts, Indicators in Isolation and analysing historical charts by hind sight.

I wanted to reason out the markets along with the learning traders. Here all the participants are both teachers and students. By trying to teach others my concepts and rules will become clear and I will be able to better understand my method which is a mixture of knowledge gleaned from great personalities mentioned in this blog.

Trading Course in Hyderabad from Saturday October 10, 2009

GANGINENI DHANANJHAY's



Stock market Course for Active Traders
     http://www.hilotrader.blogspot.com/

gdhananjhay@gmail.com
Mobile : 09391319721         






Module1 – Basics of Trading -


Trading Vs Investing Vs Gambling, Types of Trading, Players in the Trading Industry, Orders and Order Properties . Why People Trade ( Utilitarian Traders, Profit Motivated traders ),Cardinal Rules of Trading
FA,TA, Traders Mindset.,


Module 2 – Understanding Candlesticks & Indicators:


Candlesticks, Simple patterns ( Doji,Bullish Engulfing, Bearish engulfing etc)
Indicators – trend following ( SMA,EMA,MACD)

Momentum Oscillators ( RSI,Stochastics)




Module 3 - Tools of Trading –


 How to identify the trend of the market ? Larger time frame (20DEMA,50DEMA,200DSMA)
Intraday ( 20 EMA, Open, ATP, UpTrend(HH,HL), DownTrend(LH,LL),Swing High, Swing low, Chart based Pivots)
Determine the strength of a trend ( ADX,A/D, Sector Behavior, MACD,RSI),
Low risk entry into the trend (Pullback to 20 EMA,ATP, Open, Volume action)




Module 4 – Preparation for the Trading Day:

1. Identify intermediate term trend ( Uptrend, Downtrend or Range- 20DEMA, No of Stocks > 20DMA, Basket of Stocks (5 each from 8 sectors) strength)
2. Yesterday's Price stronger, weaker or in range wrt previous day (Hi&Lo prices across sectors, Indexes, DoD Changes)
3. Special Circumstances likely to affect today's trade ( RBI, Economic numbers, Holiday period)
4. What are relevant Price target Levels and Reference points ( PDH,PDL, Previous day ATP, Intraday Pivots S1,S2,S3/ R1,R2,R3)
5. Close of previous day and Open of today
   ( Near the top of the range / Above yesterday 's PP – Strong. Near Bottom of range/ Below PP – Weakness , Around PP/ Mixed A-D in early trade – Range)
6. Global Cues - S&P 500, US CBoE VIX, USD Index, CRB Index, Crude Oil, Gold, Baltic Dry Index, Nikkei, Chinese, HangSeng, SGX Nifty )
7. Writing down all observations and Opinions in a Notebook and reflecting daily.
   
   
   
   
   
   
   
   
   
   
   
   
   
    

Module 5 – Intraday Trading strategies

1. Identifying Stocks in Play for Intraday ( Stocks in News, Earnings, Policy announcements, Most actives, Contrary Behavior) ( Less than 3 to focus on )
2. Keep track of key levels and inflection points on SIP
3. Know what sectors are in play, and what stocks within those sectors are strong or weak.
   
4. Look at different time frames, 1min, 5min, 15min, 30min, daily, monthly and yearly.
   
5. Make one good trade and not necessarily one profitable trade
   
6. Stick to one stock on the open, Avoid
   Flipping
   
7. Focus on Buying supports, shorting resistance, playing held bids, held offers, consolidation and ranges
   
8. Trade in the direction of intraday sentiment ( A/D,ATP,Open)
9. Start with profit targets: range extremes, pivot prices, and R1/R2/R3 and S1/S2/S3 targets. First figure out where you think the market is likely to move
10. Don't chase price highs or lows. Make the market show you that it is making a higher low (uptrend), a lower high (downtrend), or holding support/resistance (range).
11. Stop loss level ( logical stops, random noise, Small position size with larger stops adj for Vol)
12. Catching the late day volume surges
13. ATP as an evolving estimate of fulcrum/value
    
14. Characteristics of a trend day (Breakouts from short-term ranges ( previous day's range, multi-day range, opening range) on strong volume; Strength in market's leading sectors, Confirmation from correlated markets, Extreme readings in the day's advance-decline readings)
    
15. Understanding price Spikes
    
16. Sharp Moves vs Mild moves ( mean, SD of a Normal Distribution)
17. ORB Strategy
18. Opening one hour / Closing one hour ( DH/DL made in first hour ?)

 


Module 6 – Best Practices in Trading & Trading Psychology

1. Reading Inter market Themes (Pro Risk Vs Anti Risk, Dollar weakness, Interest Rates )
2. Reading Volume ( Volumes, Delivery %, OI)
3. Reading Sector themes ( Strength in metals, Oil , Commodities)
4. Stresses for Traders : Excessive risk taking, Changing markets, Unrealistic Expectations, Departures from prudent risk management
5. Trading Mechanics( Dr Brett , ETP page 140), An Observation Checklist(ETP,page143)
6. Mechanics of Risk management ( ETP, page 145)

Mixing Volatility Regimes

I had an interesting conversation through the blog on Mean reversion of Volatility with SohamDas

1. While searching DailySpec on the same topic a good post here
2. Bernanke on why crashes happen in October
3. A dash of insight on the same topic
   

SohamDas on Volatility and Mean Reversion

I take pleasure to post SohamDas's thoughts on Volatility

Historically, VIX is strongly mean reverting, hence we should be able to fit a standard mean reversion model (usually I gravitate towards Ornstein Uhlenbeck, but I couldnt fit properly) to some extent.

So, if we are indeed able to form a consensus on the "low"-ness of the present VIX, we should be seeing a run up very soon, how soon I dont know.So yes, it would be better to go long in ATM straddles.

About VIX, consensus
The point is exactly that! Is it obvious to market participants that VIX is low? And low doesn't give any information. I would rather say, are they discerning, if its historically "out of whack". I might be wrong, but I dont think many people will think that way. So I would say, it is a fantastic opportunity to apply a trading strategy which is totally different from the usual market strategies, i.e less $$$ are chasing it.
Everchanging Cycles?
Umm...The cycle behaviour is not that pronounced, cycles are mean reverting but all mean reverting signals are not cyclic. So, as it becomes non intuitive, you know...

How to detect a regime shift?

Well, VIX shooting up wont really be a full scale regime shift, because it again reverts back. But if we want to detect/predict a rise in VIX,MA-GARCH modelling might help {I did some work in it, but didnt really exploit it commercially yet}

Free Stockscreener

Wow. The web is a goldmine for motivated and interested market participants. Lot of tools and Information is available free!

1. Excellent Stockscreener here
2. Any Intraday stockscreener available ?
3. Nice fundamental data here
4. Free downloadable books on stockmarket here
5. Another good screener here
6. Even horly intraday screener here
   

Long Volatility Trade in October

I have tried to look at monthly volatility of NIFTY Index.

1. The inspiration for this post here.
2. Average Monthly range is taken as proxy for volatility ( Ln(H/L))
3. Data from 2003 to Apr 2009 is available - 76 data points
4. Most Volatile month is October at 18.94%.
5. Least Volatile month Feb at 8.83 %
6. October has highest correlation of volatility with previous month at 0.98. Even though volatility clusters this is pretty high

What are the Implications ?

1. Given that Volatility is low till now can we expect increase in volatility or this time it is different?
2. India VIX low
3. Will the low IV s signalling a blowout run in Indian markets ?
4. If the hypothesis of October expected to be volatile can we set up a options strategy being Long straddles

Trading Education Framework

I am taking up a project to launch real time training for short term traders in Hyderabad.

1. The motivation for this program came after seeing lot of trainers selling tips, Blackbox system sellers.
2. My aim is to provide a framework for understanding market activity.
3. Taking market microstructure as a base ( Trading & Exchanges by Larry Harris ).
4. Topics I am going to discuss and share include Charting basics, Trading Psychology ( drawing inspiration from Dr Brett ) , Qualities needed for a Speculator ( EdSpec by Victor Niederhoffer)
5. How to Understand Intraday Action ( SMB Capital is my Inspiration )
6. Basics of Derivatives ( Understanding Volatility and Options )
7. Combining all the elements into a framework ( Concepts of Auction theory and Market Profile)
8. Utilizing Fundamentals and Macroeconomics as a handle for Trading decisions

I am going to release ads offering this service as fully refundable if not satisfied after one week of training and mentoring the traders. This is my way to share what I have learnt . I dont claim to be perfect though. I feel this knowledge is necessary for any trader.

Trade Tiger of Sharekhan

My friend opened a franchisee of Sharekhan. I got to see their TradeTiger Platform.

1. It has good charting facilities. Chart updation and clean screen impressed me more than ODIN Diet 9.1.0.5.
2. Tick, 1,3,5,10,15,30,60, upto monthly charts available and fast updation on the platform.
3. I am unable to keep ATP on the Market watch ?
4. ATP is coming as a fixed line on the chart. Can I see the building up of ATP in real time. I am not sure. One popular indicator with American markets is VWAP and its MA.
5. I felt brokerage charges are bit high ( default of 0.05% intraday) for my style of trading.

TA & Price action

My idea of understanding Technical analysis found resonance in an excellent post by Newton Linchen in his characteristic clarity.

1. Earlier I struggled with Charts having huge number of Indicators , Filled with lines. But now I feel simplicity is the best and understanding of price action is more important than indicators.
2. Basics of candlesticks and how they are forming is intutively appealing.
3. I find Maoxian's illustration of charts worth studying.
4. Illustrating how the process of arriving at a trading decision and the details of building evidence before the trade is the hallmark of good trading educator.
5. After the fact the patterns appear to be very easy and to see the Seminar gurus keeping on explaining the left hand side of the chart is irritating. The trader has the challenge of deciphering the the hard righthand side of the chart.
6. In many cases market moves by surprise and with violence. What you see on the charts might have happened in one bar or spike. The trader studying static charts with indicators does not realize this.
   

Trader Education

I have noticed increased interest in Trading Education. Yesterday I attended a 1-Day Course on Trading by Mr Vivek Khemka, CA and CFP by Qualification. Some of my observations

1. Youth are increasingly participating in the Trading of stocks. Business Line also reported on a Google survey .
2. Online trading increasingly democratised access to financial markets.
3. IT & Software employees are increasingly being attracted to Trading the markets. This is anecdotal evidence of my observations.
4. Youth is adapting currency trading diversifying away from stocks.
5. I have observations of Women Traders also actively trading in Hyderabad and even special branches of Brokerages for women in Hyderabad.
6. Some of the trading educators in Hyderabad whom I have come across are Mr Ajay Kumar, Mr Vivek Khemka, Mr Damodar Sai. Their focus is on TA and Chart patterns with a bit of Trading psychology and money management thrown in.
7. Some times I wonder what is the prerequisite for a trading educator. Because there is no curriculum or Common body of Knowledge as in other fields. Lot of opacity and non verifiable track records in this field.

Intersting Readings

I had the pleasure of going through the following readings in the weekend.

1. Trading lessons from Newton Linchen, my friend and a SpecList Author
2. Best Practices in Trading from Dr Brett
3. Deepaksingh 's way of keeping track of Global Cues

Fundamentals for Intraday Traders

Understanding of fundamentals cannot be brushed aside for intraday traders. This came to the forefront in the ABAN trading.

1. My colleagues at TCSS used to have an excellent handle on fundamentals. When he prepares a spreadsheet the numbers used to be at his command. That fundamental handle of working out the value of the company from basics gives the trader an edge in designing the trade.
2. In the ABAN situation, first there is a rerating of the scripand there is a valuation surprise in the analysts estimates of rig rentals. This may not be adequately appreciated by a retail trader .
3. Another microstructure factor of ABAN fresh positions banned in F&O led to short squeeze.
4. Thistaught me the importance of market design issues and keeping multiple time frame participants actions in mind .

Being Stubborn

It's almost ten days since the last post. Meanwhile I had endured roller coaster ride of P/L reminding me the mistakes.

1. I learnt the danger of hoping and being stubborn in a trade and going against my own rules. Very important article by Brett on trading rules. Having short on AxisBank in the morning trade , I refused to scratched when it violated my rules ( Normally I don't keep a short position if it crosses above both open and ATP) and paid the tuition for education to the market.
2. My trades should start working within short period of time. If it is taking longer than normal, some part is suspicious. I should review the trade.
3. You cant scare the market twice on the same factor ( China Scare).
4. Tomorrow I would like to watch how the second time invasion of HDIL in 300 level pans out.
5. Though there is brader weakness today in Banks, I failed to keep settlement week pressures and other market context in mind.
6. Axis bank OI up 52% any corporate news or short squeeze in the offing?
   

Fading UNITECH

Today I tried to fade UNITECH's Strength in the opening. My thought process behind the trade is as follows.

1. Unitech is near its monthly high of Rs 98. This may be overhead resistance or supply area.
2. US markets flat with Asian markets marginally negative.
3. Market Context of 4600 Nifty and 7% move in Unitech and Real estate stocks yesterday.
4. Anecdotal evidence of large number of retail traders entering real estate stocks on Thursday.
5. Futures data suggest mild Open Interest Increase ( + 9%) which does not indicate explosive follow through IMHO
6. India VIX stable ( Not down )
7. Volumes moderate ( Rs 90000 Cr)
8. Anecdotal evidence of traders faked out of their shorts in Real estate counters at the closing yesterday.
9. Unitech's inclusion in MSCI Index may already have been in the price discounted by smart money.
   

Though I could close the trade for 1% gain

1. I entered large size ( 10 times normal ) trying to come back from previous day's draw down of 2% of my account.
2. I should always keep in mind Brett' s advice of "Drama Creates Trauma "
3. However I have taken solace from reading EdSpec where Victor comments about Losses and Comebacks and going right after a losing trade with size.
4. I always try to visualize how Victor would have traded that piece or Read relevant Chapters from EdSpec for guidance and inspiration. New meanings and previously hazy material comes to life each time I read perhaps reflecting my incresed struggle to make sense of market movements . It is a constant companion for me.
5. I regard Victor Niederhoffer, Brett Steenbarger as my two Dronas while I am their Ekalavya student according to Indian Mythology.

Forecasting EPS Projections

This is a writeup I prepared when working in Equity Research for TCSS.
http://bullstocks.blogspot.com/2008/10/forecasting-financial-statements.html

Looking for Proximate Causes

Today after the NIFTY closed around 4400, many traders are asking the reasons for the fall.

1. Media and analysts are citing proximate causes such as Monsoon
2. I think as traders our job is not to ask why and search for reasons. Trade the price action reasons will come later
3. Market focuses on whatever it wants and whenever it wants according to its Path of Least Resistance. Who are we as traders to ask the market to give reasons for a particular path.
4. Following my method in the set risk parameters and in my time frame taking least possible heat in the trade, minimising the vig, trying to articulate my edge and looking for disconfirmation of my hypothesis will allow me to survive in this game.

Indian Market Wizards

When I used to work with ICFAI, I had an idea of editing a book on Indian Market Wizards loosely modeled on Jack Schwager. Some personalities on Indian Markets I follow very intently. This is not a comprehensive list of course.

1. Devangshu Datta : Columnist in Business standard. Very incisive and fluent analysis in Monday special Smart Investor. His two page analysis is worth reading, chewing and digesting. I specially like his way of explaining his thought process behind the trade recommendation which Dr Brett always advises.
2. Udayan Mukherjee : Excellent commentary on Daily Stockmarket movement. I have many times benifitted from his themes and macro views. I think the traders' job is to synthesise various sorces of market information, opinion, analysis, recommendations, commentary and form his own trade hypothesis. Trader should always remind himself that nobody is responsible for his P/L except himself. Blaming others comes easily . I particulary admire the way he negotiates the short term daily fluctuations and ties them in a thematic frame work. His questions to Market analysts are striking compared to similar channels.
3. Ajay Shah & Susan Thomas : Two finest Financial Economists in India. Ajay Shah's writing style is fluid and I read him very closely. His trade mark logic on business channels is worth watching which is packed with data and statistics rathe than anecdotal impressions.
4. Sameer Arora : Sameer Arora 's ideas are very miuch packed with lot of analysis.
5. Ashwani Gujral
   
6. Deepak Mohoni : The man credited wiyh coining the term SENSEX as a short form of sensitive Index.
7. JR Verma : The academician and SEBI SMAC Chairman and author of my favorite DRM book which I used to teach DFE at a B School in Hyderabad.
8. Ruchir Sarma : Morgan Stanley
   
9. Shankar Sarma : First Global
   
10. Devina Mehra
11. Mukul Pal at Orpheus Capital

This is a work in progress list. I verymuch welcome suggestions and additions to the list.

Understanding Pain & Regret

Pain & Regret are two powerful emotions in Trading. Market always ferrets out traders' weak points and exploits them to extract maximum energy.

1. I think after all Fundamental and technicals , the edge of a trader lies in his observation of other traders and self observation of these two emotions.
2. Pain of a position going against the trader, Regret of exiting early from a profitable position these two emotions can be used to the traders' advantage.
3. Today I have traded IOC trying to fade consensus bullishness in the stock. Traders are citing reasons of Oil India listing as trigger for the stock. I had a hypothesis of price already reflecting that news.
   
4. IOC opening was weak relative to market and also in the context of price appreciation in the previous days, I shorted the stock for a 2% gain.
   

Fighting the vig in Day Trading

Brokerage and Taxes form a very big part of any day trader's P/L .

1. 50% of p&l is being eaten away by commissions and taxes . Even with low commissions for high volume traders taxes form an amount equal to brokerage.
2. It is difficult to fight the vig if the trader is fixated on the market gyrations and start over trading.
3. Dr Brett has an excellent piece as always here on Over trading.Comments to the post are also very readable.
4. Vig, Spread and slippage are the three enemies of any Day trader. I have often seen upwards of 25% spreads being routinely quoted and being bought in Options market particularly in stock options. The trader is being butchered alive in the stock option market with these spreads.
   

Options Trading by Retail traders

I have observed many retail traders trading options purely as a directional bets. Most of them are not aware of the basic properties of the Options Instruments they are trading.

1. NSE has to its credit prepared a freely downloadable material on Options Trading Strategies
2. How many retail traders are aware of Volatility trading and Caluculation of Implied Volatility
3. Sharekhan has a nice caluculator based on Excel here
4. What I observed in Indian Brokerages is lack of basic market understanding which is a prerequisite for market participation.
5. The best antidote to this situation is a thorough reading of Trading & Exchanges by Larry Harris available at any college book store at hugely discounted price of Rs 300 ( $6) in India. This should be made mandatory before any trade is entered.
6. I think many trading demons can be exorcised with good reading as suggested by Victor and also repeated in this site. My favorites are the two by Victor & Laurel, the three by Brett and one by Larry Harris which are minimum for any educated speculator.
7. Excellent discussion of Options Trading here
   

My Trading Plan

1. Review Yesterday's Most actives, Top gainers / losers and any headline news in BS/ ET for zeroing on Stocks in Play.


2. I keenly watch 9.00 am UDAYAN's show on CNBC TV18. Useful insights and synthesis of market action. The way I use this info is writing down all his observations in my note book so that they go through my internal processing. This covers currencies, commodities, asian, US markets and corporate developments.


3. I narrow down to 4 or 5 stocks as possible trading candidates for the day and then look for more info on these stocks.


4. Using websites as vfmdirect , I check for useful indicators like 5DMA,20DMA,50DMA,200DMA, RSI . These indicators are not absolute but has to be used as handles only. Review intraday, weekly, Monthly charts for any eye balling of Support and resistance areas. Remember reading charts is not rocket science. After all it simply tells us where price had travelled in the past. Also remember Victor 's remark " Why the market has to give money for knowing how to draw lines on a chart ".


5. I use NSE website for stock volume, delivery positions and OI data on the futures.


6. I would like to form a tentative opinion on the stocks at the time of market open. I may further narrow down to 1-2 stocks to have more focus in the first half hour.


7. Once this hypothesis is formed, I start observing the market generated data to implement my idea. As Dr Brett often observes market mechanics and execution is very critical part.


8. I watch for ATP, Open price as crucial pieces in my execution.


9. The Chart should be in my mind once I am at my trading terminal.


10. How the price and volume behaves as it approaches Open and ATP is a clue. In my experience Day high and Day Low are not as significant as Previous day high and Previous day low. Day high and Day low are obvious points for shaking out intraday players.


11. I try to assess the likelihood of reversion to ATP or building distance from ATP and try to play the odds.


12. All this information has to be seen in the context of Trend day / range day structure.

Random Thoughts on 6 th Aug

1. " As expected/ As predicted " is one of the most frequent phrase used in analyst comments/ Media reports. But Market movement is probabilistic involving both luck and skill. Only in hindsight we attribute market success to the competence of the trader. Read NNTaleb's Scandal of Prediction.


2. When I am working with TCSS as equity research analyst one of my tasks is to prepare a Daily Report in the morning which is a combo of Previous day's activities, Today's forecast. This is where I used to have a bit of dissonance later when I look at the market as a trader. I felt some conflict between my stated opinions in the report and need for time decisions in the market.


3. My recollection of Taleb's ideas such as " Scandal of Prediction " used to trouble me in forecasting.


4. When you trade a stock on both long and short side, you get to know the stock's significant intraday levels. This levels can be used for next day. This I have observed in ABAN's case. The level of 1200 proved to be a good resistance and stock behavior is with less conviction. Laboured pullback to around 1198 yesterday convinced me to short on the open for 2% down move.


5. I tried to trade metals weakness via Tata Steel and the fund raising plans also helped me on the short side. But for risk management purposes, I have quickly closed the trade.

EUPHORIA needed

NSE Nifty crossed the round number 4700 to close @ 4711.

1. Though the market registered significant gains ( YTD up 50%) we are yet to see euphoria.
2. I doubt strong markets correct easily without making euphoric moves though we are seeing some of it in midcaps ( Bharat Forge, ABAN ? )
3. Market Overshoots as a way of maintaining ecology ? ( DailySpec)
   
4. Excellent post on Invasion of Stock prices by Victor
5. Volumes remain low = Energy in the market is low. More energy has to be extracted by the market from the participants. What is the best volume path to achieve this ?
6. Real estate is lagging the market. Will new set of stocks ( Power, Education sectors ) lead this move.
7. Market may not wait for inflationary pressures to manifest. It will react first. Watch Autos, Real estate
   

Trading ideas beyond TA

1. I think every trader has his own unique style or Niche once he has gained sufficient experience in the school of hard knocks. This is becoming apparent to me when I try to frame a trading idea.
2. When I try to synthesize all the fundamental information, Technical levels I often doubt how this will give me an edge? ( Which is in the public domain). As Victor often asks why the market should give any one who knows to draw a straight line money ( Technical analysis )
   
3. The edge comes from framing in the concepts of Round Numbers, Lobogola, Tension and release, Market torture, Traders being forced out of a position, Markets volume path or Path of least resistance etc which I learned and continue to learn from Giants like Victor, Brett.
4. This is the secret sauce of Legendary traders.
   

Round Numbers in Indian Market

Attraction of Prices to Round Numbers is a concept discussed in DailySpec by Victor.

1. Today Indian markets are close to round numbers BSE Sensex near 16000, NSE Nifty above 4700.
2. US Markets are nearing round numbers . Nasdaq at 2000. SP above 1000.
3. Newton Linchen has a nice post on Round numbers which is an inspiration for this post.
4. I have traded reliance today based on attraction to round number 2000.

Derivatives Expiry day

Today is F&O expiry in Indian Market. Normally I would like to avoid expiry days for Intraday trading. Some of the observations from market action

1. Yesterday Volumes at Rs 147000 Cr , 3rd highest. Shows lot energy in the market. Volume path is important ingauging the price movement. Market tries to move where volume is greatest.
2. Expiry day - Participants trying to adjust positions frenetically may lead to spurious and strike gunning.
3. Today being heavy results day - I may wait for selective trades with less size as stops may be inappropriate to manage risk in this heightened volatility situation.
   

Guaranteed to Happen

In the tradition of DailySpec, Indian market movement of going down 4% intraday in sympathy with Chinese market is guranteed to happen. Here I quote from DailySpec

" Looking at the performance of the major indexes to date, one notes that the three biggest markets are up 1 to 10% and the average of the 150 medium markets is up about 40%. What is the explanation for this divergence other than the ruination of incentives, and the adjustment of price levels to equal after service returns in the future? Israel up 3% over nite and 44% on year to date gives good precis of what would have happened. "

1. Whatever may be the proximate causes spewed out by Financial Journalists ex-post and ever- ready to attribute and concoct reasons for market movements , Traders are better off considering the pathof least resistance.
2. Many market tells were visible. Bank stocks lagging, No broad sector participation, Low volumes in yesterday's trade.
3. "Market travels in the path that maximizes Volumes" Since marketinfrastructure has to be maintained and paid for it has to extract maximum amount of energy from participants.
   
4. If the trader considers which path will maximize volumes that can give him clues about possiblities.
5. Price discovery being a chaotic process and market does not move in a straight line, Market is about surprises and trading is about nor being surprised by the market can act as a conceptual foundation to react.
   

Web 2.0 resources for Indian Investors and Traders

There are a number of resources freely available to any motivated trader or Investor in search of knowledge and wisdom. I believe markets are ultimately a search for truth and love of knowledge. I list the resources I found useful in my search for market Understanding in Indian Context.

1. Indian Market Monitor : Gives data based view of Markets. His focus on empirical methods and simple explanation I relly found interesting.
2. Yahoo India : Useful for Basic charting and updates intraday with delay of 5 min.
3. Deepaksingh : Liked very much his conversational style,weekly quiz and entertaining way of Market views.
4. Just Nifty:Nice posting of Indicators. But indicators are helpful if you understand the context and have no intention to directly come to a conclusion . Overbought and Oversold can remain more time than you are solvent.
5. VFMDirect : Remarkable format with all the Pivots, Indicators, Charts at one place. You should have your own sauce to apply by taking this raw information. Useful for short term traders.
6. ICharts: Has a free section for registered users charting facilities. Clean interface
7. NSE: Nse has wealth of information for any discerning user. Their delivery stats, Volumes, Corporate announcements, Resultsgive lot of market tells for the motivated trader. I often use the sit intraday to sift for Most actives, Top gainers & losers for possible intradaytrading candidates

High Frequency & Algorithmic trading

HFT or AT is drawing huge attention with the Goldman Sachs episode. Here are some posts on HFT in India. SEBI has not permitted HFT in Indian Markets . But with one of the experienced traders Mr Prakash has brought to my attention the increasing presence of Algorithmic Trading in India. It will be interesting to see how Indian Traders cope wiyh the ALGO Monsters disrupting the order book and having discretionary & manual traders for lunch !

1. Dr Ajay Shah here

2. Business Standard on SEBI allowing AT

3. Galatime on AT

Tape Reading at Indian Brokerage Trading Rooms

Good posts on Tape reading and order flow caught my attention.

1. www.tradeorderflow.blogspot.com
2.http://traderfeed.blogspot.com/2009/07/trading-order-flow-lost-skill-important.html
3.http://www.smbtraining.com/blog/?p=1547


A topic which I am thinking of for a longtime. Being a trader in Indian markets, Brokerage trading rooms do not have access to charting and indicators for retail traders. I have observed that some experienced traders watch order book and other info like VWAP, Open. Being forced to form opinion from order book in the initial phases helped me in the market rather than going for Charts from the start. This gives the trader a feel for the market color. Combining this with some microstructure aspects ( Trading & Exchanges by Larry Harris ) will give the Short term trader an advantage. I have seen some scalpers purely depending on Order book to hypothesize on significant levels.The intutive understanding of markets in the absence of technical tools made many old Indian traders that much formidable.

Newton Linchen & Soham Das

I am previleged to be quoted by two fine quant traders & system developers.

Newton Linchen of http://newtonlinchen.wordpress.com
Soham Das of http://jumpup.wordpress.com

I have enjoyed their clear expression of ideas and energetic nature.

Some thoughts on my Trading

Today is a range day in the markets, masking stock specific action.

1. Delay in F&O segment orders on NSE caught me on the wrong foot in HDIL futures. As there is no order confirmation, I have sold two futures short and increased my trading size dramatically.
2. On hind sight I could have waited for my level of 273 as discussed in the previous post which is ATP + one SD. It could have minimized my heat on the trade.
3. On the cash segment also I have gone short increasing my exposure. Luckily I am able to scratch the trade on weakness around 12 am.
4. I should not violate my own concept of shorting a stock above open and ATP and sector RS as DLF and Unitech are showing strength.
5. Power failure irritated me and gone to brokers office and scratched the trades.
6. Scalped some trades on DLF and Tata motors trying to fade after results announcement.
7. Dr Brett has good posts on respecting size in trading and how drama leads to trauma in trading. He elaborates on how the trader becomes a different person when he puts on the trade and when he is managing the trade
8. Lot of tension and release on HDIL as it closes at 275. Most active list. Results on 29 th.
9. Anouncements on Share holding, FM announcements on Real estate.
10. Look to see the stock reaction tommorrow. I want to be prepared to fade any post results strength. RBI policy may also affect rate sensitives.

HDIL

Stock price of HDIL has gone up 50% in 10 days.

1. Real Estate stocks showing relative strength compared to market.
2. HDIL has strong resistance in the 269-273 zone.
3. I know traders holding large positions relative to their risk tolerance or financial position
4. High beta of around 2 .
5. Quartely results on july 29
6. F&O settlement on July 30.
7. My assumption is overbought in the short term ( till expiry ) based on only 50% position limits, and only 1.5% OI increase not displaying bullish expectations.
8. Rate sensitives including banks and real estate may be in focus next week on the back of RBI Monetary policy on 28 th.
9. I would like to trade on the short side assuming a range bias at best. My stop loss around 275 given high volatility of 7%. ATR of Rs 15.

How not to run a trading Operation

I would like to further submit some observations from trading in Brokerage Offices from India.

1.Engage in lot of conversation,personal mockery of other traders with lot of unrelated arguments of political nature or other wise
2.Keep CNBC with constant shouting and comments on breaking news,worse still keep shifting channels for cricket and Romance to keep you out of Boredom in seemingly slow markets
3.Always be on the look out for others random opinions and commentary with out any reason or data.Try to win them over to your point of view even when the market is open.
4.Give and recieve unsolicited, free opinions during market hours
5.Keep looking into other traders positions and get emotional excitement
6.Criticise others for trades not taken when they have gone your way
7.Express opinions on others trades when they are still on and get influenced inevitably by their intentional or unintentional commentary on your positions mostly negative
8.Ask for dealers opinion, Consult your broker for trading advice
who is looking for churn and maximising turnover ( Forget the Stock Brokers aim is to convert client’s Networth into his own)
9.Be intolerant of any small adverse excursions of price against your position, Be jubiliant of any small profitable movement and close the position to realise the profit ( Forget that the ” Speculator’s aim is to take reasonable losses or reasonable gains “)
10. Keep your trading room noisy with constant ringing phones and uncomfortable and crowded so that you are always under pressure to trade.
11.Take lot of breaks from trading terminal to chat with other traders,lunch breaks,attending to small personal works.
12. Invite friends and relatives to your trading room to engage in conversation
These are only a few along with many others exist in Brokerage Offices.
I feel fortunate in finding this forum of intense intellectual discussion with nothing spared in helping me to protect from some of the above.

Bewildered looks from other traders are common when I try to make some cryptic remarks like
a)Respect vig, spread,getting into huge positions
b)Why do you quote long term fundamentals and brand name of the company as a crutch for short term trading
c)Price knows al the published facts and much more
This forum helped many a trader exorcise his trading demons. I always keep my copies of EdSpec,PracSpec,Trading&Exchanges,Enhancing trader Performance handy to refer , chew and digest in times of market turbulence and frustation. They protect me from deep losses and show me the path to survival.

Concepts of Short Term Trading

As I have struggled to understand markets , my concepts mostly came from a synthesis of ideas from Brett from Traderfeed and The Chair's forum at Dailyspeculations. Here I will briefly outline my idea of approaching markets which is a never ending work in process.

1. Understanding the Day's Structure : As a short term day trader I want to form an initial working hypothesis as to whether the unfolding day is Trending, Rangebound. This has to be continuously revised in a Bayseian approach as new market generated information is taken into consideration. Data I normally consider are Advances vs Declines, Sector strength ( what sectors are leading, percentage movements ), Correlated asset price movements like commodities , currencies, Asian Markets, European Markets, US Futures data.
2. Observing VWAP or ATP : One of the useful practical technique I have learned from Traderfeed is tracking the evolution of ATP ( Average traded price). This is volume weighted average of price. Trader can form his opinion on how the price is reacting to vwap. Whether market is taking support at VWAP or rejecting VWAP and going lower thus effectively VWAP acting as resistance.
3. Reaction to Opening Price : How the instrument is reacting to opening price. Is it rejecting open price with volume or finding support at opening price.
4. Concepts derived from DailySpec: Always many approaches from posts in DailySpeculations act as a conceptual background. some of the examples are

• Market Overshooting to extremes as form of maintaing Ecology
• Market trying close the door if you have only one Exit
• Market's technics of Torture
• Survivl techniques when in a bad position, crying for help
• Not Panicking, Proving to be difficult to be devoured by market
• Market being more bullish on extreme negative mews and vice versa
• Reaction to news and economic announcements
• Deception and camouflage trying to lead you in the wrong way

These are some of my observations . I will keep posting as new ideas develop.

India's Financial Markets Book

A very incisive and thoroughly researched with lot of empirical data in this book by Ajay Shah, Susan Thomas & Michel Gorham. I have compiled microstructure articles in a book with ICFAI University Press and is published http://www.flipkart.com/indian-equity-derivative-markets-players/8131421635-tu23f957q4 . I have always got deep admiration for the crisp comments of Dr AjayShah on CNBC and his formidable grasp of Indian Financialmarkets.

Books for My Daughter

I would suggest the following books my daughter Gangineni Hita who understands my efforts at markets & Trading. I would suggest her to read the following when she grows up as presently she is 11 years old studying class 6.

1. Trading & Exchanges - Larry Harris
2. Education of a Speculator - Victor Niederhoffer
3. Practical Speculation - Victor Niederhoffer
4. Psychology of trading - Brett Steenbarger
5. Enhancing Trader Performance - Brett Steenbarger
6.Daily Trader Coach - Brett Steenbarger
7. Fooled by Randomness - NN Taleb
8. The Black Swan - NN Taleb
9. Dynamic Hedging - NN Taleb

IntraDay Trading

Intra Day trading offers the most exciting opportunities and also risks with it. In my discussion with traders I came across lot of misconceptions. This is an attempt to clarify some of those.

1. Intraday time frame players are generally large speculators and moves are deceptive. As Victor notes in DailySpec " In Intraday price inevitably tend to go to the traders point of ruin".
2. Trader keeps his trading position when it goes against him for the next day. Trader rationalises and moves his stop further increasing his stop loss.
3. Anecdotal evidence of some stocks returning after 1 or 2 days to his buying price. This may be selective memory and market teaching you the wrong principles of speculation.
4. Inability to distinguish between Investing, Speculation & Gambling.
5. Entering into the arena of Gambling unknowingly aiming to speculate.
6. Having a fixed bias overriding price action.
7. Assuming ability to interpret news as positive or negative to stockprices instead of companies.

These are some of my observations in discussions with short term traders.

The QIP Trading theme

Lot of trading activity around QIP theme in the market today 30/6/2009. Nice article on trading secondary offerings on www.smbcapital.com/blog .
1. HDIL selling off from important price level of 260.
2. I've seen how traders disregard risk and concentrate heavily on one scrip tempting the BlackSwan.
3. Too many instances of mistaking Correlation for causation.
4. Taking anecdotal evidence as definite relationship in the market.
5. It is unnecessary to search for reasons in the market which are evident only expost.

Ajay Shah's blog: The BPO path to international finance

Ajay Shah's blog: The BPO path to international finance

Market Review 26/2/09

Today is F&O settlement. Market remained subdued till afternoon. Volatility picked up in the afternoon session. I think some of the factors played out in the market today.

1. F&O lot sizes are increasing in March contracts. Any short/long positions have to be squred off.This played out in some of the heavily shorted stocks like DLF, TataMotors
2. Banking sector weakness is a prevailing opinion so I doubt whether this will continue
3. Weakness in L&T. I am able to recognise this as the stock is weak against market showing strength and unable to cross ATP and Day high.
4. There is a very good article on mental flexibility of the trader from the ever favorite Dr Brett
5. I wonder how traders feel the regret and bias of knowing after the fact.
6. Intersting post on Day trading and arbitrage from Dr Ajay Shah

Stocks in Play

Trading stocks in Play is very important for the Day trader.

1. See a good post in SMB Training on stocks in Play.
2. stocks that might be in play for 24 th feb in Indian market are ABB, TechMahindra, Satyam, M&M, Matrix
3. ABB is short covering on the cards on the back of decline pre results ?
4. Bank stocks may be in Play = ICICI Bank, Axis Bank ( watch for US market and Bank stock movement there, expectations of RBI action, Considerable decline in stock prices as a back drop, Small short covering can lift )

Preparation for the Market Day

Active Traders must prepare for the Market Day. Here I compile some guidelines for participating effectively in the market.

1. Identify a Stoploss level for the Day. Identify a stop loss level for each trade depending on no of trades derived from that.
2. Identify major world events that are currently in Play ( eg Bank recapitalization in US,Expected announcements, Gold as a risk aversion trade, weakness in Metals & Crude)
3. Check Asian Markets ( Nkkei, Hangseng, Kospi, China)
4. Check the movement of Macro data points ( Oil, Currencies,Precious metals)
5. Check overnight movement in Europe and US ( Focus on Intraday movement and sectors in Focus eg Bank Stocks, Shipping etc refer to Bloomberg, Reuters )
6. Filter the News items - News that affect your positions and stocks
7. Focus initially on one stock at the opening.
8. Try to identify the structure of the market day - Range bound, Up trending, Down trending
9. Which sectors in Play?
   
10. Which stocks in Play? watch levels . Support resistance
    

DELAY in Market Moves

Markets delay the moves to frustate traders and force them out of their positions.

1. Stock price delays moves. This is an important characteristic of the market. Price movement will not happen when you are anticipating it.
2. Price moves when it is inconvenient for the trader.
3. This is recently observed in EDUCOMP.
4. The movement we think random may be in the scheme of things for traders on the other side.
5. This is the reason why for active traders path dependence is important.
6. If the stock price hits my stop before making the favorable move I am forced out of the position.

Trading at Brokerage Office

For Active Short term traders there are lot of lessons while trading at Brokerage office.
Of course this is my personal experience.

1. Aviod taking advice from VOODOOS
2. Lot of opinion floating around which is random impressions . This tends to confuse and panic the trader out of his position at exactly the wrong moment.
3. Psychological Capital is more important to a trader than financial capital.
4. Cramming more traders to one terminal creates a sense of urgency to trade with shouting of orders by other traders and noise
5. Comments on your trades and their opinion disrupts your equilibrium.
6. Engaging in social chatter
7. Constant phone calls & attending to personal work during market time resulting in loss of Concentration.

I think a post by Victor on How not to run a Trading Operation is must for all speculators.

Indian Market on 20/2/2009

Market opened with a gap around 2750 Spot Nifty .However there is no big sell off.

1. I had a long position on Feb Nifty at 2790. Luckily I hedge it with Short 2800 call @ 38
2. Closed my NIFTY @2740. Opened fresh short @2743
3. Closed fresh short on Nifty with a trailing stop @ 2720 and also call @14
4. Market remained listless with little volatility till 2 pm.
5. Market searching for intraday bottom and taken out stops around the round number 2700 by dipping to 2690.
6. Closing saw some covering of short positions ahead of long weekend and recovered to 2630.

The lesson I have learned is to be ready with what - if scenarios and use appropriate type of orders for the market conditions and opinion.
For e.g If my opinion is for the market to gun for stops below round number 2700 I have to be ready with a deep limit order around 2690 with a stop of 20 points.
Another way to trade may be wait for a botom confirmation and enter Nifty on the market with stop at the day,s low @ 2690. Ofcourse all this appears easy with hindsight. Action in the heat of markrt battle is always hazy and fraught with uncertainities.

Learning to Trade

The education needed to effectively participate in Markets is wide and intensive. In this post I will discuss my observations regarding the beginning trader starting with a clean slate and resources available to him on web 2.0 for self development in the Indian Context.

1. Start with a very good introduction to markets from Trading & Exchanges by Larry Harris
2. Good resource for observation of market data like volumes, price history from National Stock Exchange.
3. The short term trader can concentrate on Most active Securities and Top Gainers/ Losers list.
4. Active Day traders benefit from a market scanner like FALCON software.
5. For general understanding of trading psychology there is no better resource than Dr Brett Steenbarger
   

Market on 15/12/2008

• Market opened with a gap of 40 points on Nifty taking cues from SGX NIFTY.
• Resilience of the market on Friday after US auto bailout news. These actions are bound to be resolved or reversed but the beauty of the market mistress to take out the chips from weak hands is once again demonstrated.
• Harmony of Commodity, currency movements has given strength to market bullish bias
• Nifty 3000 is a psychological level has reached and sold off keeping large number of intraday participants on the wrong side.
• I think diversification in trading time frame is needed
• As Victor Niederhoffer says in daily speculations the market will block the only escape route you have.
• Traded NIFTY, LT
• It is frustating to see unprofessional behavior in brokers trading rooms . This adds to individual traders losses.
• Uncalled for vague comments affect the traders' psychology
• Very good post in Dailyspeculations on How not to run a trading Operation.