NEW & Refined FUTURES & OPTIONS Training JAN 8 - 9 , 2011

Futures & Options Made Easy (FOME 2011) is improved & refined in 2011 with lot of new additions very useful for students, traders and any one interested in the Derivatives Markets.

1. Option analysis software is being provided free .
2. Complete analysis of 22 option strategies of NSE OTS Module.
3. Lot of Examples are added to the course presentation
4. Complete market microstructure and market design is integrated.
5. Special topics on VOLATILITY and Statistical Concepts.
6. Real world trading approach and demonstration of trading and analysis software tools .
7. Sessions on Trading psychology & riskmanagement

INTERESTING READINGS

Some of the posts I found may be of interest to the readers.

1. How to trade with the STOCHASTICS.
2. Newton Linchen has a very interesting Trading & Investment Library
3. From the God of Trading Psychology
4. JR Verma on Financial History books. His Derivatives & Risk Management is a my favorite for Indian perspective. I think everyone interested in Financial History should read william Goetzman.

Can I be 100% sure of Making Money?

In response to my many advertisements in the print media, canvassing for participants in my three trading & Investment education workshops , I often face many intriguing questions.

1. Three core educational workshops were being focussed by me namely 

 a) TECHNICAL ANALYSIS MADE EASY ( TAME),
 b) FUTURES & OPTIONS MADE EASY ( FOME)
 c) FUNDAMENTAL ANALYSIS MADE EASY ( FAME)

    2. Often participants ask"  is there a 100% guranteed way to make money ". I am left speechless for a moment as I have no short answer.

    3. Here I try quote from professional traders in trying to answer the above question.
    4.  “Contrary to popular belief, trading is a craft. Like an artisan who develops a craft over a lifetime, it requires a discipline to be exercised daily.” Mike Bellafiore 

    5.   What’s going to happen? Who knows. As a trader, you’re not supposed to know the absolute future   to be able to profit from it.
You study the chart, assess the structure, define the probabilities, and then if you feel an opportunity presents itself, position into the price action that triggers an entry (or exit in the case of a stop-loss).
                                        
                                   - COREY ROSENBLOOM

6,"There is nothing to 'get' as a trader. What works one month may not the next. Trading set ups you crush one year may be extinct the next. As prop traders our job is to recognize present patterns and exploit them. But we also must have the humility to accept that these patterns might change at any moment. And when they do we must find new patterns. We must adapt."

                              - Mike Bellafoire

I can quote from any number of respected industry voices, but the beginning or developing trader needs to realize and internalize that" there is no holy grail in trading to be discovered"

Stocks in Play

Stocks that may be on traders' radar today

1. FINANCE TECH : The stock appears to have rebounded stronly yesterday. My inductive leap  of understanding in this might have to do with  SEBI Chairman replacement / hopes of MCX-SX revival ?

Understanding TREND !

One of the major dilemmas faced by the traders is regarding Trend. Here let us try to understand it by standing on the shoulders of Giants in the field of financial Markets.

1. Interesting readings on Momentum. The large amount of research freely available on the web provides a solid foundation for the motivated market participant.
2. How to draw a Trend Line. Many of the details in TA is important  and nuances in TA should be considered.
3. Jim Sogi on Trends
4. Phil a DailySpec author on Trends
5. Trend following by Rocky Humbert
6. Trend spotting from Kensmith
7. The classic by chairman of DailySpec and the chief speculator on Negative feedback
8. Range and Trend by Bill Rafter

Everyone can Learn & Use Technical Analysis

TA remained a secret to me for many years due to lack of access to proper resources and orientation. Now one of my aims in this blog is to share and open the TA approach to as many market participants as possible.

1. As a DailySpec member , I have my own reservations about naive TA and stubborn adherence to rigid rules.
2. But if approached in the way of concepts, TA can be a powerful tool in the arsenal of a disciplined trader.
3. Another advantage in understanding TA is to be aware of the Media Jargon in interpreting market movement.
4. If one has basic concepts of TA, I found following many analysts in the media like Ashwani Gujral, Sudershan Sukhani, Rajat Bose, Devangshu Datta,Atul Suri  enriches our foundation and really adds to building our edge in the market.
5. I believe the first step in becoming an independent analyst , is to understand what other commentators are saying and can we reconstruct their arguments independently ?
6. What I implent in my Futures & Options training program is to decode many of Devangshu Datta's Derivatives articles in Business Standard .

Essential Package for MBA ( Finance) students & Fresh Graduates

BlackSwan Financial Marlets School is launching an essential package for MBA Students of JNTU/OU.
This package is planned as three parts which will give solid understanding of Equity markets, Practical exposure to Trading & Exchanges, Corporate perspective on relationship management in Financial services industry.

1. One-Week Crash Course ( Dec27- 31,2010) full time ( 10am - 4 pm) on the subjects  SECURITY ANALYSIS & PORTFOLIO MANAGEMENT , DERIVATIVES.
2. NCFM - Capital Market Dealers Module & Derivatives Market Dealers Module Training
3. Live project with Share Broker ( Member of NSE)

Feedback from a Participant

I am happy to post a pleasant feedback from a participant in Futures & Options Training program.



                "Hi Mr Dhananjay,




I am Alnoor Parbatani , i ve attended ur workshop on future and option strategies last week , which gave me good insights on market and its behaviour .


Now i am comfortable in understanding of option strategy and after reading and understanding of material u given to me , i tried my first hands on attempting the ncfm option paper mock test werein i was able to score 75% in my first attempt out of 90% . i thank u for ur valuable traing and input .


reagrds


Alnoor "


9533252765

Technical Analysis training Program

As I am preparing for the 2-Day workshop on  DEC 18- 19, it gives me an opportunity to look afresh at my TA Concepts, tools, actionable strategies.

1. Understanding Trend is the most basic. Often beginners questions revolve round Trend determination.One good post on this by Tucker report.
2. What Indicators trader should use and the steps to follow in looking at a price chart ? 20EMA,50 EMA, 200 SMA and Bollinger Band ( 20,2,0) together with MACD (3,10,0) is the preferred approach of Corey Rosenbloom.
3. Reasoning in terms of Key levels to watch, idenfying any confluence in all these price levels, developing an IF / THEN logic will build a solid foundation for the trader.
4. Using multiple timeframes in our analysis. Studying daily chart, weekly chart in conjunction or reading both 15-min and 30-min Intraday chart.
5. Having tools to detect TREND CHANGE
6. Trying to answer the frequent question of best time frame to Trade
7. Interesting post on the relevance of Trading Education.
8. I will be emphasising on the various free tools available to the Indian retail trader in his quest for trading success.
9. This 2-Day ful time program will help investors and traders take independent decisions, make sense of the randomness of markets, decode the jargon of financial media anr recommendations/ tips from brokers and consultants. 

Reflections on F&O Training Program

We have succesfully completed F&O Training program during Nov 28 - 29. Some of my learnings from this workshop

1. The group of 14 participants are very involved. Experienced traders from brokerages, Technical analyst also attended.
2. Innovations in the program included walking through many Derivatives articles by Devangshu Datta in Business Standard, Using Options caluculator in NOW Software.
3. As a team we are able to crack the Option Greeks.
4. Our course pack is compiled from NCFM modules on Derivatives Market dealers module, Option Trading strategies Module, Derivatives & Riskmanagement by J R Verma and Options Trading by Jeff Augen.
5. Need for actionable techniques and immediately useful trading ideas were stressed by some of the participants.

FUTURES & OPTIONS MADE EASY ( FOME)

FOME , a Derivatives workshop is being conducted on NOV 27-28,2010 at BLACKSWAN Financial Markets School.

1. The twin objectives of this workshop are

     a) To understand the Derivatives Instruments- Futures & Options as they  are traded at NSE 
      b) To be able to succesfully clear NCFM - Derivatives Dealers Module ,    NCFM - Option Trading Strategies Module

  2. The following topics are covered in the course

             a) Introduction to Derivatives
             b) Reading the Derivatives page
             c) Market Index
             d) Introduction to Futures & Options
             e) Application of Futures & Options
             f) Option Strategies - 22 types of strategies given in NCFM - Option  trading strategies module
            g)Option Pricing
           h) Greeks - Delta, Gamma, Vega, Theta, Rho
           i) Volatility
           j) Trading the Earnings & Expiration Cycle

 3. Practical analysis of Open Interest, Put-Call Ratio, Implied Volatility data
     is discussed

Useful Web resources for Independent Traders

Huge data and info is available on the net for a motivated independent trader. Some websites provide excellent tools at reasonable price. I think this is leading to huge participation and democratisation of financial markets. Some would argue it is leading to huge volumes aiding price discovery.

1. NSE offers excellent data and visualization facility by way of  NSE MARKETTRACKER
2. ICharts has a screener and stock lists and stock Glance facility which is also appreciated by active trader community. I believe it comes at a nominal charge.
3. One of the dilemmas faced by an independent, active ,discretionary trader is in stock selection. As emphasised by SMB Capital  being in SIP ( Stocks in Play) is most important for active traders.

Thinking about Volatility

Volatility is a bit less understood and researched by retail market participants compared to directional bets.

1. There is lot of disdain about academic work on markets in the arena of practicing traders. This gap needs to be bridged as there is plenty of fine academic work on market behavior and the traders edge can be derived from that.
2. My reading of Victor Niederhoffer, Brett  Steenbarger's works have made me appreciate the scientific and quantitative aspect of markets.
3. I had the pleasure of attending NISM workshop and listening to the fine lectures of Kotha Kiran Kumar on Volatility and Market Microstructure.
4. Fine Understanding about Volatility here from none other than Robert Engle.
5. Volatility is least understood because it is not directly observable unlike price movement.

Understanding Price Structure

The basic intention in the TA training course @ BlackSwan is to make investors & Traders understand the technical jargon. Concepts of TA are very important than simplistic technical rules or tips.

1. Often media and analysts proclaim about the structure of a market or Instrument. Corey  Rosenbloom lucidly explains about PRICE STRUCTURE.
2. After reading and following Corey Rosenbloom, I got to respect TA and the importance of understanding deeply its concepts.
3. Stockbee on concepts of TA.
4. I am happy to see a fellow SpecLister and highly respected Analyst SUSHIL KEDIA launching a TA forum for Indian Traders. I would love to be part of this initiative. Sushil regularly contributes to DailySpec and I liked his articles.

What is BlackSwan Financial Markets School ?

BlackSwan Financial Markets School had succesfully completed a two day Technical Analysis workshop during Oct 2-3.

1. Nine participants from diverse backgrounds and age groups attended the workshop.
2. The group expressed tremendous satisfaction on the way it is organised and presented. one medical doctor, ex-CEO, an Entrepreneur, an IT professional on a sabbatical from UK, a professional Day trader, A beginning Trader, Investor are part of this group.
3. We shared ideas, exchanged notes and  both the teacher and taught are richer for the experience.

TECHNICAL ANALYSIS MADE EASY ( TAME) 2010

BlackSwan Financial Markets School is offering intensive,detailed, practical training program in Technical Analysis from Oct 2-3,2010 at Hyderabad.

1. The program curriculum is exhaustive, well-structured.
2. Having seen many TA programs lacking the context and becoming mere powerpoint presentations, BlackSwan aims to concentrate on CONCEPT-ORIENTED TA.
3. Dr Brett on Introduction to TRADING
4. TA is but one piece of Learning how to trade.
5. Creating a learning culture for your trading effort.Trading is a mindset and a way of thinking, it is more than entry, exit, stop loss and target.
6. New and developing traders need to have a holistic understanding of market environment and context.
7. Inspiration for this training efforts derived from Dr Brett's thinking.
8. Sharing curriculum of the Trading program is important to asses the quality of the program.

STOCKMARKET APTITUDE TEST ( SMAT) 2010

BlackSwan is proposing to conduct SMAT 2010 a stockmarket aptitude test for all learners interested in Trading & Exchanges.

1. Possible partners for this initiative are Stockbrokers, Exchanges, B-Schools, Media partners like economic news papers and business channels, trading software providers etc.
2. The possible dates for the launch is Nov 2010.
3. The participants will be awarded discounts ranging from 25-100% on a 3- month NCMP Level 4 course.
4. SMAT can be benchmarked to industry needs (for ex StockBroking and financial services employee requirements)

Transaction Costs in Trading

Active trading involves huge transaction costs. In my experience as an intraday trader and running a trading office predominantly consisting of short term traders

1. Huge amount of energy is expended in the form of Transaction Costs, Taxes
2. Some of the items in the Broker's charges that need clarity is the Stamp Duty in case of Brokers having regd office at Hyderabad.
3. Turnover Charges being charged in excess of NSE Charges from clients ?
4. Victor on the effect of VIG

How to generate Trading Ideas

One of the best practices I am trying to implement in my short term trading approach since entering into professional trading of stockmarket is STOCK SELECTION.

1. Trading only active stocks with volume and volatility, Identifying stocks in play, Stocks with Breaking News, Top Gainers/ Losers .
2. Brett Steenbarger on Identifying Trading Themes.
3. Personally I would zero-in on Stocks with huge CNBC coverage, print media exposure as contrarian plays trying to fade extreme optimism / pessimism on the stock.
4. Opening reversals identified work faster with less heat for the Intraday Trader.

Useful resources on DERIVATIVES

Web provides top class resources on financial markets,trading and exchanges.

1. Derivatives FAQs by Ajay Shah, an original thinker in Financial Economics. Although the document is

a bit dated, his prose reminds me of the style of Larry Harris in Trading & Exchanges

2. Another original piece by Dr Ajay Shah

Interesting Readings

Stop Loss is a commonly discussed topic in Trading Rooms. Disagreement over the use of stops is common among experienced traders.

1. Scholarly opinion on Stops at DailySpec
2. Modern Classics of Trading here

World Class education on Trading - for Free

For a motivated student of markets  , Web offers a feast of trading education resources.

1. Understanding Technical Analysis to the core from  Corey Rosenbloom.
2. Concepts and techniques of Intraday Trading  by  SMB Capital
3. You have to drink and eat every post of the God of Trading Psychology.
4. Scholarly education for a speculator from the Giant in the field of Speculation.
5. Plenty of trading ideas and model templates from Stocktwits

Are you a Day Trader?

One of the common points of discussion among traders is about their timeframe. Day trading, Swing trading or position trading  or scalping ?

1. Many traders defend and elucidate the advantages of their timeframe ( for ex Intraday).
2. The point is I am a trader. Depending on the opportunity presented by the market I am flexible with the time frame.
3. Drakoln of  Speculator Academy opines on this here.
4. Tucker Report has  thoughts on Day Trading and opportunities in Very short or very long time frames.
5. Trader  Mike has an interesting take on Day Trading.
6. A scholarly day trading approach by DailySpec Lister .
7. Every trader has a niche. He has to practice and perfect it.
8. Trading intution can only be gained by years of Screen time.

Where will the market go today?

This is a common query by market participants. I have a different opinion on this.

1. As an intra-day trader I dont like to have a fixed opinion on the market direction.
2. The moment I express my directional opinion if any I am locked into this opinion and finding it difficult to trade.
3. Each instrument you trade has a different market. Many participants may not recognise this. They may not necessarily follow the broad market direction.
4. Though this may appear simple , clarity in basics will be of utmost importance.
5. The amount of information already reflected in the stock price and the trader's evaluation of this relative opinion ( ex : Crompton Greaves reaction to Avantha Power IPO, Sesagoa's inclusion in NIFTY, KVB's reaction to Rakesh Jhunjhunwala's announcements )

INTRADAY FUNDAMENTALS

Intra-Day Trading  requires lot of attention to detail and a science in itself.

1. I have been inspired by several concepts from SMB Trading Blog like Stocks in Play, Second day plays, Earnings play.
2. Combining Intraday fundamentals with technicals.
3. Traders' intution as a result of  years of screen time ( 10 yrs min according to Outliers by Malcom Gladwell),ability to process breaking news ( witnesses in TCS - Friday) will result in good trades.
4. Identification of Niche of the trader is important since it tells us where the escape routes exist.

Designing Risk

Financial markets allow you to design your own risk. Market is a vast pool of risk - return matrix. Investors can manufacture their own risk according to

1. The timeframes  ( IntraDay, Swing, Positional, Long Term, Short term)
2. Selection of Instruments ( Stocks, Futures and Options)
3. Position Size  ( small or large)
4. Type of strategies ( Long or Short or Pairs trading )
5. Diversification ( Across stocks, industries, asset classes like commodities and currencies)
6. Liquidity preferences

Stocks in Play 19th June 2010

As an intraday trader I want to be in stocks with volume and volatility. Trading gurus often emphasise stock selection. Some of my random observations are

1. Asian Markets not picking up weakness displayed in US. US futures mildly positive.
2. EVERONN : This is a stock in play. Board meeting today. Reports of stake buy by Nikhil Gandhi

         stock up 18% in 2 days. Everonn Business education a rehash of
        ICFAI NationalCollege ?    Everonn trades violently ahead of earnings as witnessed last  time    . I would like to choose my spots and reduce size and honor stops and try to avoid revenge and aggressive trading in the scrip. Previous Day High of 613 may be good resistance but beware of false breakouts. Stock is only in Cash segment that adds to lack of flexibility to express negative view. I would have to allow the market to show that it has made a top.

3. Other stocks likely to be in play : TCS, Cromgreaves, HDFC Bank, Sesagoa, CanBank, DCB, Escorts, PFC, Mindtree, Zylog Systems on Results meetings and as active securities for the previous day.



                                

Concepts of Trading

I have started my learning in markets the hard way paying huge tution fees to the market and Vig to the brokers. Starting with fundamentals and by necessity learning by trial and error in brokerage trading rooms reminding of Reminiscences of a Stockoperator 's description way back in 1997.

1. As my journey continued with rich information contained in web 2.0 , I am fortunate to discover giants in the field of speculation, trading psychology and derivatives including Victor, Brett, Taleb.
2. Where as the beginning trader starts with Technical analysis and Charts , solid foundation may be possible only with CONCEPTS of TRADING.
3. TA when understood in terms of concepts like Trend, Momemtum, mean reversion, Low risk entry, classification of tools for ranging and trending markets,Day Structure assesment,Execution in countertrend,Allowing the market to show top or bottom formation, Sticking to timeframe,and understanding the Technical indicator built up rather than mechanical rules will put the developing trader in a formidable position.
4. I find much appreciation for the way the material of NSE Technical Analysis program is prepared in the lines of emphasing the concepts of Trading. The flow of the content in TA is very smooth and connected.

Short cut to approximating IV,HV

Some of the benefits of sharing market information is the trainer achieves more clarity on specific concepts.

1. In delivering NSE program on derivatives , I came across a shortcut to approximating Implied Volatility(IV) and Historical Volatility(HV).
2. Normal approach to caluculating HV involves statistical caluculation.
3. Devangshu Datta of BS describes a thumb rule approach to estimating HV. It involves calculating the daily  HIGH - LOW range as a % of Futures settle price. You can take say, a 20-day moving average of this in order to get a smoother value. This can be used as a proxy for HV.
4. For estimating IV, We can take nearest to money call option and nearest to money put option premiums and calculate the breakevens to derive a range. For ex Nifty at 5280, 5300C (premium 100) and 5250 P (128) can be considered. A strangle breaks even outside 5558 -5022. This 536 points can be expressed as a percentage of NIFTY 5300 approx 10% as a estimate of IV. 
5. Black-Scholes options caluculator gives more precision but a thumbrule approx can be done as above

Technical Analysis @Manipal Education

The training program  jointly delivered by me along with another colleague gone very well.

1. NSE's Technical analysis material supplied to the participants provided unique way of classifying TA
2. Students liked the classification of TA tool kit and what tools to apply to Trending, Range-bound markets and transitioning markets from Bull to range-bound and vice versa.
3. Audience participation is very good with practicing traders and even top management from some brokerages thrown in.
4. I could bring value to the process through my emphasis on trading psychology and risk management mostly adopted from Trader Feed.
5. Intraday trading strategies with pivots is one chapter on the TA course.
6. I could personally appreciate how the basic concepts of TA can help the beginning trader have a grip on the market perception.
7. So many commentaries on  Financial Press and TV  became evident after going through this process along with my co-learners.
8. Much of the philosophy and terminology was effectively internalised by the participants by the end of the workshop as they were freely using the jargon.
9. Illustration of many concepts were done using  TAME and ShareKhan 's TradeTiger platform.
10. TA concepts when viewed in a foundational sense clarified many of my hazy opinion on TA.

NSE - MANIPAL Training Program on DERIVATIVES

I had the pleasure of taking classes for NSE-Manipal Training program on Derivatives at Hyderabad.

1. The educational material of NSE is absolutely top class.
2. The 14-hour program covered all Market Design, Microstructure and Analysis
3. Audience interacted very well  with diverse profiles from JPMorgan, Dr Reddy Labs, Stockbroking employees like Kantilal Chaganlal, India Infoline, and Independent traders.
4. I could discuss various indicators for derivatives analysis like  OI, CoC, PCR, IV by taking reference to DEVANGSHU DATTA's article in BUSINESS STANDARD - Smart Investor JULY 2007
5. Interpretation and understanding of Derivatives analysis by Devangshu Datta in Tuesday's BS will be very helpful to investors & traders in interpreting market direction.
6. Participants could appreciate the role of market design in taking trading decisions.

Simplifying the TRADING Framework

Today I had an aha moment trying to explain a methodology to understand price action to a new student of Markets and Trading.

1. The need for reference points which act as handles for the trader is emphasised.
2. These price handles will make the trader make sense of randomness
3. New and developing trader could feel a sense of elation at understanding the complex world of  Trading
4. When you can write your trading style on the back of your visiting card you can easily explain the approach to traders.

Understanding Investments

INVESTMENTS is a subject that is better understood and interpreted through a quantitative and statistical lens. This will avoid many biases of narrative distortion,selective recounting and other heuristics mentioned in behavioral finance.

1. I would think INVESTMENTS by BKM & Pitabas Mohanty with good indian examples and data will help students of Investments learn the right way.
2. Practicing with data from NSE website, Yahoo Finance, BSE website is the way to feel and understand finance theory.
3. MBA Course curriculum is enriched in OU & JNTU. BlackSwan Financial Markets School plans to associate with MBA Colleges and B-Schools in Interpreting SAPM, Investments Courses with practical approach and live trading.
4. Bridge Course for BCom/BBA students can also be implemented.

Finance Education in Hyderabad

As I ventured into financial markets education space in Hyderabad, I happened  to meet many interesting people.

1. My  deepest regard for Dr KG Ray of VJIM for his emphasis on Empirical Research and grooming students on research methodology.I learnt a lot from him  academically even though there are minor differences with style of admin. I can vouch for the superiority of VJIM's PGDM program, its pedagogy, curriculum, student culture and Vibrant atmosphere with top class infrastructure.
2. Mr Vishnu Mohan of Firstmove Advisors for his clarity and confidence of his techno-Fundamental approach.
3. Damodar Sai for his Intraday  and Technical analysis skills.
4. Harsha for his expertise in Commodities Trading and advisory.

Different ways of approaching the Market

Some of my random observations interacting with market participants and self styled portfolio advisors

1. Need to appreciate that there are many ways of approaching the market from different angles
2. Market comprises of different risk and time frames. Both long and short may be right when viewed from different time frames
3. Market consists of RISK. It is like a raw material made available to the participants.They can manufacture their own risk ( dish)
4. Experts trying to tell about their succesful tips but unwilling to discuss methodology and concepts of Trading.

Trading the Earnings Season & FY 2009-10 Results

Always the results season offers good opportunities and volatility for the Intraday equities Trader.

1. I would like to be ready and prepared for this earnings season
2. Infosys results on April 13 before Market opening ( BMO). Early results are expected to be in-line as market is not showing any trembling. Surprises happen in the direction of Trend ?
3. Identifying stocks in play (SIP) as per SMB Training
4. Proper stock selection provides most of the edge in this season
5. Information regarding the exact timing of company announcements of their results is not available to me ?
6. How far the announcements are priced in the stock and expectations
7. Post earnings announcement drift( PEAD) is some thing traders have to be careful about.
8. Interesting post on playing the earnings season

NCMP Level 4 Modules @ BLACKSWAN

BlackSwan FMB-School is launching NCMP Level 4 Training from May 10

• The modules we are covering are  
• 
  
  
   1 Capital Market (Dealers) Module
• 
  
   
  2 Commodities Market Module
  
  
   
  3 Derivatives Market (Dealers) Module
  
  
   
  4 FIMMDA-NSE Debt Market (Basic) Module
  
  
   
  5 Financial Markets: A Beginners’ Module
  
  
   
  6 Mutual Funds : A Beginners' Module
  
  
   
  7 NSDL–Depository Operations Module
  
  
   
  8 Options Trading Strategies Module
  
  
   
  9 Securities Market (Basic) Module
  
  
   
  10 Currency Derivatives: A Beginner’s Module
  
  
   
  11 Equity Derivatives: A Beginner's Module
  
  
   
  12 Interest Rate Derivatives: A Beginner’s Module
  
  
   
  13 Investment Analysis and Portfolio Management
  
  
• BlackSwan aims to add value by access to Live Trading facilities, Thorough discussion of concepts, Using standard reference books like 
• INVESTMENTS - Bodie, Kane, Marcus, Mohanty
• TRADING & EXCHANGES - Larry Harris
• HANDBOOK Of FIXED INCOME SECURITIES - Fabozzi
NCMP can become a gold standard of Financial Market Education BlackSwan has the will and knowledge resources to provide 24- Carat Financial Market & Trading Education to  a very large audience.

Benefits of not Trading alone

Since I started trading from an office , I noticed several changes.

1. Compared to home trading, I am more in control
2. It is difficult to go on tilt when your co-traders are observing you
3. I am trading more responsibly as I am assuming the role of a mentor as described by Dr Brett in The Daily Trading Coach
4. Some distractions relating to admin tasks may arise
5. Running a training and also trading operation gives me that emotional satisfaction of sharing ideas and developing clarity of thought
    
6. I hope this will exert positive influence on all the traders I encounter and associate with in this journey

Some very fine posts  regarding this topic are

• Doug Tucker on Trading Methods & usefulness of trading groups 
• Dr Brett on Networking

Professional Trading Course

BlackSwan FMB-School is launching for the first time in Hyderabad CERTIFIED PROFESSIONAL ACTIVE TRADER Course.

1. My inspiration for this is derived from SMB training in US and CD integrated in Indian Context.
2. BlackSwan would like to provide solid basic foundation for trading in the markets.
3. Association with RLP securities will help in providing sufficient Intraday exposure to the active traders
4. Components of this course will be in the lines of Active Traders Course
5. All ingredients required for stock speculation like Intraday Fundamentals, Chart reading, Risk management, Trading psychology, Understanding macro data, Reacting to news will be dealt.
6. A disciplined environment and lessons from How not to run a trading operation will guide this effort.
7. Giving best chance to the active trader to succeed is the motto.
   

NCMP @ BlackSwan FMB-School

BlackSwan Training can add value to financial market training.  We are starting with NSE Certified Market Professional ( NCMP) a high quality program from NSE. Their study material is of top quality.

1. How BlackSwan can add value  to NCFM certifications ?
2. I believe it is in detailed explanation and discussion of concepts
3. Providing live trading environment for students to observe markets
4. Learning about the thinking process of active investors and traders
5. Access to standard text books and case studies of International quality
6. Team work and seminars information sharing
7. Training by NCMP Level 4 Professional - ID 28075
8. Training by NSE Certified Trainer
9. Access to real time traders
10. Highly educated and qualified persons to give lectures

If the above combination is irresistible to any keen student of markets, BlackSwan is here to help  you find satisfaction and success in Markets.

Financial Market Education in India

Financial Markets have grown both in volumes and reach in the past decade.

1. The amount of literature available on Trading, Market structure, Various instruments has exploded.
2. Media focus on Markets has also increased phenomenally. Local Channels are also taking to business programming in a big way.
3. I would like to highlight some of the education providers I have come across in my research in the process of establishing BlackSwan Financial Markets B-School.
4. Finance Certifications : a) Kredent Academy

b) Ideators

c) NISM

d) ITM Financial Markets

e)BLB institute

f) FTKMC

g) Mansukh Institute for Finance

h) Equity Rush

i) APTART

j) Pristine Careers

k) Ace 3 levels

l) IQFI

m) Quantamatics

n) Torux

o) CD integrated

p) Inspire education

q) iicm india

r)iifp india

s) Kunvarji Academy

t) finosys

Role of Fundamentals in Intraday Trading

In my new journey of BlackSwan Financial Markets B-School and setting up a broking office in association with RLP Securities I would like to share some of my observations

1. The role of comprehensive view of Market Context. Often beginning traders may be looking at price levels or chart patterns, where as they need to put all this into sectoral context, Traders Behavioral reaction patterns, planning the trade in terms of risk
2. It is taking time for me to get reconciled with lack of control when the trader is given a free hand and the limitless environment of trading will make the trader go aggressive at the wrong time.
3. As often the Chair admonishes in DailySpec, beginning traders fail to scratch the trade, when survival is very near.
4. The importance of survival cannot be overstated
5. Market tuition fees must be paid so that it repeatedly drills the riskmanagement rules into the trader's head.
6. The importance of market context was highlighted on Friday's trade when I am trying to trade Pharma stocks from the Short side.
7. Often CNBC's hyping of certain stocks or sectors may give the intraday trader fade the sentiment extremes.

NSE Certified Market Professional Level 4

I am glad to announce that I have received NCMP Level 4 certificate from NSE.

1. NCMP  Level 4 is awarded to candidates who have cleared 9 + Modules.
2. I particularly liked its new addition IAPM module which has lot of relevance and market interpretation scope  with an MBA ( Finance) equivalent course content in it.
3. IAPM has been taught by me in various B-Schools with my major text being BKM,Nofsinger
4. BlackSwan is launching a 3-month full time/weekend batch for intensive training in NCMP Level 4 Course.
5. This course comes with a hostel accomodation, Placement tie ups with Brokerages, and Certicication assurance else fee refund options.

Importance of Trading Environment

Intraday Trading needs to be conducted in a conducive environment.

1. As Intraday Trading needs intense concentration , the trader needs to avoid all distractions.

2. The trader needs to access his meditative flow state.

3. There needs to be no opinion sharing itch among fellow traders unless there is a clearly defined protocol. This reminds me of how Victor writes about Trading Operation.

4.Need for maintaining silence in the trading room.

5. I am willing to admit that these unnecessary mistakes cost me yesterday and I paid the market a huge tution fee.

Pursuit of ShortCuts

In my interaction with many investors in the process of operating Blackswan FMB-School my observations

1.Pursuit of Shortcuts in the form of TIPS and sure-shot recommendations by investors surprise me .

2. How pursuit of money is put on top of market understanding and pursuit of knowledge

3.Market should give the participant energy rather than draining it

4. Having some framework or method in place of no method


I believe only when the market participants enjoy the journey they can go up the learning curve and increase their expertise.

Grand Strategy in Trading

As a student of market,grown up on traderfeed by Dr Brett , I find his posts resonating in my trading approach.

1. In my recent effort to build a Trading & Markets Monastry in Hyderabad , I had immense satisfaction in interacting with Beginning Traders and Students.

2. I had associated with RLP securities in this venture to offer trading facilities. My need for intraday flexibility and easy approachability of top management together with sppedy response fitted with RLP.

3 My basic approach of Risk Management,Viewing every Trade idea as a hypothesis, having a Grand Framework for Trading ( Mostly derived from Dr Brett), Identifying the particular traders' niche, I am trying to instill in my co-traders and speculators.

4 I am fortunate to find able friends like Mr VVM Reddy an IIT Chennai Grad and and an expert physics tutor for IITJEE. He is very enthusiastic about fundamental research and deep value investing. Another trading friend Mr Venkatgiri an engineer who is very keen on learning trading and analytics.

Intraday Trading - Best practices

BlackSwan is organising a seminar on Intraday Trading - Best Practices at Hyderabad.

1.Our office is at Flat 402, Srigurudatta Towers, Nizampet X Roads,Hyderabad -72
2.The motivation is derived from Dr Brett's articles on Trader Training,SMB Capital , Trading RM
3.Approaching the markets with a basic foundation on risk,trading psychology and structured way for continuous feedback.

Training on Financial Markets

My effort to train Traders and students in Financial markets and trading is taking shape in the form of BlackSwan FMB-School at Hyderabad.

1. I came across many talented youth interested in Markets in this venture.
2. My inspiration is derived from many top-quality programs envisioned by Dr Brett, SMB Capital, Trading RM with the motivation from EdSpec, DailySpec.
3. I would like to implement Trading & Exchanges by  Larry Harris as a foundation for students of markets as everyone is a lifelong student

BlackSwan FMB School

It gives me great pleasure to inform all readers and well wishers that I have brought into existence Blackswan Financial markets B-School and Stock Trading Facility.

1. My aim to provide a professional stock trading facility with value addition to Traders.
2. Trading environment on the lines envisioned by Dr Brett Steenbarger and Implemented on the lines of SMB Capital.
3. Rigorous study,observation, review and feedback facilities for Intraday Trading
4. A methodical approach with Morning worksheet, Afternoon Review, Post Market Review will help traders immensely.
5. I would also like to implement programs for Practical NCFM +,Professional Trading,Research Analyst.
6. Some of my inspiration for this program in Indian Context derives from  Kredent Academy, CdIntegrated.
7. My trading room contains wisdom from Dr Brett, Victor and Taleb.

Exchange Traded Currency Futures in India

I am glad to see in Business Standard about the SEBI approval for Exchange Traded Currency Futures.

1. Presently USD-INR futures are being traded and a succesful instrument on various parameters. Dr Ajay Shah has an excellent piece on Currency futures and an early advocate and pioneer in this area.
2. Prof JR Verma blogs about OTC derivatives here. I have used and admired his book DERIVATIVES AND RISK MANAGEMENT at VJIM and students liked his treatment of the subject which is clarity , precision and brevity.
3. Previously I have read and enjoyed a book about the genesis of currency futures and the role of Leo Melamood in The Vandal's Crown.
4. Currency Futures gives a great platform for both hedgers and speculators and arbitragers in India. I particularly noticed in Hyderabad many dubious outfits as they lure customers into OTC international currency broker trading platforms with horrifying results.
5. I wonder how the owners of these shops are blissfully unaware of market design fundamentals? Atleast now they can engage in a settlement guranteed and scam free Speculation in Currency market.
6. I may ask my freind Pradeep to shift from OTC forex broker to NSE CD Segment .
7. My sense is that this will greatly surpass equities trading as youth are increasingly taking to currency trading. Currency pairs are also less subject to assymetric information as they are macro underlyings.
8. Will new pairs INR-JPY,INR-EUR,INR-GBP bring Volatility ? I think USD-INR annualized Vol is low at 8.77% compared to Nifty annualized Vol at 17.7%.

NCFM Exams in CM & DM

I have taken NCFM examination in Capital Market ( Dealers) Module and Derivatives Market ( dealers) Module.

1. I am satisfied with my scores 74% in CMDM, 95% in DMDM
2. My feeling is that DMDM question paper strength is decreased due to separation of Option Trading Strategies module.
3. CMDM level of difficulty and questioning increased.
4. The quality of new study material is high and the flow is very smooth.

Important Readings

Some of the must readings from the resources I follow

1. Brett on Trader Education, Training, Mentoring
2. Victor on Checklist for Traders
3. Nice Humour from Newton Linchen

Newton Linchen's Insightful Comments

I always look forward to my dear friend Newton Linchen's insightful comments, critique, advice and direction. As a Speclist author, Trader and a great teacher willing to share his ideas, he has been a source of inspiration even in difficult times. I take liberty to post his comments here.

I rejoice to know you are involved in such a high standard project.Most brokerage houses are just interested in commissions, whether or not the client learns something or is profitable.
To develop an environment in wich is possible for the customer to grow, both in wealth and knowledge, is indeed a noble way to do business.
May all the good influences come in your way, and may you, your partners and clientes prosper!Regards from Brazil,
Newton Paulo Linchen
www.markettiming.com.br

Financial markets School

Presently my intentions to develop a stockbroking & research office complete with training facilities is taking shape.

1. My intention is to setup an office which offers quality trading facilities , atmosphere and culture from the lessons I learned in typical Brokerage Trading rooms.


2. Can I replicate the atmosphere of University Research Lab with the precision and quality which Brett often describes. It reminds me of Victor's Comments.


3. SMB Training is a pointer in this direction with their daily rigorous structure for preparation, execution and review.


4. The advantage of training operation gives a feedback mechanism and I feel it a natural extension for my academic background


5. Presently youth interested to learn about Financial Markets need more quality training facilities which are accesible, practical oriented, free of anecdotal nonsense,ability to validate with data,Scientific appraoch of viewing the markets.


6. These are available at big cities and reputed institutes like NISM, IICM, IITs etc which are out of reach for Graduates and Other persons interested to make a career in stockmarket or trying to become Professional Traders.


7. Another aspect of developing a professional approach to trading and speculation by retail investors with the help of good information and ways to approach this data can be an area which needs intervention and offers scope for value creation.


8. Is there a positive feedback to Market Training and related activities like Broking, PMS and Research. Since Market is a truly a knowledge and information business, I would hypothesise there are increasing returns to investment in Knowledge creation and dissemination.

Wonderful world of Econometrics

Financial Econometrics combines financial theory with econometric methods for forecasting.

1. The need for crunching huge data with availability of databases is bringing Financial Econometrics to the fore.


2. Some of the excellent authors in this field I came across are Chris Brooks, Tsay, Eric Zivot,Carol Alexander


3. I have yet to find an accesible book in the Indian Context with finacial data from Indian Exchanges. I hope NISM will bring out such a work. It could be good companion for their NSMD database. HF data analysis in the context of Indian Markets is a growing and important area.


4. High Frequency trading and Algorithmic Trading is adding to the requirement of familiarity with Financial Econometrics.


5. I think there are lot issues which traders implicitly assume needs to be empirically validated. Some of the examples are

Open Interest (OI) data in Futures as a predictor for nextday's Spot price

TEA near BSE

After NISM workshop is over myself and Mr Srinivasan, PhD Scholar with Pondichery University have gone to BSE.

1. Here I could feel the seductive nature of stockmarket as the participants gather watching around the ticker. This reminded me of the feelings expressed by Victor Niederhoffer on Visiting NYMEX floor.


2. Volatility of markets is a contributing feature to the seduction of stockmarket. Market will die if there is no volatility. I think many academic papers are starting to recognise and defferentiate between information induced volatility and spurious volatility.


3. We have visited major bookstores like Bookzone & Sterling book house & Strandbook stall near CST railway station.


4. We have spent time near Gateway of India and taken photographs at TajHotel.

Learnings from NISM

Attending NISM workshop had been an enriching experience .

1. The unique format of closely tracking the session structure without random lectures from different speakers had given depth to the topic.


2. The group is cohesive with background in finance and statistics that enhanced discussions and interaction among the group.


3. Lot of my questions regarding empirical research in finance particularly market microstructure were resolved.


4. I am able to access and become comfortable with econometric terminology and financial interpretation.


5. Having a trading experience in markets gave me a unique lens to understand the empirical and theoretical angle in the discussions.

Afraid to Trade Options

I had interacted today with many option traders who apparently know nothing about the concept of Volatility. I shiver at the description of their trading strategy confined to directional option bets. Disregard or lack of understanding for Time Decay or Implied Volatility.

1. Interesting post on Options


2. What are the parameters to look for in deciding whether option is attractively priced ?


3. Are we aware that Option is a non linear convex instrument unlike stocks or Futures ?

Simplifying Your Trading Framework

Active Traders internalize market lessons through exposure to patterns, pain of market losses, learning forced by the market.

1. There are many stages in the development and evolution of a trader.


2. I believe it is always difficult to predict the market as it appears mostly random. But a trader with clarity of his approach and trading framework is not surprised by the market moves . This progressive elimination of being surprised by the market makes him resistant to being fooled by randomness.


3. The trader should be able to explain his approach on the back of a visiting card in three steps.


4. The trader can reduce most of the trades to three approaches . Thus the concepts of trading are superior and of lasting edge than a single trade idea.


5. I would admit most of the trading experience and knowledge can be distilled in this excellent article by Brett Steenbarger.


6. When the market movement cannot induce surprise in the trader most of the negative power of the market is reduced. As the greats in trading say " In the expert's mind there are only few possibilities where as an amateur sees many possibilities".

Trading and Econometrics

I have been reading a bit on Econometrics recently sparked by my registration at NISM workshop.

1. My friend Newton Linchen has interesting comments on Trading and Econometrics
2. Econometrics of Tape reading where Newton Linchen discusses Strategies and Models. As pointed out trading is more about skill than knowledge.
3. Good posts by SohamDas relating to Quant and Econometrics, Basics, Concepts
4. As Newton Linchen rightly pointed out , Insightful analysis by Victor in DailySpec, here
5. Thoughts on Trading Price levels

Econometrics for Finance at NISM

It's has been almost three weeks since I posted . My aplogies to the readers and my friends.

1. I am eagerly looking forward to attending Econometrics program at NISM, a prestigious institute by SEBI.
2. Presently I find Chris Brooks book on econometrics interesting.
I look forward to post some interesting notes on the econometrics workshop in the coming days.

Lessons from ANACONDA,the movie

Some of the points that struck me from watching the Anaconda movie today

1. Deception : How the snake hunter practices deception leading the others in the Amazon Jungle. Parallels to market where traders are mislead by the hidden motives and apparent movements to one direction sharply reversed in the other direction
2. Insearch of Risk : My favorite analogy of a trader in search of risk is the snake hunter in search of Anaconda where other people are afraid of the snake. When I encounter questions about risk of a given trade, I wonder why they are in the market if not in search of risk
3. Preparation : Jon Voight is well prepared to catch Anaconda. He is anticipating and longing for it to show up. Instigating it with his monkey bait. He is ready with ropes,net, gun with anaesthetic etc. Proper preparation with his trading framework , significant price levels to watch for, trade structure, awareness of context is essential.
4. Timing : Acting decisively when the snake appears. The trader is not surprised. Extreme agility to time the trade not missing the shot at the right time is critical.
5. What are the signals similar to the trembling Monkey: When big predator is around the market weather changes. The prey gets the signals. Monkeys holler and make unberable noise. What are similarities in markets. I have witnessed trembling in leading stocks in leading sectors before a panic sell off or Squeeezes. Can we look for trembling and howls in VIX, Int Rates, Gold, Oil, Dollar Index, Baltic Dry Index, Credit Spreads.

what shows fear before big predators make a move in markets ?

Fading Other Traders' positions

Assuming Day Trading is a fight between participants in the trade, Is there an edge to fading other traders positions ?

1. Trading floor used to give advantage of reading other traders or Tells.
2. Can similar edge be gained in brokerage trading rooms where novice traders positions are displayed to all?
3. What are the characteristics of "fadeable" traders ?
4. I am surprised to find sometimes the positions of other traders overriding all indicators, TA patterns will give a clue to short term positions.
5. If daytrading needs flash opinion on a stock what better market tell than an injured trader on the other side?
6. This may sound cruel but the practice of deception is the nature of the market.
7. Some characteristics of the trades I can fade are

• When there is a random stop on a losing trade
• Trader has taken a position rather than voicing his opinion
• Revege trading is visible
• Trader is trying to break even
• Cursing or exhorting the financial instrument
• Entering into trade to avoid regret
• Lowering stops on a losing trade
• Avoiding when the trader is strong or profiting in the trade
• Quick and random profit booking by the trader for emotional reasons
• Larger than normal size by the trader
• Timeframe of fadable trader should match your own

Can these observations of traders strength or weakness in a particular trade give an edge at least for entering the position and relying upon TA and indicators for managing and exiting the trades ? I had lot of anecdotal evidence of Stockbrokers fading the positions of their clients when they run their prop books.

Can the daytrader use this as a shortcut cutting across opinions , news, TA and Random noise?

Newton Linchen on OVERTRADING

Newton Linchen , SpecList Author has nailed the issue of OVERTRADING. I take the liberty to post here.

Dear Prof.
Overtrading is the greatest issue for a trader with internet dealing access (home broker).
Really nothing prevents the trader to enter another trade, to his own misfortune.Some time ago (it seems in fact another incarnation!) I can say I was the master of overtrading. Really! My brokerage statement showed up to 25 + "trades" for the day. The results were quite poor.As I developed as a trader, I learnt some key aspects of market behaviour, which allowed me to enter trading in very good trading opportunities.My overtrading stopped completely when, after doing this a thousand times, I asked myself: "wow, I just bought the downtick in the first trade... what were the other 19 for?" "Couldn't I just be quiet with that first entry and enjoy the move?????????"
The breakthrough came remembering Larry Williams approach to day trading: find a spot, enter and hold till the close.In my case, hold till the close doesn't work very well, but I manage to discover key levels where to scale out the position - now doing just one or at tops two trades per day!
The real point of overtrading, I realized, is that intraday charts has much NOISE - and this NOISE gets you out of the trade if you are:a. Following price action tick by tickb. Using moving averagesThe fix I use was to identify entry and target points, so, once the trade is begun, I minimize (yes, shut down!) the trading screen and put alarms to the price levels (stop and targets) - and then go play chess with my work colleagues, so that we are not shaken out of our position by market noise.Once the alarm rings, (I just love Nelogica!), we see whether we were stopped or profitable.With this simple solution our ration fell to one, two trades a day, and our sharpe ratio is in the vicinity of 5.
Regards from Brazil,
Newton Paulo Linchen.
November 21, 2009 3:59 AM

Identifying Overtrading

What are the parameters to identify Overtrading by Active Traders?
Some of the following can be of help.

1. Number of Trades
2. Total Trading Volume
3. Vig to Trading Capital Ratio
4. Number of Instruments Traded
5. Duration in the Trade ( minutes held)
6. Number of Orders Placed / Cancelled Orders
7. Number of Unplanned / Impulsive Trades ( which are based on " Breaking News", Based on Other Traders's Positions, Reacting to Opinions of Other Traders )
8. Position Size in a single Trade ( Above Avg Size)
9. Number of positions at a particular point of time ( More than two ?)
10. Tight stoplosses ignoring the Logical stops ?

As I struggle to cut down overtrading , I understand the Broker's ( Market Infrastructure's) way of turning thr trader's networth into his own through VIG, SPREAD, SLIPPAGE.

NSE Adv- Dec Line : Identifying Day Structure

As an Intraday trader, I want to arrive at a working hypothesis of whether the day is trending or ranging? For this I use the following proxies inspired from Brett

1. NSE A-D Line ( ADL): I would prefer a calculation from the open . As an intraday trader the overnight situation may be misleading . As of now I could not get ready caluculation.How this Adv-Dec is developing as the day progresses is an important factor in my decision to fade strength or trade for breakout moves. This will also guide me in position sizing, adjusting the tightness of stoplosses, Necessity for taking scalping profits or scratching the trade.
2. SECTOR BEHAVIOR : How the leading sectors are behaving. What the leading stocks in these leading sectors doing. I am taking 5 stocks from 8 sectors ( IT, Pharma, Metals, Realty, OIL, Banking, Auto, FMCG)
3. CORRELATED ASSETS : Behavior of USD/ INR, oil, Interest rates and commodities

Interesting Readings

The quality of the information available free in web for any willing and hardworking trader surprises me. What are the incentives available for traders to share so much information and insight so freely ?

1. Newton Linchen 's insightful post on Trading Behavior
2. Another great piece from Newton on Fun in Trading
3. Dr Brett on Trading Education

Few Queries

In my quest to learn trading , I had great teachers in Dr Brett, Victor, Newton Linchen, SMB. Their thoughts continue to light my path towards finding consistency in trading. In following their articles and discussions , I had a few queries in Indian Context.

1. Is there a similar indicator as NYSE TICK ?
2. Any trading platform allows caluculation of % Change from OPEN ?
3. How to get Adv- Dec line caluculated from OPEN instead of Previous Close ?
4. Market Delta and Market Profile how to access in India without high cost for retail traders

I would highly appreciate responses from fellow traders to share their nowledge in this area.

Interesting Readings

I found the following interesting for the weekend reading.

1. Newton Linchen on the trading process. Infact a whole trading course can be designed on these SIX elements. Trading structure beautifully contained in these six bins.
2. Brett on Preparation for trading . I find this a common occurence with me as I frenetically search for trading ideas when I am not fully prepared for the trading day.
3. Lot of interesting trading concepts on Stocktwits. This can act as a model for thinking about setups and distilled wisdom from experienced traders. Must watch for professional traders to imbibe the thinking process and the language of the protrader.

Falling In Love With TradeTiger

As a small speculator earlier I did not have access to real-time intra-day charting. It is a bit expensive for independent traders and infact not possible to access in crowded brokerage trading rooms.

1. Many retail traders are forced to trade with tape reading and their own imagination from the screen.
2. Tradetiger of Sharekhan really a good tool for prepared traders.
3. Multiple time frame view of price action ( 3D,5D) helps traders to form a opinion about likely support & resistance areas.
4. Using this tool I could form a likely supply area for DLF at 487 in the morning trade. Combined with a range trading day hypothesis , me and my co-learner in the trading course decided to take a short trade. We covered for a 2% gain when other indicators started to deteriorate.
5. How many retail day traders can access multiday view of price action of their stock in real time? I would presume not many.
6. Chart based viewing of price action also helps traders avoid impulsive reactions and they can view with respect to a reference frame.
7. I am trying to illustrate my trade ideas and decision making process using Tradetiger in the trading course.
   

Fighting the Isolation of trading

Trading is based on Individual Opinion synthesised from various sources. But ultimately the trader has to decide and execute on his own. Trading is isolating in a way so as not to be biased by others random opinions.

1. In an effort to interact and share my opinions I have started my blog. I could form friend ship with excellent market participants and human beings like Newton Linchen, Soham Das, Sushil Kedia
2. I started to comment on market related blogs and in this process found myself approval from DailySpec , Newton Linchen, Jumpup
3. For the past one year, my thought process has got refined and I could explain my framework as a combination of ideas to beginning traders.
4. Initially I used to work from home but I shifted to my friend's office which made me more in control and reduced my overtrading to avoid boredom and frustation.
5. When I keep a trading student with me and start explaining trading setups to him and my process becomes more evident and my trading more responsible.

Newton LInchen's Observations on Course for Traders

I take liberty to post my esteemed friend, SpecList Author 's observations.

"Dear Prof.
I read the comment before your answer to it.I must tell you it has great merit to maintain such an aggressive comment in your blog, and it takes great humility and courage to answer it openly.I don't know the trading background of this person, but I'm suspicious of everyone who claims trading to be an easy task.Anyone who claims trading to be easy - surely doesn't make a living from trading. (That's why I don't like very much Dr. Brett books... It's clear to me that he is not a trader in the full meaning of the word. I rather to learn "trading psychology" from traders who really live from trading - In that matter, I would recommend an excellent book by Mark Fisher (the man who trained Paul Tudor Jones pit traders) - "The Logical Trader" (you find it at www.avaxhome.ws).You know, I also had my ugly ups and downs."BEEN THERE, DONE THAT, BOUGHT THE SHIRT"I started searching for guidance and I first found it in the person and work of Larry Williams (www.ireallytrade.com). Then I started to read other authors, (including Victor).The point is that I spend many years just to develop a conceptual framework for trading!!!! Many years just to understand (although roughly) the INTELECTUAL part of trading.Now, imagine my position, some time ago: being a market encyclopedia - and trading poorly.When I had enough bad trades, I realized that INTELECTUAL knowkedge of the markets wasn't enough.And... no "psycho trading" books were of ANY help.ANY. AT ALL.The first good "trading psychology" advise came from Larry Williams (I will quote it in my blog, next post!). It was something like this: "It's not the positive feelings that generate good trades...It's doing the right thing that generate good trades - and the good trades generate positive feelings."SO, there I was, stuck in the middle of bad trades - but "knowing" a lot about the markets. In sum, my TRADING didn't correspond to my KNOWLEDGE.Then I realized a trading METHOD that just solved every trading discipline issue I had. And it worked well for my students and for everyone who started using it. (I can disclosure it for you via skype).But, the point is: one struggle a LOT to achieve a minimal understanding of the markets - then, one have to struggle EVEN MORE to make this knowledge "work".I can see you are definitively in the path of making your knowledge work... And if I can be of some help in this process, I would be honored.
NAMASTE! " - Newton Linchen
I believe we all get resilience and humility from the exemplary path shown by the Chair Dr Victor Niederhoffer.

Why A Course for Traders

A reader commented on the blog about teaching trading without being a super trader. I will summarize my thoughts on this in response to his observations.

1. I am a co-learner in this course for traders. Each participant is a student as well as a teacher including the mentor.
2. I humbly accept that I had my highs and lows in the never ending journey called Trading ( " Hilotrader")
3. My effort is to find my own fusion of academic finance and trading.
4. I am not teaching a canned system but a thinking process.
5. Can I emphasize Mechanics,Tactics and Strategies thereby accelerating the learning curve of beginning traders.
6. My own learnings from 2003 onwards in the tradition of DailySpec, Traderfeed, Fooled by Randomness will give a framework to approach trading.
7. The course fulfils my desire and need to express myself and find flow in the feedback of my co-learners.
8. My effort to integrate Pivot points, Day Structure,Sector Themes, Preparation for the Day, Risk management,Trading psychology into a coherent framework will definitely protect beginners from blowing out before market allows them to learn to be competent traders
9. To put things in perspective, I have never blown my account in the past ten years of my active trading. Never panicked in a 10% move in Index, 70% down move in my stock ( Unitech in Oct 2008) in one trading session and always manged my risk.
10. An approach to markets, relentless drive to find your own trading style, Discovering your niche are the points I drive home in my course.
11. As for being a supertrader, knowledge is necessary but not sufficient, Risk-taking capacity is also needed. I try to trade within my risk parameters avoiding entering into Gambling territory.
12. I thank the reader for helping me clarify my thoughts on the course for Traders

Horse sense in the Market and Underestimation of VIG

Allow me to quote from Daily Spec

"This reinforces T@leb's argument that life is becoming over-optimised, reducing the slack in the system that's necessary to absorb the impact of the unforeseen. I have seen this myself recently, having interviewed a kid who was near top of his class at IIT and IIM, top of his class at a top tier MS in quant finance, straight As and a bonafide mathemagician. But he had zero intuition about the mechanics of the market, the vig or anything else. Everything was an equation to be solved where one simply cranks the wheel and spits out the answer." - Nick White

I have encountered situations where learned people under estimating the market realities and friction ( transactional costs).

1. One stockbroker explaining to me how high brokerage costs doesnt matter . It reminded me of Victor's anger when he was given dubious quotes on the floor of the exchanges.
2. Dealers buying 5% spread for customers and buying at the market in which there is scant volume.
3. Inappropriate use of Order types in the market situation.( Stop loss, Limit Orders)
4. Need for recognising how the " Obvious therefore Dubious " ( Courtesy GM Nigel Davis of DailySpec) more often than not as evidenced by Indian Market on Friday ( Nifty opening at + 110 points and closing at -40 points). Am I hearing Victor's admonition here ( You can find any example retrospectively in the market to fit your analogy )
   

My Friend a Fantastic Teacher, Trader & SpecList Author

Today I had wonderful conversation with Newton Linchen. I am all ears to his most incisive explanation of edge in market microstructure and Index futures trading.

1. I believe Newton Linchen 's constant encouragement enabled me to succesfully launch the " Active Trader Course " in Hyderabad.
2. I am very excited for the past two days looking forward to this conversation. We had a good time ." Trading & Exchanges " is a book that has to be digested many times over.
3. The excitement with which Newton Linchen described Round numbers and their relevance still resonates with me.
4. As the saying goes " When the student is ready, the teacher appears ".
   
5. I look forward to more conversations with Newton and India - Brazil Connections .
6. The effort to meet the Stock Exchange authorities to discover the edge is a lesson I always keep with me.
   

Learnings from Trading Course

Some observations from my trading course conducted successfully.

1. Two participants having good educational background attended the course.
   
2. I am really pleased to have them as co-learners. We enjoyed mutual sharing of knowledge.
3. One participant who traded forex has very good feel for charts and Elliot wave, Fib retracements. This has shown me the importance of trading niche and individual style. Another participant has feel for Correlation trading.
4. I enjoyed interacting with them and we could observe the market real time making good inferences.
5. Another point that came to the fore in my discussions is individual risk tolerance levels.
   

Index Futures Trading by Newton Linchen

Insightful observations as usual by my friend and SpecList Author
Newton Linchen. I take liberty to post here.

Dear Professor,Namastê.Honoured to be mentioned in your post.
About your question: it is - at least in Brazil - for the retail trader to perform well in such arena of index futures.First of all, there is the "easy" path of the mini contracts, ideal for the undercapitalized trading as well for to put some new ideas to work in the markets with low exposure.
When you go to the "big" contracts, you can count on the institutional hedgers and arbitrageurs as LIQUIDITY PROVIDERS, (Market Microestructure - an idea from "Trading and Exchanges".All "mean reversion" traders, all arbitrageurs, all "pairs trading" traders will act as liquidity providers for the DIRECTIONAL TRADER.I myself am a directional trader. Always been, and perhaps always will be.
What one must understand, however, is that index futures may contain more intraday noise, but, as a good side effect, it is more influenced by international environment (such as Gold and Bonds trading), wich makes it easier to trade in the context of a CORRELATION STRATEGY.And, as a benefit, the LEVERAGE acts to smooth VIG and SLIPPAGE.
Regards
Newton Linchen
October 25, 2009 4:42 AM

Newton Linchen on Insider Trading

Newton Linchen had read my mind. Recently I am toying with the idea of shifting to Index futures. Trading in individual stocks I may be at a disadvantage due to informational asymmetry. Company managements are accessible 24/7 to large funds. I have witnessed how the inner circle operates when I am a sell side analyst in a brokerage firm. The only hesitation in my mind of the suitability of Index futures to a retail , independent trader is Institutional activity in Index futures for purposes of hedging and arbitrage. Is it possible to a retail trader who is doing predominantly directional trading not to be overwhelmed by the Basis ( discount / premium to the spot index). Does the independent trader has the necessary skills to combine it with Index options for proper hedging. Where as apparently it seems individual stocks show a clean trend ( sometimes!)

Insider trading is what made me turn my trading activity to index futures and to market microstructure. I don't depend on large moves to make money. I really don't care were the car is going - and what car is, who is the driver, etc - for I'm trading on its mechanics, it's engine, it's structure.

For example, my day target is 30% of the day's bar range. Achievable and reliable.

Regards from Brazil!

Newton Paulo Linchen

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.