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.