[Altaf Petiwala]

Originally Posted by carboy

I have created a thread - use this -> http://www.team-bhp.com/forum/shifti...-tutorial.html

Since its more like a question and answer session, I cannot start there till my posts are moderated and I have to wait for them to reflect. Maybe later if and when I collect 25 posts.

Thanks for the effort anyway.

Its not like writing a book or something. Its more of an interactive thing that grows.

[Eddy]

Altaf.. If you post during the day, the posts are moderated and become visible in a matter of minutes. Please do not let that stop you from posting.

[Altaf Petiwala]

Originally Posted by Eddy

Altaf.. If you post during the day, the posts are moderated and become visible in a matter of minutes. Please do not let that stop you from posting.

Sir, as it is my wife is threatening to leave me, and if I post during the daytime during trading hours, she will find someone with a lot more BHP !!!


Just joking Will try to post. Will compile at least 2 pages worth at a time and start off. First will come the ideal Trader. Then his qualities. Then his hurdles. Then his dreams. Then how his dreams are shattered. Then how he realises there is something more to it. etc etc.

This is NOT going to be a tips thread, but a wake up call.

[SDP]

Altaf,
Since you want this to be interactive session in Q&A mode, let me ask you a few questions (one or two at a time).

1. I believe you do 'trading' for a living. Many on this forum are either salaried or run their own business and would be interested in 'trading' possibly as an additional source of income by risking a small part of their savings. So the first question: Is this really possible? Or is 'trading' limited to professionals like you and is this a full-time activity which needs multiple hours of dedicated research every day coupled with minute-by-minute tracking of the market?

Thanks

[RS_DEL]

Originally Posted by SDP

Altaf,
Since you want this to be interactive session in Q&A mode, let me ask you a few questions (one or two at a time).

1. I believe you do 'trading' for a living. Many on this forum are either salaried or run their own business and would be interested in 'trading' possibly as an additional source of income by risking a small part of their savings. So the first question: Is this really possible? Or is 'trading' limited to professionals like you and is this a full-time activity which needs multiple hours of dedicated research every day coupled with minute-by-minute tracking of the market?

Thanks

Allow me jump into this as I too am from the much maligned fraternity(mostly a male club so use the term fraternity - not a sexist) of glorified gamblers aka traders.

[] Trading is not limited to a select club. Anyone can do it. If someone reading this is a business owner , they can understand the analogy I will give. Think of the friendly neighborhood grocer. He replenishes his stock and you pick the stuff from his shelf. Then he makes his money. Apply this analogy to the business of buying and selling stocks and you have trading. Leave the esoterics like derivatives to the brave souls who like the kicks they get - literally . Simply buy and hold. Wait for a customer to come at your price. Sell it to him/her and collect your money.


[] Trading on very short time frames of the kind you refer to demands that you have an "edge" which enables you to buy the small magnitude dips and sell the small magnitude tops ( magnitude = %age of movement). Laws of probability state that higher the frequency of your actions higher the probability of your going wrong. Therefore trading over very short time horizons for small percentages is a strict "Do not do" (again in my opinion ) and is best avoided.

[] Trading is very much do-able(again just one man's opinion) if you can --> NOT loose your nerve in times of despair and BUY and vice-versa--> NOT get greedy when there is good cheer and bonhomie all over the market place and sell. I can pretend to give a discourse on the whys and hows of the business but it will not be of any practical use. However I will simply point you to a very simple minded indicator . Whenever the anchors on the business channels have droopy faces and are predicting doom put your money to work i.e. buy inventory. Conversely when they are predicting further gains after markets have appreciated - sell. This is one indicator that has never failed.

[Altaf Petiwala]

Originally Posted by SDP

Altaf,
Since you want this to be interactive session in Q&A mode, let me ask you a few questions (one or two at a time).

1. I believe you do 'trading' for a living. Many on this forum are either salaried or run their own business and would be interested in 'trading' possibly as an additional source of income by risking a small part of their savings. So the first question: Is this really possible? Or is 'trading' limited to professionals like you and is this a full-time activity which needs multiple hours of dedicated research every day coupled with minute-by-minute tracking of the market?

Thanks

First of all, there is no need to do market research, as we are trading only Nifty, based on certain patterns, and we do not need to think, just need to trade the system.

Very short term trading is not advisable, and trading does not mean trading daily or 5 times a day.

We have to have certain parameters satisfied, and our orders are punched in maybe 15 to 30 minutes before the trade.

Also, there are some ways of trading which will allow you to punch your orders early in the morning, and just keep a general track of the markets, maybe on a good java enabled mobile on GPRS.

It depends on what your targets are and how aggressive you want to be.

[musicmanaman]

Originally Posted by RS_DEL

Allow me jump into this as I too am from the much maligned fraternity(mostly a male club so use the term fraternity - not a sexist) of glorified gamblers aka traders.



[] Trading is very much do-able(again just one man's opinion) if you can --> NOT loose your nerve in times of despair and BUY and vice-versa--> NOT get greedy when there is good cheer and bonhomie all over the market place and sell. I can pretend to give a discourse on the whys and hows of the business but it will not be of any practical use. However I will simply point you to a very simple minded indicator . Whenever the anchors on the business channels have droopy faces and are predicting doom put your money to work i.e. buy inventory. Conversely when they are predicting further gains after markets have appreciated - sell. This is one indicator that has never failed.

The above point is soo very true, in 2008 when everyone was selling, if one had put his/her money to good use in Stocks, the returns would have been fantastic, just imagine on Diwali day Hindalco had touched Rs 40/- if I remember right, and see the price now.

[SDP]

Thanks RS_DEL and Altaf for the prompt responses.

Let's take a scenario to take the discussion further. It would help to keep the discussion focussed.

Let's assume that a person knows how the stock market works at a broad level, has a stocks-portfolio, uses icicidirect/hdfcssec, but is completely new to Derivatives in general and Nifty Futures in particular. He/She has a full-time day-job (in non-Finanacial-Services sector ) and wants to make 10,000 Rs per month by trading Nifty-Futures.

2. What are the resources needed to trade in Nifty-futures? Let's categorize resources in following basic categories:
a. Knowledge (primarily concepts. Any recommended books/links?)
b. Online trading platform (Would icicidirect/hdfcsec suffice? What should one look for while chosing a online trading platform? Any recommendations?)
c. Data & Analysis (any data feeds needed real-time/dalayed and/or end-of-the-day? Data-analysis tools needed? Are these packaged with the trading platform?)
d. Trading system & strategy (which are the popular trading systems (not platform) used by traders and what are some of the common strategies?)
e. Money (What is the margin requirement? Based on your experience, what is the optimum amount of starting capital requirement, so that you can survive some of the initial mistakes and don't get wiped out completely?)
f. Time (For a newbie, what is the daily time investment? )

Thanks in advance

[Altaf Petiwala]

Originally Posted by SDP

Thanks RS_DEL and Altaf for the prompt responses.

Let's take a scenario to take the discussion further. It would help to keep the discussion focussed.

Let's assume that a person knows how the stock market works at a broad level, has a stocks-portfolio, uses icicidirect/hdfcssec, but is completely new to Derivatives in general and Nifty Futures in particular. He/She has a full-time day-job (in non-Finanacial-Services sector ) and wants to make 10,000 Rs per month by trading Nifty-Futures.

2. What are the resources needed to trade in Nifty-futures? Let's categorize resources in following basic categories:
a. Knowledge (primarily concepts. Any recommended books/links?)
b. Online trading platform (Would icicidirect/hdfcsec suffice? What should one look for while chosing a online trading platform? Any recommendations?)
c. Data & Analysis (any data feeds needed real-time/dalayed and/or end-of-the-day? Data-analysis tools needed? Are these packaged with the trading platform?)
d. Trading system & strategy (which are the popular trading systems (not platform) used by traders and what are some of the common strategies?)
e. Money (What is the margin requirement? Based on your experience, what is the optimum amount of starting capital requirement, so that you can survive some of the initial mistakes and don't get wiped out completely?)
f. Time (For a newbie, what is the daily time investment? )

Thanks in advance

Beautiful questions.
If all new entrants to the markets asked these questions, we would have a lot less of horror stories about the markets.

Each of your one line questions deserves about half a page in answers. I will post the answer to each subquestion as a seperate post.

A: knowledge required. The lesser the knowledge, the better. Because the knowledge out there is soooo misleading, the less you know, the easier it is. And no, this is not a joke, nor sarcasm. Its easier to teach a newbie, than to teach someone who has half baked false knowledge.

Yes, if you DO want to collect some knowledge, do get to know yourself better.
How do you react in times of stress. When you take a loss, do you take it personally?
Does your ego allow you to accept a small loss and move along?
Are you so emotionally distressed if the markets do not co operate, that if affects your regular day job?
Are you having complete confidence in the system, and continue to trade it after a few losses, or do you get panicky and start tinkering around with the parameters?
Do you have the patience for letting the edge of the system kick in, over 25 trades?
For books, I would highly recommend " Trading in the Zone " by Mark Douglass.

In short, not much knowledge required ablut the markets, but TREMENDOUS knowledge required about yourself.

I could give you the best system in the world and even capital to trade it, but you woild loose money if you did not have the answers to the above questions.

Take out a note book. Write down the answers. After a year, these notes will be useful.

[RS_DEL]

I will address your specific queries with unasked for advice at the very outset. If I sound patronising or disrespectful please forgive me. Derivatives will be your funeral, sooner than later. Having said that let me go to your queries.

[] You need data terminals, read data terminals not transaction terminals. Vendors - Equis/Reuters, Bloomberg, IDC/eSignal. These are the reputed global names. Monthly subscription last I saw was US $ 175 odd to begin with. There are homegrown Indian names which are cheaper but I have no experience of their service quality. Data terminals report live, the happenings in the marketplace in the form of live feed data. Data terminals can make you or break you if you are trading derivatives.

[] You need transaction terminals Most brokers, if not all, provide the same these days. Then you need back up telephone support - in case internet connectivity between your front end and the broker's server is a problem. Plus you need redundancy built in, Back up desktop/laptop & internet connectivity. Most people would say I am exaggerating and trying to scare the reader away. No I am not.

[] Then you need a good trading software. Not a major cost.

[] There are scores of websites offering basic info on technical analysis, to name a few investopedia.com, chartschool section of stockcharts.com. All are basically rehashing the same stuff. What you must realise is a chart is a picture. There are supposedly objective rules defined to analyse the picture. The subjectivity comes in when deciding which rules are applicable to which situation. Thats the art, needs years of chart time. No short cuts here.

[] Margins- The stock exchange sets daily margins fior trading derivative instruments which are volatility based. They are publicly reported and and more or less in the region of 25 percent of contract value. How much of your risk capital should you allocate to a trade ? This is subjective , but my inclination would be no more than a quarter. Keep your powder dry to take care of drawdowns - margin replenishment calls from your broker when the market goes against you.

I will point out a couple of factors to consider here. When in derivative segment, you are highly leveraged. Small market movements are magnified WRT to the absolute impact on your capital. You need to be very vigilant and constantly on your toes. If someone has a business or a regular job, how can that person do both? Altaf may be a prosperous man today. I mean no disrespect to him when I say this, I doubt very much if it was smooth sailing for him from the very outset. Let us see the price he paid to achieve the success he has achieved. Thats what you should look at. In this business even if Altaf gives away his system to someone, that person's ability to replicate Altaf's success is highly suspect in my opinion. Why? Simply because that person will not have the gut feel, instincts Altaf has developed which make his system a winner.

I hope my rant has provided something of use to you. I will strongly urge you to think and think hard before you venture into the derivative segment. Think of it this way - if by being a simple minded grocer you can make money which is the four to five times the long time FD rate in a year and do it year after year with relative ease ,where is the need for being a cowboy and getting ulcers in the bargain along with the rude kicks to backside that markets give ad nauseum?

[anand_saraf]

Originally Posted by SDP

Thanks RS_DEL and Altaf for the prompt responses.

Let's take a scenario to take the discussion further. It would help to keep the discussion focussed.

Let's assume that a person knows how the stock market works at a broad level, has a stocks-portfolio, uses icicidirect/hdfcssec, but is completely new to Derivatives in general and Nifty Futures in particular. He/She has a full-time day-job (in non-Finanacial-Services sector ) and wants to make 10,000 Rs per month by trading Nifty-Futures.

2. What are the resources needed to trade in Nifty-futures? Let's categorize resources in following basic categories:
a. Knowledge (primarily concepts. Any recommended books/links?)
b. Online trading platform (Would icicidirect/hdfcsec suffice? What should one look for while chosing a online trading platform? Any recommendations?)
c. Data & Analysis (any data feeds needed real-time/dalayed and/or end-of-the-day? Data-analysis tools needed? Are these packaged with the trading platform?)
d. Trading system & strategy (which are the popular trading systems (not platform) used by traders and what are some of the common strategies?)
e. Money (What is the margin requirement? Based on your experience, what is the optimum amount of starting capital requirement, so that you can survive some of the initial mistakes and don't get wiped out completely?)
f. Time (For a newbie, what is the daily time investment? )

Thanks in advance

@Altaf - eagerly waiting for your thread to get active so I can learn about the Nifty trading that you are going to teach.

I think it is very much possible to do trading while keeping a full-time job. To give a background - I have a full-time business and have been an 'investor' in the market for a long time. I have made money also and lost money also. I myself have tried this as an experiment in 2010. At the start of the year, I put aside 1.5 Lakhs as my trading capital. After six months, I invested more and made my trading capital 3.0 Lakhs. Through the year, I have made about 5-6 transactions per month, all delivery based but all purchased with an intent to trade/sell as soon as a certain profit trigger is reached (say 15% or Rs. XXX whichever gets hit first). At the end of the year, on this trade capital, I earned about 83,000 in profit (~28%)- not great but better than my mutual fund earned.

Normally, I spend 5 minutes in the morning looking at my portfolio and maybe 15 minutes in the afternoon for putting in any trades/etc.

On the downside, I know my weakness - my ego - I hate to sell at a loss - the classic mistake of the investor. Therefore, in my 3L portfolio I am holding some stocks that are running at a loss of about 25,000. I know when to book profits - I find that it is hard to book losses. This I also find a limitation in the software (sharekhan) - I wish I could put trades that are not "end-of-day" but open till execution. I think I might be more likely to then put a stop-loss trade after every purchase!

@Altaf - I am quite looking forward to your tutorial - please do begin ASAP!

Happy new year everyone on T-BHP!

Regards
Anand

[Altaf Petiwala]

Originally Posted by RS_DEL

I will address your specific queries with unasked for advice at the very outset. If I sound patronising or disrespectful please forgive me. Derivatives will be your funeral, sooner than later. Having said that let me go to your queries.
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Beautiful post. As for cost incurred by me, let me tell you, I learned the hard way.

It was not so difficult financially as it was emotionally. The markets broke me many times emotionally before I found out that the problems exist with me, and not the markets.

[SDP]

Originally Posted by RS_DEL

I will address your specific queries with unasked for advice at the very outset. If I sound patronising or disrespectful please forgive me. Derivatives will be your funeral, sooner than later. Having said that let me go to your queries.
...

I hope my rant has provided something of use to you. I will strongly urge you to think and think hard before you venture into the derivative segment. Think of it this way - if by being a simple minded grocer you can make money which is the four to five times the long time FD rate in a year and do it year after year with relative ease ,where is the need for being a cowboy and getting ulcers in the bargain along with the rude kicks to backside that markets give ad nauseum?

RS_DEL, thanks for the detailed post.
I do share your concern and really appreciate you looking out for mis-informed dreamy-eyed newbie traders.

I have been a classic long-term investor and have consciously stayed away from derivatives since last 10 odd years. Buy and forget for 5-10 years was the strategy. That was till post-Lehman crash in which I saw all the notional profit accumulated over 3-4 years evaporate and even capital erosion for quite a few stocks that I owned.

Big lesson learnt, now only part of my portfolio is 'long-term'. Have been following your simple-minded-grocer logic for part of the remaining portfolio for this entire calendar year and it has worked decently well. What was once a 100% long-term-equity portfolio looks like the following now: 25% long-term-Stocks, 10% short-term-stocks-trading capital and rest in cash (waiting for the deep correction ).

Just like the 10% that I have earmarked for the short-term-stock-trading capital, I want to have a fixed amount for derivatives-trading. I do understand that its a high-risk-high-reward avenue. Besides the greed (for the lack of a better word) for the higher-returns, the reason I want to do it is because I do believe that derivatives trading is a science and can be learnt. I do have a decent knack for numbers & charts and that should help in this new adventure.

[SDP]

Originally Posted by Altaf Petiwala

A: knowledge required. The lesser the knowledge, the better. Because the knowledge out there is soooo misleading, the less you know, the easier it is. And no, this is not a joke, nor sarcasm. Its easier to teach a newbie, than to teach someone who has half baked false knowledge.

Altaf, thanks for sharing your insights. Your view on knowing yourself is very apt. I do agree that the trader's discipline and mental strength decide his success or failure.
By 'Knowledge', I was hinting more at 'concepts' rather than 'experiences'. I mean a trader needs to understand Open Interest, EMA, Cost of Carry etc etc. Just wanted to understand what is the list of concepts that a trader 'must' be aware of. Thanks again

[Altaf Petiwala]

Originally Posted by SDP

Altaf, thanks for sharing your insights. Your view on knowing yourself is very apt. I do agree that the trader's discipline and mental strength decide his success or failure.
By 'Knowledge', I was hinting more at 'concepts' rather than 'experiences'. I mean a trader needs to understand Open Interest, EMA, Cost of Carry etc etc. Just wanted to understand what is the list of concepts that a trader 'must' be aware of. Thanks again

If you are going to be a technical trader, you dont need to look at all that jargon, because these are all terms used at the end of the day by the anchors on TV trying to describe what happened in the markets AFTER it has happened

As for Technical terms, you mentioned EMA..... its stands for Exponential Moving Average, and may well be the only term required to trade, if you trade one of the systems that I mean to reveal to people.

All theoritical knowledge required to trade can be learned in 30 minutes flat.... its not rocket science, though the gurus make it out to be.

Will add more later, dinner calls.