[vamsi.kona]

Firstly a very happy new year to all.

Originally Posted by SDP

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

Open Interest (OI), in crude and simple terms means those transactions in which only buying or selling has taken place. For example I may have bought a share and still holding it, without taking actual delivery or liquidating it. This doesn't arise in cash markets as the settlement is done immediately. So Open interest arises only in case of derivatives.

What is its importance?
Along with volume, OI plays a very important role in Technical analysis. I will try to explain it with an example. Generally we purchase a property expecting it to appreciate in value in future. So we hold the property till prices reach our expectations. Till the time we sell off the property, it is implied that our interest in the said property is intact.

Generally we sell the property only on two conditions. 1) Our target price has reached 2) We are not hopeful that the prices will appreciate further ( I have ignored contingencies, which may lead to selling the property). So this shows that we continue to hold on to the property till we are hopeful of prices appreciating further.

Now if you apply the same analogy to the markets, higher OI in a stock/index or any asset shows that more people are expecting prices to continue with the existing direction (Please note that as OI comes into play in derivatives segment only, it may increase in a bearish market also). This shows the strength in the market.

Together with volume and price, OI forms the basic and most important tool to gauge market strength. This is called PVO analysis. And the best part is you don't need any softwares to analyse this as the data can be gathered from exchange website.

Price -------------Volume--------------OI------------Indication
Rising-------------Increasing-----------Increasing----Bullish Strength
Rising-------------Decreasing-----------Decreasing---Reversal Signal
Falling------------Increasing-----------Increasing-----Bearish Strength
Falling------------Decreasing-----------Decreasing----Reversal Signal

This is the most basic and important analysis that one can do to find out the strength of the ongoing trend. This, however, will not give you the entry and exit points, for that is to be found through price charts, which our friend Altaf would explain. And as he rightly said learning the basic concepts of Technical analysis isn't as time consuming and tricky as many people appearing on TV or outside make others believe. However, the most tricky part and important part is their implementation and above all emotional discipline. Emotional discipline will make or break a trader or investor, irrespective of his/her knowledge.

Happy trading/investing.

[SDP]

A very happy new year 2011 to all investors and traders! May members of both the categories make lot of money in the stock market in year 2011.

Altaf,
Let's continue the discussion. Eagerly waiting for you to return and enlighten the newbies.

Regards
SDP

[vahss_11]

I am thinking that SCI is going to have big Rise in current week, lets hope it goes well..

I think its better to give some trading / investment ideas over here.

[RS_DEL]

@vahs_11

You may well be right, but what if someone acts on your input and loses money? IMO it is best if this thread is restricted to the issues of analysis/trading/investing methodologies, issues related to logistics and trade practices if any member faces any problems with their broker/dp etc.

The teep exchange thing is best avoided. As the chinese saying goes"Give a man a fish he eats for a day, teach a man to fish he eats for life" or something to that effect.

[recshenoy]

Originally Posted by vahss_11

I am thinking that SCI is going to have big Rise in current week, lets hope it goes well..

I think its better to give some trading / investment ideas over here.

yeah SCI showed some momentum yesterday but today again its down. Best bet would be FMCG. ITC and HUL showing good moves after being silent for some time. I am sure they will give good returns this year!

The MOIL seems to be a doomed story. Its completely dead. Not showing any signs of revival though! i am holding a huge chunk and waiting for target of 580 (becasue i bought at 580, i just want to get rid of MOIL )

[Altaf Petiwala]

Another fall that was captured by some traders...

[Altaf Petiwala]

Just to put the above picture in perspective, is that it shows about a 40 % return on investment in 4 days. Margin on Nifty is about 600 points, and profits on screen are about 250 points.

And I am highly suspect that investors made money in the last 4 days. If they did, they are wasting their time reading this, they should be racing their Bugatti's with fighter jets. No offence meant to investors. Its just that why bear pain? If you had the money, would you buy an old car and bring her into shape? or buy the same car from the showroom?
Now dont go off about antique cars, am talking of latest models

[SDP]

Originally Posted by Altaf Petiwala

Just to put the above picture in perspective, is that it shows about a 40 % return on investment in 4 days. Margin on Nifty is about 600 points, and profits on screen are about 250 points.

And I am highly suspect that investors made money in the last 4 days. If they did, they are wasting their time reading this, they should be racing their Bugatti's with fighter jets. No offence meant to investors. Its just that why bear pain? If you had the money, would you buy an old car and bring her into shape? or buy the same car from the showroom?
Now dont go off about antique cars, am talking of latest models

Altaf, welcome back.
Leave the 'investors' alone, will you
The battle between fundamental analysis and technical analysis (i.e. Investors v/s Traders) is eternal.
I believe, you have given enough examples to support your point of view. Let's move on.

BTW, the 'investor' in me sold Suzlon @56.85 on 4th Jan with the intent of buying it back around 49-50 Rs. .
So even 'investors' can use 'trading' to reduce their cost of ownership.

[vahss_11]

Investing is like demand and supply, on a longer term, people hold their stocks and as many other starts holding the same stock, the supply gets reduced and if the company is growing, then the demands get higher which results in price increase, same way in trading you deal for shorter period demand supply mismatch.

Investments can be sold when you feel big moves in price within short period of time, and hold on to your money till the "Hot Period" cools down and reenter when every one is crying. But this is recommended only for active player.

I hope market might bounce from here. lets see what Euro does today and dollar index closes.

[Altaf Petiwala]

Originally Posted by vahss_11

Investing is like demand and supply, on a longer term, people hold their stocks and as many other starts holding the same stock, the supply gets reduced and if the company is growing, then the demands get higher which results in price increase, same way in trading you deal for shorter period demand supply mismatch.

Investments can be sold when you feel big moves in price within short period of time, and hold on to your money till the "Hot Period" cools down and reenter when every one is crying. But this is recommended only for active player.

I hope market might bounce from here. lets see what Euro does today and dollar index closes.

Frankly, I dont even know what the effect of the euro or the dollar index is on the markets.

And yes, the markets seem oversold here. We have booked out on our shorts completely. Now, if the markets fall, we wont be getting a share of the pie. In fact we exited at 5930 odd levels, phased out right from 5970 to 5920 levels.

PS: Most of the qty was squared around 5970 levels. But hey, you cant have it all

[Altaf Petiwala]

Looks like the threads gone quiet... seen it happen the second time on this thread after a fall..... people loose interest after a fall??

[musicmanaman]

Originally Posted by Altaf Petiwala

Looks like the threads gone quiet... seen it happen the second time on this thread after a fall..... people loose interest after a fall??

I only get interested when there is a fall.

[SDP]

Originally Posted by Altaf Petiwala

Looks like the threads gone quiet... seen it happen the second time on this thread after a fall..... people loose interest after a fall??

Altaf, how about picking up the thread from where we left it in the last year?
You were helping people like me to understand the resources needed for trading. For easy reference, I have pasted the same questions below. You have already explained about the 'knowledge' part. How about the rest?
Thanks - SDP

Originally Posted by SDP

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

Altaf, how about picking up the thread from where we left it in the last year?
You were helping people like me to understand the resources needed for trading. For easy reference, I have pasted the same questions below. You have already explained about the 'knowledge' part. How about the rest?
Thanks - SDP

Platform: You need an exe based platform offered by almost all brokers. Indiabulls, sharekhan, IIFL. etc. Most have a one time charge of about 750 rs for the software, and then you can use that software on even multiple machines with the same account, though only 1 instance can run at any one time.

The bkg you must have is max 2 paise means 0.02 %, means a maximum of about 4 points on the Nifty. 1 paise can be negotiated with some good volumes though. Anything beyond that, and you cant trade. So, the types like ICICI, HDFC, etc go out of the window as choices.

Data : There are ways to pull data right from the trading platform into the charting software, using 3rd party softwares, for a negligible charge.

Charting Package: Fcharts is a free charting package. I use Amibroker, and it costs about 15000. But it comes empty, in the sense that you have to feed it data, and give it the program that will generate the signals.

Trading system and strategy: You asked which ones are popular and most used by traders... Are you here to make money or lose it? All systems that are commonly available are at best breakevens to small earners, and at worst, disasters.

Try backtesting popular systems over thew last few years like those based on MA, RSI, Stochastics, Bla Bla.... and you will see that they perform only maybe 20 % of the time.

Will reply to other questions when I get the time

[Altaf Petiwala]

Derivatives are actually a very dangerous tool, if you get carried away with leverage, and the horror stories that you might be hearing are almost all true, because there is no one to stop a person from putting on a highly leveraged trade. If you have the money, you can. No prequalifiers.

Think, if you had the money to set up a clinic, would you become a doctor overnight?

That is exactly what people are doing.

It had to be handled after putting in a proper trading plan in place.

As for failure, 95 % of traders wash out within 6 months.

But, that is almost the same percentage as in any other business startup. 75 % businesses wind up withing a year, and upto 90 % business are found wound up at the end of 3 years. The only thing that differs is the time. The market is much more ruthless than business.

A proper trading plan includes almost 2 pages of questions to be answered in detail.
All people do is, " Kya lagta hai... uper jayega? " and jump in. Translated from hindi, it means, " Do you think it will go up? " and go long