Wednesday, August 24, 2011

Confidence and Patience

One needs to have confidence in oneself. It is easy to lose it and panic and sell off before things get realized. Even though one may be correct in analysis and the trend of the stock one may sell it too soon when there is no confidence and fear of losing in the very short term instead of waiting for the analysis to realize.

This is very important quality for a trader. Confidence and patience. Knowledge of trend is essential but one has to be confident. One should not be overconfident and go against the rules of trend analysis. That is dangerous but if one is sticking to the rules, then one should be confident.

Money comes to the confident, knowledgeable and the patient. Wow! 

Thursday, August 18, 2011

Options pricing and Volatility

1. Use option calculator to always find the option price.

2. when volatility is high it is time to sell. Use stop loss to sell. what if the market opens rally low or high??

3. That is a good question. The best thing is to buy when there is low volatility or when the stock rallies in the opposite direction of the overall long run 1 year 30 day moving average.

4. Got the idea. Take good profits and get out.

5. Volatility is the most important factor and also the trend of the underlying stock. The option pricing is most dependent on volatility. This is an important point to remember. 

Buying Put options during bear market conditions

1. Buy stocks options puts that have high volume. Like Bank of america.

2. Buy options that expire in 1 to 2 months to take advantage of the downward momentum.

3. find the price of the option in the option calculator before purchase. Do not buy options that are too high above the option calculator price. May be 5 to 10 percent higher is fine. More than that is not worth it  and the profit potential and also the loss potential becomes high.

4. Diversity put options into 2-3 stock options.

5. This is a great way to make money during these unhealthy times. Better than shorting stocks if done in a proper way.

6. Move money to MB trading where it is easy to buy options and stocks from the same platform.

7. Buy puts when the market rallies for 2-3 days. That is the time to buy puts during bear markets and hold it . If the stocks are in a down slide, profits are sure.

This is the way to make money.

speculating and not waiting,losing is easy but waiting and gaining is hard

When one knows what to do but yet one cannot do what one wants to then there is a problem somewhere. Fortunately I do not have losses but all my gains have been lost because of day trading.

The underlying macro economic conditions are weak and the market is bear. I have not taken advantage of this situation. I shorted stocks but put all money in one stock and took stress when it fluctuated and sold off at a loss or day traded.

Now I am in no loss no gain situation. Do I want to make money or not is the question???

The way to do it is to diversity the shorting into 3-4 stocks and segments. All stocks are falling broadly.
This is a great opportunity to short the market not to leave it and run.

One a good 2 to 3 day rally upwards, short the stocks broadly, one in financial sector for sure like BAC.
Fossils has been falling like crazy. As you know the most gains come during this time when the stocks fall from the top part of the hill.

The graph formation now is utter bear and if I can short broadly and wait, I will surely realize gains. I should not touch the stocks because the markets behave the way they should not in short periods of 2 to 3 days but within 2 to 3 weeks time.

Stop day trading completely. This is the best analysis of the present conditions and why not to day trade. I have been day trading and missing all the big moves. It is an utter waste of knowledge of the markets.

diversified portfolio during shorting Vs day trading problems

1. this is the great blunder I commit when I short. I try to short just one stock with all my money.

Now is a complete bear market conditions. If I can pick 3-4 stocks and short them and wait for a month, I am sure I can make money.

2. This is the same as buying stocks upwards and diversifying within a 3-4 stocks.

3. Without diversifying one panics even for small changes in price of a single stock and takes losses. when the market rises and feels normal during a bear market that is the time to short the market and diversity within 3-4 stocks.

4. do not mix this strategy of diversifying and waiting with day trading. Do not confuse day trading with this strategy. This a the best strategy because it depends on macro economic conditions which
realize themselves with in a time span of 2 weeks to one month depending on fundamental conditions of the economy. But Day trading depends on many day to day factors of world economy, news,etc.

5. But over a period of 2-4 weeks, the market moves in the direction of the fundamental strength.

6. Find the weak segment and short the market on the good days during a bear market. Then just leave it to realize the fundamental weakness of the market conditions.

How is possible to get any kind of losses with this strategy???? Day trading needs a lot of attention and following the rules and control on emotions on a day to day basis. It also consumes a lot of time.
And after all that if one makes one or two bad trades one loses all the money one has made with all the skill, time and energy.
It also increases broker charges significantly.

This the reason also why Options is a good way to make money because one has to wait for a couple of  weeks to a months time for the stock to realize the fundamental direction and when one makes a good assessment of the fundamental economic factors and waits for some time for the market to realize it within a certain time span, then definitely the market moves in the desired direction. The important lesson is to wait.

But that is not possible in day trading. One has to keep making changes every day and one misses the big moves either upwards or downwards.

Saturday, August 13, 2011


1. This is the new mantra. HIGH PROBABILITY TRADES ONLY. Nothing else is worth the time or life because others trades just wipe off the profits of the high probability trades. That's what they do and at the end all you gain is nothing and a whole lot of waste of time and money and profits and also getting into losses. This is the story of many many times. Nothing will improve unless I take this stand of only trading high probability trades.

 From my experience in day trading, this is what I realized. One has to do only HIGH PROBABILITY TRADES one a week and keeping the 1 year 30 day moving average graph into perspective. This graph is the only graph that give the over all picture of how the stock has been behaving over one year. Obviously if one can see a pattern repeating one can take advantage of it.

2. If the stock graph does not fit the conventional but moves like commodity, that is moves in one direction extremely and does make a repetitive pattern, these are the graph to avoid. I got loss on shorting SINA, which moves like commodities.

3. Again day trading is not a HIGH probability, it is low probability and most unpredictable. Experimenting with too much money wiped off all the gains from previous months. I should not have put too much money into low probability trades and time consuming and ill studied systems.

4. So the best way to is only trade the high probability trades from KNOWN graph patterns that repeat themselves and I have studied them intensely over the years. Just make money on them using OPTIONS with low capital input for now, since the markets are bad. Even if there is a small rally going on one can still buy calls on stocks that are moving above 30 day moving average in a bullish macroeconomic scenario which is not evident in conditions now.

There might be small rallies but nothing consistent with the economic problems we have. So just buy some puts when the stock moves to the 30 day moving average in bulling and down trend markets.

Advantages of Options over day trading.

I was thinking of high probability trades.

1. The first thing to do when using options is to fine a pattern graph like a wave formation on the upside or the downside.

2. the good thing about options is that when you do it on high probability trades, then I can be very profitable with minimum upfront money.

3. When Netflix was around 300 dollars I knew it would fall down. That is how the graph pattern was indicating. Since it was above the 30 day moving average on the peak, I did not take any action to short the stock. But If the stock has been showing consistent repetitive pattern, then it was worth a try to short the stock. But to short requires a lot of money.

4. So with mininum risk, buying 1 or 2 contracts and waiting for stock to fall down 20-30 percent would have been like 50-60  or more profit on the puts side.

5. With options one has to buy Stock that trade in high volume. Those are the only ones one should enter and also buy AT THE MONEY options, NEVER out of money  and NEVER NEVER far out of money options.

6. It is a very good strategy. Day trading is not suitable for me because of the time consumed and also the day to day stress to take the right decision. I cannot take the right decision always on that time scale. It is easier for me to take the right decision from the 1 year graph, on the long side or the short side. Buying calls or puts, once or twice a month depending on the graph is a high probability trade.

7. Its good to read about day trading but if you are experimenting it is better to do it with less money. The same also goes with Options. But options are a better way to make money and there is a time from after which you have to sell it off. There is the time decay. So the rule in the book TREND TRADING  are good for OPTION trading.

8. If one can make a only make those high probability trades once a week may be and just wait for the rest to enfold  in a month or two months time, then that is the best way to do it. Because on day to day basis the stock market is fluctuation on a number of factor but on a monthly basis, tit is based on Macro economic situation and also individual stock performance. So giving time for the stock to fluctuate for a couple of days and then the stock moves the way it should.

9. But in day to day trading that is not possible. Also there are chances of taking too much risk. What I am using for a trading system is not enough for day trading. There are too many things to learn to perform well in day trading according to the book MASTERING THE TRADE. It has it own indicators one has to first of all have a plan and understand of the market is going to be choppy or it is going to be in one direction. Without that one can mess up. And there are too many trades involved rising the cost of trades too much.

10. That is the reason why Stock Brokers promote these software so that you can do many trades and make money for them. But the more number of trades you do them more probability of mistakes. And that time frame of one hour or less than that it is high probable to make mistakes. It is not for everyone it is only for a minority.

11. I would still give a big appreciation for SECRETS OF PROFITING IN BULL AND BEAR MARKETS.  Using the 30 day moving average and finding patterns to either short or long is the best way to deal with market trend. Day trading is too risky and time consuming and not worth it, even if one puts the effort to learn the trading system and indicator to show how the day is going to be.

12. I  would just buy it and leave if for a couple of weeks. But again Options can be dangerous if one takes risk and does low probability trades. One should remember that if one does that I money is lost with out a question. there is no arguing about it or turning around of luck. 

13. One should accept what one cannot do and capitalize on stuff one can do well. Trying to do things that one is cannot do if fine with less money but not with a lot of money. Its not worth the time and also the money loss and everything. I have wasted time on day trading and also all my profits. I have realized its not for me. 

14. i am deleting all the day trading software from my computer. the google graph should be enough for making the purchases. 

Friday, August 12, 2011

Over all financial analysis

1. I find that there are two days of safe investments for passive income. Passive income comes from other sources other than our regular job. One is rental money and the other is investments in dividend and growth stocks for a long term. These are the two no stress investments.

2. The more risky stocks which are not dividend stocks and volatile are more stress stocks. From my experience, no matter how good one is analysis, day trading is difficult. Because under stress, one does not take the right decision until one takes decision on technical indicators. Not guess work. Until then day trading is not worth wasting time or energy. One has to learn and experiment before taking big bets.

3. there is no loss or gain situation. So I am getting out now. Lots of entertainment for the year. As I had decided. I should just relax for sometime and just read some books.

4. One's aim should be to think of passive income coming from low risk investments like rental and stable dividend stocks. One should invest most of the money into that.

5. One should invest may be 20 percent money in high risk stocks. Either one is long or short does not matter. One can do whatever one wants to do but most of the money should be in stable investments.

6. It is not worth the stress. Learning how to manage life without stress is the intelligent way in life. Having a good quality life is more important and pursuing other intellectual or spiritual pursuits.

7. Day trading takes a lot of time and is time consuming. The other medium term investment like monthly investment is better even for the 20 percent invested in volatile stocks. Like following the 30 day moving average over 1 month time frame is the best way to invest money.

8. Following the lesson from the book Secrets of Profiting in Bull and Bear markets, one needs to have patience. When you purchase in a bull market one has to wait till the uptrend stock comes near to the 30 day moving average during correction then buy.

9. When you short wait till the down trend stock comes near to the 30 day moving average then short.

10. This is the only way to make maximum profit for less risk. THIS THE ONLY WAY. Day trading consumes too much time and quality of life comes down. One could be reading a book or other recreational activities instead watching the Stock market score board all the time. That is not worth it.

11. Again one needs patience. Just like one needs to have patience for the uptrend stock to move closer to the 30 moving average, one should also have patience to short a stock in downtrend to move closer to the 30 day moving average. If one does not have patience to follow this rule which is always true from all the graph and study, then one is not fit for stocks on a medium term strategy.

12. There is no use to say to oneself that one can do it next time when after all these months of stock watching one did not gain or lose. One reason is patience and following the rules.

13. If one is changing strategies everyday, then it is a problem too. One has to choose and only act when it is the right time.

14. Look at the market sectors graph in GOOGLE finance. When it is the bull market look at what sector has most most. Those are the stocks to short, when those stocks come near their 30 day moving average.

15. One can follow the IBD newspaper doing the bull market, their recommendations are good for bull markets but not for bear markets.

16. For bear markets ones has to do one's own analysis like looking at Google sectors and find which sectors are doing the worst.

17. Do not short when the market or stock has fallen down rapidly. It rallies or bounces back to the 30 day moving average. So that is too much risk taking. One has to wait till the stock comes loser to the 30 day moving average during a downfall and only then short it. This especially if you are putting all your money into it. Better bet all your money at the right time than gamble everyday.

Now coming to the point of passive investments where most of the money should be invested in. Look at rental and dividend stocks.

Rental money in India is a good option. Building some small apartments and giving to rent. No risk at all but at least some money is coming in. No stress.

Investment in 401K or 401 k like investment in Sharebuilder. Investing by automatic way is the best way to do it. Perhaps investing in 500 to 1000 dollars is good enough. One the long term there is no loss in this strategy. I have tested it several times

It is time to put money where it works. Enough of Experimentation now. Experiment is minimum money.

Day trading that I am experimenting should be with minimum money. Now it bull market not a market that is easy to make money. One has to short and one has to be patient till the stock moves to the 30 moving average. One has to decide if one can do that or not.

I should not be putting too much money in day trading when I am not good at it now. What ever it is I am exactly at no loss or gain situation. So that good.

I will follow this plan I like it. If I want to experiment I will do it with 5k especially in this crazy bull market. When it turns around many in a couple of years I will buy again later and hold good stocks from IBD list.

Monday, August 8, 2011

Best ways to take advantage to the situation

1. Until the market is falling buy puts of the best companies that have good put volume. Do not buy calls .

2. buy CALLS when the market reaches the equilibrim stage when the market starts to show the up and down waves for a couple of times. That is when the bottom has reached. That is the time to buy CALLS on companies like Apple.

3. Today some of the puts when up 200 percent. SIMPLY AMAZING.

4. Also the option volume is high in BAC.

5. Advantage of having a long term account with SHARE BUILDER is that the stable stocks do not decline much. Also it give some cushion to use buying options with margin money.  When portfolio is declining because of massive selling, hedge it with options on stocks like Apple or any high volume decline option sector. Right now it is the banking sector like Bank of america or Citibank.

6. This give good hedging and also protects the capital.

Try to buy IN THE MONEY or AT THE MONEY options. DO NOT BUY OUT OF THE MONEY OPTIONS. They are the most dangerous.

7. Buy Walmart stocks for 48 dollars. That is a good price to buy. It is a very stable stock. Then with them margin money you can buy options. Either you can buy puts or calls depending on the trend of the market.

8. This is the time to invest wisely use all the knowledge you have. Its a challenge.

volatile markets are back

Day trading is the best thing to do to manage these volatile markets. there will be some major moves up or down. It is not worth holding stocks for the next day at this time.

Time to be extremely careful also time of great opportunity.

1. DO NOT AVERAGE DOWN. short stocks going down. If stock below day Moving Average do not cover it till the day end. Today BAC and URI fell the most. They were good opputunities. shorted BAC at 7.10. Should have held it till the day end since the graph showed there was still heavy selling. It closed at
6.40. Would have made 2-3K on it. Any way made some money on it but it was bad execution.

2. Market is down from 12600 to 10,800. that is a 1800 drop. Market may go up again for 300 point any day. It is better to just day trade. need to be very careful. If holding stock overnight DO NOT DO IT WITH MORE THAN 15k. One can day trade the next day with the extra money.

Saturday, August 6, 2011


Google finance does not give graph picture in the porfolio section. This is a big negative for technical studies. This is not the first time, this mistake caused great loss yet I have been using it for no reason. Use google finance for looking up stocks never for porfolio. I changed it to yahoo finance today. 

Time to short

Market is uncertain and there are good shorting opportunities. Short 2-3 stocks and diversify so that there is no stress. Do not short just on stock. That is a mistake and can cause unnecessary stress and losses and getting out of position prematurely.

I will select 2-3 stocks and short them on money. Stocks are moving below the 30 moving average. One is NETL. Need to find 2 more and short them. The stocks should be fundamentally weak and the P/e should be negative if possible. Does not matter even if the P/e is positive. Tech or solar or other volatile or recreation sectors are preferable. These are the stocks that go down real fast and are the first to move down.

Monday, August 1, 2011

No active trading from now for sometime

No active trading for some time. I made no money in july. It was lossing money month. So better to go long on AAPL.

Finding 1-2 dollar stocks that move 100 percent is rare looks like on Yahoo. It only happens once in a while.

I am completely into AAPL and it moves up 10 percent to around 440, i will get back to where I was. nothing to worry. This the best stock out there. it moved 20 percent last month. Should have noticed it when it breaked the equilibrium at 340. Any way going long, not trading day. Reducing trading costs. Its not worth it.

I realize that day trading is too time consuming and not worth it. It is better to buy at old way. Just sit on good stocks. Buy them when there is a correction and sit on it. the 10-20 percent on makes is better than making money and losing money game in day trading. 

Bye bye day trading