Sensex

Saturday, January 02, 2010

Re: [sharetrading] Market Outlook - From some other source - Very Interesting!

 

Ms Rao
 
In line with the logic of 'patience' I would suggest a relook at the idea of  'StopLoss'
If with patience, the entry point/range for the trade has been correctly identified, the following is true.
 
The risk / reward ratio is most attractive (at least 1:3).
The POSTION SIZE is such that the profit amount at the target price is attractive and the possible loss of capital if the trade went wrong would qualify as a business risk and not as a crippling loss.
And most important, the conviction -
- the chances of the SL being hit are remote.
-If the SL is hit but then prices swing back into the safe range, the conviction to re-enter the trade is strong
 
In other words,
 
To enter an 'iffy' trade just because you can afford to take the loss is a loser's game of slow bleed to death.
Using a circular logic, to ensure that the loss remains affordable, such trades are entered with a much tighter SL than the charts would permit. (a typical scenario is where the position trader leaves the EOD chart and looks for S/R on the intraday chart to set the SL). In my experience this is a not much better than a risky gamble. 
 
When a tight SL is hit and the trade runs away against you, there is a gratifying feeling about the amount of money saved
by the tight SL.
Dont let that fool you.
The one undeniable fact is, you entered a losing trade.
Either your timing was bad or the entry price was bad or your analysis was bad.
 
As a trader the one thing you dont want is to lose money on a trade.
 
A SL is the last resort.
 
You dont want your SL to be hit no matter how affordable the loss.
Of course even the best laid plans of men and mice, SL are routinely hit but it is the attitude and the approach that makes the difference.
Most of us would agree that, the lesser your SL is hit the more money you will make.
So take positions and set SL accordingly.
 
regards
 
N Samir
 
 
 
On 02-01-2010 16:46, Shaila Rao wrote:
 

MARKET OUTLOOK

 

Dear Investor,

The Patience

One of the best aspects of having WII-tennis is convert your living room to tennis court and play the game with any body. It can virtually make even a old grandfather/ grand mother to a successful tennis player who can beat an opponent of teen age, with waist size almost double of the kid & dispatches his volleys with merciless strength often running opponents into the ground.

The key to success in the game is not they are professional players. Rather its, PATIENCE. Patience to learn how to play the game. WII-tennis game relies on touch rather than force. Once the player realise that Tennis is a game of angles and move your adversary to one side of the court and hit your volley to the other and will not matter if the ball is travelling at the speed of sound or fluttering like a butterfly. As long as the angle is steep enough one do not need to overpower the opponent in order to win the point.

The essence of winning play in tennis is to position yourself for the proper shot. That may mean making as many as 20 volleys before you can establish a genuine advantage on the court. Fortunately the speed lost with age has been somewhat offset by gaining some patience. Unlike a teen-age player who likes to whack every shot that comes his way, one needs to stoically volley back and forth until the opponent is out of position.

Trading like tennis is a simple game.  Get the positioning right and all other mistakes will fall by the wayside. EXECUTION is the MOST important aspect of the process. If you are on the right side of the trend it doesn't matter if you paid up 10 or even 20 points more for your entry and conversely if you are wrong, no matter how great your entry you will still lose.

Getting into the right position when you trade is mostly a function of patience - of waiting for fundamentals and technicals to align themselves   properly to provide you with the highest probability of success.

If one looks back and ask themselves what was wrong in all their earlier wrong trades, the nearest answer usually would b…

1). Wrong on interpretation of the data
2). Some unexpected news event suddenly moved market against the perceived sentiment
3). Rushed on the  trade  because  we needed "to come  up with something".

While the first two reasons are simply the normal market risks we assume every time we put on a trade, the third reason is where we have plenty of room for improvement, by learning to be more patient and selective.  As the past year progressed I believe we've become a bit better at doing that, but we still have a long way to go.

Hopefully, as 2010 begins and we all get a year older and maybe a step slower, we will learn to appreciate the value of patience making our trading more precise and profitable.



The INTERNET now has a personality. YOURS! See your Yahoo! Homepage.

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Please use your discretion before acting on the ideas expressed in the group.
Happy Trading,
United we grow!!!
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