Teach A Man To Fish And.........

[Saint]

Hi all,

I'm trying to take printout of this whole post; it comes without the chart attachements. How to take printout with the charts included?

Praveen.

Hi Praveen,

I can't help you there.........try asking our tech savvy friends of this forum like Karthik,or Murthy,or Pankaj(pkjha),or Satya(srisara).They could give you an answer on that one.

I am not too good with any tech aspects,..............even a simple thing like uploading these charts on to this forum,never knew it possible till Amit helped out on that one!!

So,do ask for their help........all the best!

Saint

 

[GKHERA99]

Gitanjali Gems Advice Whether Buy

 

[Saint]

Gitanjali Gems Advice Whether Buy

Not Yet .

 

[aca_trader]

Not been well last few days................let's get back to business later today.

Saint

Hi Saint,

Hope you are fine now. Guessed that you were busy with other stuffs of life. The guess was wrong.

Take Care!

--Ashish

 

[bvpraveen]

.....

Meanwhile, Praveen, you can tell us how to take a copy of the entire post. That will still make my job easier.

Thanks,

Pranay

Hi Pranay,

1. On the beginning of each thread you can see "Thread Tools".
2. Navigate as : Thread Tools -> Show Printable Version
3. That will show the cool printable version without any ads,etc...
4. You can even have a longer view by selecting "Show 40 posts from this thread on one page".

Note: It doesn't include the charts(attachments) while taking printout.

Hope this helps,
Praveen.

 

[pranayd]

Hope this helps,
Praveen.

It definitely does....

Thanks and ton Praveen,

Cheers!

Pranay

 

[Saint]

Right,so we more or less know the importance of stops,we realise that having predetermined stops is an absolute must.........just as in any battle,not only do we have our Entry strategies in place,we also have our Exit points in order.And all of this .....PREDETERMINED,and written down before the trade.

For those who see no reason for having any stops,good luck to you,my friend,.........for yours is the path of extreme pain and total ruin.Please do not go down that path.If you already have been on that path to ruin once before,please do not repeat it.If never been there,learn from the mistakes of others.

Some wise person once said(was it Einstein-tend to remember quotes and forget who said what??!!)......"A fool never learns from his mistakes,a smart person always learns from his mistakes,but a wise person learns from the mistakes of others."


Get your trading strategies in placeand above all ........stop and money management techniques.Money management is so important,even more than entry and exit strategies........it is money management that separates the men from the boys,it is money management that is the Holy Grail in Trading.You have poor strategies but good money management skills.......you WILL survive,you may not become a great trader,but you will still be around in a few years.On the other hand,if you are great at entries,and exits,but know zilch about money management............you WILL come to your Doom sooner or later!!

Not trying to go all lunatic all over again............but knowing money management is so very important,so so important.So,let us get down to a bit of Money Management in the next few posts.....

This part you MUST absorb,no two ways about it........those that have read Elder would feel like taking a yawn on the next few posts.Do yawn,no harm though in reading again........but to those who have never heard of this strange 2 words called "Money Management",the next few posts are for you...................and like I said before,there are no two ways about it.

MONEY MANAGEMENT IS VITAL TO TRADING SURVIVAL,TRADING SUCCESS,AND TRADING PROFITS.......know them and open the treasures available.Know them not ,and that will be at your peril and doom.

All the best!
Saint

 

[Saint]

Before moving on about Money Management,here's another post about stop losses from our very wise Jaideep.........posted in Some Good Steals nearly a year ago.

Originally posted by Jaideep
Plenty has been said on this topic Usha, all very wise ones at that. Try & go through the earlier posts. They will educate you no end on your exit strategy etc. Meanwhile, I'll give you something to read on the topic & put you in the know of things. After all, I'm no expert TA myself....

A Stop-loss Order is an order placed with your broker to buy or sell once the stock reaches a certain price. A stop-loss is designed to limit an investor's loss on a security position. Setting a stop-loss order for 10% below the price at which you bought the stock will limit your loss to 10%. For example, let's say you just purchased SAIL at Rs.50 per share. Right after buying the stock you enter a stop-loss order for $45. This means that if the stock falls below
Rs.45,your shares will then be sold at the prevailing market price.

Positives and Negatives

The advantage of a stop order is you don't have to monitor on a daily basis how a stock is performing. This is especially when some other commitments prevents you from monitoring your stocks for any period of time.

The disadvantage is that the stop price could be activated by a short-term fluctuation in a stock's price. The key is picking a stop-loss percentage that allows a stock to fluctuate day to day while preventing as much downside risk as possible. Setting a 5% stop loss on a stock that has a history of fluctuating 10% or more in a week is not the best strategy: you'll most likely just lose money on the brokerage you'll pay for execution of your orders.

There are no hard and fast rules for the level at which stops should be placed. This totally depends on your individual investing style: an active trader might use 5% while a long-term investor might choose 15% or more.
Another thing to keep in mind is that once your stop price is reached, your stop order becomes a market order and the price at which you sell may be much different from the stop price. This is especially true in a fast-moving market where stock prices can change rapidly.

Not Just for Preventing Losses

Stop-loss orders are traditionally thought of as a way to prevent losses, thus the name. Another use of this tool, though, is to lock in profits, in which case it is sometimes referred to as a "trailing stop". Here, the stop-loss order is set at a percentage level below not the price at which you bought it but the current market price. The price of the stop loss adjusts as the stock price fluctuates. Remember, if a stock goes up, what you have is an unrealized gain, which means you don't have the cash in hand until you sell. Using a trailing stop allows you to let profits run while at the same time guaranteeing at least some realized capital gain.

Continuing with our SAIL example from above, say you set a trailing stop order for 10% below the current price, and the stock skyrockets to Rs.80 within a month. Your trailing-stop order would then lock in at Rs.72 per share (Rs.80 - (10% x Rs.80) = Rs.72). This is the worst price you would receive, so even if the stock takes an unexpected dip, you won't be in the red.


Advantages of the Stop-Loss Order

First of all, the beauty of the stop-loss order is that it costs nothing to implement. Your regular brokerage is charged only once the stop-loss price has been reached and the stock must be sold. It's like a free insurance policy!

Secondly, but most importantly, a stop loss allows decision making to be free from any emotional influences. People tend to fall in love with stocks, believing that if they give a stock another chance, it will come around. This causes procrastination and delay, giving the stock yet another chance and then yet another. In the meantime, the losses mount....

No matter what type of investor you are, you should know why you own a stock. A value investor's criteria will be different from that of a growth investor, which will be different still from an active trader. Any one strategy may work, but only if you stick to the strategy. This also means that if you are a hardcore buy-and-hold investor, your stop-loss orders are next to useless.

The point here is to be confident in your strategy and carry through with your plan. Stop-loss orders can help you stay on track without clouding your judgment with emotion.

Finally, it's important to realize that stop-loss orders do not guarantee you'll make money in the stock market; you still have to make intelligent investment decisions. If you don't, you'll lose just as much money as you would without a stop loss, only at a much slower rate.

Conclusion

A stop-loss order is such a simple little tool, yet so many investors fail to use it. Whether to prevent excessive losses or to lock in profits, nearly all investing styles can benefit from this trade. Think of a stop loss as an insurance policy: you hope you never have to use it, but it's good to know you have the protection should you need it.

HAPPY TRADING & LOADS OF PATIENCE, you'll need all this to laugh all the way to the Bank (as Saint said). Best of Luck.

All the best!
Saint

 

[Saint]

MONEY MANAGEMENT :

Basically,we use money management rules to restrict how much the market can take away from us.Certain rules that we follow with discipline.Rules that are written and implemented trade after trade,again and again.Rules that help us to stay with the trend and to let profits run as long as possible.Rules that trigger off small losses as compared to the big profits.

Like a warrior,this is the Code that a trader swears by,and adheres to,come what may.

If his stop is triggerred,he is out,he does not sit there reasoning that the economy is growing 15%,and the fundamentals of this company is great,and that it is expecting good earnings............If the stop is hit,that's it.He/She's out of that trade.All thought therefore goes into the trade BEFORE the trade.No more thoughts after the trade has been set in motion.

The mind is set into "NOW" mode,no more planning ,no more thinking.When the stop is hit,the trader is out,...........and that's that!

But,there is more to money management other than stops........stops is an aspect of it.But there is more.....

But before getting into it,just noticed that there always is this great amount of blabber about the number of wins a trader has had,etc etc...............So before getting into things,felt that we all should realise one thing.We are in this business to make profits,we are NOT in this business to win.......you can have a Batting Avg of 95% and lose out when you look at profits and losses.You can have a Batting Avg of 30% and come out with stupendous profits by the end of the month.

How is that possible?Well,presume you make an average of Rs200 per trade for 19 trades,and lose Rs5000 in the 20th trade,well,you are sitting pretty with a 95%batting avg and a loss at the end of the month.

Presuming that you have made losses in 14 trades,an average of Rs 400 per trade,and we made Rs10,000 in the other 6 trades,well,we are sitting with a profit at the end of the month although we have been wrong 70% of the time.

So,it's not about about the number of wins that one makes,it's all about making profits............and that verily is the heart and core of money management!

All the best!
Saint

 

[Saint]

MONEY MANAGEMENT

We look at a trade,yummy,yummy trade..........a beautiful clean sideways pattern just itching to breakout.Our plan is to buy the breakout and ride the trend ,trail stopping upwards at every pivot low.Cool.So far so good.We now need to ascertain how many shares we plan to buy.For example,the stop is Rs20 away from our entry point.Right,do we buy 10 shares(which means we lose Rs 200 if stopped),or do we buy a 100 shares(which means we lose Rs 2000 if stopped),or a 1000 shares(which means we lose Rs 20000 if stopped)?

The amount of money lost if stopped is the risk on this trade.Don't let it get past 2% of your equity.Which means,first calculation is:How much Capital do I have in my trading Account?(trad acct only,not the worth of your house and car and jewellery all put together).

Let us say that I have 10 lakhs in my trading account,that means the maximum risk that I can take on any single trade is :2% of 10 lakhs=20,000.

Which is to say that if I enter into a trade,and the trade goes against me,I will lose Rs20000.

So whether you paid 2.5 lakhs for that stock or not,you are not risking 2.5 lakhs,but Rs20000,as that is where your stop is.

Now must it definitely be 2% of the capital...........not necessarily.Can be anywhere between 0.5-2%,but no more than that.I personally use 0.75% of my capital as a stop loss,but that is something you have to tweak to your comfort levels.But,to stress again,no more than 2%!

So,therefore,first I look at my trading capital at the end of the month.I then assess how much my risk would be the next month.For example,let us say I have 10 lakhs at the end of July.Let us say I take 1% loss in each trade.Therefore for the month of August,I would be risking Rs10,000 per trade(to reiterate,that means the amount lost if stopped out).

Now I have my ups and downs in August,and landed up in August with an equity of 10.5 lakhs,now my risk in the month of September would be 1% of 10.5lakhs=10,500 per trade.

So too,if my equity had dropped that month to 9.5lakhs,then my risk of 1% for the following month would be 9,500 per trade..............so on so forth!!

Right,I now know my trading capital,the amount of percentage risk that I am willing to take,and the amount of money risked for the following month at the end of each month.........now how do I calculate share size:

Share Size=(% risk xtrading capital) divided by (entry-predetermined stoploss)

So,therefore,we look at our charts,we get our entry point let us say 200,and our stop loss is at 175.Now presuming our capital is 10lakhs,and our percentage risk per trade is 1%.


Therefore,Share Size=(1% of 10lakhs)divided by (200-175)
=10,000 divided by 25
=400


Therefore in the above example we would buy 400 shares with an entry at 200 with a predetermined stop loss at 175 .The max.we should lose in this trade if stopped would be Rs10,000/=

The 2% rule for assessing position sizing is vital,but there is more to be done.We'll go through the rest...........maybe tomorrow!!

All the best!
Saint