Saturday, November 8, 2008

Art of Loosing money......

0020 hrs 10 Nov 08: China announced a $586 billion stimulus package Sunday in its biggest move to stop the global financial crisis from hitting the world's fourth-largest economy. News to cheer? or news to take it this way that China too has realised that they deep down in a well?

09 Nov 08: I must admit that I have not made money so far but -- can always lecture others how to make money - that's how they do it on the idiot box - don't they? It is simple - just go with a gun and rob a bank - isn't it easy? No you got me wrong - I meant to say how to make money in the stock markets. See there are some genuine problems - the value of the stock is related to what is the perceived price valuations in the markets. let us say there is a company with 100 shares and held with one person each - and out of them 98 do hold the shares and do not trade. The two persons trade the shares - one day one stock trades at 10 Rs a share - so the 98 think that the value of their share is 10 Rs, second day the stock trades at 100 Rs and the 98 think that they are suddenly rich. Let us say next day for some hypothetical reason the stocks trade at 2 Rs - have all 98 person now poor? I have taken an extreme but this remains a fact - all the stock of a company does not change hands - but psychologically we are rich one day and poor the other. The second point is for the two of them who are trading - one looses and other gains - it is as simple as that.

Now let us see where we stand in all this. One of the two above is a trader and the other is retail (take trader to be FIIs or people with deep pockets and retail to be me and you) See if They have to make money then we have to loose. If we keep on loosing - then we will not come back to the game - so they have to make us think that we can win. Frankly tell me how many have made small money once a while and lost big money most of the times and are now in the game because we think that we can do it or we now understand the markets well enough to make it big? Well if you are into it for some time - then it is likely that you are of this variety - the one who has on the net - lost money and not gained.

If the above is true then what is the relevance of all this to our present times? - Well the markets have to be taken to a high where we think that we are on the right side of the markets and then the ball will be set into the motion - alas the ball that goes in the opposite direction to where we are and we have to be made a "Sucker" (term borrowed from someone - Ha!). So that is one of the reason where I feel that we will go to 3500 or 3800 or 4200 - whatever that level - where we do not expect the markets to go and then we will be where we become complacent and fall into a trap. The run up from the lows (2250) level has been too fast - the drop is too fresh in our minds - if they were to drop the markets now then we the retail will be on the right side (sitting on shorts) and then they (big fish) will not make money. So we have to be - firstly, tricked to believe that we are on verge of making big money. Secondly, we have then to be made to believe that we should part with our savings (Ahh my pay arrears) and then only will they strike. So sink it in your head - you loose this time - you loose it all. So believe in only yourself, fight it out and win.

The World markets were cool at the last closing - except for Nikkei that was trying to catch up for the drop that it did not participate in earlier - all markets were up one way or the other. Nikkei was down 3.55%, Hang Seng up 3.29% and Strait Times up 2.43%. FTSE closed up 2.17%, Dax up 2.59% and CAC up 2.42%. The US markets opened flat and then traded in a fairly narrow range to end - Dow 2.85% up, Nasdaq up 2.41% and S&P up 2.89%. So far so good.

The story on the candles was not as bright - the candle last trading day too seems to be in a bearish engulf - so take the fact that the opening was at or near yesterday's closing and it could not cross the previous day's opening on closing basis. The Bollinger bands have constricted a bet further, 5 EMA line is below the 20 EMA line. The candles are in the so called centre of the bands and they do not remain there as a rule - so expect them to start trailing the upper edge or the lower edge soon. The volumes were lower than before. MACD red line is above the blue line and the divergence is the same as before - that is good. Mass Index is now firmly below the 26.5 point so the trend (down trend) I assume is about to be confirmed. RSI has raised its head again and is good and bullish. On the Slow Stochastic the red line is below the blue line and red line has gone below the 50 marker. Hey the TRIX is looking up and that is good. Jaggu too says that the markets are Bullish.

The Pivot data -
R3 3160
R2 3097
R1 3035
Pivot 2947
S1 2991
S2 2953
S3 2735

Projected High Range 2991 to 3066
Projected Low Range 2953 to 2878
Fib Projected High 3050
Fib Projected Low 2819



H S Cheema said...

A very realistic analysis. What has been said happens to most of the investers. My congratulations.

S S Cheema said...

Read it already pop? that's nice.

Uma said...

Man, it's terrible each time you talk about how you're stuck in a straddle or strangle that gets nowhere. I start feeling guilty and I feel obligated to help you out with more advice. And then I HATE it!
I have a statement to make - not a request, not an order, just a statement. Do whatever you want with the market, but keep me out of it. Don't address such comments to me, because I just want to focus on my own trading and not that of others.

Uma said...

that last comment refers to your comments on geniusjaggu's blog.

preet said...

Uma: sending a mail to you.