Skip to main content



Trading Revolutions and story of 6 Blind men





Trading Revolutions

My great seniors first exposure to the Stock market was as early as (1987-95). For the last (25-33) years they were in the market either as a buy and hold investor or as a trader. Earlier, trading for a living in Indian market was only a dream. Exchange membership was confined to a group of brokers. They controlled and manipulated everything.

There was no transparency and proper price information. Investors always ended up buying at the days high and selling at the low of the day. There was no way to monitor intraday moves and change the orders during the day. Commission was as high as 2%,During market falls investors were not able to get out as the brokers did not accept the orders. Their first priority was to get out of their own positions.

Then the first Stock market revolution happened. National Stock Exchange started operation in 1994. Floor based trading gave way to transparent electronic trading. Investors and traders could get live price information. Transaction cost came down to reasonable level. Derivative segment started in 2000 and trading became accessible to laymen.

The next best thing happened in Indian Capital market was the debut of discount broking. In 2010 “Zerodha” India’s first discount brokerage started its operation from Bangalore. It was an instant hit and they redefined the Indian brokerage business. Many other brokerages followed suit and entered the arena. The ultimate beneficiary was the retail trader.Cost of trades came down significantly. One round trip in Nifty Futures was costing around 8 points earlier. Now it is some what less than 2 points. A buy and sell in Nifty Futures cost less than Rs 100/- now. It became feasible to play for small moves, day trade and scalp

I am a lot more optimistic now. I think the best is yet to come for the Indian Day Trader. there have been some changes in the SEBI RULES , may lead to need of more capital for traders .


Blind Men, Blind Elephants

Six blind men encounter an elephant. The first touches its leg and declares that an elephant is like a pillar. Another touches its side and says that an elephant is a rough wall. Next one feels its tail and says that an elephant is like a piece of rope. Each of them touches different part of the elephant and is convinced that their own explanation is correct and that the others are wrong. None of them realizes that they are all experiencing just one part of the same elephant and that none of their explanations are complete.

There was another blind man hearing all these arguments. He exclaimed aloud “I wonder what an elephant is really like” .The mahout heard this and took him to the elephant. He made the blind man explore the elephant and told him a lot about the animal. Even though there is no way to know exactly how an elephant looked like, he was able to get a good idea, far better than the other six.

Traders are like the blind men. Nobody knows the exact structure of the market and never will. They reach some conclusions with their limited experience and exposure and refuse to change it. Be like the seventh blind man if you want to survive in the market as a trader.

There is another version of the story. In a forest, there lived six elephants. These elephants were blind by birth. They heard a lot about men and were wondering what men were like. After arguing a lot, they decided to find one and determine it by direct experience.

One day a poor man stranded into the forest losing his way. The blind elephants caught him. The first elephant felt the man with its trunk and front leg. He declared “Men are flat”. One by one, the other elephants felt the man. They too agreed. Elephants left the place, happy with their new discovery, leaving the dead man aside.

You know this man and the elephants well.The man was a poor retail trader and the elephants were stocks, futures, options, commodities, currency and bond markets. Be careful. Don’t get lost in this jungle and get crushed by the blind elephants.


ENJOY TRADING | WATCH THIS TECHNICAL ANALYSIS STEPS BY STEP VIDEO BELOW



Labels:
Location: India

Comments

Post a Comment

Popular posts from this blog

Questions and Methods for Price Action Analysis

 Winners and Losers in the Market a. Who is dominating the current swing, bulls or bears? b. Are they correct? c. If they‟re wrong: i. Where is this move likely to stall? Where is the opposite order flow likely to enter the market? ii. Where will these traders have positioned their stops? d. If they‟re right: i. Where are these traders targeting? Where are they going to take profits or lighten their position? e. If they‟re in the right direction, but late: i. Where is the worst place to be entering late in this move? Where will the late traders be stopped out? Trapped Traders a. Where is the last group of trapped traders? b. Where are they hoping to get out? How will that affect price? c. Where will they give up and bail out? How will that affect price? Expectations - Most Likely Price Movement a. What do you expect the market to do from here? i. Why do you expect that? ii. How would price have to behave prior to that move occurring? iii. Is price behaving this way? b. If the most ...
Post a Comment
Read more

Understanding Gaps in the market and trading them !!

  Common Gaps Sometimes referred to as a trading gap or an area gap, the common gap is usually uneventful. In fact, they can be caused by a stock going ex-dividend when the trading volume is low. These gaps are common (get it?) and usually get filled fairly quickly. "Getting filled" means that the price action at a later time (few days to a few weeks) usually retraces at the least to the last day before the gap. This is also known as closing the gap. Here is a chart of two common gaps that have not been filled for while but now filled up . Notice that after the gap the prices have come down to at least the beginning of the gap? That is called closing or filling the gap. A common gap usually appears in a trading range or congestion area, and reinforces the apparent lack of interest in the stock at that time. Many times this is further exacerbated by low trading volume. Being aware of these types of gaps is good, but doubtful that they will produce a trading opportunities. Brea...
Post a Comment
Read more

THE 25 - POINT MANTRA DISCIPLINE FOR DAY TRADING

The Wheel of Success in Trading  There are three spokes that make up, what I call the Wheel of Success as it relates to trading.   The first spoke is content Content consists of all the external and internal market information that traders utilize to make their trading decisions. All traders must purchase value-added content that provides utility in making their trading decisions. The most important content being internal market information , which is simply time and price information as disseminated by the exchanges. As we are making our trading decisions in present time based on time and price, In order to "scalp" the markets effectively, we must have the most live up-to-date information . The second spoke is mechanics Mechanics is how you access the markets and the methodology that you employ to enter/exit your trades. You must master mechanics before you can enjoy any success as a trader. A simple keystroke error can result in a loss of thousands . A trader can ruin his e...
Post a Comment
Read more