Fear of losing profits

No matter how much analysis you do, the probability of any trade failing or succeeding (over a 1000+ trades) is on an average 50%.

Position sizing will take care of the risk.

Once you understand this, it does not matter what system you follow or how much analysis you do.

Question on Risk management/ Money management

I understand from your blog that risk per trade should be limited to 1% of capital. So if I have Rs.500000 to invest, my risk per trade would be Rs.5000. Suppose the Last close of a stock is Rs 100 and SL is at 90 (10%), the no. of shares I should limit to is 5000 / (100-90) which is 500 valued at Rs. 50000.

What is your advice regarding limiting investment per stock to certain %age of total of capital, say 2%, 3%....so on,  or should it be decided by number of max positions one should keep. Suppose, I am not comfortable with more than 20 open positions at a time. This will limit my investment to 500000/20 i.e. Rs.25000 investment per stock. What are your views on limit of investment per stock, if one is keeping aside Rs. 5 lac capital for shares. And what will be investment limit per stock if the capital is Rs. 10 Lac.

B.P.Singh

Weekend update

Trend is up with support at 8000 and then 7540.

Option writing points to support at 8000 and resistance at 8300. Overall bias is bullish.

CNX IT technicals

Trend is up with support at 10600.

On weekly charts, trend is again up ( 3 year charts) and we have minor support at 9500 and swing low support at 8500.

BANK NIFTY technicals

BNF is bullish with support at 15600... last few candlesticks indicate sustained buying at lower levels.

Market outlook

Trend is up with support at 8000-7840 spot.

Though markets opened gap down, selloff was limited and advance decline was actually positive. This is a bullish sign.

Market outlook

Trend is up and will reverse on close below 7540.

Strong support exists at 8000.

Market outlook

Trend is up with support at 8000-7840. Deep swing low is 7540 spot.

Option writing points to increasing support at 8000 levels.

Decreasing VIX is a cause of concern as complacency has usually led to trend reversals.

MCX CRUDEOIL charts

Trend is clearly down and with reversal possible on close above 6000. Immediate SL is 5850.

On weekly charts, expect strong support at 5500. But if this breaks and crude is unable to recover, expect next support 20% down at 4500.

MCX GOLD

Trend is down and the correction/ fall may increase once 27000 breaks. Next support is at 26000.

A token pullback may happen just as GOLD is getting oversold but you can ignore this.

If short, your SL is 29000.

Crude oil BRENT charts

On EOD charts, trend is clearly down and will reverse on close above 105.

On weekly charts, BRENT is trading in a range for past 2 years and has good support at 97.50. Break of this can see a further fall to 90 levels.

Bollinger band and reversals

Several times, I read in forums or receive emails saying so and so stock has hit upper Bollinger band so can I short. Or stock has hit lower Bollinger band so can I buy.

Just remember one simple rule - buy strength and sell weakness. For trend reversals, look at break of areas of support or resistance.

For eg. look at this chart of JP ASSOCIATES.

Weekend market update

Broader trend is up with support at 7540 spot. Intermediate support exists at 7840.

Option writing clues are bullish and point to support at 8000.

Market outlook

Markets form first day ow "lower high lower low" correction. After 2 weeks of a rally, a pause is perfectly fine. This pause can be for 3-4 days and it is normal.

OPtion writers are bullish that 8000 will not break this series.

Quote of the day

Whatever you are today is because of the choices you have made in the past.

What you will be tomorrow will be determined by the choices you make today.

Human weaknesses

1) Loss Aversion: the strong tendency for people to prefer avoiding losses over acquiring gains

2) Sunk Cost Effect: The tendency to treat money that already has been committed or spent as more valuable than money that may be spent in the future

3) Disposition Effect: the tendency for people to lock in gains and ride losses

4) Outcome Bias: The tendency to judge a decision by its outcome rather then by the quality of the decision at the time it was made

5) Recency Bias: the tendency to weigh recent data or experience more than earlier data or experience

6) Anchoring: the tendency to rely too heavily, or anchor, on readily available information

7) Bandwagon Effect: the tendency to believe things because many other people believe them

All traders have in one or another time been affected by one or several of these biases. Its easy to make mistakes when you are under pressure and dealing with money.

As Jesse Livermore once said, above all other things we have to guard against ourselves.

Market outlook

Trend is up with support at 7540... On hourly charts, support/ swing reversal level is at 7850 spot.

Option writing points to support at 8000 levels. Writers are bullish and do not expect this level to break this month.

Market outlook

Trend is up and will reverse on close below 7540. Immediate support exists at 7840.

Option writing points to support at 8000.

NIFTY diametric chart

I have posted this before but am unable to find the link. This is not my research but this chart has appeared in firecharts in JUN 2013.

The view here is of a rally to 11000 nifty is expected (F wave) followed by a crash to 4400 levels... this will be followed by the start of super massive bull run.

Do not be obsessed with the levels or the accuracy.... just focus on the pattern.

So generally there seems to be a consensus that this rally will continue for some time, we will have a big correction and then start of a new bull run. The levels/ timing differs but that is ok.

Market outlook

NIFTY and B Nifty close at new record highs.

NIFTY closes first time above 8000 and BNIFTY above 16000. So far trend is still up.