Tuesday, June 30, 2009

Proof that Markets do what they want

TOOCOOL7610 asks "how to book profits in carry forward position and how to trail stop losses if trades move in my favour"
I have two posts that discuss exits:
Buying on Dips - How to Exit
tighten-your-stops
If you need clarifications, please drop a comment.

I keep on saying "Markets will do what they want". Today's market action is proof of my hypothesis. Everything was ready for an upmove, which did not come. A gap up was the end of the bullishness. After that prices went downhill. Today was also a classic example of why mechanical systems are often superior to discretion and judgement.
In my office, all our systems went short at decent levels, around 4380. Now, the systems work only on price behavior. They are not influenced by perceptions. On the other hand, I was upbeat and kept on trying to time the market (searching for a bottom) - with rather dismal results. All discipline was abandoned as I decided again and again that the brief correction will end. Fortunately, my own volume is a very small percentage of the volume allotted to systems, so the only damage done was to my ego. But the experience of trying to trade without a basis, was unnerving.

11 comments:

NITIN DAMLE said...

Sir,
What experience u have discribed is experienced by us many times system tells something & we thought to act otherwise at different direction. Please guide how to come out of it & trade mechanically rather emotionlly.
Nitin Damle

pratik said...

hi sir,

1. IN TODAY BLOG YOU MENTION THAT MECHANICAL SYSTEMS ARE SUPERIOR TO DISCRETIONARY WAY.
BUT I BELIEVE YOU SAY THIS BECAUSE AS YOU MENTION , YOU TRIED TO CATCH THE BOTTOM BUT FAILED, SO TODAY YOUR HURT TO EGO PROMPTED YOU TO SAY THIS(EVEN THOUGH YOU BELIVE WHAT YOU SAID ABOUT MECHANICAL SYSTEM)

2. IN MARKETS EVERYTHING WORKS (GAMBLING, ASTROLOGY, LUCK, MECHANICAL TRADING, DISCRETONARY, ETC..)BUT WHAT WORKS FOR YOU THAT MATTERS THE MOST.

3. I AM BIASED BECAUSE I AM A DISCRETIONARY TRADER. AS FAR AS MARKET IS CONCERN, IN 15MINS CHART THERE WAS A H&S TOP WAS FORMED WHICH WAS IN THE PROCESS OVER LAST 3 DAYS.AND TODAY GAP UP BEING A RIGHT SHOULDER AND WITH REASONABLE TARGET.

I APPLIED MY JUDGEMENT ON THE BASIS OF TA KNOWLEGE.

suseem said...

hello sudarshan ji,
i know that u r a disciplined player,but i am sure this is how most say goodbye(they feel it is a good-buy but at the end of the session have to say GOD-BUY!!!)to the mkt.and yes we just have to do wat the mkt does....the mkt has its own way of dealing with peoplewho follow and disobey the rulz.

i think trading is best done without any emotions,unnecessary use of intelligence and position sizing....mighty difficult things to do these.
sudarshanji this is a great platform to be sharing views with a pro like you,pl keep up the good work
regards

CHANDU said...

Well said sudarshan ji.Today i did the same thing about finding bottom at every level.Un fortnately i dont have any trading system,so i suffered with losses at the end of the day.Of courese Ego also(laughing).I know i need to be deciplined and following some basic rules.

I have a question for u.I have 1 lakh and i want to trade in mini nifty.(iam trading only 1 lot from last 6 months).can u tell me about money mangement and how to be deciplined by following some rules.I think if u respond to this question,many people will learn from your post.

Regards

solo said...

How can i get certifications? you said work 3-4 years as a tech. analyst, but how to first become a tech analyst and where? Will you please explain a bit longer?

Thanks.

Student Of Market said...

Sir,

I made the same type of mistake that you mentioned here.

For me this is a common mistake that always wipes off my gains from previous tradesn- this time is not exception.

For interested readers, I wrote about this in my blog
nifty day trading-deadly temptations revisited.

Regards,
StudentOfMarket

wildeazoscar said...

just one question sir----

what was ready for an upmove??

1.NIFTY is completing an H&S in daily chart after a rally, and that too volume confirmed.....

2.The MA of Volume weighted Put-Call Ratio as a percent of OI is at its 52 week low....

3.TRIN has hit its 52 week high

4.Force Index of NIFTY is diverging like anything

AND THE TORCHLIGHT--- MACD Histogram has hit its 4 month low---indicating LOW LOWER prices ahead


on second thoughts.... are we really looking at the same charts, or is this blog meant to be used as an institutio's tool--- you help people 90% of the time, and the 10% time the rug is pulled down from under there feet is either the market bottom or market top....(sorry for being that rude, but i really feel bad when i see my idol rant without reason)

jskservices said...

Sir I was at the Inv Camp on Saturday. There you did mention that Inv H&S was confirmed. Actually the text books say that the confirmation comes when the prices move abt 1-3% from the neckline. In our "emotional" mkt 3% would be a good assumption for confirmation. Of course your note now is another great learning.

Shubh said...

Your words are priceless.. "Markets will do what they want".. liek a fool i held on to my over leveraged long positions.. even though got your calls of going short.. kept hoping it wld trigger the stops... Hw do i go abt doing allocation.. But thanks none the less.. u truly are gifted (touchwood).. SC

Pi said...

so even the great one had a bad day:P
happens all the time.. don't lose hope ;)

really.whole of last yr i lost money. despite my post last week dt last yr was very easy to make money. yes dts cause i didnt learn didnt see wt was obvious and kept on making the same mistake - fighting the market. Finally i ran out of money. Good dt i did. If i had more would have lost dt too.

But now its been different. Started again with a capital of 70k. Have made 50k on dt already in last one month. Whoops - June has been one awesome month. And days like Tuesday even more so. Down down down down. move up to 20ema, then again go down. whole of last year same thing happened. trend days up and trend days down. easy money. just expect dt mkt will keep moving in the same direction and hold on. wt fun rides !!

Or Friday's breakout and the rally which lasted through the day. Picture perfect head and shoulders breakout. First there was breakout above short term trendline resistance with large up candle with good volumes. Rest of day market trended up. Took out resistance levels, closed the day at confluence of 2-3 resistance levels.

Monday we see a early morning dip which took a few longs with not so deep losses, mkt went and took support exactly off 4350 the neckline and then rallied off frm thr. Came to 50% fib of the correction from 4700. So a correction to a correction it was.

The moves were so technically perfect. Today we were all set to go up. Early morning only one got the feeling maybe things wont turn out the way we expected to. This whole upmove from 4150 was just the markets way to pull in more suckers who would have gone long.. and now its gonna go back below dt level.. haha.. divergences on rsi, macd on daily.. macd on sell on daily, weekly stochastics sell, inverse head and shoulders breakout pattern with lower volumes than on left shoulders. had the gut feeling dt this was a false move.. but still u stick wid trend and stayed long.

coming back to today, long in morning, then short at 4385, covered at 4350, short back again when mkt below 4350 and came back to test and found selling at 4350. so now i am holding on. not as good as gettin in at 4420 and holding but good enough we are going bak below 4150. today could have been better, but going home with a small gain is better than with no gains and hopefully tomorrow and day after will be much better.

men said...

Mr. Sudarshan,
Long back you gave reasons to vote for, now I wanna give you some feed back of Bangalore, near Leela Palace, where you must have stayed if you came for the investors camp THERE ARE POWER CUTS UP TO 5-9 HOURS/DAY, and we call our selves the IT CAPITAL OF INDIA. Well who so ever comes into power is like the new wine in the same old bottle. I would request all of you to come here and experience this for yourselves. So does our vote really matter...........?
Sorry for deviating from the main point.