Saturday, August 18, 2012

The Market is a Friend

Quite often, we traders get frustrated at what the market is doing. We believe that somehow, the market has decided to destroy our trading career. Often, there is a lot of frustration at Market behavior, which leads to irritation and annoyance with ourselves as well as with trading.

But, truly speaking, the market is a friend. It gives us money, so it is a benevolent friend - on who showers benefits and gifts on us.

If the market is a friend, what is the reason for unusual market movements which often result in whipsaws?

The answer to this question is: What we perceive as unusual is in reality normal market behavior.  Markets are a collection of thousands of traders and investors, each with different views. Sometimes, the views re similar leading to trend. often, the views are different, leading to choppy markets. That is the nature of the market.

Then, we have to adapt ourselves to the market behavior. We can control our trading decisions, therefore we have the tools to adjust to what the market is doing.

Example:

I have been long in the Nifty. Yesterday (Friday, Aug 17), it appeared that the Nifty will finally make a strong up move. Then, the CAG report was presented in Parliament leading to a sharp sudden decline. I cannot blame the market for letting me down. It is for me to adjust to changing market conditions. After the initial reaction, the Nifty stabilized around 5375, when I reduced my positions and also shifted my deep in the money calls, to a little less deep.

My point is: we have to do what we believe is the correct response to changing market behavior. It is our responsibility.

10 comments:

Dinesh said...

Dear Sir,
I think trading is a full time job. The most important quality is to come out of the losses quickly by learning a lesson. The other most important quality is flexibility. People who normally have strong views and do not want to change it may not be the most suitable people for trading.
A strong bullish trend turned not-so-bullish on the same day and may become slightly-bearish on the next opening day.
Some people believe, trading should better be done in a programmed way. I mean not with much human intervention. So, program/feed your actions into the system and the system should take it forward. What about Algo Trading? Do you have a view here?
Regards,
Dinesh

Sameerbhai Limaye said...

Absolutely correct, "what we perceive as unusual is in reality normal market behaviour". We have to adjust our trades as per changing market dynamics.

Seeking your blessings,
Sameer Limaye

oracle said...

STOP BLOWING YOUR BUGLE

Raj said...

"After the initial reaction, the Nifty stabilized around 5375, when I reduced my positions and also shifted my deep in the money calls, to a little less deep."
Sir can you pls explain how this helps and also why insted of futures, deep in the money cals are prefered pls reply

Jitender Yadav said...

Respected Sir,

Shouldn't we rephrase the topic as "Market is a girlfriend" as the market are very attractive, its difficult to predict their mood and we'll be out of trouble if we lovingly follow them instead of forcing our opinion on them. The similarities are endless.

Your Fan
Jitender Yadav

Gaurav said...

Dear Sudarshan Sir,

I have been a fan of yours for nearly 10 years now. I have never seen you making tall claims and your humility is amazing.

Sir, I have a query. You have been advising buying ITC on dips. However I see a divergence on RSI. Does it signify that we should wait for an opportunity to short or should we respect the trend and trade against a breakdonwn. I am hesitant to short as it is in a very strong uptrend. What do u think?

Mohamed Musthafa said...

Hai Sir Good Morning,
I want need your strategy or other risk free earning oppotunity sir. Any strategy can make .5% -1% per day?(Risk free strategy). Because i have more lose in this trading.! so this time i need to earn risk free earning sir.. Please help me.. Thank you

Mohamed Musthafa said...

Hai Sir Good Morning,
I want need your strategy or other risk free earning oppotunity sir. Any strategy can make .5% -1% per day?(Risk free strategy). Because i have more lose in this trading.! so this time i need to earn risk free earning sir.. Please help me.. Thank you

Mohamed Musthafa said...

Hi Sir Good Morning,
Sir i want need your strategy or other risk free earning oppotunity sir.Any strategy can make 0.5%-1% per day?( risk free ).. ?Because i have more lose this trading market sir. so i want to need risk free earnings sir.. Please help me sir..

Thank you

Mohamed Musthafa said...

Hi Sir Good Morning,
Sir i want need your strategy or other risk free earning oppotunity sir.Any strategy can make 0.5%-1% per day?( risk free ).. ?Because i have more lose this trading market sir. so i want to need risk free earnings sir.. Please help me sir..

Thank you