Sunday Afternoon Musings.

nagu asks “can any body explain why thare is huge discount on nifty futeres ?”
My Notes: This is mainly due to dividends. Some Index heavyweights will go ex-dividend this month. The lower price of futures reflects the ex-dividend price of the cash index.

Men says “Some stocks like ITC & maybe lupin continue to make new all time highs while the nifty flirts with the 200 dma so what is to be done to those stocks any guidance?”
My Notes: Well, you may not like what I say, but what goes up comes down. ITC and Lupin are both making life time highs – this is a sign of strength. Yet, ITC will remain strong even if there is a dip to 220 area where support will come in. If you own it, then you probably want to hold it, but if you want to buy, wait for a deep correction.

Anuj says “these-days I have been quite frustrated by unexpected news and inability of technical analysis to give advance warning about price direction…… Now with a heavy heart I have decided to reduce my dependence on technicals and concentrate on money management or what you have mentioned here as trade management”
My Notes: Why with a heavy heart? Traders should always focus more on trade management. Technical analysis does not forecast the future. It explains the probability of future price action. Unforseen events will always come in, that is why TA gives probabilities, and, not certainties.”

Only two groups of people give certainty in forecasting. The first is God, and, the second is the fund managers – investment bankers – fundamental analysts who always seem to know the future.

Mind without Fear says “am finding that it is very difficult to trade with one lot only. The specific difficulty is not knowing whether to book profits at 15-20 points gain or whether to let the profit run. Two lots solve this problem — one can book one lot at 15 points or so and then let the second one run longer …. please comment ….”
My Notes: Absolutely correct. two units make it easier to trade a longer trend. Although, if the trade gets stopped out, the pain is also twice as great. But then, losses are the cost of doing business!

Pranav says “Many experts feel that you should keep a journal of your trading history, you should update it daily. Sir, do you have one such journal, and if yes, could I request you to share what are the points you included in your journal.”
My Notes: A Journal is required for all traders. But do not think of the Journal as a form of literature. It is a recap of whatever trading you do. I trade mechancial systems and track the system performance versus the actual performance, every day, every trade. This becomes important since we sometimes override our system orders. I want my journal to answer this question: Are we correctly judging the changing nature of the market? So, the Journal will take the shape of the trader’s priorities. But, it should be there.

Gourav says “Thanks a lot for answering my query regarding money management for mini nifty.however the SL you advised is on your assumption of day trader.Could you please take few minutes of yours to say how much the SL could be for EOD trade.”
My Notes: I did not actually give you a stop loss. I just used a number to explain how you should work out your plans. Please understand, stop losses are method + trader dependent. It is like asking me to drive for you while you sit on the drivers seat. Not a good idea!