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”

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 up move, 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.

Tuesday morning outlook

With the American markets closing in the green, Asia seeming upbeat, we should expect gains in our market. The theme is to look for a rally, since momentum in the Indian markets supports the world moves. A bullish head and shoulder pattern confirmed on Friday gives an upside target of 4500 – 4510. We should see the Nifty trying to touch this number, maybe today.

There is a direct relationship between capital employed and gains. The less risk you have, the stronger your chances of making money. if you trade 50 Nifty (1 contract) on an investment of Rs 2 lakhs, your chances of making money are almost certain (almost, because there is no certainty). Start your trades with 50, then see if you need to add a position, in that case add another 50. Stop right here. Your maximum exposure is not to exceed 100 (2 contracts).

Have Fun!