The bull roars like a lion.

Our markets are roaring like a lion. A significant resistance level around 4760 is now coming up for inspection. It is reasonable to assume that a breakout from this resistance will signal confirmation of the large bullish head and shoulder pattern visible on the weekly nifty chart (or, cup and handle, if you view it that way).

With such strong upside momentum, short selling is not a good idea. Traders should also understand that markets are extended. Sudden sharp declines can take place anytime. I do not know if selling such declines will work. but protecting your long positions is neccessary.

Tuesday, today, may well see the Nifty make a short term top.

Cheers!

Trading for a living

There is a lot of interesting feedback on my ideas on ‘the perfect trader’.
@nubhut! says:
“if i were to set aside three lac and trade four lots of nifty(about 60% capital deployed and rest to cater for drawdowns/M to M adjustment) as per a mechanical trading system(e.g trade vinayak), am i not likely to get about 1200 nifty pts in a year (which ur system is likely to get as per the results so far). after paying subscription of 90 thousand for the year, i still get about 1.5 lac . now that is 50% return ”

My Notes: your arithmetic is correct and practical. This will work only if you allocate a part of your funds to this method. Which means Rs 3 lakhs is spare money. Overleverage will cause psychological setbacks during periods of drawdowns. Since the returns come with risk, you must remain conservative in capital allocation. In my post, I was being conservative with returns.

Ankush said: “There is nothing like spare money in this world. You cannot spare the money and feel that did not exist. ”

My Notes: Fair enough. I meant money which can be used for risk taking activities. This means you do not need this money for your day to day expenses. If you are running a business, then the working capital is NOT spare money. If you have an Fixed Deposit and the interest is reinvested (you do not need it) that may well be spare money.

student of the market said “while I agree with the note of caution in the initial years, how can one trade with spare money if one is trading for a living? Or do you not recommend trading as a living? ”

My Notes: Of course, I recommend trading for a living. When you become a full time trader, you have asset allocation. Part of your funds are in trading. Assuming that the bulk of your funds are in trading, then you have become wise and experienced and understand the risks of over trading / leverage. [I am worried when I write this, because all readers will think they are wise and experienced!].