Trading is a business also a hobby.

A young reader has sent me this:
I am a student of  XXXXXX Pursuing MBA(Finance) to be completed in Feb-2010. I have a loan of 5,00,000 oustanding to be paid starting in the next 6 months and wanted to learn technical analysis. I am trading the stock markets for the last 4.5 years and am deeply interested in pursuing trading as a career.

I am thinking about joining XXXXXX for the course of XXXXXX at the cost of 75000 + 10.3% tax. with live market training at the cost of loss to be borne by the company. after which they assure of a job is the performance is satisfactory.

what should i do ?

My Notes:
With some regret, I can give advice which is likely to make the reader unhappy. But here goes: The most sensible course of action after completing your MBA is to get a job. Now, if you are lucky, you can get a job in a brokerage / trading firm where you will be closer to the market, but that is not important. At this stage in your career, you need to have a stable income so that you can repay your loan. The loan comes first.

You should NOT pay for any course to learn trading. There is no assurance on a stable career path once you have completed this course.

It seems that Technical  Analysis is your favorite activity, and, I can understand this. Same here. At some point in my life, I was lucky enough to have a career in my favorite activity. But, life is what it is. There are people who love golf yet work in different areas. They devote a considerable part of their time to golf although they do not earn their living from it. And…… cricket ??

Take one step at a time. Your first step is to have stability and take care of your dues. A career in trading will not give you stability.

Cycles of expansion and contraction

I have written many times in the blog on the repeating cycles of expansion and contraction. We have now seen a classic example. The Nifty was rangebound for many days, suggesting (to me!) that it was in a consolidation prior to a resumption of the original up trend. As it turned out, The eventual breakdown was to the downside.

How did we trade: My perceptions were not important. The pattern was a contraction and an expansion should be expected once the market decides on the next step. We were short on Wednesday around 5220 when the Nifty begain its downward drift. At that point, the Nifty support was assumed at 5200 with resistance at 5300, and this I had explained on wedenesday afternoon show on CNBC also. Our trading is mainly (100%) mechanical, therefore 2 short positions were taken.(two means two times normal were taken in anticipation of a breakdown from 5200 – this part, position sizing is our discretion). 25% of the position was closed at 5150 and balance 75% at 5100.  We were also short in the Bank Nifty from Tuesday and, that position was closed in one go on thursday 3 PM.

Why did we close our positions? The short trades are against the intermediate trend (which is UP, so far) therefore require exits on range expansion in our favor.

Lessons learnt. The Market has its own mind. What I perceive about the market is irrelevant. The basic theme is: contraction leads to expansion, direction of move is unknown.
What can the Nifty do now? On its downward move, there is support at every decline. We have touched the 5080 support, then we are looking at 5000 , then at 4940. A base, at least on intra day charts is required to justify buying.