Dhanvarsha

THINK MKG,
Quickly we remember Mohandas Karamchand Gandhi ...

October 2, 1869

No man is rich enough to buy back his past. We are made wise not by the recollection of our past, but by the responsibility for our future. We have come to believe that all of past failure and frustration were actually laying the foundation for the understandings that have created the new level of thinking one could enjoy.

THINK MKG - Market Key Goals

Welcome to Think, Care, Act, where we can find rationales and resources to infuse required learnings attributes of market habits, character, global, and concepts throughout the trading.

Agenda / Topics as below ;

12 thoughts to learn from mistakes. Common pitfalls to be avoided
Know the Risks in F&O Trading
MKG mid-week bird's view index reality checks
MKG Actions
MKG events on the run.

To act in a world whose problems seem overwhelming requires being able to use the powers of critical and creative thinking and compassionate and inclusive governance. Employing these techniques can work effectively and conscientiously to solve problems big and small, global and local.

12 thoughts to learn from mistakes. Common pitfalls to be avoided ...

Not being disciplined and failing to cut losses at 8% below the purchase price A strategy of selling while losses are small is a lot like buying an insurance policy. You may feel foolish selling a stock for a loss -- and downright embarrassed if it recovers. But you're protecting yourself from devastating losses. Once you've sold, your capital is safe.The 7%-8% sell rule is a maximum, not an average. Time your buys right, and if the market goes against you the average loss might be limited to only 3% or 4%. Again its to be kept in mind, do not to sell a winning stock just because it pulls back a little bit.
Do not purchase low-priced, low quality stocks.
One should follow a system or set of rules.
Do not let emotions or ego get in the way of a sound investing strategy You may feel foolish buying a stock at 60, selling at 55, only to buy it back at 65. Put that aside. You might have been too early before, but if the time is right now, don't hesitate. Getting shaken out of a stock should have no bearing on whether you buy it at a later date. It's a new decision every time
Invest in equities for long term and not short term
Do not make unplanned investing and starting without setting clear investment objectives and time frame for achieving the same.
Not having an eye on what the big players / mutual funds buy & sell is a pitfall and an opportunity lost to pick the right stocks. It takes big money to move markets, and institutional investors have the cash. But how do you find out where the smart money is going? Make sure the stock you have your eye on is owned by at least one top-rated fund. If the stock has passed muster with leading portfolio managers and analysts, it's a good confirmation its business is in order. Plus, mutual funds pack plenty of buying power, which will drive the stock higher
Patience is a virtue in investing. Do not panic on your existing stocks. It's so important, we repeat: Be patient for your stocks to reap rewards.
Do not be unaware of what is happening around in the market. As always, knowledge is power and in investing, it's also a comfort. Dig for more information other than just the top stories that are flashed.
Do not put all your money on the same horse. Diversify your portfolio ideally into five industries and ten stocks.
Margin is not a luxury, it is a deep-seated risk, know your risk profile and use margin trading sparingly. You as an investor might lose control of your investments if you borrow too much.
Greed is dangerous; it may wipe out the gains already made. Once a reasonable profit is made the investor should get out of the market quickly.

Know the Risks in F&O Trading ...

F&O Trading - A Temptation to Leverage on Trading Limits

Normally to buy shares, you need to have sufficient limit to provide for 100% of the order value, while to sell shares, you need to have shares in your demat account. However, in F&O Trading, funds are blocked only to the extent of some % of the order value allowing you to leverage on your trading limits. Investors generally use F&O to increase their purchasing power so that they can own more stock without fully paying for it. But F&O exposes you to the potential for higher losses. Here's what you need to know about F&O.

How Does Leveraging Works

Let's say you buy a stock for Rs. 60 and the price of the stock rises to Rs. 75. If you bought the stock in 'Cash" Segment and paid for it in full, you'll earn a 25 percent return on your investment. But if you bought the stock on futures (say 33.33%) paying only Rs. 20 in cash - you'll earn a 75 percent return on the money you invested.

The downside of using F&O is that if the stock price moves unfavorably, losses can mount quickly. For example, let's say the stock you bought for Rs. 60 falls to Rs. 39. If you fully paid for the stock, you'll lose 35 percent of your money. But if you bought on futures, you'll lose more than 100 percent.

Beware of Additional Margin requirements - You Can Lose Your Money Fast

Your positions are continuously monitored and additional margin call is made as per the defined rules.

If the limit is not sufficient to meet the call for additional margins, the broker may close out your position.

Always remember that the broker may not be required to make a margin call or otherwise tell you that your margin has fallen below the required level. The broker has the legitimate right to close out the open position at any time (without consulting you) in case you do not satisfy the additional margin requirements. Therefore, once you buy/sell stock on F&O, do not exhaust your trading limit in full. Maintain sufficient free limit to provide for additional margin as and when required.

Recognize the Risks Beforehand

F&O Trading carries risk and therefore may not suit every investor. Before trading on F&O, you should ensure that:

You have understood the trading and settlement mechanism of the exchange and your compulsion to follow the F&O Trading rules
You can lose more money than you have invested
You have to keep sufficient trading limits as cushion to fund additional margin as and when called for.
You would not be tempted to over leverage your positions.

Last but not the least

You can protect yourself by knowing how F&O Trading works. Judge for yourself whether it is prudent for you to trade on F&O in light of your financial resources, investment objectives, and tolerance for risk.

MKG mid-week bird's view index reality checks ...

Put Call Ratio based on Open Interest of Nifty moved down from 1.03 to 1.01 levels. Historical Volatility of Nifty moved down from 32.21 to 32.18 levels but Implied Volatility moved up from 23.38 to 24.76 levels. Nifty future after a gap down opening continued to maintain its southward journey for the entire trading session with no major relief rally seen. Traders need to maintain cautious approach and prefer to hedge their long portfolio by buying out of the money put options. PCR OI is hovering near psychological one level and now sustaining above or below this level may decide further directional move in the market.

Nifty future for the day, if it sustains above 5780 levels then only positive move may be seen towards 5820-5850 levels, whereas if it fails to hold 5750 levels then selling pressure may be continued towards 5700 levels. Looking at the option concentration data, max Put OI is placed at 5700 followed by 5500 strike price whereas max Call OI is at 6000 followed by 6100 strike prices. Bank Nifty has immediate hurdle at psychological 10000 levels and till the time it holding below this area selling pressure may remain continue towards 9700-9550 levels.

Rationale for support near 5700-5750...

Rationale for resistance near 6100...

The Nifty up move from 5100 to 6100 was captured by creation of long positions by FIIs . At 6100, FIIs, for the first time in the series, bought index options aggressively totalling over 3300 crore. Since then, the Nifty has faced headwinds at higher levels near 6000-6100

Looking at the current options build up, highest Call OI is placed at 6000-6100 strikes. This lays out expectation of the Nifty facing resistance near these levels in the near term

The higher Nifty future premium of 55 points is one of the highest seen in the last couple of quarters. With this trend, the Nifty usually faces pressure at the higher band and
consolidates in the near term

The rising 10 year bond yields at 8.7-8.9 levels, post the RBI policy preview, have again dampened sentiments for banking and other rate sensitive sectors, which hold over 40% weight in the Nifty. If bond yields continue to remain sticky above 8.35 levels, then it will be negative for the banking space

MKG Actions ...

The Nifty began the week on a subdued note as sentiments remained fragile after the rate hike announced by the RBI in the previous week. Lack of directional cues from global peers saw the index witness range bound movement for the rest of the week between 5800 and 5900 even as rate sensitives like banking and the realty pack cracked more than 7% each.

The price action formed a sizable bear candle, which carries a lower high but a higher low as the index managed to sustain above previous week’s low (5798) despite volatile trades

The index is currently placed precariously above its immediate support placed of 5798 being the higher bottom formed in the previous week’s trade. A break and close below the same will confirm a short-term top at the recent high of 6142 and pave the way for profit bookings towards 5500 in the near term. The 61.8% Fibonacci retracement of the current rally from 5118 to 6142 is placed at 5500, which falls within the first major rising gap area of current up move placed between 5552 and 5448 levels

The time-wise behaviour of the index since January 2013 also indicates that the rally from August 2013 low of 5118 is nearing maturity. It has been observed that all major directional up/down moves on the index since the start of this year have lasted precisely 20-25 trading sessions. As on last Friday the current up move has completed 21 sessions and, therefore, warrants a cautious approach on any pullback attempts from current levels

We believe pullback attempts from current levels will be short lived and provide fresh shorting opportunities around last week’s bearish gap area formed on hourly charts between 5989 and 6015, which also coincides with the 61.8% retracement of last week’s decline from 6142 to 5811 levels
For the coming week, the Nifty has resistance at 5930, 6015 levels whereas supports are placed at 5700, 5630 levels

MKG events on the run ...

A salute to the man
who led us to
the Freedom
Wishes on Gandhi Jayanti !! - See more at: http://www.shaupdates.com/2013/happy-mahatma-gandhi-jayanti-quotes-sms-wishes-greetings/#sthash.bgSpqplB.dpuf

Happy Gandhi Jayanti !!

Rock N Roll

omsairam

Wednesday, October 2, 2013