Chaos in Trading

Today I lost Rs.3000 for trading too many times despite the market being at same place. Small volatility of 15 Points is giving me a panic. What has happened to me? Small volatility is making me to panic despite having experience for 5 years. I'm thinking too much and that is the reason for stupid behavior. At this point of time, I've decided to shut down my computer and planned to read a book written by the Great Martin Zweig titled Winning on Wall Street. I'm looking like a fool and believe that my thinking has been too much erratic in the recent times. Only way to stop this is to stop trading and start reading books. If you are in relentless pursuit to do something in a market, you would probably lose money. 

Most of the Nifty stocks are weak

Symbol	52 Week High	52 Week Low	30	50	200
ACC	1,545.35	1,104.05	1282	1316	1336
AMBUJACEM	223	135.75	193	195	191
ASIANPAINT	4,829.65	3,001.00	4529	4464	4045
AXISBANK	1,516.05	922	2203	2041	1812
BAJAJ-AUTO	2,229.00	1,425.10	1282	1316	1336
BANKBARODA	899	605.55	755	801	746
BHARTIARTL	370.6	215.8	318	329	299
BHEL	297.95	195.1	207	216	225
BPCL	789.35	315	394	396	364
CAIRN	381	285.8	308	318	326
CIPLA	435	286.3	385	395	369
CNX NIFTY	6,111.80	4,770.35	1282	1316	1336
COALINDIA	386.25	289.4	332	341	349
DLF	289.25	169.75	270	261	222
DRREDDY	1,970.00	1,526.40	1835	1867	1741
GAIL	397.2	302	337	348	354
GRASIM	3,510.00	2,210.00	3018	3041	3001
HCLTECH	785.9	440.6	715	696	594
HDFC	882.3	610.5	799	806	754
HDFCBANK	705.5	482.2	650	656	621
HEROMOTOCO	2,279.00	1,615.00	1706	1753	1874
HINDALCO	144.9	93.85	106	113	116
HINDUNILVR	580.45	380	455	472	496
ICICIBANK	1,232.00	767.4	1117	1142	1027
IDFC	185.3	110.35	156	161	151
INFY	3,009.80	2,060.55	2850	2775	2450
ITC	310.9	206.1	298	294	275
JINDALSTEL	627.7	320.4	372	402	408
JPASSOCIAT	106.7	58	73	81	82
KOTAKBANK	697.2	510.5	666	658	617
LT	1,720.00	1,106.05	1462	1505	1492
LUPIN	631.95	490.35	597	595	578
M&M	976	621.1	890	900	827
MARUTI	1,639.00	1,051.00	1487	1513	1343
NTPC	181.3	137	150	153	159
ONGC	355	227.4	320	318	283
PNB	1,035.00	659.2	841	858	798
POWERGRID	124.7	95.2	109	110	114
RANBAXY	578.4	370.8	416	444	497
RELIANCE	955	673.05	853	861	801
RELINFRA	667.9	415	468	497	502
SBIN	2,551.70	1,802.30	2239	2236	2184
SESAGOA	215.1	145	166	176	180
SIEMENS	840	482.35	567	604	664
SUNPHARMA	839.8	535.9	784	761	609
TATAMOTORS	337.4	203.05	296	304	267
TATAPOWER	113.15	84.6	97	101	102
TATASTEEL	482.25	333.35	370	389	399
TCS	1,597.60	1,047.65	1462	1405	1310
ULTRACEMCO	2,154.20	1,342.00	1908	1919	1806
WIPRO	456	295	417	413	383

I put up this data before couple of weeks and took positions and  made some profits and also booked few losses. Over all most of the Nifty stocks looks bad and have been trading below 200 day simple moving average. 

IT sector is the stand out. Sun Pharma is a clear winner in Pharma sector. HCL Tech, TCS, Infy and Wipro are looking strong. Banks looks very weak. Reliance Infra is the weakest stock in the index.

I don't know why the hell NSE is having Asian Paints in its index. Volumes are very thin and float is minuscule and it could be easily manipulated. 

There might be some bounces, but it should be used as a selling opportunity. I'd be a buyer only when index closes above 52 week high. 

2 trades eating all the profits

Stock market is a profession where you would be learning a lesson on daily basis. I guess this is one of the reasons why I'm staying humble in my life. For the first 15 days, I made 25% gains on my capital. I took one big position and from then I was not able to manage it. Just imagine two trades wiping out your 25% gains. This is one of the biggest blunders I’ve committed in my trading. Couldn’t digest what I’ve done with the trades. I know that I should cut my losses. I guess I should go back to school and learn how to maintain discipline in my trading.

Lessons:

Never take a position that is not possible to manage.

Always think negative once you take your position. 

I’ll explain both these lessons. Managing a position is important in stock market. One should have reasonable control over position. We should make sure that we shouldn’t afford to lose more than 2% of the capital (Total Capital). In my case I was just complacent ( 25% profits in less than 15 days) and took a position that instantly became out of my control and didn’t had the common sense to book the loss once I saw the weakness in the particular position.

If you didn’t have the inclination to book loss then you’re preparing for the disaster. This is one of the biggest lessons I learnt in this month. I have taken a vow not to do these kinds of trades in my life time and I believe I wouldn’t do that in my trading.

It is important to develop negative thinking in trading. I know I would receive some rants, but let me explain the thesis behind this thinking. If a trade goes according to our plan then there is no problem for us to make money in the markets. Only when it goes against us, we should have a strategy to manage it and comes out with minimum loss. I’d recommend traders to always think negative about their positions and dig deep into the negativity to find solution for the problem. I didn’t have this negativity and as a result I’ve given up all my profits I made in just couple of trades. It’s a pain and I’m feeling like an Ass****!

HOW I SCREW UP WITH ULTRA SHORT ETFS

One of the sucker stories in my trading career (My job at Muscat, where I managed $25 Million and supported almost $600 Million). If someone speaks with me, they wouldn't believe that I've made such a pathetic trade in my life. But that’s the beauty of stock markets. You never know until someone really discloses their real position. Here it is –Enjoy
I guess I took a large position in Ultra short. Ultra short on basket of ETFs – I’ll name them – SKF, SDS, DXD, SMN and that’s it. Before going into story I just want to explain why this would become a loss making trade even before taking a position.
All these Ultra shorts are completely asymmetrical trade and it’s identical to buying deep out of money calls in which call price remain same despite rise in the prices of shares. If markets go down, all these ETFs would go up twice and vice versa. If markets go up it surprisingly goes down too much and it was not at all designed properly by the issuers.
I’d rather prefer to short than going long on these kinds of instruments. Well, now coming into the point.
I took total of almost $700,000 position (Managed $25Million) in the mentioned ETFs. My superior (Manager) is completely against shorting the market ( Well he is actually an Ultra bull who completely missed 2008 downturn as well 2009 raise of the markets) and he was rightly critical about my trade. In couple of day, position was up by 5% and he asked me to book the profits (He was right, but I didn’t do that). I kept that position and eventually went on to keep and saw my position value bleeding by more than 30% in couple of months.
In the mean time, I was right in my short call of EUR/USD at 1.51 and rightly predicted the problems of Europe and asked him to take position in couple of structured instruments (Please check www.investopedia.com for the meaning of structured instruments). He didn’t took that because I got wrong in Ultra shorts and he took some position which he didn’t disclose properly ( He is one of the worst person to work and that is the reason why I left the job, despite performing reasonably well and I’ll put that in a separate write up) and he didn’t took the position. In January 2010, problem in Greece happened and markets sold off and my ETFs got into the place where I bought before couple of months (Break Even point in simple English).
From November and December I asked him to take lot of positions in stocks which he took but didn’t disclose properly to me. I asked him to take position in Apple around$200, Amazon around $100, basket of Agricultural stocks (I clearly predicted Terra as a takeover candidate and it was taken over by CF industries in the month of Jan, 2010) and other possible takeover targets and other stocks. He took that but he didn’t disclose me properly. He screwed me right and left for my ultra short position and he keep on saying that till I put my papers (I made huge money on McDonalds, and almost all Agri stocks, Broadcom, Amazon, and most importantly in Apple for my organization) from the organization.
I was carrying the position for another 4 months and there comes May 2010. I was seeing few erratic movements in the market and I predicted a knee jerk reaction (didn’t discussed within organization but to my close friend) in the markets. Charts also seem to validate that event. There is a technical analyst in our organization and I discussed with him and sent a write up asking him to take further position in that for a short time.
On that day he simply blow down my confidence (Despite that I was confident) by filthy words and he was not interested to add any positions. D-day came and Dow crashed 1000 points (Flash Crash), but nothing happened in my account.

Lessons:

1.     Don’t make asymmetrical bet without understanding the underlying instruments
2.     Always use stop loss irrespective of your confidence in a particular trade
3.     If you get opportunity to minimize the loss and get out of the trade, use that opportunity and exit from the trade.
4.     Don’t let your manager to talk about other trades that are no way related to new bets you are making for the organization. Say FUCK OFF in his face, if not it would affect your performance.
5.     Ask for transparency in the bets you’re making for the organization. Ask for complete P&L with your manager (Don’t adjust with him in this regard. I did that, but eventually I thought enough is enough and quit the company).
6.     Don’t work under Lucky Fool (My manager is a lucky fool than intelligent loser).
7.     If you didn't follow the above six lessons, your bonuses and performances would be swallowed by your so called Manager whose primary aim is to screw his subordinates and put the trades in his own name and make money only for him.

Note: I felt deep pain while writing about this particular incident. I dreamt of conquering world with the job I got in Muscat. I really thought I could do lot of things and make money for myself and my organization. I really worked very hard and made lots of money (This Ultra short is the only losing trade- This is the real truth and I could give references) for my organization. Despite my hard work, I've been literally screwed by my filthy manager who cheated everyone who worked for him. I’ve lot of failures in my life and I’m planned to pen down everything in this blog. I believe that this one is failure in a victory. Yeh, I made money for my organization, but not recognized by the members of family office and  on top of that my performance bonus got swallowed by my manager. 

How I lose 90000 bucks in Unitech

Unitech is one of the biggest losses in my life that really devastated me in 2006. I believe I lost almost 90000 (89500 is the exact amount) in that trade. My broker was Kotak Securities. I still remember that day. I was at Chennai. I bought 500 shares while Unitech traded after split and bonuses and was around 350 bucks. On that day it went to upper freeze, got released and was trading down a percentage point. I bought 500 shares at that time and at lower freeze I bought 300 shares (Don’t show a fucking urge to average your losers-Important lesson). I owned almost 800 shares. From that day Unitech continuously opened at lower freeze and it continued for almost a week and Unitech was trading around 180 bucks while I returned back to my home town to pay my margin of more than lakh and half to my broker. They thought I ran after that day (I remember a guy who got abscond after losing 5 lakhs in 2006 crash). Luckily for them, I’m a decent guy who really wants to pay the dues and continue to pay tuition fees to the market to make a career in stock markets. Despite paying one and half lakhs I was in debit and pressure was made to cut the portion of the shares to pay for them. If you are real loser you would blame Kotak securities, but I still remember of not making any complaints against them for their pressure (Even today I couldn’t believe that I showed that kind of maturity despite doing sucking trade) to pay their margins. I asked their permission for 3 more days and they gave me that and eventually booked my losses at 215(215-220). A week after booking my losses Unitech was added in futures and from there it started to rally and it eventually crossed than my buying price of 350. What an irony? I lost 90000 bucks in that trade.

Lessons:

1.    Have an idea on stock which you want to buy. Idea doesn’t necessarily mean knowing all the fundamental stuff and technical stuff. Idea means atleast a price movement of the stock.

2.    Don’t rush to catch the so called momentum stock. You know what was in my mind. I thought Unitech would continue to put more upper freezes and I planned to sell after 3-4 upper freezes by making a leveraged bet. Even now I can’t stop laughing about my idea of entering into that trade.

3.    Don’t make leveraged bets without knowing stuff (Even now I make leveraged bets).

4.    Don’t blame your broker or dealer for your sucking trade (Candidly speaking this is one of the thing that I’ve never done  in my entire career). I have seen people doing this and I really feel sorry for those dealers.

5.    Don’t bet on your own imagination. This is one of the worst things you could do in stock markets.

6.    Don’t predict on direction of the stock. If someone says that they are making predictions on stocks, be wary to work with them.

7.    If you are operating in Indian markets, try to put stop losses on momentum stocks that are having price limits (stocks that are not in futures) in trading.

Blogging helps to learn

I'm not proficient in English. Despite this problem, I'm trying to blog about my experiences in my career as a trader. I'm planned to update my blog on continuous basis. If there are any readers they would definitely be entertained to read about my failures that are really laughable for experienced one in markets. I believe I'd be able to bring entertainment value for learned gentleman who read my writing(If at all if someone really read my blog). I believe that blogging would help me to learn more about trading. In order to learn more I've planned to update my blog on weekly basis. I'm going to write my spectacularly wrong trade on Unitech which was made in 2006 that helped me to lose 90000 bucks.

I've got a good news for me

With the help of my friend, I'd be able to manage money for funds (I'm currently doing for US markets, but got chance in Indian markets) to invest in Indian Markets. I have got some tight agreement to sign that gives guarantee on investments. I've to accept to that agreement since I'm a starter and there is no other way for me than accepting to this agreement. I've got so many strategies and I've infact followed all those strategies now for the accounts of my friend (which is around Rs.4Lakhs). Most importantly I've made profits using those strategies. I made some calculations and come out with the possible profits and chances of losses and how to minimize those and come out with profits. I have agreed for 12% guaranteed return to my investors. It doesn't matter whether I make or lose money I'm suppose to return 12% to my investors. I did that and I might be signing contract within a fortnight with pool of investors. If possible, I'd probably scan those agreements and display it in this blog(with the permission of those investors, if not permitted not possible).  I guess this would be a start for me in India. I'm also speaking with few investors. Let me see who would bet on me. I'm a starter and don't have much credibility to show it to my investors. Let's see how things move from here.