iCharts Discussions

[opportunist]

Dear all,

This is a pertinent question if you consider that one can plough in profits to increase the size of the trades. As we increase lot size and if we have a winning strategy then our profits increase with the number of lots. It looks very attractive on excel but really speaking how many lots can you trade realistically? Because after a point ordering a high number of lots for buy/sell may cause slippages.

Any light on this issue will be highly appreciated.

Regards,
Oppo

[pkholla]

Beware of black swans ~ 'Kaaley Kavey se Dario' (Bobby picture!!!)

Oppo:
1 I believe that X headed for Las Vegas (real story) with an unbeatable strategy. He would bet on red with 1 token, lose? = place 2 tokens and so on till he won and would start all over again with one token
The problem is on that particular run on that table, black came up 16 times in a row, wiping him out!
1a I believe that there is a book on this = black swan event?
2 How about the British trader, Nick Leeson in 1995 who went on increasing the bet on [Short Straddle on the Nikkei]. The bet soured as an earthquake (black swan event?) hit Japan and the Nikkei plunged. Leeson placed panicky larger bets to recover his losses but the Nikkei didnt rise. This submerged the 200+ year old Barings Bank in Singapore ? The bank lost GBP 827 mn!
The best strategy may be to calculate the max loss you can bear, then go on increasing the lot size till you reach that ceiling.
Isnt there another strategy that dont bet more than 5 or 10% of capital on one bet ... so reach the ceiling then stay with it eg 10 lots futures OR start from original lot size all over again?
But ... I bet you know all this and wrote the post just to get a rise out of us!
Cheers, Prakash Holla

[opportunist]

Holla saab,

You bet right. I know all this. But I am not saying all this to get a rise out of anybody but to seek some genuine direction. Sometimes when you know too much it is actually detrimental. Actually after years of missteps when I am seeing some light at the end of the tunnel I want to run surely towards the light without a single fall.

My days of predicting the market is more or less over. Not just intellectually but from the heart I have accepted that the best way to trade is to follow the market and not predict.

It is a sheer coincidence that I am now half way through Nassem Taleb's masterpiece - "Black Swan". It is a cerebral book written in a fiercely erudite manner (not suitable for all tastes) but once you can bite into the content it can provide a rare understanding of ourselves. And since you mentioned the casino game, I would like to clarify - Black swans are not just a very rare event, not just 16 black dices in a row (which though rare can be counted as a possibility), but an event which is beyond one's imagination, an event which is never foreseen even by the most meticulous planner and is usually outside the framework of the game.

For example, in the market it would NOT mean a sudden change of direction or even a gap up/down. Such things happen now and then, maybe once in 5 years. But a black swan would mean anything beyond the obvious or even the imaginable. Say a sudden loss of volume of trade (say nifty trades 500,000 lots everyday on an average suddenly tomorrow it trades no more than 500) . So you cant sell even at the desired price as there are not enough buyers. Or it could be more extreme - suddenly your broker is ordered out of business while you are midway in trading.

I take your point of trading a small fraction of your capital. The model that I am following includes that aspect very well.

Thanks for your time.

Regards,

Oppo

[amitagg]

The real answer to this having multiple accounts ( with near replica trades) in first stage of having seen "light at the end of tunnel" and when u are comfortable , try to employ desk traders to do the job for you on multiple platforms...... Does it clarify or sound right!

[pkholla]

[channasri]

Dear opportunist,

This is my opinion taking Nifty trading as illustration:

1. Trading one lot initially with Rs. 1 lakh as trading capital and by following a time tested robust method,

2. Use the profits to buy the RBI/GOI bonds until profit reaches Rs. 1 lakh,

3. Start trading 2 lots as now the trader will have a corpus of Rs. 2 lakhs but with the same trading method,

4. Use the profits to buy the RBI/GOI bonds until profit reaches Rs. 1 lakh,

5. Start trading 3 lots as now the trader will have a corpus of Rs. 3 lakhs but with the same trading method,

6. And so on .....

The point is that whatever happens to one lot happens to 2 lots or multiple lots. Normally, traders get scared of the number of lots OR try to reduce the trading capital per lot to increase the number of lots and earn more money in lesser time.

The key is to hold the nerves and remain disciplined with the chosen trading method.

The wise thing will be to refine the trading method to minimise whipsaws OR switchover to a better method developed over a period of time.

An excellent thing will be to diversify into counters whose price behaviour suits the psyche of the trader.

You may be aware of these things as well.

[pkholla]

Dear Channasri,
Excellent point in your post
I would only add that we can park the profits in ETF gold like goldbees/ setfgold/ new Govt gold scheme OR cash mutual funds of good MF like HDFCMF : both types are now easily trade-able just like equity, online. Moreover, the cash fund can give a return of 5-8% pa
Regards, Prakash Holla

[channasri]

Excellent Prakash from the view of parking the profits in a safe manner. I thought of GOI bonds as there is IT exemption on interests earned. Please correct me if I am wrong.

One can consider Liquid Bees also to park the profits as these are extremely stable.

[opportunist]

Thanks Channasri for your detailed advice. I was not aware that one can buy GOI bonds like that and was under the impression that it was bought only by institutions in large quantities. Can you suggest some portals where I can buy GOI bonds and "liquid bees" as suggested ?

Regards,

Oppo

[opportunist]

Thanks Holla saab, it is not a question of being democratic but a question of being "Indian" and showing respect to elders. Caution and prudence are the qualities that elders teach and the young dont learn or want to learn till they get beaten enough times to understand.

Regards,
Oppo

[Alchemist]

[pkholla]

[opportunist]

I can understand what you are trying to say Alchemist, that you need not bull s*** around if I you are really playing with 100 lots NIFTY.

I am not. But it is a professional curiosity for me as to how much I can trade in an instrument without affecting its liquidity. By the way I don’t trade Nifty and only focus on commodities so an answer on that front would be more useful personally.

Regards,
Oppo

[opportunist]

Holla saab,

You are right, till we reach the point where I can hire people to advise us crowdsourcing is best and Icharts has an awesome crowd indeed, Alchemist bhai included .

Whatever I have really learnt about trading (and what they dont teach you in the books) is from Icharts stalwarts. Here we can find people who have "been there and done that". Discussing with them on shoutbox and reading their posts is one invaluable source of advice that any trader can't deny.

Regards,

Oppo



[quote="pkholla"]

[prabit]

I have heard that wealth created by some like Buffet, jhunjhunwala and others.But I have not heard that people created real wealth by trading. Can someone give any example.