Date: Monday, 05-June-2017
Nifty has rallied from 8000 levels to the highest in history today: 9685.15
Learn why you should avoid temptation to buy stocks in a bull rally, wait for a fall and then buy stocks as per your choice.
In a bull rally most investors get lured by temptation to participate in the rally and make quick money and end up getting caught at the peak.
In the history of stock markets which bull rally ran permanently? None. What goes up has to come down and what comes down has to go up. This is the nature of stock markets.
Mistakes To Avoid In a Stock Rally
1. Temptation to Buy Stocks – Too many investors are now in a buying frenzy mode as if stocks will never fall. This is a huge mistake. This is the time to sell not to buy. Of course to sell you must have stocks in your portfolio that are making good profits. If you did not buy earlier when the stocks were at attractive prices, you did a mistake. If you buy now you will do a double mistake. Avoid your temptation to buy stocks now.
2. It is A Very Costly Market Now You are getting a deal but its very costly. Will you go for this deal? Yes there is a feeling that Nifty may touch 10,000 who knows but the deal is costly and the risk is too much. It is better to leave a costly deal and wait for a better deal.
3. Chance of a Bubble – Agreed now government across the world have taken considerable steps to avoid the recession like situation in 2007-08, but who knows what is happening? Why risk your money when it can be avoided. There is little chance of a bubble, but its better to sit sideways.
4. Aggressive Shorting – There are a lot of contrarian traders. They always short the markets whenever they see a bull market. Positional shorting cannot be done on stocks so they take aggressive bets on options shorting. I am sure a lot of traders are now shorting at the money options or just out of the money ones trying to capture the maximum profit. They forget that in a bull market option premiums are very low so the risk reward ratio is very bad. See India VIX on 05-June-2017. It is less that 11. Range of 9-12 is considered low for VIX. VIX or Volatility Index has a big role to play in deciding option premiums. It forces trader to come near the money to short options to make more money. They do not even hedge and if the rally continues they end up making huge losses.
India VIX as on 05-June-2017:
Learn proper option hedging methods in my conservative options trading course.
5. Depending on Trading Software – I am sure all trading software must be giving a buy signal. A software does not have a brain. When it sees no downfall for days it will obviously make a straight line up. The software cannot predict a fall. No software ever predicted a bull run or a great fall and they will never do. I have never traded based on any software because I believe business is done by humans not machines. The article you are reading now is written by me not a machine. Similarly, the money you will keep to trade will be yours, the profit and losses will be yours – then why follow a software? Like your place in your job/business cannot be replaced by a robot or a machine, what makes you think software can trade?
Read this how automated trading systems can fail big time. Here are the disadvantages as per the wiki article:
Disadvantages of Automated Trading System:
Even though the underlying algorithm is capable of performing well in the live market, an internet connection malfunction could lead to failure.
Although the computer is processing the orders, it still needs to be monitored because it is susceptible to technology failures.
An algorithm that performs very well on backtesting could end up performing very poorly in the live market. This point is very important for traders who backtest a strategy, get great results and think the strategy will work in future as well. This is simply not true. Good performance on backtesting could lead to overly optimistic expectations from the traders which could lead to big failures.
The following text has been taken from Futuresmag.com:
The system wins only 38% of its trades. The average winning trade lasts 153 days, whereas the average loser lasts only 55 days. If we look at monthly returns, however, six out of 10 months make money. Our winning months average $7,028, and our average losing month is –$5,805. At first glance, this may seem like a paradox—how can only 38% of the traders make money, while 60% of the months are winners? The answer lies in the role of time. This is a trend-following system; as such, a large percentage of trades shows an interim profit at some point even though (per the rules of the system) only 38% are closed out as winners.
Because the average winning trade lasts 153 days, we can assume we must trade for at least 600 days before we make money. That would be just four winning trade periods. Even though it may seem like a long time (almost two years), it is still a short period measured in terms of trade time frame.
The following text has been taken from https://en.wikipedia.org/wiki/Automated_trading_system:
On May 6, 2010, the Dow Jones Industrial Average declined about 1,000 points (about 9 percent) and recovered those losses within minutes. It was the second-largest point swing (1,010.14 points) and the largest one-day point decline (998.5 points) on an intraday basis in the Average’s history. This market disruption became known as the Flash Crash and resulted in U.S. regulators issuing new regulations to control market access achieved through automated trading.
On August 1, 2012, between 9:30 a.m. and 10:00 a.m. EDT, Knight Capital Group lost four times its 2011 net income. Knight’s CEO Thomas Joyce stated, on the day after the market disruption, that the firm had “all hands on deck” to fix a bug in one of Knight’s trading algorithms that submitted erroneous orders to exchanges for nearly 150 different stocks. Trading volumes soared in so many issues, that the SPDR S&P 500 ETF (SYMBOL: SPY), which is generally the most heavily traded U.S. security, became the 52nd-most traded stock on that day, according to Eric Hunsader, CEO of market data service Nanex. Knight shares closed down 62 percent as a result of the trading error and Knight Capital nearly collapsed. Knight ultimately reached an agreement to merge with Getco, a Chicago-based high-speed trading firm.
One small mistake by the software and the trader loses his shirt or may have to sell his home to at least put food on the table.
Never do these mistakes in your trading life especially in a Bull Run which attracts most investors to stock markets.
Do not let Automated Systems take ownership of your trading money – if they do mistakes you will pay the price not automated systems. Take control of your money yourself. God has given you a brain and two hands to take control of your future so do not let anyone else either a machine or an unsolicited advisor or tip provider take control of your finances.
You Can Read More On My Site
Hi, I am Dilip Shaw, owner of this website. I am a trader like you. I have been trading since 2007, but lost a lot of money till 2010. I then stopped trading and studied options like college exams. Started trading again from 2011 and never looked back since. I did a lot of research, read books and did countless paper-trading before being profitable. You can read about me here.
My conservative trading course since 2014 is helping many retail traders just like you who have a job or business make consistent profits like this:
What Traders Say About This Course
Testimonials Year 2015
Testimonials Year 2015 Page 2
Testimonials Year 2015 & 2016
Testimonials Year 2016
Testimonials Year 2017
Testimonials Year 2018
Testimonials Year 2019
Testimonials Year 2020 to 2023
What People Say Just After Reading My Course
Emotional Testimonial by a Young Woman Trader and Her Mother
One Of My Client Is Making Rs.25k Per Week
Difference Between Other Courses And Mine
What Others Charge for Courses
You can do this course from your home. Some traders make amazing profits like Rs. 16.26 lakhs profit in 5 days though results may differ for all.
This course helps you learn to trade conservative option strategies for monthly income. Once you finish the course you can start trading immediately. You can start trading from any day. No need to wait for expiry. You will make profits consistently.
This course is good if you have a regular job or business. You DO NOT NEED to monitor your trades every second.
What You Get?
Before reading please understand that for all 5 strategies, strike selection will be taught. Strike selection while trading Options is the most essential part to succeed.
You get two conservative non-directional strategies on options, one conservative stock option strategy and two conservative directional strategies on Future & Option combination.
Non directional trades are profitable 80% of the times and make 3-5% per trade (Results may vary).
Directional strategy makes money fast. It does not matter which side the stock moves. In fact you make more when you are wrong in the Future trade. 🙂 Some amazing profits possible here.
The stock option trade makes 30,000 in one trade and if SL is hit there is a way to recover losses plus make 30k in that trade.
Technical knowledge is NOT required. No need to monitor trades every second.
In the course you will learn how to select the strike prices. You learn when to trade, which strikes to sell which to buy, how much profit target you should be looking for, the best place to take stop loss and what to do after taking stop loss – means how to get that money back. The success rate is more than 80%.
Since trades are properly hedged there is no stress in trading my strategies.
I am very confident that you will make money trading my strategies. To help you succeed I offer few months support for FREE.
11 Reasons Why You Should Do The Course:
1. TA Knowledge NOT required
2. NO Software Required
3. Regular Monitoring NOT Required
4. Continue with Your Job
5. Do Course From Your Home
6. 100% Hedged
7. Stress-Free Trading
8. Not too much money needed to trade
9. Scaling Possible
10. One Time Fee
11. FREE Support For Months
To know more Call/SMS/WhatsApp me on 9051143004 or email me now. I know English and Hindi.
Read the details of the course here.
If you want to enroll for the course you can do so here.
P.S: So many years of trading has thought me one thing - it is always better to make small profits month after month, rather than lose money month after month trying to make too much money. It never happens. But small money accumulated month after month can become very big in only a few years.
WhatsApp or Call me: 9051143004
If you have any question you can contact me.
You can read about me here and my trading mistakes here.
Dilip Shaw, Founder
Copyright Infringement: Any act of copying, reproducing or distributing any content in the site or newsletters, whether wholly or in part, for any purpose without my permission is strictly prohibited and shall be deemed to be copyright infringement.
INCOME DISCLAIMER: Any references in this site of income made by the traders are given to me by them either through Email or WhatsApp as a Thank You message. However every trade depends on the trader and his level of risk taking capability, knowledge and experience. Moreover stock market investments and trading are subject to market risks. Therefore there is no guarantee that everyone will achieve the same or similar results. My aim is to make you a better & disciplined trader with the stock trading and investing education and strategies you get from this website.
DISCLAIMER: I am NOT an Investment Adviser (IA). I am an Authorized Person (AP) of a Stock Broker. In other words I am a sub-broker. I DO NOT give tips or advisory services by SMS, Email, or WhatsApp or any other forms of social media. I strictly adhere to laws of my country. I only offer education for free on finance, risk management & investments in stock markets through the articles in this website. You must consult an authorized Investment Adviser (IA) or do thorough research before investing in any stock or derivative using any strategy given in this website. I am not responsible for any investment decision you take after reading any article in this website. Click here to read the disclaimer in full.