Can you make fortune by doing nothing but simply sitting tight?

How many times we heard or read this in our trading life?.. “Sitting tight”.

Let me also give my experience through my recent trades.

Copper :

Had given few whipsaw trades around 400 price levels and had a break-out at 403. Gone long and closed it at 406 itself as it shown some weakness. It further moved all the way up to 423 and given a sell there. I was cursing myself for not following a system but made a self decision to exit that long trade. I didn’t go for a SELL since I missed a buy and wanted to wait expecting sideways movement again.

Yes, it showed 3 whipsaw trades around 420 and I was glad for skipping the trade.. and then the climax chapter.. final sell was at 417 and I didn’t follow this too as somehow I lost my charm towards copper and concentrating on Oil.. this might have been because of the itch in my mind due to missing the good long trade from 403 to 423..

Once it gave a sell at 417, it was slowly moving down and every day at open it was breaking low levels in top gear.. Finally the FOMC announcement helped it to freeze quite a few time at lower circuits.. It finally showed the low of 343 yesterday before the bounce. This is the dream run and it never gave buy since 417.. Simply a sell and hold would have generated profit of 300% if the trade was taken.. the best part is, 417 entry was given on 15th sep and the 343 low was made on 26th sep. Just 9 trading days would have added 300% returns to your portfolio.

Silver :

Started trading it from last week and first 3 trades ended with 15% loss. Fourth trade was a SELL@64500 on the 21st Sep. On the 23rd, it was falling like “no world tomorrow”. When it was trading closer to its second lower circuit of the day, booked profits and made exit from the trade.. got 100% profit apart from compensating earlier 15% loss. After booking the profit, felt like flying.. but the climax is different..

Market immediately made another lower circuit at 12% and by end of the day it closed all the way down at 52300. i.e, 15% lost from previous close. I realised that I have not even booked in the midpoint of the day but way above the midpoint of the day :). Worst part is , it made another two low circuits next day morning to show the low of 45700.. Almost 11500points down from my exit. Holding the shorts would have given me total of 300% returns..

In total, out of 600% returns, I could pocket only 100% returns though I got the entry very right.

Moral of the story :

1. Be a slave to your system. If it asks you to sit, JUST SIT TIGHT! You can make money just not doing anything but just sitting tight with your system.

2. If you are in and capture full profit of these kind of trades, then you don’t need to bother at all about the whipsaws in SAR trading. These mega profits will take care of your entire year’s whipsaw losses.

3. And very important is that, missed mega profit from the right entry is equivalent to unexpressed love. You can recover from love failure. But unexpressed love will kill you for a long time. Same applies to trading. Loss from trade can be recovered in no time. But these kind of " missed- one life time opportunity" will make you asleep for long time.

Wherd do we stand?!

What we are witnessing in Indian equities are like "gully cricket"!! Real cracking matches are going on at commodity markets. Just look at this table.



I have just given each one counter from energy, base metal and precious metal just to show how the commodities are making a deep cut.. Above are MCX prices. What is more interesting is that, we had a biggest single day drop of USD-INR yesterday in last 15 years .. Despite that, every commodities had fallen this much. If USD-INR was stable, then the cut would have been more.

Copper, Silver and many counters have frozen at second lower circuits today..

Every fat finger across globe are winding their sacks!!!

What else is in store??!! million dollar question!!

Dream day - if you are on the right side!!

Trade Update

Crude oil was reversed to long @ 4181 on 20th and it made high of 4262 yesterday..It had ran up a lot mainly due to heavy weakness witnessed in INR. Due to FOMC statement, there was sell off late night in NYMEX. When we opened today, Oil was down by 3$ but fortunately INR helped the slide in MCX prices. We opened down by 80rs instead of 120-130rs.

Had a sell signal at open itself and reversed to shorts at 4135. If INR was a hero yesterday, he is a villain today who spoiled the entire show. Oil in $ tumbled about 3 $ again in intraday which should have reduced the MCX value at least by 120rs but INR is in heavy losing streak as it reached to 49.53 at close against open price of 48.70. This resulted only about 70rs loss in MCX oil prices till am doing this post. Rest of the move is based on how US mkts are going to open and trade tonight. Europe is bleeding about 4-5%. SAR is placed at 4270 for the day.

Copper continuing its mini dream run on downside. Currently its trading at 390. I have missed the entry. You know how much it pains!! Yes! The good trade which you missed will give you more pain than the one which caused heavy loss to you :)

Silver – Let me list down my trades here. Crazy start with this mother of swings counter !!

Short @ 63700 – Made low of 63165 but not booked.

Long @ 64510 – Made high of 65550 but not booked

Short @ 64510 – Today again reversed to shorts and it’s now trading at 63000 and yet not booked :)

In sum, three good swing trades of silver showed me good profits but yet to pocket them. Not booking the profits but just riding the swings with the system which so far gifted me just 700 points profit as of now. If I book the profits and exit, I will surely struggle to enter again and I may miss the huge move as like what is going on with copper. As I just started trading silver, am not ready to exit from position and want to be with the system to test where it takes me.. It’s the best way rather than doing the paper trades.

There will be some clue tonight whether global markets are bottoming out or another “2008-lehman” kind of history is in making!!

Trade Update

Crude oil was sold at 4235 and made low yesterday 4058. Due to expiry, covered the shorts at 4164 in Sep series and shorted Oct series at 4182. SAR is placed at 4180 today.

Copper had made a mini dream run on downside. Should have shorted it around 416 but stayed away from the trade due to preceding whipsawed trades. It made low 403.25 yesterday and SAR is placed at 410.50 today.

Silver - Started trading from yesterday. Sold it at 63700. SAR is placed at 64510 today.

Either crude or silver is making a wrong move and either one of it will hit SL today.

Crude oil

Crude was testing patience for couple of days and finally paid for the waiting.. It was kissing 4215 levels on the downside from wednesday and not breaking the same yesterday till evening. And finally the much awaited break was done which accelerated the downfall to another 100 points i.e, till 4118. It has closed at 4150.

4250 at MCX or 89.50 on dollar will offer some good resistance next week and more price action in store next week. It is trending in these days and am trying to capture the most of its move..

Recent trades read as below for oil.

Short @ 4050
Long@ 3920
Short@ 4085
Long@ 4138
Short@ 4235

Aggregated 340 points in 2 weeks. Should stay focussed and disciplined otherwise all of it will be swayed away :)

Trade Update

Crude oil :

Shorted it at 4050. It made low of 3843 and 3847 on the consecutive days. Didn't book the shorts as system was still in short. Reversed to long @3920 and it made high of 4153 today.Still holding the long in hand with SAR at 4024.

Copper :

Not trading for the last one month. It should have been sold at 423 and reversed to long at 419. Long from 419 should be in hand with SAR at 418.50 as of today.

Bill Lipschutz - Sultan of Currencies

"The New Market Wizards" by Jack Schwager is an awesome book. This book is with full of practical approaches. Traders who survived the markets with great success, expose their mind over markets in simple conversations. Will try to post the important Q&A from each trader's interview here.

Let's start with Bill Lipschutz, a veteran forex legend trader. Author describes him as "sultan of currencies". It's true as he made billions at his age of 35. He reveals his success as below.

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For argument's sake, let's say that the fundamentals ostensibly don't change but the dollar starts going down. How would you decide that you're wrong? What would prevent you from taking an open ended loss?

I believe in this scenario very strongly-but if the price action fails to confirm my expectations, will I be hugely long? No, I'm going to be flat and buying a little bit on the dips. You have to trade at a size such that if you're not exactly right in your timing, you won't be blown out of your position. My approach is to build to a larger size as the market is going my way. I don't put on a trade by saying, "My God, this is the level; the market is taking off right from here." I am definitely a scale-in type of trader. I do the same thing getting out of positions. I don't say, "Fine, I've made enough money. This is it. I'm out." Instead, I start to lighten up as I see the fundamentals or price action changing."

Do you believe your scaling type of approach in entering and exiting positions is an essential element in your overall trading success?

I think it has enabled me to stay with long-term winners much longer than I've seen most traders stay with their positions. I don't have a problem letting my profits run, which many traders do. You have to be able to let your profits run. I don't think you can consistently be a winning trader if you're banking on being right more than 50 percent of the time. You have to figure out how to make money being right only 20 to 30 percent of the time.

How do you gauge when a panic has run its course?

I think it's a combination of market experience and innate feel. Many currency traders operate under rules that if they lose a certain amount of money, they must liquidate the position. Those are not the type of decisions that are made rationally given the specific situation at a given moment; rather, they are general rules that have been established previously. How do you decide when that type of last-ditch selling is nearly exhausted? It's probably largely a matter of past experience that has suffused your subconscious. In this sense, what people describe as gut feel is probably better described as subconscious market experience.

What do you believe are the characteristics of the truly superior traders?

Let me start with an analogy. When I was in college, my impression was that people who were really smart could do very well, even if they didn't work that hard, and people who really worked hard could also do very well, even if they weren't outstandingly bright. In contrast, in trading, I think you need both elements.The best traders I know are really quite brilliant, and they all work very hard-much harder than anyone else. By the way, when I talk about working hard, I mean commitment and focus; it has nothing to do with how many hours you spend in the office. These traders have tremendous commitment to the markets-to their craft, so to speak. They develop scenarios, reevaluate scenarios, collect information, and reevaluate that information. They constantly ask themselves: What am I doing right? What am I doing wrong? How can I do what I am doing better? How can I get more information? It's obsessive.

Besides intelligence and extreme commitment, are there any other qualities that you believe are important to excel as a trader?

Courage. It's not enough to simply have the insight to see something apart from the rest of the crowd, you also need to have the courage to act on it and to stay with it. It's very difficult to be different from the rest of the crowd the majority of the time, which by definition is what you're doing if you're a successful
trader.

Many people think that trading can be reduced to a few rules. Always do this or always do that. To me, trading isn't about always at all; it is about each situation.So many people want the positive rewards of being a successful trader without being willing to go through the commitment and pain. And there's a lot of pain.

Why do you trade?

I like the game. I think it's a great challenge- It's also an easy game to keep score of.

With trading consuming most of your day, not to mention night, is it still fun?

It's tremendous fun! It's fascinating as hell because it's different every day.

Would you still trade if there were no monetary remuneration?

Absolutely. Without question, I would do this for free. I'm thirty-six years old, and I almost feel like I have never worked. I sometimes can't believe I'm making all this money to essentially play an elaborate game. On the other hand, when you look at all the money I've produced over the years, I've been vastly underpaid.