Before I say anything please see this:

Here is the chat in text:

Trader: Sir today I paid the money for both course. Now advise me how to trade in options with safe guarding capital amount. Genuinely I tell about myself I am in Market since 1997 but single pie I haven’t earned anything. The examples what you are saying in your mail’s all I experienced in my entire 20 years time.

Now with your guidance I may get change my trading pattern. Guide me properly.

Me: I have sent you three emails please check.

You have not earned a single pie but have you lost? If yes can you please tell me how much?

Trader: Yah! Lost almost Rs.20.00 lakhs in my 20 years experience something on my own decisions and something on others advises. Now I stopped all. I want to start a fresh beginning.

Me: Sad… Thousand times and it’s you to be blamed not anyone else. Had you just kept that money in liquid funds your money would have be at least 50 lakhs by now.

Trader: Yes Sir I agree.

Me: Anyway now start reading the course.
=======================

Though he did not tell in details what mistakes he did, neither I wanted to ask because its not that 20 lakhs that matters – what matters is 20 years that has gone down the drain. 🙁

If you do some math 20 lakhs in 20 years is loss of Rs.8333.33 per month. 20 years back it was 1997-1998. In those days Rs.8333.33 per month was considered a high salary. This person lost that in stock markets.

If you read the mistakes I did and the common mistakes of stock market investors you will know some of the mistakes he may have done. Fact is if you are reading this you also may be doing some of the mistakes now.

If you stop doing these mistakes at least you will stop losing huge amount of money.

The problem with the above kind of investors is that they are not wiling to learn. They think its a waste of time learning online, reading books, or doing a course. Agreed doing a course will cost a small fees but it can help you make better trading and investing decisions. This small investment in learning to trade is better than losing lakhs in your entire trading career.

If you are not willing to learn at least trade with very small amount. This will keep you in the game for long. I have seen investors trading with huge capital as soon as they win a small amount in any one trade – the next trade they want to hit a sixer (make a huge profit) with a huge amount. Unfortunately that one big trade ends up cleaned bowled (in a big loss).

Then they do another mistake – pay the tip providers. If a tip provider is good they will not employ marketing people to call you and ask you to pay for their services. In fact it will be other way round. With word of mouth they will get many clients a month. They know that a client will be their client for two months only – so they keep doing their marketing.

Do not do the mistakes written in the pages I have linked above, start small, research well and stick to a strategy that works well for you. Do not try to experiment something new with a huge amount unless you are successful 70% of times and have taken at least 10 trades.

Even if you want to increase your capital in trading, increase gradually. Like one lot each month. Do not put all your money in one trade. Hedge properly and keep an eye once at least in 2 hours in the trade.

Hope you become a good trader if you keep the above in mind.

Though it looks easy – buy and option/future and sell it at a higher price looks easy – fact is trading is one of the most difficult profession in the world. Actually it is not that difficult – your expectation makes it difficult.

I read quite a lot of newsletters on stock markets – mostly from USA traders. But there too it looks like traders’ mind-set is same as here in India – double money every month or something like that. See this newsletter from a Forex Trading Software provider I got today morning:

After reading the above I immediately deleted the email.

Let me warn you in bold & capital letters – THERE IS NO SOFTWARE/PERSON/TIP PROVIDER/ALGO TRADING SYSTEM THAT CAN DOUBLE YOUR OR THEIR OWN MONEY IN ONE MONTH – IN FACT LET ME BE EVEN MORE STERN – THERE IS NO SOFTWARE/PERSON/TIP PROVIDER/ALGO TRADING SYSTEM THAT CAN DOUBLE YOUR OR THEIR OWN MONEY IN ONE YEAR.

Read that again and keep that in your mind forever. I also offer a course but nowhere in my site or on whatsapp or on a phone call have I said the above. You can read my Nifty course and Bank Nifty course page to know yourself what you can achieve in one year.

After doing my courses you can make anywhere from 20% on the lower side and 40% on the higher side in one year. Some testimonials in my site are mind-boggling but they are mostly because the trader took some risk slightly different from my strategy – means changing the strikes or deviating from the strike selection to buy or sell as per the guidelines given in the course. This can be done but only after doing my course and getting some experience trading them. I do not take much credit for the mind boggling results in some trades given in the testimonials. 70% of the credit goes to the trader – but it was possible because they learned to hedge from my course and took a risky trader with confidence.

What I am trying to say is that the biggest roadblock that is negatively impacting your trading results is that you are expecting too much from the stock markets. This is forcing you to take huge risk in trading on top of that you are not wiling to hedge.

These are some roadblocks that you need to remove to become a better trader:

Please note that failure to become a good trader has many causes however I will write some of the major reasons here:

1. Inability to plan well:

Right from the very beginning the planning and execution is bad. You ”think” that a stock since its moving up will go further up and buy a call, or seeing it go down buy a put, or buy both. Only to see nothing is working.

Did you ever ask yourself why did you do this trade? If the reason is because you though – then the planning is wrong. Just because you think the stock will go up or down, it will not behave that way. Stock will behave on demand and supply.

2. Inability to manage risk:

Traders do not know whether to buy one lot or two lots or more. They do not take a second to decide how much to go for. Most of them buy with all the money in their trading account. Only to see all the money becoming zero. How much to invest in a trade is a very important decision – you must take that with proper thinking.

3. Trading something not suiting your lifestyle:

Most newbie traders choose intraday trading over positional trading. It’s interesting to note that most of them have a day job still they prefer intraday trading. You cannot execute both at one time. You have a job and some work associated with it so how can you do intraday trading. Does the nature of your job allows you to trade stock markets while on the job? If the answer is no you must take positional trading only. Positional trading involves only 5-10 minutes a day which you can easily take off time from your office. Go out of the office and trade on your mobile and go back to work. Day trading is not for busy people – it’s for people who have a night job or people who have a business and can afford to take time out from it. You need to pick a style of trading and stick to it. I have known traders who try a lot of things without much success.

4. Less Capital:

This is also a big roadblock. How can you make money from very small amount? You cannot turn 1000 into 100,000 in a year. Just do not believe what you see in those, millions of telegram channel. They do not show the losses. Every option that you buy will not convert to gold. You need money to short options as well sometimes. For that money will be required. You cannot become a full time trader with 50,000 in your account. At least 10 lakh is required to become a full time trader.

You must start trading with at least 1 lakh capital with proper hedging and risk management.

5. Not trading with money you cannot afford to lose:

You should not trade with money you cannot afford to lose at least for next one year. Well up to 20% is fine but not more than that. Some traders trade with a big portion of their net worth to make too much money. And when they lose, they get into major financial problems.

Note that if you are trading with money you cannot afford to lose it will severely impact trading psychology and you are likely to do mistakes. A free mind can never trade. If you trade with money you need to pay your bills you will force yourself to trade. Forcing yourself to trade is a bad trading decision. You will panic every time the market goes even slightly against you because you cannot afford to lose the money. In panic you will go against the rule of the trade and press the stop loss button.

6. Taking Tips:

After losing money trading themselves traders turn to tip providers. This is the best way to lose double the money. You will trade in more lots thinking the person giving tips is awesome plus you will pay a monthly fees. You lose money in both your trading account and by paying to tip providers.

7. Not learning to trade:

Some people hate reading books or researching online. To become a good trader you must learn something every day so that after a few months you know a lot about trading, planning and risk management. This is one business where you cannot do a mistake even by mistake. One simple mistake will cost you money. So you must keep yourself updated.

New traders do not know how to trade the earnings season. This post will help you to trade the earnings season. If you do not know when the earning season comes – they fall end of fiscal quarter. This means that earnings seasons fall in January, April, July and October. Corporate earnings are released to the public during earning season – stocks move a lot during this season at least for 5 trading days after the result is out.

If you are a momentum trader you will find earning season to be a great time to enter trades. You can take the benefit of gap up and down in reaction to quarterly earnings reports. Especially the mid caps will give you great opportunity to trade. On top of that finding direction gets easy as well. If the earnings are as per expectation of the market the stock will likely go up, if the earnings are not as per expectation of the market or bad, the stock will go down. You can take trades accordingly.

There are plenty of stocks to trade so even if you miss an opportunity you will get another soon.

Why There Is Huge Volatility During Earnings Plays

Fact is that there are more speculative traders than non-speculative traders. Speculative traders take their positions much before the result is out. They just go as per the market expectation – this is the reason you will see that the stock starts moving a few days before the result is out.

Most of the speculative traders get the direction wrong and pay a price. Stops are hit and the stocks take a different direction. This is the reason sometimes stock does not go in the expected direction of the results.

Please also note that stocks gets too volatile during earnings season because everyone including long term investors, short term investors, swing traders and derivative traders gets active in a stock. Big players also enter here to make some money. Sudden volume increase makes the stock volatile.

What Strategy To Deploy To Take Benefit During Earnings Plays

Since the stock may move in either direction a long straddle may be deployed. A long straddle is when a trader buys both calls and puts to take benefit of the volatility. But note that long straddle may get risky if the stock does not move. Also a drop a VIX of the stock after the result is over may drastically drop the options premium too. This may also cause the damage. Therefore its better to hedge your positions. Still if you want to trade the long straddle then its better to reduce the lot size to take less risk.

Its better to enter stocks that are historically known to make 10% move the result week. Once the result is out these stocks will move 8-10% in one direction and then depending on the situation change the direction, stay there for some time or reverse direction. You can take benefit of this move and make some good money.

Some stocks move more than 10% – keep moving in the same direction for weeks or months. However if you are a trader you must take your profits out and exit the position and then look for another opportunity.

Earning season comes around four times a year, and usually lasts for 2-3 weeks. So you have enough time to make good money during this time.

Other Notes to Keep in Mind During Earnings Season

Part of my free newsletter dated: 24-Oct-2018

Last few days volatility has become average but India VIX is still high. By the time you check it may have changed but right now at 11.17 am on 24-10-18 it is 18.51 – down -2.78% from yesterdays close.

Below 16 is comfortable zone to trade derivatives. I feel within 10 days it should come down to near 16.

What you can do?

You can chose to trade or not. My principal of trading is very different than what you keep reading in other websites or videos. When in confusion or very volatile times go non-directional or just do not trade. Not forcing yourself to trade should also be mastered. Just trading for the sake of trading is fun not business. And business is not fun – you have to be serious.

Stock hunting (buy equity) is also a great idea when stocks are being sold at a discount. You know who are selling them? Those who bought them at peak when markets were at 11500. Its sad but this happens. It is happening since the days stocks started trading and it will happen thousands of years from now.

Why this happens?

Because when stock markets goes up very fast people who were sitting aside suddenly jump in to make some money very fast – that does not happen and they take losses very fast. Exactly opposite of what should be done.

If you do my Nifty Option course you will get sometimes name of stocks that may go up to 20% in one year time. You will get this by email only until your subscription which is one year from the date of payment.

Please note that Nifty course is one time fees only.

Here is complete process of my course:

1. Once you pay I will send you the course materials for studying to your email.

2. You read and ask me questions via phone/whatsapp/email to clear doubts.

3. Then you start paper trading and still can ask me questions.

4. After about one month you can start trading.

5. Since doubts can come anytime the support will be there for one year.

Then you can start trading on your own. No need to depend on anyone once you are on your own.

Click here to see the course fees.

Update: Part of my newsletter dated: 29-Oct-18
===================================================

Check how Nifty behaved today:

Source: money.rediff.com

And how India VIX behaved:

India VIX 29-10-18 Source: http://www.moneycontrol.com/indian-indices/india-vix-36.html

Look at the above images – India VIX is still over 20 and has risen 5.56% over last close.

This is not a good sign for the markets.

Nifty non directional strategy will work out in these situations with lower lot size – the point is when India VIX is over the danger mark its better to trade with lower risk or lot size.

Do not take any huge risk now as anything might happen in this high VIX market.

Its strange that though India VIX is inversely proportional to Nifty today both have increased.

So even you want to trade options better take do a debit spread to lower your risk.

Trading without hedge is financial destruction. I know I am saying to limit your profits and losses due to hedge – which is totally different than what you read in other websites and media. But a fact is fact – a limited profit with hedge is much better trade than naked (not-hedged trading). Rest up to you.

Note: This is text of my newsletter sent to my email subscribers on 11-Oct-2018 before the stock markets opened.

By the time this email reaches you, you will see that the damage has been done to all Future/Call long traders yesterday. I hope it is not you.

Today Nifty will gap down open by almost 300 points. Just see what the damage a gap up or down can do to a naked option or future trader.

This is the loss of a naked (UN-hedged) future trader in SINGLE LOT ONLY:

300 (points) * 75 (lot size) = Rs.22,500/-. Loss of a greedy trader trading 10 lots = Rs.2,25,000/- gone in a single day. 🙁

Yesterday (10-Oct-18) Nifty was in huge bull mode – closed up by 160 points from the previous day (09-Oct-18).

If you are a technical trader or even if not – I am sure you can easily guess that all technical indicators must have given a strong buy signal before yesterdays close. Not a single technical software or technical theories in the world must have given a sell signal indicating a sell off. This is the reason I do not believe much in technical analysis.

Stocks are not a living thing that they will respect or obey technical signals. They will move as per people trade. And its a fact that less than 99.9% of people who buy stocks don’t know technical. Then why technical will work??

Here is some proof – this is not just another blog – it is a research paper:

https://papers.ssrn.com/sol3/papers.cfm?abstract_id=2401230

Copied from above URL:

We find that individual investors who use technical analysis and trade options frequently make poor portfolio decisions, resulting in dramatically lower returns than other investors. The data on which this claim is based consists of transaction records and matched survey responses of a sample of Dutch discount brokerage clients for the period 2000-2006. Overall, our results indicate that individual investors who report using technical analysis are disproportionately prone to have speculation on short-term stock-market developments as their primary investment objective, hold more concentrated portfolios which they turn over at a higher rate, are less inclined to bet on reversals, choose risk exposures featuring a higher ratio of nonsystematic risk to total risk, engage in more options trading, and earn lower returns.

Conclusion:

Post date: 09-Oct-2018

Last one month graph of Nifty:

Sep-Oct 2018 Nifty

Last one month markets have fallen badly. I am sure your investments may have also gone down. Same with me. This is normal. Do not worry. When you own stocks be ready to hold in though times. But when stocks fall its a good news too. Treat this as a discount sale in stock markets.

What you can and should do in falling markets:

1. Look for quality stocks and buy them over a period of one or two months. For example by some on 10th, 20th and last day of the month. That way you will average out. I have yesterday emailed my nifty course subscribers name of some stocks that they can buy and keep for sometime for good returns.

2. Do not over buy stocks. Just because you are getting stocks at a bargain, it does not mean you should over shop – just like you do not buy too many clothes when a discount in going on in Big Bazaar, Pantaloons or Shopper’s Stop.

3. Be patient and wait for a rebound. It may take months – but you did not invest to make a quick buck. So wait and when you are getting a reasonable profit – exit the stock.

4. Do not trade options and futures without hedge. This is important in all kinds of markets. If you trade without hedge losses can be huge. Here is one trader who lost 40 lakhs in option trading due to greed and no hedge. And during high volatility times losses can take away years of your profits especially if you trade without hedge.

Post date: 03-Oct-2018

Take a look at India VIX today 03-Oct-2018 at 11.28 am:

India VIX 03-10-18

Update: India VIX date 04-Oct-2018 at 10.15 am:

India VIX 04-Oct-18

Source: http://www.moneycontrol.com/indian-indices/india-vix-36.html – Note India VIX changes as the trading progresses.

Stock markets are inversely proportional to India VIX. Here is the fall on Nifty on 04-Oct-2018 at 10.15 am:

NSE 04-Oct-18

Update: India VIX date 08-Oct-2018:

India VIX 08-Oct-18

Note see that intraday high was 21.76.

And NSE close on 08-Oct-2018:

Nifty close 08-Oct-18

Proof of India VIX is inversely proportional to Nifty and stock markets:

What is India VIX? India VIX is a volatility index based on the NIFTY Index Option prices. “VIX” is a trademark of Chicago Board Options Exchange, Incorporated (“CBOE”) and Standard & Poor’s has granted a license to NSE, with permission from CBOE, to use such mark in the name of the India VIX and for purposes relating to the India VIX. You can read about what is INDIA VIX and why it changes here.

Volatility Index is a measure of market’s expectation of volatility over the near term. Volatility is often described as the “rate and magnitude of changes in prices” and in finance often referred to as risk. Volatility Index is a measure, of the amount by which an underlying Index is expected to fluctuate, in the near term. In other words VIX is colloquially referred to as the fear index or the fear gauge.

So it is apparent that when VIX increases there is fear and volatility in the markets.

What happens when VIX increases?

When VIX increase it makes the option premiums costlier. This means that for the same time decay options premium will be higher if VIX increases compared to same time frame of expiry of the months when VIX was lower.

Does this effects both Calls and Puts?

Yes it effects both Calls and Puts. Both calls and puts will become costly to buy. This is the reason during these times selling of options becomes more attractive and trading volume increases. Traders who were sitting on the sidelines enter the markets seeing either huge volatility or increased option premiums.

What are the reasons for India VIX to increase?

It increases due to either bad business or political situations/news in the country.

Before the stock markets opened in India on 03-10-2018 this news had hit the markets:

1) The rupee weakened past the 73 mark against the US dollar for the first time
2) Crude oil prices surged near $85 barrel.

First one is bad news for the Indian economy as goods to be imported will get costlier from USA. Government and business both will have to pay more money for the same amount of good they used to buy when INR was 65 for USD. This is 15% increase. This increases fiscal burden for the government. To tackle this situation government increases taxes – both direct and indirect taxes to cover the extra fiscal burden. Because of worsening rupee everyone will suffer. Therefore stock markets goes down. Who will buy stocks when a bad news has hit?

Second one will make the everything made by Crude oil costlier like Gasoline (Used to fuel cars), Heating Oil (Used to heat buildings), Diesel Fuel, Jet Fuel etc. This will make transportation coslty. This in turn will make goods costly.

All of the above combined it is obvious that India VIX will increase.

What you can do as a trader?

If you are a speculative trader – a trader who trades on gut feelings – its better you do not trade when India VIX is above normal. Normal is anywhere between 12-15.

If you are taking advisory services – ignore there SMS. Stop taking tips. No one has ever become rich by taking tips.

If you are a technical trader make sure you respect your original plan of taking stop loss and profits.

Hedge your trades either its future or options. This will make sure you are in the game comfortably.

Well to start with frankly I do not like intraday trading. The reasons are plenty. Here are a few:

1. You cannot keep your legs on two boats and sail through. You are likely to fall down. What I mean is if you have a job and you trade intraday too then it gets hard to manage both job and intraday trading. If you get caught then you may lose your job. Well it has happened to me.

2. Too much brokerage. Even if you make some day profits and some day loss – the brokerage will take away 20% of your profits and increase the loss by 30%. Effectively even if you are a good intraday trader you will be left with very less money.

3. Intraday trading cannot be compounded. I read in moneycontrol a long time back that one trader traded with Rs.50,000/- intraday equity cash scalping, even today he is trading with the same amount. When asked why he is not increasing the trading amount – the answer given was obvious – FEAR. Think yourself – can you trade with 10 lakh rupees intraday? If no, then its clear intraday is not a long solution to trading.

4. Non directional trading is not possible in intraday trading. Positional trading can be directional or non-directional depending on traders skills and knowledge. But even if you want to become a non-directional day trader, it almost impossible to become a intraday non-directional day trader. So basically you have to see all the charts and choose among hundreds of stocks to figure out which stock to trade intraday and then take a call. All this while siting in your office where anytime your boss can come in your cabin and catch you trading stock markets and not doing your job.

This is the reason I always advocate trading positional with hedge trading which you can trade anytime you want and leave for the day.

However if you are doing intraday trading it is very important to keep a stop loss. But most traders do not know where to keep a stop loss.

In this article I will discuss some ideas on where to keep a stop loss. Note that if you are a trader you must give more important to stop loss than to profits. If you can limit your loss chances are high that over time you will make profits.

Here are some tips to help you decide the stop loss place:

1. For low-volatile stocks keep stop loss near and for high-volatile stocks keep stop loss at a distance.

2. If you have decided to keep stop loss at 5 points then the profit should be at 10 points i.e. doable points of stop loss.

3. If using a trading software for support or resistance – it is better to keep stops lower than support level given by the trading software or above the resistance if you have shorted the stock.

4. Do not take stops too wide or too tight. Count in terms of money what you may lose. Don’t keep a stop where you are afraid of being hit but do not keep very close either. Take a balanced view.

5. Whatever the condition never trade without a stop loss.

Bottomline to remember:

Remember this – wider stop loss will be hit less often but will take out a lot of money if it gets hit. Tighter stop loss will be hit more often but they will keep the loss smaller.

If you are a trader with a lot of money you may choose to keep wider stops, and if you are trading with less money you cannot afford to lose then trade with tighter stop loss.

A tighter stop loss will allow you to trade multiple times while a wider stop loss will allow you to trade only once a day.

Hope this article will help you to take better stop loss decisions.

If you have any questions please ask in the comments section below.

Article Date: 25-Sep-2018

Reasons can be plenty for stock markets to fall. A few of them has hit Indian market recently therefore approx 8% fall in last 30 days.

Here is Nifty fall in last one month Aug-Sep 2018:

Nifty One Month Aug-Sep-2018

If I have to describe in two words why such a sudden fall then it is – PANIC SELLING.

Here is the panic indicator in stock markets – INDIA VIX:

India VIX on 25-Sep-18

Panic selling has come due to these reasons:

Reason 1) Stock Yes Bank

Reason: RBI denying MD & CEO Rana Kapoor a term extension beyond January 31, 2019.
Why: Reserve Bank of India (RBI), found non-performing assets to have been four times as large on 31 March 2018, than was then acknowledged in audited results. If found to be true then the last financial year of profit is inflated as much as 44%. These were the assets that come under NPA (Non Performing Assets) or Bad Loans. Which means the comoany is not making a profit that it was showing to the country.

Result – Stock Tanks 39% in a few days.

Reason 2) Stock Dewan Housing Finance (DHFL)

Reason: First trigger was the news that DSP mutual fund sold Rs 300 crore worth of commercial papers of DHFL for an implied yield of about 11%. When a bond is sold for a higher yield than normal it signifies that there is a liquidity problem.

What is yield?

The yield is the income return on an investment, such as the interest or dividends received from holding a particular security. The yield is usually expressed as an annual percentage rate based on the investment’s cost, current market value or face value.

11% is high yield compared to the current 8-9%. When there is liquidity problem the person buying the security is taking a risk, so obviously they will buy at higher yield, expecting a higher return.

What is liquidity problem?

You see banking companies or loan companies give a loan at an interest rate for a profit. But from where they get that money? Bank gets from their customers savings accounts but non-banking finance companies borrow money at a lower rate and give to consumers as a loan at a higher rate. The difference is the profit they take.

But what if there are no takers? Or 30% of the loans given come out as bad loans? These companies will face a liquidity problem. Money is going away but not coming back – do not forget that they have also taken a loan that needs to be paid.

What will you do if you own a stock of such a company? Obviously sell. Who will buy? A fool – a speculative trader who is looking to make a quick buck or two. Does he make? No – he takes all the losses. He/She is gifting their hard earned money to smart educated traders.

Who is this speculative trader? Definitely not the educated DIIs and the FIIs, its the retail trader who donates his money to these educated traders and DIIs and the FIIs. I am sure at least 90% of traders who are trading DHFL stock currently do not know why this fall has taken place. All they are doing is this – trader who goes with the flow – sell DHFL, trader who goes against the flow – buy DHFL, technical traders – buy/sell depending on what their software is giving the signals. Eh really? Deepening on a software to earn a living – I would not put a rupee on bet because my software says so. God has given me a brain – I would rather use that.