Reblog: 10 Great Technical Trading Rules


Only price pays. In trading, emotions and egos are expensive collaborators. Our goal as traders is to capture price moves inside our time frame, while limiting our drawdowns in capital.

The longer I have traded, the more I have become an advocate of price action. Moving away from the perils of opinions and predictions has improved my mental well-being, and my bottom line. It also makes it easier to create and adapt to trading rules.

“WE LEARNED JUST TO GO WITH THE CHART. WHY WORK WHEN MR. MARKET CAN DO IT FOR YOU?” – PAUL TUDOR JONES

In developing a trading system of your own, you must begin with the big picture. First, look at the price action and then work your way down into your own time frame. You need to create a systematic and specific approach to entering and exiting trades, executing your signals with the right trailing stops, setting realistic price targets and position sizing, and limiting your risk exposure. Relying on fact, rather than being tossed around by your own subjective feelings, will insure your long term profitability.

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Reblog: The Debate Over Position Sizing


“If you wake up thinking about a position, it’s too big” Steve Clarke

“Make your position size more a function of not how much you can make, but really how much you can lose. So manage your position based on your downward loss perspective not your upward potential.” James Dinan

“We will make something a large position if we think there is an extremely low chance of losing money on a permanent basis. Even if we think it might be a 4X return, if the idea could be a zero, it’ll be a small position” Ken Shubin Stein

“I’ll limit position sizes when potential outcomes are too binary” Chris Mittleman

“We do not bet the ranch on any single investment; few positions have exceeded 5% of assets in recent years” Seth Klarman

“We size things based on how much we think we can make versus how much we think we can lose. We’ll probably be willing to lose 5-6% of our capital in any one investment” Bill Ackman

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Sensex recovers 300 points from day’s low to settle at 35,809


Benchmark indices ended marginally lower on Friday led by a decline in HDFC, HDFC Bank, Sun Pharma and Axis Bank.

The S&P BSE Sensex ended at 35,809, down 67 points or 0.19 per cent, while the broader Nifty50 index settled at 10,724, down 22 points or 0.20 per cent.

Among the sectorial indices, the Nifty Pharma index ended 3.1 per cent lower led a fall in Glenmark and Lupin. The Nifty Metal index settled 2.07 per cent lower weighed by JSW Steel and Welspun Corp.

In the broader market, the S&P BSE MidCap index ended 167 points, or 1.18 per cent lower at 13,941, while S&P BSE SmallCap index fell 111 points, or 0.83 per cent to settle at 13,253.

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Reblog: How to Trade Elliott Wave for Beginners


Before we begin our discussion about how to trade Elliott Wave let’s set the stage by looking at how the Elliott Wave theory was discovered and why Elliott wave strategy is so popular today. In the 1930 R.N. Elliott set out to try to learn more about the stock market after experiencing some losses in the 1929 stock market crash.

Elliott’s discoveries were quite impressive and after careful study of the markets, he began to notice that the market has some repeatable patterns and is trading in a series of five and three waves which is what we call today an Elliott wave strategy.

Our team at Trading Strategy Guides has also adopted the Elliott Wave strategy because it offers us good Elliott Wave entry points which ultimately leads to superior risk to reward ratio.

The Elliott wave strategy is similar to a trend following strategy like the MACD Trend Following Strategy- Simple to learn Trading Strategy or the very popular strategy: How to Profit from Trading Pullbacks.

Even though the Elliott Wave strategy is a trend following strategy, we can spot Elliott Wave entry points even on the lower time frames because the Elliott Wave theory can be applied to all time frames and to all markets so, in essence, is a universal trading strategy.

Now …

Let’s get a little bit deeper into how to trade Elliott Wave and how we can make profits trading.

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Reblog: Trading Tips by Ed Seykota


If you are a trend follower then  you must have heard of Ed Seykota. Ed Seykota was first featured in the book “Market Wizards” and has one of the best track record of all time. In one of the accounts he managed, he had a return of 250,000% over a 16 year period. Comparable to the likes of Warren Buffet, George Soros and William J. O’Neil.

Ed Seykota has an Electrical Engineering degree from MIT and is a systematic trader. His trading is largely confined to the few minutes it takes to run his computer program which generates signals for the next day. I’m sure most traders would like a system that does that.

With such an amazing trader around, it makes sense to pay attention whenever he talks. So here are the 39 best things said from the man him self, Ed Seykota.

Quotes by Ed Seykota

Technical analysis

1. In order of importance to me are: (1) the long-term trend, (2) the current chart pattern, and (3) picking a good spot to buy or sell. Those are the three primary components of my trading. Way down in very distant fourth place are my fundamental ideas and, quite likely, on balance, they have cost me money.

2. If I were buying, my point would be above the market. I try to identify a point at which I expect the market momentum to be strong in the direction of the trade, so as to reduce my probable risk.

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Sensex falls 425 points, NIFTY settles at 10,944 weighed by Autos


Benchmark indices ended over 1 per cent lower on Friday, weighed by a sharp sell-off in the automobile and metal stocks.

The S&P BSE Sensex ended at 36,546, down 425 points or 1.15 per cent, while the broader Nifty50 index settled at 10,944, down 126 points or 1.14 per cent.

Among sectoral indices, the Nifty Auto index, the top loser of the day, settled 3.6 per cent lower as Tata Motors, MRF and Mahindra & Mahindra (M&M) lost considerable ground. Nifty Metal index ended 3.4 per cent lower with SAIL and Vedanta among the top losers.

In the broader market, the S&P BSE MidCap index ended 203 points or 1.40 per cent lower at 14,328, while S&P BSE SmallCap index settled at 13,656, down 122 points or 0.89 per cent.

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Reblog: What You Can Learn from Fighter Pilots About Making Fast and Accurate Decisions


“What is a strategy? A mental tapestry of changing intentions for harmonizing and focusing our efforts as a basis for realizing some aim or purpose in an unfolding and often unforeseen world of many bewildering events and many contending interests.” — John Boyd

What techniques do people use in the most extreme situations to make decisions? What can we learn from them to help us make more rational and quick decisions?

If these techniques work in the most drastic scenarios, they have a good chance of working for us. This is why military mental models can have such wide, useful applications outside their original context.

Military mental models are constantly tested in the laboratory of conflict. If they weren’t agile, versatile, and effective, they would quickly be replaced by others. Military leaders and strategists invest a great deal of time in developing and teaching decision-making processes.

One strategy that I’ve found repeatedly effective is the OODA loop.

Developed by strategist and U.S. Air Force Colonel John Boyd, the OODA loop is a practical concept designed to be the foundation of rational thinking in confusing or chaotic situations. OODA stands for Observe, Orient, Decide, and Act.

Boyd developed the strategy for fighter pilots. However, like all good mental models, it can be extended into other fields. We used it at the intelligence agency I used to work at. I know lawyers, police officers, doctors, businesspeople, politicians, athletes, and coaches who use it.

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Reblog: Capitulation of the small-cap investor


The heady Indian bull market was fueled by the liquidity rush post demonetization. But that was not the only reason propelling indices in India to new highs. Thanks to lower global interest rates, money was channelized into India in the hunt for better returns. A stable government at the center, lower crude prices and low inflation were other factors that contributed to the overall positive sentiment.

But many of us wanted more than what blue chips had to offer. We wanted to “beat the market”. Or, for that matter even the track records of legendary investors like Warren Buffet or Peter Lynch. Naturally, this led us to scenarios which offered potentially superior returns. And in the perpetual hunt for 10-baggers, we ended up investing in nano-, micro- and small-cap companies with questionable business models, corporate governance and promoter intentions.

We looked at:

  • Turn around stories
  • Hope stories
  • High growth small cap names
  • Formalization of informal sector across industries
  • Commodity stocks

Many stocks that fell in the above categorizations turned out to be 10-20 baggers over the last 3-4 years. But once the music stopped, we witnessed a vertical decline in stock prices that has stunned even seasoned investors.

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Sensex gains 213 points post Populist Budget Proposals


The benchmark indices settled over 0.5 per cent higher on Friday after Finance Minister Piyush Goyal announced a string of populist measures in his Interim Budget 2019 speech in the Parliament.

The S&P BSE Sensex ended at 36,469, up 213 points or 0.59 per cent, while the broader Nifty50 index settled at 10,894, up 63 points or 0.58 per cent.

In the broader market, the S&P BSE MidCap index ended at 14,641, up 81 points or 0.56 per cent, while the S&P BSE SmallCap settled at 13,950, up 24 points or 0.17 per cent.

Among sectors, the Nifty Auto index was the top gainer of the day, rising 2.71 per cent led by Hero MotoCorp and Maruti Suzuki. The Nifty IT index too rose 1.45 per cent led by HCL Technologies and Tech Mahindra.

In a major relief to the middle-class taxpayer, Finance Minister Piyush Goyal, in his Interim Budget 2019 speech announced that those earning up to Rs 5 lakh a year would not have to pay any tax. He also said that those with an annual income of up to Rs 6.5 lakh would not have to file income-tax returns.

Goyal also announced PM Kisan Samadhan Nidhi scheme in which, farmers owning up to 2 hectares of land will get Rs 6,000 per annum, which will be completely funded by the central government. This scheme is likely to benefit 12 crore small and marginal farmers, at an estimated cost of Rs. 75,000 crore, he said. Apart from this, he also said that the government has set aside Rs 60,000 crore for MGNREGA this year, and allocated Rs 19,000 crore for Pradhan Mantri Gram Sadak Yojana.

The finance minister also said that the country’s defence budget for FY20 has been increased to Rs 3 lakh crore.

The government allocated Rs 64,587 crore for railways in FY20, Goyal said adding that the railway operating ratio was seen 96.2 per cent in FY19 vs 95 per cent in FY20.

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Reblog: Seth Klarman Protege David Abrams Says “Value Investing Is The E = mc² Of Money And Investing”


One of our favorite investors to follow here at The Acquirer’s Multiple is Seth Klarman’s protege David Abrams. Abrams typically shuns the public limelight so it’s difficult to find interviews where he shares his investing strategy. The WSJ did a great story on him back in 2014 titled – Hedge-Fund World’s One-Man Wealth Machine saying:

Mr. Abrams got his start in 1988 at Baupost Group LLC, also based in Boston. Run by Seth Klarman, Baupost is one of the world’s largest hedge-fund firms, with $27 billion under management. The two remain friends, and Mr. Klarman’s personal foundation has put money into Abrams Capital’s funds. Mr. Klarman described his protégé as “smart as a whip.”

“He loves a good puzzle and a good treasure hunt,” Mr. Klarman said.

The hedge-fund manager, David Abrams, has personally become a billionaire, and earned billions more for his wealthy investors, over the past five years running what is effectively a one-man shop, according to company and investor documents reviewed by The Wall Street Journal and people who have worked with him. His firm, Abrams Capital Management LP, manages nearly $8 billion across three funds and is discussing raising money for a fourth fund that could help push its assets past $10 billion.

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