Category Archives: Common Sense

Moving away from the Greeks

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I’ve never been to Greece.

I have nothing against people from Greece.

I don’t like Greeks, though.

Yeah, I’m an options player.

The Greeks I don’t like are options Greeks, he he he…!

What, you thought I didn’t like actual Greeks?

Come on, I’m sure I’ll love Greece and actual Greeks!

When you don’t like something, you can try to go around it.

I don’t need options Greeks to play options. I’ve found a way around the Greeks.

I’m sure others have discovered this too, because truth is truth.

Let me tell you about it.

You’re buying in the direction of the long-term trend.

You’re buying (calls / puts) after a significant correction / rally level has been hit.

You’re buying post a small move in the direction of the long-term trend, after the correction / rally level has been hit.

You’re buying out of the money to compound the cheapness.

You’re buying with breathing space on your side, so that the trade has enough time to pan out in your favour.

You’re not booking without a very solid reason, once the trade is running in your favour.

You’re trying to book (deep) in the money.

You must, must, must let your profits run as long as you can. This is the toughest part, but also the most essential one.

That’s all.

No Greeks.

Just common sense.

Options Setup El Cheapo

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What are the basic ingredients of a cheap options setup?

We’re not bothered about what the underlying is.

We’re outlining in general. 

A correction / rally needs to have taken place. 

The correction / rally level needs to be significant.

That’ll account for the cheapness of the option.

I suppose it’s obvio, but I’m still saying it nevertheless, that you’re going to be trading in the counter-correction or counter-rally direction, but in tandem with the overall long-term trend.

Then, a slight move needs to have started in your trade direction after this significant correction / rally. 

That could account for correct choice of trade direction. 

We need just one more ingredient.

Can you guess what that is?

Yeah, breathing space. 

Allow the trade time to pan out in your direction. 

Buy an option which has at least 3-4 weeks left till expiry, if not more. 

That’s it. 

It’s as simple as that. 

Lucrative ideas are simple. There is nothing complicated about them. 

Lose your sophistication and / or complicatedness. You’re not going to make it big by being sophisticated or complicated. These two characteristics will negatively affect your trading. Flush them down the drain. 

Be simple. 

Happy trading. 

🙂

That Thing about High Growth

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Panipat, India, 2004…

The Asia-Pacific Head’s speech was intriguing. I still remember it, even though it was delivered a decade ago. 

He’d come to inaugurate his bank’s branch in our town. He said that he loved opening new branches in the middle of chaos, where he can barely manage to park his car, and where there is just about an iota of order amidst disorder. 

We were puzzled, and I believe one of the invitee’s even ventured asking why. “That’s where 8%+ growth exists” replied he, or something to that effect, and his words stamped themselves in my memory. 

Cut to 2014.

Look around you.

Can you find any corner in the world, where high growth is linear?

Very low single digit growth can be linear, yes. In such countries, there are systems, that check short-cuts and mal-practices. Governments are overall honest. Social security systems are up and running. 

There is some element or the other of a banana republic to any really high-growth economy you find today. You don’t really know what’s cooking in China’s soup, do you, behind the media-ban? Brazil’s let so many starve to host a successfully organised world cup. How much of Russia is about mafia, and crime? And, India might be a democracy, but you just need to look at the inflation and deficit numbers to figure out that something’s off. We’ve just gone through the BRIC nations, prime examples of high non-linear growth. 

Let’s not grieve about what all is wrong with high-growth nations. Let’s look at what we do have going in our favour. What’s common to such nations?

 

– The fact that growth comes in spurts, when some conducive event occurs, like a sound governance stretch.

– The fact that these economies are all highly volatile. 

– The fact that we don’t need anything else – to trade them. 


Yes, we are going to trade such economies. Regular volatility, both ways, is what a trader wants. 

You can invest in such economies if you want to, sure. In that case, you’ll need to use your common-sense and not believe every balance-sheet that is being presented to you. You’ll need to read between the lines at every step. Some people are good at that. 

I’m more comfortable trading a volatile market. 

Thus, I really don’t care why a Ranbaxy might be poised to go down. I’ll just be looking to purchase a cheap Put upon noticing that a key support level has broken down. 

At the same time, I couldn’t care less if an Infosys is just about to disclose stupendous numbers. I’ll just be looking to purchase a cheap call based on a technical level being pierced towards the up-side. 

That’s the thing I love about trading. You don’t need to ask more than a few basic questions before taking the plunge. Also, with avenues like options now being liquid both ways, risk is exactly defined and relatively low. 

The thing about high-growth economies is that you can play them well enough with options. 

Wishing for you happy and safe trading.

🙂

Connection & Disconnection

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Sizzling hot stuff is best kept at an arm’s length … … something I learnt along the path … …

You reach for it at a conducive time, do what you need to do, and then you let it be. This way it doesn’t burn you. 

When you’ve let it be, you’re not thinking about it. Your mind has switched off from it. It is utilising its resources to do other stuff … … till it’s time to work with your sizzling hot stuff again. 

Now replace sizzling hot stuff with Mrs. Market.

There’s no doubt in my mind that Mrs. Market can burn you. You need to work with it in a manner that it doesn’t. 

You’ve understood that whole deal about the establishment of an emergency fund. Such a fund will render any burns only temporary. You have to have an emergency fund going first up, before you enter Mrs. Market. The income generated from this fund needs to cater for the basic requirements of your core family. Period.

Ok, good, so now you’ve got your protective gear on. Till you’re getting it on, you are absolutely disconnected from Mrs. Market.

Now let’s talk constant connection and disconnection. 

Why allow something or someone to control your moods?

No!

You are absolutely not giving Mrs. M that much power. 

Therefore, play small. 

How small?

Small enough to not lose any sleep over Mrs. M. 

Play with stops. These allow you to disconnect from Mrs. M and focus on other work. Other work is as important as Mrs. M, or perhaps more important. Yeah, show Mrs. M her place in your life. This way she’ll behave herself. Giver her any more leeway, and she’ll take over your life, and you don’t want that, right?

So, connect to Mr. M, do your work, place your stops, and disconnect. 

Don’t think about Mrs. M till you connect to her again. 

The period in between connection and disconnection is your time. Use it for any activity that has nothing to do with Mrs. M.

Day in, day out.

 

 

Speed of Rise vs Speed of Fall

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Specifically, equity markets have this one repetitive characteristic.

Their average speed of rising is lesser than their average speed of falling. Much lesser, I would say. 

Why?

Falling has to do with selling pressure being more than buying pressure. Selling pressure is connected to fear. Add caution to fear, and one has already sold out. 

Rise has to do with buying pressure being more than selling pressure. Buying pressure is connected to optimism. As markets keep nudging higher, slowly, optimism turns into euphoria, with a hint of caution. This caution slows the speed of rising, till greed takes over in the last stage of the rise, and one fails to see any caution anymore. At this time, the speed of rising is the highest, but is still lesser than the speed of falling at the nadir. Why?

What is the prevalent situation at a nadir? There’s blood. People are running for their lives. They take action before asking questions, and before looking here or there. 

Many times, you come across someone holding a stock which he or she has inherited from a parent. This someone comes to you with the ubiquitous query – what to do, sell it now? You look at the chart. Whoahhhh! You see the buy price, one and a half decades ago. You look at the current level. You calculate the profit. Along the time axis of the chart, you also see that the stock fell back to its buy price or below in a market crash, all within a month and a half. After this, the stock has recouped its losses of the crash, and is showing a healthy profit again, six years after the crash. During the crash, how long did it take the stock to fall below the buy price of one and a half decades ago? A month and a half. Holy moly!

That’s the equity playground for you. 

It’s directly connected to human emotions. 

Anything can happen on this playground, so keep your eyes and ears open, and…

… be prepared. 

Learning to be Blunt

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Don’t like something? Is it causing you harm? Is someone bothering you? Is something draining your energy? Are you unhappy with a situation?

Get a grip. 

Get that something or someone out of your way. Now. Be blunt about it.

It pays to be blunt. I’m really learning this the hard way, but today I feel there is a lot of truth in this. 

I’ll tell you how I’ve benefited. 

All uselessly energy-depleting people and situations are now out of my life. With the surplus energy saved, I am able to create. 

Stonewalling is for bankers, private investigators, cops, crooks and what have you. 

Diplomacy is for diplomats. Let them do their jobs. 

I’ll do my job. I wish to conserve maximum energy for activities I enjoy and which are beneficial to my surroundings. To achieve this, I have learnt to be blunt. 

Who was my teacher?

Ever wondered?

I mean, do you ask such questions?

Do you use your imagination?

Do you grow?

Are you doing justice to your incarnation as a human?

Ok, enough provocation. Who was my teacher?

None other than…

… Mrs. Market.

I take my stops.

I’m blunt about taking small hits. Very, very often. 

So often that…I’m numb to their pain. 

This puts me in line for…

… fill in the blanks…

… big wins …

… provided …

… fill in the blanks …

… what, you thought this would be a spoon-feed… ? …

… well, … provided…

… provided I let my profits run. 

When a Model collapses…

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… that’s when you shouldn’t collapse.

A model is something temporary. You use it. Successfully. For a while.

Then it starts to play up. You tweak it into yielding successful results.

You keep doing this, till the model is representable. Ultimately, it collapses.

You don’t grieve or look back. Construct a new model.

Tweak it into success.

Move on.

Construction of a market model requires you to use common-sense and your observatory powers.

How do you mould a market into your daily usage without tipping any other balance in your life?

Right, we are only going to be discussing holistic models. Such models should not make you a worse human being. Otherwise, find a better model.

You’ll also need to create some vacuum in your system to attract the required energies for the construction of a new model from scratch.

Use your imagination. Move stuff around. Donate. Write. Help. Be kind. Do good. Pro bono. Create a vacuum in your system.

Soon, your vacuum will attract what you deserve and require. A missing link might flash as a brain-wave. An obstacle might get removed. A vital family member might become kinder. Nature’ll give it back to you.

Before you know it, you’ll be working with your new model…

Remember The Frog Who Lived in a Well?

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Paramhans Yogananda once spoke of a frog who lived in a well. 

You see, this frog was visited by his cousin from the ocean, who invited him back to the ocean. Till that point in time, the well-froggy thought his well-world was the ultimate. When the well-froggy entered the ocean, his head exploded. 

Today, I feel like the well-froggy. 

Yeah, I’ve become serious about forex. I’m going to specialize in it. 

I’m already specialised in Indian equities, and am going to seal it off with this second area of specialization.

That’s after a controlled head-explosion, of course. 

Coming from the world of equity, forex feels like a borderless and unlimited party. It also feels very, very special.

Everything’s so enormous. So streamlined. So quality. 24×5. Volume. Paperless. Non-slippage. Pinnacle of technicals and fundamentals. Unparalleled and breaking newsfeed, if you want it … … …

I’m feeling blessed. This line is for me. I can feel it’s challenge. I think I’m cut out for it. I think I’m going to love it.

It’s taken ten years in finance to find this calling. 

I’ve tried everything that finance has to offer. Equity, bonds, derivatives, bullion / metals, commodities, currencies versus the INR, ULIPs, Arbitrage, mutual funds, real-estate, debt, private equity …….., you name it. 

Only pure equity has given me that kick till now. Of course I’m not going to throw it away. I’ll be in pure equity for life. 

And now, yeah, it’s forex on the world stage. 

And look how nature is responding.

It’s already directed me to a mentor. A lot of my thinking is changing. Till today, I’ve done good with just my common-sense in the world of finance. I suppose forex is a bit trickier than that, and that one needs a good mentor in the beginning. 

Wow! A world-class mentor in forex, when one is starting out with the nitty-gritty! That’s a big one!

I’m going to give it back. This blog’s a give-back too. I’m not going to be stopping any word-flow, I can promise you that. 

Cheers!

🙂

 

How to Swallow Small Losses…

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… as if nothing has happened … is one of my biggest trading goals.

You see, our society teaches us not to lose. 

It doesn’t teach us that we can lose a bit 5 times, and after that we can win big, recovering all our losses and making money overall.

No. 

It teaches us to try and win all the time. 

That’s the exact reason 90%+ of all society members actually lose in the markets. They’ve not learnt how to lose small, move on, and take the next trade.

Mrs. Market won’t budge an inch for you. You’ll have to make the adjustment. 

So how does one take a loss in one’s stride?

Only one type of loss is immediately digestible – a small one. Therefore, define your risk in the market. Cut and scoot when required. Don’t get married to your trade.

Then, once the small loss has happened, and has been taken, it will nag you. 

It’ll be there, trying to bite your brain in the background. 

Focus on your next trade. 

Identification – Implementation – Entry – Management – Exit – Next Trade Identification – Implementation – Entry – Management – Exit – Next Trade Identification – Implementation – Entry – Management – Exit – … … [what’s the difference between implementation and entry? Well, you could be implementing the trade through a trigger, which is not equivalent to entry yet].

Don’t let the nagging bother you by keeping yourself busy with Identification – Implementation – Entry – Management – Exit – Next Trade Identification – Implementation – Entry – Management – Exit – Next Trade Identification – Implementation – Entry – Management – Exit – … … 

Ultimately the nagging will die out, as your mind starts to revolve around your current trades. 

If you give in to the nagging, it will grow, and will slow you down. You might snap at a family member. You might go into depression. You might freeze. DON’T. Don’t give in to the nagging. Don’t let it grow. Don’t let it slow you down. Maintain your family equilibrium at all costs. Move on. 

The nagging is worst if there’s been a close below your stop, and the market is to open the next day, or after the weekend. You have to deal with this one. If you’re not able to deal with this particular situation, you’ll either need to expose your mental stop prematurely and feed it in intraday (before there’s been a close under it), or you’ll need to follow the progress of your trade from half an hour before next market open onwards.

Yes, this last one’s tough, and you need to absolutely work your way around it. 

You can do it with a bit of practise. 

🙂

The Meaning of Comfort

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Your money is as comfortable as you are.

Why not make it comfortable?

Right, for that you’ll need to be comfortable.

How does one go about doing that?

There are many meanings of comfort. 

You need to choose the right one for yourself.

Mission recap – this is the marketplace, and you need to feel comfortable in the marketplace. 

Firstly, secure your bread and butter. Decouple it from the markets. No matter what happens in the markets, your bread and butter should not stop. In fact, it should not even be threatened. You got it. Enter the markets on a secondary mission. Enter it to have fun first, and success will follow. 

Secondly, where does Jack want to play? The arena is so vast. Does Jill want to do many things, or does she want to master one, or perhaps two segments. What gives you pleasure? What gives you a kick? What challenges you? Find out for yourself. Try out everything if you want. Try things out many times. Ultimately you’ll know where your calling is. Your future field of expertise will speak to you. Do what you enjoy doing in the marketplace. Whatever you do should come naturally to you. Nothing should be forced, or a burden. That’s when you’ll excel.

Before this, you’ve lost small. That’s tuition fees. The best place to study finance is in the marketplace. Embrace your tuition fees. Keep it low. Make a mistake – repeat it if you please, as long as levels are small. Don’t ever repeat any mistake as levels start to get big. Levels start to get big as basic salary pay-checks start rising with age. Mistakes then mean larger losses. 

You are not tense because of your market activity. It won’t snatch your child’s education away. It won’t take food off your family’s table. You are comfortable. That’s when you play the markets best. 

Slowly, your actions will start adding to your income. 

That’s the sweet-spot. That’s where you want to be. At this spot, your comfort-level, along with your confidence, will keep going higher. 

Soon, big wins will come. All because you’ve understood the meaning of comfort.

Go for it. 

 

Dynamics of a Long-Long System

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What if your system doesn’t allow you to second-guess yourself?

Wouldn’t that be a wonderful situation?

And you’d be right there, in the middle of it all.

What would such a system look like?

Right, it would only go one way.

Long-long. “A-la-la-la-la-long”, to quote Inner Circle!

Why aren’t we talking about a short-short system?

Theoretically, we could. Theoretically, everything is possible.

Well, a short-short system would have no limits on your potential loss, if the trade went against you. That’s the fundametal problem I have against a short-short system, without even having gone into the whole leverage discussion.

You could bring the stop argument.

Fine.

Just take a deep breath.

Think clearly.

Take a look at the average price-speeds of both directions, long and short.

The average price-speed in the short direction is far higher. Price-jumps are greater. The probability of your stop getting high-jumped over is much higher in the short direction. Frankly, that doesn’t work for me.

Also, which market allows you to set an overnight stop, barring the international forex market?. None that I know of, at least in India. No stops overnight means potential exposure to a large drawdown upon next market-opening, and here I’d like to be in a long-situation, because loss is capped.

Therefore, when we’re discussing a system that doesn’t allow us to second-guess ourselves, I will only discuss a long-long system.

What does long-long mean?

Yeah, we’re talking about a system, where you’re looking for long trades all the time. You don’t look for trades to go short in-between. There’s no shorting in the equation whatsoever. The moment you start thinking about shorting, you start second-guessing your long-approach.

What does that mean for someone applying such a system?

It means that the whole world might be crumbling apart, and one is still looking for long-trades. Yes, one could take some hits here. One just needs to make sure, that one’s consecutive drawdown doesn’t exceed a bearable level. Also, as losses might pile up, one position-sizes one’s way through. The concept ot position-sizing has been pioneered and elucidated by Dr. Van K. Tharp @ www.iitm.com.

It also means that when your underlyings start to run, you’ll be piling up winning trade upon winning trade.

The thing is, nobody knows when what is going to run. If you’ve taken all second-guessing out of your equation, you’re aligning yourself with the correct direction once things start to run. Going the other way now would mean further losses.

Then, it further means that if you lock in a big winner in a running market, your paper profits can now be used to harness even greater profits in the same trade. Such big winners provide a big boost to your trading corpus, and, in my opinion, are the difference between winning and losing in the markets. One needs to keep oneself aligned correctly when such opportunities come along. A long-long system will keep you aligned, no matter what.

You could argue about dry spells.

In any dry spell, or when markets are tanking, there are still underlyings that are going up. You just have to identify them. Today, such identification is not difficult at all.

For such identification, you need market software, a data feed, and an algorithm which defines what you are looking for. Your software then scans the entire breadth of the market you’re in to try and find what you’re looking for, and opens corresponding charts for you for underlyings that are still going up, or where there is buying interest, buying pressure, unusual increment in volume or what have you.

Don’t let the word algorithm scare you. You don’t have to learn a new programming language to put an algorithm together. Common-sense is enough. You know what you’re looking for. Let’s say what you’re looking for involves volume and price. You look inside your market software. Then you couple two algorithms together into a new algorithm which defines what you are looking for. You see, a typical market software like Metastock already uses algorithms for volume moving average, price etc., and these are visible to you. Just copy-paste and make a new algorithm that suits your purpose.

Lastly for today, decouple yourself from the market during trading hours, except when you’re feeding in the trade. Analyze your current trades when the market is closed. Intuitively, you will probably feel that your decisions during off-market hours will be better than when you’re coupled to a live market. Find out for yourself. More on this some other day.

Emotion in the Marketplace – Enemy or Ally?

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Either or…

… choice is yours baby.

I’m not going to pretend we don’t have emotions.

We do.

We need to make these work for us.

Everyone feels exhilaration upon winning.

We’re down after a loss. 

Before you enter the marketplace again, dump all this somewhere …

… which, btw, is the most difficult thing in the world.

Didn’t anyone tell you that? What about your professor in financial college? Oh, I forgot, he or she never had his or her own money on the line, so he or she didn’t know this one. 

Arghhhhhhhhhhh@#$%^!

Don’t learn anything about finance from anyone who doesn’t have his or her own money on the line, and that too regularly on the line (((financial theory is worth mud unless it is realistic, applicable, and ultimately…profitable). 

So, what is this “line”? [More about “The Line” here – https://magicalbull.wordpress.com/2012/01/13/the-line/ ].

The line is an invisible connection between the vicissitudes of the marketplace and our emotional centres in the brain. 

The line gets activated once one is in a trade, or once one has initiated an investment. 

Once the line has been activated, we need to deal with its effects upon our systems. For optimal efficiency, we need to nullify the effects of the line on our systems. After that, we enter the marketplace again. 

So, acknowledge whatever emotion you are experiencing. Then deal with it. 

Dump the emotion of a loss in a safe place, to be nullified by a big future win. 

Dump the emotion of a big win in another safe place, lest it causes you to exit improperly and prematurely. 

How does one nullify this particular emotion? 

You see, your next activity in the marketplace can make you blow up, if there is any remnant hubris from a previous big win. 

You close your eyes, tell yourself that under no circumstances are you going to suffer the humiliation of blowing up, you centre, focus, you identify the next trade, and then you just take the next trade, as if nothing has happened. 

You have to work yourself around your own emotions. In the marketplace, emotions are your allies only if and when they are properly dealt with before the next market activity. 

Otherwise, they become your enemy. 

Loss can lead to depression and ultimate exit from the marketplace. One needs to understand and accept the concept of taking small losses. Why small? Why not small? You can define your loss. You can cut it when it’s small. Once one has understood and accepted the idea of taking small losses, these won’t bother you any more. That’s how you set yourself up to win big. Big wins, unless dealt with properly, lead to hubris, which can cause one to blow up permanently. We work ourselves around the negative potential of big wins through visualisation. 

Once you’ve sorted out the emotional angle…well, just take the next trade. Don’t wait. Just take it. 

Are You a Juggler?

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No?

Why not?

You don’t need juggling balls to juggle.

Life in a country like India is enough.

India teaches you to juggle your way through.

You keep improvising… till something fits.

In the marketplace, a fit is big news. One struggles towards a system that fits.

Once there is a fit, you follow the system, till it continues to fit.

As the fit experiences turbulence, you struggle, tweak and juggle towards a renewed fit.

What does a fit mean?

Success.

Balance.

Harmony.

Health.

Happiness.

Peace.

What more could one want?

At times, a system collapses.

Accept the collapse.

Work out a new system.

Fine-tune it into fitting.

You’re a juggler, remember?

Am I Taking Bitcoin Seriously?

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Yeah.

Bitcoin is a serious new kid on the block.

Am I getting into it? That’s the more important question, isn’t it?

Well, not yet.

First up, I know very little about it. I’m not going to get into something because of the smoke. Gone are the days.

So, I’m educating myself.

The Web tells me that Bitcoin is not alone. Numerous Crypto-currencies have emerged. Confusing.

Many of these have their main servers or their secondary addresses located in ex-Soviet / ex-iron-curtain nations. Intimidating. I’m afraid.

Then I look at the bid-ask spread for Bitcoin. There’s typically a 1% difference between buying and selling price. That is huge. In fact, it’s outrageous.

After that I look at the Bitcoin price vs time chart.  I can see the panic in the chart. I don’t like panic. I generally stay away from panic markets. If I’m entering a long-term market, I like entering on a solid base foundation. The panic dust hasn’t settled yet. Technical bases build after panic settles, and only if the underlying has long-term mettle. They’re visible on the chart as horizontal stretches. Not happening as yet on the Bitcoin price vs time chart. Means I’m not entering yet.

Then there’s this mining stuff. Like, virtual mining. I don’t understand it. Yet. Looks silly, off-hand. Could this be connected to currency-backing? Or, is this just a hype-creating gimmick that doesn’t make economic sense? I’m not sure, I tell myself.

Last point I’m making against current Bitcoin entry – theft and loss. If I store Bitcoin on my computer, it becomes a potential target. I don’t wish to have the 5 million odd extremely sharp ex-Soviet ex-chess wizard brains targeting my computer. Period.

So, where do we stand?

Meaning, why am I taking Bitcoin seriously?

The USD has nothing backing it. The US seems to be following a fiscal policy with high risk of implosion due to escalating debt. They’ve got no reserves left. Savings are nil. The USD will probably maintain its hierarchy till the world has another alternative.

A few years ago, I thought that Gold could be this alternative. Today, I think Bitcoin is a more serious contender.

First, I need to convince myself that Bitcoin is backed. Meanwhile, the noise will even out, and only the most solid crypto-currencies shall live on. I’d like Bitcoin to still be at the top of all crypto-charts once the noise settles. By then, there’ll be someone reliable in my own country offering Bitcoin investment and trading, someone I know, like an HDFC Bank, or a Kotak Securities. Volumes will escalate. Slippage will be down to a bearable 0.1% or less. Bitcoin’s chart will show a base foundation. I’ll have understood the virtual mining stuff, and hopefully it’ll be connected to currency-backing. Banks will store Bitcoin as an e-holding, which will reflect in one’s Netbanking.

That’s when I’ll enter Bitcoin.

The Path

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You’re just two steps away…

… from success in finance.

Don’t follow anyone.

Use your common-sense.

That’s all it takes.

Use your nose to sniff out trouble.

Use your eyes to identify Ponzi billboards, with promises of 12%+ returns. Use your hands to push away the Ponzis, or your feet to kick them out of your office.

Shut your ears to the external world. No tips, no rumours. Use your ears to hear the sound of your own intuition. Yes, use them to hear your inner voice. Correct, this is about you. You and only you bear full responsibility for your finances and well-being.

As and when you identify the taste of success, you might realize the following.

Success doesn’t taste sweet without appropriate struggle. To really know, feel and retain something, the human being must know and feel the opposite pole first.

What matters in the end?

Meaning, after you’ve gotten your success, and are sitting on top of things?

Yeah, what matters then?

Any ideas?

The path you took. That’s what matters.

Your path has shaped your soul.

Success is a mere statistic.

The real game was played on the path.

Did you enjoy the path?

Did you enjoy it despite the struggle?

Did it challenge you?

Did you learn something?

Did you grow?

Did you stop to smell the flowers while on the path?

Did you help others who were struggling with their paths, even as you were coming to terms with your own path?

Did your path fulfill you?

Did it give you the feeling of “Yes, I’ve done something”?

Did it make you happy?

These are the factors that really matter.

They make your grade in the path called life.

Enjoy your path. It’s nature’s gift to you, whereas…

… success is a mere statistic.

Happy Third Birthday, Magic Bull!

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Hey,

We turn three.

You know it, and I know it…

… that this year’s been a slow going.

Sometimes, life is slow.

Such junctures are great times to recuperate and consolidate.

Inaction is big in the markets.

Very few know how to be inactive – and stay sane.

Those who do – well – they make big bucks when it’s time for action.

That’s only if they haven’t gotten rusty and lazy by then.

Yeah, inaction is an art.

In the markets, it is at least equal in importance to – action.

So, for the most part of the year that’s gone by, my market activity’s been practically zilch.

It’s not that I’ve been sitting and twiddling my thumbs. No! For heaven’s sake! Of course I’ve been doing other stuff.

Inaction in the markets must be coupled with action elsewhere, if one plans to stay sane, that is.

Also, inaction in the markets leads to preservation of capital. That, what you made during active times, remains safe, pickled and intact.

Then, when there’s opportunity, you’ve got your whole arsenal to cash in with.

While changing gears, don’t jump out of your seat with your saliva drooling, though.

Have some rules in place for opportunistic action.

I have some basic rules for myself at such junctures. I don’t put more than 10% of my networth on the line, while pursuing an idea. This rule applies for me while changing gears too, more than ever. Also, I don’t pursue more than two ideas at any given point of time. Most of the time, I’m not pursuing any idea, till an idea appears, refuses to break down, and just sticks.

Safe.

Simple.

Comfortable.

Ideal circumstances…

… to hit the sweet-spot…

… when it’s time for action.

Wishing you happiness, safety and profits in whatever market activity you pursue,

Yours sincerely, and just there for you, period,

Magic Bull.

Taking the Pan out of Panic

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Panic – Pan = ic = i see = I SEE.

Times are unprecedented.

We’re breaking new lows of evil everyday.

Ours looks to be a hopeless nation.
Is it over for us?

Shall we pack up our bags and migrate?

Just take a deep breath. Bear with me for a moment. Try and cast your panic aside. Try and think clearly.

I’ll share with you an observation. Take any Indian. Doesn’t have to be an outperformer. Take an under-averagely performing Indian, for all I care. Weed him or her out of our pathetic system, and place him or her in a nation with good governance.

Lo and behold, our candidate will start performing. Not only that, soon, he or she will be outperforming. After a decade or so, he or she will probably have mastered the system and punctuated it with innovative short-cuts.

Get my point?

We are a resilient race. We might look fickle, frail and harmless superficially, but we can struggle, bear, survive, and finally break out. Just give us good governance.
Don’t panic. We’re not going down that easily.

What’s happening currently is a purge. Yeah, it’s a catharsis with a big C. While it continues, asset classes across the board will probably get hammered.

What does that mean for you?

Only one thing.

Stay in cash. Accumulate it. Learn to sit on cash. Sit on it as long as the purge lasts. Let its value depreciate, doesn’t matter. Park it safely with a conservative private bank. Fixed deposits would be the instruments of choice. Yeah, you don’t want to leave unattached cash lying around. Potentially, unattached cash could be susceptible to online fraud. Attach your cash, safely, and keep it before your eyes. Put some watch-dogs in place, as in sms and email alerts. Password-change attempt? You are immediately alerted. New payee added? You are immediately alerted. Watch-dogs bark.

As per my instinct, though we probably won’t go bankrupt as a nation, we might just go a long way down before the purge is over. After the purge, there will be tremendous bargains on offer, across the board, in all asset-classes. Cash will be king. Save your cash and sit on it – for that day.

Meanwhile, your wealth-manager will try to push you into panic purchases with your cash. As in, buying gold at 32k, and the USD at 65. Don’t listen. These are crazy levels. One doesn’t invest at crazy levels. These are not even normal trading levels. Yes, they are institutional trading levels. One does not invest at institutional trading levels.

It’s time to use your common-sense and maintain a cool head.

You can only do that by refusing to panic.

One Up on the Romans

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Sometimes, words are hard to come by.

Like now.

It’s a dry spell.

Happens.

At other times, well, they burst forth as if a geyser’s exploded.

Then, I’m not able to stop their flow.

That also happens.

Welcome to the dual-natured environment of Earth.

While we’re steeped in this duality, there’s no option but to get used to it.

One can always go on to then master it.

Oh, I forgot, that’s optional.

I’ll tell you what I’ve done to master such fluctuating fortunes, as far as word-flow is concerned.

Two simple steps, that’s all.

When we’re dry,…, we’re dry. No PhDing over the fact that we’re dry. We’re just dry. Period. Accepted. Digested. We just go on to do other stuff. There are millions of other things that grab our interest on this dual planet.

When we’re up and running – that’s just it – we’re up and running. No PhDing over why we’re up and running. We let the flow happen. We can decide to make it happen even more. That’s optional…, but we don’t stop the flow… till the tap dries itself out.

Similarly, you can experience a string of losses in the markets. Losses make you hit your cut-off. A cut-off is a cut-off. You don’t keep on trading. Nature’s telling you to lay off till your mind and body align themselves with the flow of the markets again. Just do other stuff till you’re mentally and physically back.

On the other hand, when profits run, they can really run. PLEASE LET THEM RUN. Don’t PhD about the run. Let them run till they dry out.

When in dualism, the idea here is to first live through dualism, in order to understand its nature.

We’re one up on the Romans, though.

We’re trying to be masters over our fluctuating dualistic environment.

Yeah, in the markets, we’re getting through losing spells with minimal damage.

Simultaneously, we’re maximizing the potential of profit-runs.

That’s what we’re doing.

If not, then that’s exactly what we are going to do.

Cheers

🙂

The Art of Emotional Recycling

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Taken a hit?

If yes, at least admit it… to yourself and for your own sake.

People take hits at various times in their lives.
That’s the way of the market.

That’s how it teaches us to make money next time.

Think of your loss as tuition fees.

In my opinion, the best way forward is to take lots of small hits in the first seven years.

Then, in nine cases out of ten, you won’t fall for the big ones.

Big hits can decapacitate a player, especially when they come late, since there is no time for full recovery. Besides, emotional breakdown at a late stage is very difficult to get out of.

Make it a point never to take a big hit.

That’s only possible, if at any given time, the capital that is risked is within reasonable limits.

Let’s say you risk not more than 1% of your networth at any given time. What’s the maximum hit you will take at one time? Right, 1%.

That’s bearable.

That’s something you can shake yourself out of, and move on.

Moving on is a huge quality to possess in the markets.

Taken a hit?

Move on and make your next trade.

All this while, you are putting any remnant emotional hurt in cold storage.

Yeah, there’s a certain portion of emotional hurt that won’t be nullified by family time, vacations, hobbies etc. We’re talking about the hurt to your ego. Only a big win will wash that away. Only then is your emotional recycling complete.

Put yourself in line for that win.

After a hit, rest, recuperate, grab your wits, focus, and…

… put on the next trade.

What’s your Answer to Dictatorial Legislature?

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Cyprus almost bust…

Money from savings accounts being used to pay off debt…

Five European nations going down the same road…

US economy managing to function for now, but without any security moat (they’ve used up all their moats)…

Our own fiscal deficit at dangerous levels…

Scams in every dustbin…

Mid- & small-caps have already bled badly…

Let’s not even talk about micro-caps…

Large-caps have just started to fall big…

Just how far could this go?

Let’s just say that it’s not inconceivable to think… that this could go far.

Large-caps have a long way to fall. I’m not saying they will fall. All I’m saying is that the safety nets are way below.

I see one big, big net at PE 9, and another large one at PE 12. Getting to either will mean bloodshed.

Inflation figures are not helping.

In a last-ditch attempt to get reelected, the government recently announced a budget for which it’ll need to borrow through its nose.

Oops, I forgot, it doesn’t have a nose.

The whole world is aware about work-culture ground-truths in India.

Things are out of control, and this could go far, unless a miracle occurs and Mr. Modi gets elected. Before such an eventuality, though, things could go far.

When large-caps fall, everything else falls further.

How prepared are you?

Hats off to those with zero exposure.

Those with exposure have hopefully bought with large margins of safety.

Those who are bleeding need a plan B.

In fact, a plan B should have been formulated during good times.

Anyways, how prepared is one for a Cyprus-scenario, where dictatorial last-minute legislature allows the government to whack money from savings accounts?

In future, you might need to find a solution for loose cash in savings accounts. It needs to be kept in a form where government doesn’t have access to it.

As of now, what’s serving the purpose is an online mutual fund platform, through which loose cash can be moved and parked into liquid mutual fund schemes. For government to exercise full control over mutual fund money, it’ll probably need to be more than a bankruptcy scenario.

That’s just for now. Adaptability is the name of the game. It’s always good to be aware of one’s plans B, C & D.