Category Archives: Market-Forces

Fading Deception

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Manipulating…

…the masses…

…towards something to be bought…

…or something to be sold…

…when whales are out to buy or sell, respectively, …

…is the bread and butter order of the day usual suspect chicanery that one can expect in the marketplace.

Unnerving?

Relax.

It’s normal.

How else would a whale feed on a school of fish?

Meaning, how would a big institution, or a many-big-institutions-conglomerate loosen the public’s hold on their holdings, to sell en masse if the big people are buying. Or, vice-versa, how else would the BigFats offload bulk onto the unsuspecting FatteningPigPublic, if the BigFats (BFs) are selling bulk?

Deception…

…is a handy tool that comes to hand.

Offloading Korea? Gold? Silver? Oil? Something AI with no fundamentals? Create the hype, reel after reel, rant after rant, roadshow after roadshow, till all and one’s Aunty believe the story, and when these latters start to act, BFs start offloading.

Buying Core Indian Tech? Lambast the country and the world with non stop ranting for 5 months and continuing. Flood its social media with panic reels about the collapse of Core Indian Tech with its debt-free-ness and its cash on the balance sheets, something whales want to own, and watch the underlyings crash, lapping them up as huge bargains.

Disturbed?

Manipulation is irritating.

However, it sets up opportunities.

Buying opportunities.

Selling opportunities.

It’s woven into the nature of markets.

Material and emotional life is about wheedling a few bucks out of someone, or keeping someone’s affection trapped with emotional blackmail.

Markets are a reflection of life itself, thus.

Why should one be alarmed, then, when short-term life-dealings are also found in the markets?

Any way out of this conundrum?

There is.

Remove the noise.

Move away from the one-month thought process, the three month one, the six month one, the one year one. Move longer term. 5 years. 10. 20. No noise now. Fundamentals will shine and translate into EPS spikes into price spikes. That’s all. That’s how markets work. This takes time though. Time enough for manipulation to come, do its work, die down as noise always does, and then the real game starts to play.

If you still can’t handle it, move onto some other play.

Or…

…teach yourself to stay long-term.

Best way to learn is to put your money on the line, hit, try, fall, get up, repeat, till you stop falling.

Ensemble

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Amidst the…

…frenzy…

…of reels, posts, communications, reports, research and what have yous…

…concerning the ongoing image battle of AI vs Core IT…

…it is extremely difficult to keep one’s head and vision clear.

What does the future look like?

A flurry of multitudinous pathways emerging does not mean utopia yet.

Forward outlook, especially a lucrative one, is not about exclusion.

Coming on to the scene with an attitude of trampling everyone else out of the scene – is this sustainable?

No.

Going into the future with partnership?

Yes. Sustainable. Let’s look around. Who’s forming partnerships?

Core IT. Yes. The impulse to continue to thrive is a strong one.

AI? (Yes). No. No. Unsure. No. Yes. No.

The frenzy that results after having spent obscene sums with steady revenue streams only developing since recently is so frantic and haphazard, that one’s left hand sometimes doesn’t know what the right hand is doing.

Pulling at the same string in the same direction will maximize revenue stream.

Hostile attacks at Core IT, every few days a new one, is not the way forward.

Is this a case of ‘as the leader does so do the subjects act’? A kind of a concerted strategy? To stomp on everyone’s heads and declare oneself king.

King?

Perhaps for a day.

Long-term market leadership requires craft.

Craft comes from years of honing.

Speak track record.

Who has this?

Core IT.

AI has at max what? Capability. Not craft. For craft, one needs to grind.

New kids will need to work as an ensemble within business infrastructures.

Not without.

Within.

Inclusion is in.

Exclusion is out.

Boo to exclusion.

Imagine a scenario…

…when Core IT comes out with something…

…much…

…much…

…cheaper.

Even in that scenario, it will choose to include. That’s why it’s made money for five decades back to back.

Remember that word.

Inclusion.

Staring Facts in the Face

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Mongerers…

…are very, very busy.

After all, the target is in a corner.

Why not strike massively, and keep striking?

Punish the vanquished multiple times per misdemeanour.

Unfortunately, Core IT has gone quiet.

They’ve stopped caring about their share price.

Focus is now on intrinsic growth, not on quarter to quarter looking good attitude.

Pushed to the wall, the instinct to survive and regain lost ground is on all fours.

Forget about all this, is the aggressor AI actually so capable as to completely substitute the need for Core IT with regard to enterprise level programming, already?

No.

Perhaps in a year?

No.

5 years.

No.

10 years?

Possibly not.

20 years?

Possibly yes.

And, look at the mass reaction.

Masses believe they are ready to take over, like, yesterday.

Then comes the black box introduction.

AI companies are offering a black box to corporates, which will be their in-house AI, all data stays at home, let’s all bypass Core IT.

Does the data stay in the black box? Does it go anywhere? Does anybody know?

No.

Where is the trust coming from?

A bank entrusting its internal data to a black box, the big four doing the same, doctor’s records, hmmmm, not adding up. To a human under non-disclosure agreement? Plausible.

Departments being trained in corporates to become the tech arm?

It’s like an additional wing being added to a hospital, to handle book-keeping. Use the wing for expanding the hospital? What a preposterous idea! Let’s all become jack of all trades. Why even bother specializing. For that we have AI, right, to handle the specialist surgeries?

Panics almost always take to ridiculous trajectories.

This one has now cracked open genuinely clean-balance-sheeted free-cashflow-generating companies. Who have decided to take on all blows without responding. Probably want their CMPs to hit three digits and then some before announcing anything. They seem to have forgotten what buybacks are.

With nothing to go on, where do you stand, regarding Core IT?

Clean balance sheets.

Zero debt.

Track record of navigating through disruption.

Free cash flow being generated year upon year.

That’s enough.

Two choices.

Hold on to your holdings and look elsewhere currently, for investing.

Add on, as in average down.

Depends upon your risk profile, which option you choose.

Liquidation, for me, is not an option, given this :

Clean balance sheets.

Zero debt.

Track record of navigating through disruption.

Free cash flow being generated year upon year.

What am I doing?

Till lately I was averaging down.

Recently, I stopped averaging down in Core Tech. That’s a change in trajectory. Ya, have been investing elsewhere recently. Going to hold Core IT through, and accumulate further only above my buying averages for Core IT stocks. The exact change that’s happened is that now I need these stocks to speak out with their deeds and propel themselves to above my buying averages, before buying more. Might not happen soon. That’s fine. The reasons for comfort in holding are these :

Clean balance sheets.

Zero debt.

Track record of navigating through disruption.

Free cash flow being generated year upon year.

As long as these reasons exist, holding beyond while focusing elsewhere is the change that’s happened at Magic Bull.

Why, you ask? Why a change from the staunch attitude earlier?

It’s a matter of being in tune with one’s risk-profile. Till it wasn’t speaking up, I was comfortable averaging down. When it started to be bewildered by the goings on, I changed to being comfortable holding.

It’s ok. One can’t have the right opinion all the time. For a while, one can be wrong also. In those times that one feels one can be wrong also, making the switch from averaging down to only holding is ok, provided these exist :

Clean balance sheets.

Zero debt.

Track record of navigating through disruption.

Free cash flow being generated year upon year.

A Tale of Two Worlds

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Like the plus…

…to the minus…

…and day to night, …

…like forwards to backwards, …

…like North to South, …

…so is…

…investing to trading…

…or trading to investing…

…spin it any way around, like you’d like to.

These two worlds have their own tales, and, you guessed it, each is…

…diametrically opposite to the other.

In the one, you average down. In the other, you pyramid.

In the one, you buy low. Ideally, you don’t sell for a long time, and when you do, you sell high.

In the other, you buy high and sell higher, or sell low and buy back lower, ideally sooner than later.

In the one, you welcome notional losses in high conviction bets, so you can put in more at lower cost.

In the other, you abhor the sight of notional losses, and cut these beyond small thresholds.

In the one you are not glued to the screen, and can even choose to operate completely from after hours.

In the other, especially while taking big positions, significant screen-time is important.

In the one, you have time for other things in life, many other things.

In the other, perhaps not as many.

In the one, emotional and nervous overhang can be reasonably manageable with lifestyle and mental training.

In the other, management and mental training required is tougher.

One could go on.

That’s not the point though.

What do we take from this?

We want something concrete.

There’s a potent and vital point where the two worlds meet.

Let’s say you engage in the one world.

You then need the other – one way or another.

How?

Let’s say you are a trader.

You need to divert some profits to long-term holds, to build wealth, to secure yourself and your family.

Let’s say, on the other hand, you are a long-term investor.

Where does the world of trading fit in, for you?

To control your gambler’s instinct.

To not allow passage to your repeated inclination towards opening up your long-term portfolio, again and again.

Trading gets your trigger-happiness out of the way.

You tire mentally.

Perhaps take a few small losses. Wins are a small bonus.

Bottomline is, you don’t open your long-term portfolio to fiddle with it, unnecessarily. That action is grounded by a rule imposed by you yourself. Once a week. Once a month. Half-yearly. Annually. Whatever suits. At that time, open, fiddle, rearrange, do what you wish, but then close till next window. In the meantime, satisfy your need for action with some mild trading.

Even better if your small trading operation only shorts the market.

With that, you’d automatically be hedging your long-term portfolio.

Elegant.

Symmetrical.

Purposeful.

For a long-term portfolio in a growth market, …

…very…

…winning.

Only Misses for the DoomNixers

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Stadiums full.

This is what we see at the FIFA World Cup.

Gloom and doom about no one travelling to watch…

…seems to be nixed.

Are any doomsdayers amounting to anything?

AI taking over and slaying all else?

It’s a collab. No one’s taking over anything completely.

US markets were supposed to crash…

…like yesterday. And with that, the world.

Whenever a full blown crash does happen, it will very probably be at a time when most shorters are exhausted, read in big losses and retired hurt, didn’t want to use the word bankrupt.

AI is supposed to lead the ‘bubble burst’.

Has AI just smelt some monetization in collab with the back-offices of the world?

Back-offices have the capability to hold the system up on the back of their picks and shovels work, which, obviously, DoomNixers ‘nix’ themselves upon. You see, it’s not glamorous enough. They didn’t see it at all thus, and stumbled and fell.

Here’s another one : No one can beat the effthurteefiive. True? Hmmm. We saw what we saw.

Attackers felt they would bring the opponent down over the weekend. Opponents, fighting for their lives, seem to have emerged better than their attackers.

When one fights for one’s life, one fights with every ounce of resource and every joule of energy.

The Dean at his Univ advised Max Planck to study Music instead of Physics, since he felt that every meaningful thing in Physics had been discovered already.

Max Planck went on to found a whole new branch of sciences. Quantum Physics. On which anything and everything today is based.

There’s this thing about optimists. They believe in their systems, their hard work. Their ability to fight for their lives. For their systems. For the passing on of their legacies.

Max Planck fought for the entire field of Physics, and what a legacy he’s passed on. Conventional Physics builds the framework, and Quantum allows us to traverse the Universe.

Core Tech is fighting for its life. Pushed to the wall, it will devise a way to emerge, as a monetizing handholder for AI to be implemented. It’s fought for its life many times before and has emerged victorious, and very lucratively.

There are two paths emerging here, in the example with Core Tech.

Path one – DoomNix. Pronounce it dead. Invest elsewhere, with expensive valuations.

Path two – research. Find companies that are transforming with the times, with clean balance sheets and free cashflows. Invest in these, as valuations are very reasonable currently.

One can even follow both paths MINUS the doomnixing. Meaning that one takes punts in expensive companies, no idea how that will pan out in the very long-term, and one also invests in very reasonably priced and transforming Core Tech, with clean balance sheets and free cashflows. This will give a decent return in the very long-term.

We leave the doomnixing to the pessimists, nay-sayers, lacking-in-hopers, non-believers in themselves and in good systems – this breed will keep collecting misses in life.

Having expunged the breed from our eco-systems, we stride ahead with our very long-term bullish view in our growth market, since the essence of sitting on a compounding portfolio for multiple decades is…

…an optimist mindset.

Miss Giving

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There’s no Hurray…

…yet…

…on the Street.

People have…

…doubts.

About anything…

…even everything.

The general public seems to be containing its enthusiasm, because who knows what might be around the corner.

Owing to the cast in the mix, like Diabolo TryMeButDon’tTryTooHard, and the opponents, who, well, have championed in sins committed, and who perhaps have now been overtaken in sins committed by Diabolo TryNotTooHard and ally NotMuchYoohooThere, …

…a cease-fire…

…could mean anything…

…but a cease-fire…

…as of now.

Enthusiasm will flow once certainty replaces misgivings.

Hesitancy to come out and fully invest, given the circs, allows us future opportunity.

At every small insinuation of an anomaly, reversals will follow.

Diabolo’s back and forth penduluming on everything, for a good while now, has capped the risk appetite of the masses.

Fine. We accept the circumstances as those which will allow repeated entries over the short-term, perhaps over the short to medium term also.

The Magic Bull approach here would be to enter with whatever there is to enter, …

…over the next three to four months.

Who knows when Miss Giving will turn into Miss NotGiving. More sooner than later. Since the penduluming has gotten on everyone’s nerves now, reactions are not under control owing to nerves, and masses might come out that much harder once it becomes clear that the peace-flag persists.

Cut to our ongoing discussion on full exposure preferred in a growth market over dilly-dallying or semi-exposure over the long run.

As far as our own microcap market vis à vis world market cap is concerned, entry more sooner than later is a thing.

As time will tell, …

…a big thing.

I want to be that fool

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You know…

…the bloke who gets called out…

…at social gatherings…

…as the fool who got fully in at the top?

In a long-term growth market, I don’t mind being that fool.

It’s a short-term affliction. I think I can…

…bear looking like a fool for a not-longish duration.

Why do I say short-term?

First up, that’s my estimation of my tolerance levels.

Never happened, so it’s all estimates we function with.

Then, field of action is a long-term growth market, remember?

Here, we risk not being exposed to growth and compounding, if we’re conservative in entry.

No one’s saying get rid of your small entry quantum.

However, do let your small entry quantum expand with portfolio-size.

Also, make more entries.

Till fully invested.

In a long-term growth market, we wish to be fully invested, more sooner than later.

What’s the risk?

Growth…

…is NOT…

…a linear entity.

If we understand this one sentence, we can stay invested. Sit. For the very long term.

Thing about growth is, it happens, and then it does not, and then there’s a crash, and then it suddenly resumes, and then it can fire back to back doubling, or 50%+ for three years in a row, or what have you. Non-linear entities have peculiar equations defining them, not linear ones.

So it can well happen, again all hypothetical, that we get in fully, with precaution, with a small entry quantum, with many entries, over 12 months, and right after that, Wham. Down it goes, big. Ya, we look like fools then. We’re called out at parties. People laugh. It’s not necessarily a ‘serve him right laugh’ but more a ‘relief laugh’, as in ‘thank God I’m not in such a position’. And that’s OK.

Why?

Ya, Nath, why so cool about the whole thing?

Will tell you why.

In a year’s time after such hypothetical crash, when the market has sunk some more, people don’t know whether to laugh at or cry for us. There are feelings of pity, and questions like ‘Are you ok?’ crop up. Just doing a simulation. Picked up the ‘Are you ok?’ from a recent smaller crash, because that exchange actually happened. These situations are also absolutely ok. Why?

Things are about to change.

Long-term growth market, remember?

Growth not a linear entity, remember? When it sets in, can happen very fast, before one has gotten significant money in.

We are fully exposed, remember?

What do you think happens to our folios? In another year, we could not only cover up, but be up 2x. In five we could be up 5x. In 10, we could be up 12x. In 20, perhaps 25x. No longer foolish.

Those who don’t get in, miss the growth market.

Others get in to some extent, and catch growth to some extent.

Fools get both extremes, …

…the looking foolish one, and…

…the long-term vindication one.

Cared to Rewire?

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Hey.

From this point onwards…

…it all boils down to…

…stamina.

Theories for market success have been out there, in abundance, since eternity.

Everybody can read how the richest man in Babylon…

…got rich.

Or how compounding works.

Position-sizing.

Entry quantum.

Margin of safety.

Profit run.

Multibaggers.

Engines of income generation.

Entry into the territory of wealth.

Generational wealth-creation. Etc.

Yes. Everybody can read. Or listen. Or both.

Question is…

…how many can follow through?

Of those who set out, how many can remain grounded and focused when the heat is turned up, like now?

Most importantly, how many can finish?

I would estimate that a low single digit percentage walks the talk to successful culmination.

Why?

You see, heat does something critical.

Once it is turned up, it burns out all nervous systems that haven’t been rewired.

Given that we are not born with nervous systems programmed towards market success, we need to rewire them over the years and over the knocks. Once fully rewired, our nervous systems can withstand, pivot, and generate wealth over prolonged strife.

As this crisis continues, more and more players will start to cave in.

Capitulation at lows.

Others will stop all activity owing to fear, but might not sell. They’ve frozen. Better than capitulation.

There will be some who cash out with the intent of getting in lower, cannot then find the courage when the lows come, and then join their frozen compatriots as the reversal arrives and accelerates.

Still others, with funds safely picked away in fixed deposits, will be afraid to bring them over to Equity. Fine. They are behaving as per their risk-pr0file. At least they are in control of their behaviour.

Rewired market entities will be acting. They know what to buy. Markets give ample time to study, and all kinds of preparation will have been done, like, yesterday. These folks will have started buying upon the arrival of their levels. Clockwork. Small entry quanta. Position-sized as per their risk profile. Programmed to keep entering for a long period. That’s how they will have positioned themselves and their liquidities. These entities will show stamina and will outlast everyone to still be buying at market bottoms and slightly beyond. They will emerge with the lowest buying averages, and will make the quickest multiples upon reversal, after which some will pull their principles out, while others will ride their holdings to multibaggers.

Who do you want to be?

It’s ok if you don’t identify with any of these categories. Find your passion elsewhere.

Or, self-PhD to a rewired market mindframe, sooner than later. Preferably – now. This crisis could even just be beginning. No one knows. Since no one also knows how long it will last, for all you know, you could still get a year or two’s great buying ahead.

Wishing you lucrative investing.

Market Ability

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Hammers…

…hammer.

That’s their job.

They do a good job, at hammering.

At times, the market behaves like a hammer.

Market players learn from hammerings.

Question is, can market players learn without being hammered?

I don’t think so.

One can psych oneself into believing otherwise, I’ll give you that.

And, for a while, things will look like all’s good.

Point is, one isn’t looking for the hammer, …

… the reason for which being, that one has never experienced one.

That’s when the hammer falls, when and where one is least expecting it.

It is better to undergo a hammer event in the early days of one’s market career, and while one’s young.

Young – because – a). one plays small when one’s young, mostly by default, owing to there not being ample access to fund supply. Also, b). in the early days of one’s market exposure, the bulk of one’s mistakes and miscomprehensions emerge. The combination of these two facts a). and b). leads to losses that are bearable (youth has backups, like parents). In our youth, we tend more to brush it off and move ahead, full of energy. Yeah, youth has the energy, and time (upcoming multiple market-cycles), to not only emerge from a hammer, but to go on to prosper from the now ingrained learning.

Issue starts when our corpus is big and we still don’t know what a hammer is.

Issue compounds when we then confuse our ability to implement money into markets, in an effort to make it work, with actual market ability.

What is market ability?

It all starts with risk profile.

Some people die without having recognized their risk profile

Then, after having recognized one’s risk profile upon encountering some hammers and seeing our bodies and minds react to these, we move on to systems.

From development to fine-tuning to implementation of a system, we keep chipping and chiselling away at our strategy. We emerge with one that has an edge. We continuously work to keep our edge profitable.

Simultaneously, we throw in risk management. Development of an emergency fund is part of this.

Discipline.

Regimen.

Rules.

Let’s throw in some unpredictability, on purpose.

After putting one system on semi-auto, we work on another, and so on and so forth. We use our profits to diversify and make ourselves more secure, ideally anti-fragile.

Market ability is a successfully implemented combo of all these factors and perhaps more.

It includes being a good human being at home too. There’s no question of letting out the effects of a bad market day on one’s family members. We’re stopping all market action before anything like this develops. Harmony paves the way for another serene market day…

…about to dawn.

Thaw?

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What does this even mean, …

… in today’s financial context?

Great, there’s some kind of a thaw on the horizon.

It’s only happening because one leader refused to be bullied.

Now, others are at least voicing themselves.

Had no one stood up, bully would have continued to arm-twist the world.

Is this a healthy situation?

Specificallly, in the context of one new tantrum almost everyday, there seems to be something big brewing.

Markets, in their efforts to behave ‘efficiently’, factored in a possible ‘thaw’, and one is barely getting entries now, for lack of margin of safety.

Fine.

No action is also considered action. No action is supreme.

Since one can feel it in one’s bones that something big is brewing, …

… will choose to save entry capital for the times to come.

Whatever’s brewing, should it come to pass, …

… will create the conditions for more entries, …

… will create margin of safety.

Proppers

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Come a crash, …

… we will let it…

…rip.

Toolkit is in place.

Having said that, the thing about crashes is, that when everyone expects them, …

… they don’t come.

If it were that easy, markets wouldn’t be markets.

That’s exactly what they are doing currently, being what they are, markets.

Some are being propped, and other markets are showing resilience, taking any kind of news in stride, and still advancing.

How long can something be propped?

Not forever.

However, longer than most players can stay liquid, that’s how long.

That’s an old market adage.

Eventually, proppers get tired, of printing, circulation, falsification or whatever gimmick they are employing. Mistakes at this level are deadly.

When a propped main market pops, initially it does take down most other markets, but resilient ones recover fast. Propped ones, after the pop, remain down, meaning that they encounter a delayed recovery.

A big pop only means entry opportunities in our resilient market of choice.

There’s no question of fear. This is what we wait for. Margin of Safety. Value. Opportunity.

Entry.

Winnings

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Not all…

…winnings…

…are tangible.

Intangible winnings…

…can be far greater…

…in stature.

One can carry these with…

…anywhere.

Don’t need to know more.

They’ve won their case already.

Let’s break this down, using a concrete example.

Let’s take this blog.

First, the losses.

Subscribers?

Hardly.

Financial loss?

A few pennies a day, equalling domain charges plus plus divided by 365.

Effort loss?

Yes, a lot of effort goes in. However, it is rewarded heavily, though indirectly. Since there are no more losses, let’s talk about winnings.

Sharpening of skill – maximum.

As words flow, ideas are elucidated, take greater shape, and are cemented into a system.

I’ve often spoken about the fact that this blog can also be seen as fundamental / critical / what have you research towards developing a 360 degree unified market field approach. I think I’m there.

Let’s look at the system that has evolved over the last fourteen years – specifically, let’s look at modules incorporated.

Small Entry Quantum.

Non-Linear Position-Sizing.

Cost-Free-Ness.

Long-Term-Hold.

Positional-Hold (culminating in trade booked with cost-free-ness generated).

2 Demat Approach.

GTT incorporation.

Buy Low.

Sell High.

Entry.

Sitting.

Letting Profits Run.

Exit.

Averaging Down.

(Stop-)Loss attenuated by Cost-Free-Ness’s capability to rise by…

…’Banking on Infinity’…

…in a Non-Linear Long-Term Growth-Market.

The Zone.

The Line.

Fitting.

Market Forces.

Market Presence.

List goes on.

Bottom line is that what has emerged is a decent-size double-digit list of modules incorporated into one clear-cut, multi-level and dynamic wealth-creating strategy…

…with results that make ‘losses’ due to lack of subscribers statistically too small to even mention.

I write to create a magnificent system, and to keep fine-tuning it.

My system creates wealth for my family.

I donate a small part of our wealth to charity.

Hence my writing facilitates pro-bono work.

Some of the few readers of this blog might one day choose to implement a few modules, or perhaps the whole approach. I’m happy for them. God bless them. Magic Bull is completely free, and is part of my give-back to society.

I create good causes with my writing.

While writing, I feel buoyant, sharp, and fulfilled, carrying this combination of feelings into the day, spilling them over into other good causes created over the whole day.

Am thankful for this avenue, since it gives my creativity an outlet.

🙂

Throw-Offs

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Hey.

Stumbled upon a concept.

Calling it the throw-off, and…

…sharing it with you.

How many times have you booked too early?

Booked late?

Gotten in early?

Late?

Not risen to required action?

Made a bad decision?

Lost faith in the market?

In yourself?

These are results of throw-offs.

Something has thrown you off your game.

This something is the ongoing market action at the time.

Action has been such, that it has thrown one off one’s track.

It’s not your fault. Action is such.

Price hits a stop, for eg. You take the stop. Price resumes in same direction.

Price hits a target. You get out. Price resumes.

Price falls just short of the stop, resuming. You double down. Price then breaches stop and a down-trend starts.

Price shoots past target, not giving you time to act. You then define a new target. Price nose-dives beneath old target, just as fast, eating up a good portion of your original profits.

Examples can be many. Common factor is market action throwing you off your profits, or throwing you out in loss.

Where do we stand?

Is this cause for alarm?

Is there something we can do about it?

First up, market action is a sum resultant of all market behaviour put together, and is perhaps impossible to defy. Our pockets are not deep enough by miles.

We don’t fight market action.

We use it.

Yes, since we can’t defy it as such, we make it work for us. Also, if market action alarms you, do something else which doesn’t. That’s where we stand.

It’s ok to be thrown off while following one’s trading plan.

It’s not ok to be thrown off, having been psyched into altering one’s trading plan mid-trade.

Meaning that it’s not ok to book below target owing to adverse market action above one’s stop.

Also, when a trade is going against us, again, it’s not ok to exit owing to adverse market action above one’s defined stop.

One exits at stops, not above. Sticking to this one rule will nullify throw-offs above stops. Defining is easy. Doing is difficult. Over time, with practice, we define and do. Period.

Now we tackle targets.

How do we knock-out throw-offs here?

Another day, another defining rule… 🙂 … .

Don’t exit at targets.

If you don’t exit at targets, no one can throw you off before a target.

Ok, so what’s the exit strategy whilst in profit?

Have a target.

When it comes, it triggers your stop into existence, which you have defined x% below this target.

So, we now stop using the word target. We use ‘trigger’ instead.

In other words, your stop gets activated, or triggered into existence, once a certain profit-threshold is crossed.

This stop, which has just come alive, is dynamic in nature, towards the profit-side only.

It moves in the same direction as the price, in a proportion defined by you.

As price keeps moving, your stops keeps locking in more and more profit.

You’ve knocked out the throw-off, since your exit is completely rule based, and no one else knows the parameters (numbers) you are feeding in for exit.

Eventually, price action makes you exit rule-based, when price reverses above the ‘trigger’ and hits your dynamic stop. Market action hasn’t succeeded in throwing you off your game.

Notice one thing?

You’ve been in control of your trade all along.

Your head is sane, your emotions are stable. You have set yourself up to take some very profitable decisions.

Wishing for you lots of profits…

… 🙂

.

Beta

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We’re not afraid…

…of beta.

In fact, we want beta to be there.

And, we want it to be big.

Beta is part of wealth-generation through cost-free-ness.

Why…

…are we not afraid of beta?

When we make an underlying cost-free, there are two parameters that are of prime importance, in the game that we are playing.

First up, speed of cost-free-ness.

How much time has it take us to reach the desired stage?

Too much time?

Work at the strategy.

Short time?

Great.

With large betas, we take lesser time to reach cost-free-ness.

Cost-free-ness is a state of mind.

Also, it is a function of parameters prevailing.

As a result of internal synthesis, we know in our mind when it’s time for cost-free-ness creation.

Once cost-free-ness is created, we move on to the next play with the same objective.

Next up, we have quantum of cost-free-ness created, per capita time.

Higher the quantum, in lesser time, why, that’s optimal.

Again big beta.

Without big beta, there’s not much chance of achieving large quantum in less time.

How do we exploit big beta to attain objective?

Get in on huge margin of safety. Get principal out when exuberance prevails. Scrips being played are those of which you are convinced. Meaning, that you are mentally in sync with very long-term holds of cost-free-ness created in these scrips.

Also…

…as a general game-enhancing practice…

…get in and out with multi-day or multi-month triggers. Don’t look at the markets while they’re on. Take emotion out of play. Nil market forces out of your equation.

Here one sees, how, amongst other factors, a big beta allows one to generate long-term wealth through cost-free-ness while…

…acting on one’s own terms.

Harness

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Market forces are like Wifi.

When we connect to them, they…

…connect to us.

When we’re indifferent, …

… we’re in a different world.

When we create systems, and put them on auto-pilot, we mostly do away with the ability of market forces to act upon us.

A successfully implemented system on auto-loop is like making time stand still.

That’s our goal; that’s where we want to be.

In the act of getting there, we are subject to compelling market forces.

How do we deal with them?

Rather than suffering KOs from their punches, we devise systems…

…to absorb their blows,…

…understand the implications of these,…

…to, then,…

…harness them.

What am I talking about?

Why give market forces so much power?

Why not?

They’re there, right?

In abundance, too.

Why not use them?

How?

You can go back to George Soros’s back pain for starters.

Have you developed such physical systems?

I’ll tell you what I implement. It’s a me thing. You’ll need to develop your you thing. I’ll share with you my me thing, though.

When markets are down, I do feel bad, it’s an initial reaction. I wait for it to intensify. I wait for myself to feel awful. That means markets must be really down. As awfulness rises, I start buying. When awfulness is uncontrollable, I buy big. When it makes me puke, I buy maximum. Meanwhile, I’ve rewired my nervous system to accept the awfulness as a marker for buying, and I’m not sad that I’m feeling awful during market crashes. Hmmm, I know it sounds a bit crazy, but this a successful harness-methodology of otherwise overwhelming market forces.

When markets are up, I feel buoyant. Earlier, when I felt buoyant, I used to buy more. Now, I do nothing. Market-nothing, that is. Non-market, I’ll do many things. That’s harnessing buoyancy. As markets rise further, I do even more of market-nothing, and when I can’t control it, I then start creating cost-free-ness. When buoyancy is uncontrollable, I create maximum possible cost-free-ness, and hopefully, then, I can go on market-vacation. Before I do that, I make sure to transfer the cost-free-ness created to a dedicated holding platform for my cost-free-ness.

Ideally, new market activity needs to only commence upon the next set of opportunities. Sometimes, one needs to wait long for these to develop. The act of bridging time comes in handy here. Market is not giving action. We harness even that. We have accumulated lots of pending tasks, just for this kind of period. Now, we do these. Ultimately, an opportunity arises. A new cycle of cost-free-ness-creation starts.

Development of you-unique systems helps you harness the market in a winning fashion.

Wishing you lucrative investing and lots of cost-free-ness!

🙂

Urges

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Market forces need to be understood…

…to win in the markets.

When do market forces start affecting us fully?

When we put our own money on the line.

That’s why…

…don’t…

…ever…

learn finance from someone who…

…doesn’t put his or her money regularly on the line.

When we put our money on the line, market forces start changing our psyche.

If we’re holding funds, we develop the urge to buy.

If we’re holding underlyings, we develop the urge to sell.

Early in our career, we give in to these urges at precisely the wrong time, resulting in loss-creation.

As we become more seasoned, we are able to resist such urges, till conditions provide profit.

As our market career continues, this is where fine-tuning matters the most.

How long are we able to resist the urge to sell as the market climbs?

How long are we able to resist the urge to buy as the market crashes?

These are pivotal questions.

One of them is playing out now.

As new highs are made, many have already sold out.

Some have sold partly.

Very few retailers are still holding on to whatever they might have left.

It’s institutions buying and selling.

New entry at these levels are a dizzy proposition.

I won’t hide that as markets climb higher, I experience a very strong urge to sell.

It’s…

…over-compelling.

How do I deal with it?

When such urge is too compelling, one does oblige.

One sells…

…little…

…and that’s the tough one.

One needs to oblige the urge lest some piston bursts, but simultaneously, one needs to hold on to as much as one can…

…since markets are on a roll.

One can’t learn this from a book, or in college.

After selling early many, many times, for more than a decade and a half, one finally learns to hold on to a chunk of one’s underlyings as markets go ballistic.

As heights get higher, this mechanism will make one sell, though, little by little…

…and that’s ok.

Let’s make sure that we do keep holding a chunk of the stuff we really like, though, after having taken the principal out.

Otherwise, how will we allow multibaggers to blossom?

Easier said than done, I know!

Bridging the Gap

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How does one bridge the middle overs?

Sure, a blogger who is simultaneously a cricket fan…

…will dish out analogies from cricket… 🙂 … !

We’re in the business of identifying extremes…

…and acting upon such identification.

Whatever is in the middle of these extremes…

…is, for us, an area of…

…inaction.

Do we know how to not act?

There is an impulse for action in all humans.

In these loaded times, this impulse is extreme.

Why do we not want to act when an extreme is not there yet?

During times of complete pessimism, one is able to purchase underlyings for a song.

Similarly, during times of total optimism, one is able to secure good exits for stuff that one wishes to get rid of.

How one behaves in between adds or subtracts significantly to or from one’s market success.

Selling early means lesser profits, and the same goes for buying late.

This is the kind of behavior that lessens our multiple, sometimes greatly.

This kind of behavior would be absolutely ok if one were trading.

We, @ Magic Bull, are in the business of effecting multiples.

Anything coming in the way of that is behavior we wish to avoid.

With markets normally trading between extremes about 95% of the time, this leaves us with a lot of time in which we do not act.

Also, it brings us back to the pivotal question – how do we manage not to act when everything and everyone around us is screaming for action?

We do – everything – else.

Apart form market action, there’s business activity, charity ventures, extra curricular activities, family time, sport, leisure, entertainment … … one’s day is packed.

There are two portions of the day when one is driven to the edge of action, though.

The first is after studying market opening.

This is when one does a half-hour call with one’s broker and just sheer discusses everything one is observing.

Strike 1.

Then, as one studies the close, this situation can arise again.

One writes, for example.

Or, annotates charts.

Observes prices.

Collects impressions…

…and demarcates patterns.

That’s sufficient.

Strike 2.

There’s no room for strike 3 – one just doesn’t let strike 3 happen.

Rewiring 3.0.3

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We grow up, being taught to win.

Slowly, we learn to expect shocks, but only sometimes, in sparing intervals.

We prepare fancy resumés. 

Life must look five star plus all the time, that’s the standard. 

We see this standard all around us. It encompasses us. We become it, in our minds.

It’s not like that in the markets.

Markets are a world, where loss is our second nature. 

If we’re not accustomed to loss, we die a thousand deaths, in the markets. 

What kind of loss are we taking about?

Small…

…loss. 

Your stock holding going down to 0…

…is a small loss…

…when compared to another holding multiplying 1000x over 10 years. 

Both these scenarios are very possible in the markets. They’ve happened. They will happen again. 

How do we react?

Our stock going down to zero mortifies us. We do something drastic. Some of us quit. 

When our potential 1000x candidate is at a healthy 10x, yeah, we cut it. 

Then we quickly post the win on our resumé. 

We must look great to the world, at any cost. 

We keep reacting like this…

…and, like this, we’ll perish in the markets with very high probability.

We can’t take a hit, and are nipping our saving graces in the bud. 

When does this stop happening?

When we rewire.

Rewiring is a mental process that happens slowly, upon repeated market exposure. 

For successful rewiring to take place, real money needs to be on the line, again and again and again, as we iron out our mistakes and let market forces teach us the tricks of the trade. 

While we’re rewiring, we need to play small. 

When we’re partly rewired, we wake up to the fact that this is the age of shocks. 

High-tower professors who’ve never had a penny on the line and have put together theorems about six-sigma events (black swans) setting on once in blue-moons have led us to believe that black swans are rare. 

They are not. They have become the norm. Our first-hand experience of multiple black-swans in a row teaches us that.

Once we rewire fully, the expectation of black-swans as the norm is engraved in our DNA. Then, we use this fact to our huge advantage.

How?

We realize the value of our ammunition, i.e. our liquidity. 

Whenever we have the chance, we build up liquidity. 

We become savers, and are not taken in by the false shine of the glittery world around us.

Also, when markets are inflated, we sell stuff we don’t want anymore, boosting our ammunition for the next onset of crisis…

…and, we stop preparing fancy resumés.

Markets have humbled us so many times, that we now just don’t have the energy to portray false images. 

Whatever energy we have left, we wish to use for successful market play, i.e. to make actual money. 

When that happens, yeah, we know for sure that we’ve fully rewired. 

Welcome to rewiring three nought three. 

Sitting – III

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Mood-swings…

…happen all the time…

…in the markets.

If we don’t get used to dealing with them, we’re pretty much gone.

When pessimism rules, it’s quite common for one to develop negative thoughts about a holding. 

Research – stands. 

There’s nothing really wrong with the stock. 

However, sentiment is king. 

When sentiment is down, not many underlyings withstand downward pressure.

Eventually, you start feeling otherwise about your stock that is just not performing, as it was supposed to, according to its stellar fundamentals. 

If your conviction is strong enough, this feeling will pass. 

Eventually, pessimism will be replaced by optimism. 

Upwards pressure…

…results in upticks. 

Finally, you say, the market is discovering what your research promised.

You feel vindicated, and your outlook about the stock changes, in the event that negativity had set in.

You’ve not ended up dumping this particular stock.

If your conviction had not been strong enough, you would have gotten swayed. 

Market-forces are very strong. 

They can sweep the rug from under one’s feet, and one can be left reeling. 

In such circumstances, solid due-diligence and solid experience are your pillars of strength, and they allow you footing to hold on to. 

However, if your research isn’t solid enough, you will start doubting it and yourself, soon (and if you’re not experienced enough, make the mistake, learn from it, it’s ok, because your mistake is going to be a small mistake just now, and you’ll never repeat it, which is better than making the same mistake on a larger scale at the peak of your career, right?! We are talking about the mistake of doing shoddy due-diligence and getting into a stock without the confidence needed to traverse downward pressure).

With that, your strategy has failed, because it is not allowing you to sit comfortably. 

Please remember, that the biggest money is made if first one has created circumstances which allow one to sit comfortably. 

Basic income. 

Emergency fund.

Excess liquidity.

Small entry quantum.

Rock solid research work, encompassing fundamentals and technicals both. 

Margin of safety.

Patience for good entries.

Exit strategy. Whichever one suits you. It should be in place, at least in your mind. 

Etc.

Fill in your blanks. 

Make yourself comfy enough to sit and allow compounding to work. 

Weed out what stops you from sitting, and finish it off forever, meaning that don’t go down that road ever again.

Very few know how to sit. 

Very few make good money in the markets.

Make sure that you do. 

Make sure that you learn to sit.

Technically speaking, how are you doing?

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Hey,

How’re your technicals going?

The whole world looks at the same or similar technicals, you know.

For example, if there’s support, everyone knows there’s support.

If a Fibonacci level has been reached, it’s the identical story.

When a trendline is broken, yes, you guessed it, the story hasn’t changed.

Yeah, we’ve got a problem.

What do we do here?

We don’t have an option but to think a couple of steps ahead.

As in, when a support is reached, we’re still talking about support at minus let’s say 3%, ok? Decide whatever number you wish to for yourself here, but till support minus that number is not breached, in your book, support still hasn’t been broken.

Thinking around, that’s what we are doing here.

Why?

We don’t wish to be pushed into market behaviour till something is happening.

We wish to forgo noise.

When we act, we wish to do so in a more sure-shot fashion.

A thinking-around approach thus becomes inevitable.

Similary, it’s not a Fibonacci bounce-off till let’s say (Fib62 + x) has been surpassed. Decide what your x is.

Or, a trendline is not broken till the close says so, or till there are two simultaneous closes below or above it.

You get the drift.

Make your own bye-rules.

That way, for all you know, you could still end up using a potentially defunct technical machinery, which, because of your thinking-around exercise, has suddenly become a powerful and potent tool.

🙂