Advertorial - Earn Money from your Credit Card Limits

How Do You Make Your Credit Card Work Well for You??

When you have a credit limit of 100,000 INR and when you spend 100,000 INR on the first of January some year, you have the liberty to use it till the 20th of February on the same year. You have full 50 days to inteligently use that money and when you make up around 4 to 5 per cent in those periods, it is not a bad deal. ....Read More

Wipro The Wealth Builder

The overwhelming power and strength of Equity market lies in the quality of company that we deal with. The company has to be investor friendly and wealth creators. Wipro Ltd is a company which falls into that coveted category and the operations of the company played a very important part in the development of country's pride and earnings. When you are a man of focus and determination, and smart to trust a quality company like Wipro, and keep faith and belief you will surely be in the process of building wealth. You should also have the qualities of great patience to watch your wealth grow, not panic in adverse conditions and not get excited during profit conditions. People with tremendous discipline and self belief are too few that they accumulate wealth without ever having to seriously risk anything big.

If you want to become a man of wealth, you need to put in lot of work and capital to run the fortune over a period of time. You need to mobilise experts to help you in your business, generate profit, retain the earned profit, manage the resources and all these things take a lot of effort.

What if you do not have capital to organise your business?
What if you do not have the expertise to run your business?
What if you do not have enough resource to organise your business?
What if you do not have the right business setup? ....

Your quest to become a millionaire gradually fades away and your dreams remain only dreams.

But when you have tremendous patience, self belief and trust, money management rules, well you are surely on the way to become a Millionaire. You don't need to have a big inventory or a big office or the supporting staff to whom you need to pay big.

It is now the year 1980. You saw a Software Company by name WIPRO. You applied for their equity share, not much only 100 shares at 100 Indian Rupees each. That is sufficient to see that you become a Big Millionaire, correction a Billionaire.

Alright, you now have 100 shares @ 100 rupees and your Equity Shares with Wipro is worth 10,000 Indian Rupees. You don't have office, nor storage sheds. You live in your own cozy home. Well.. time just tickles..and we come to the next year, a new year that is to bring you a spring of pleasant surprise!

Wipro's profit and business grew well in a short time with the support of people like you. They wanted to reward all those shareholders who supported them, reposed faith in them, encouraged them to build their business to the next level. They declared Bonus at 1:1 ratio, one share for one share held in the year 1981!

Your holdings of Wipro's share have gone 2 folds, from 100 to 200! You did nothing other than trusting your belief and showing your patience. A small reward for you!

You were paid dividends and time went on... Now you are experiencing another surprise gift, one more Bonus from Wipro...the year is 1985.

Declaration of Bonus at 1:1 ratio. Your holdings no longer remain 200 shares with Wipro...it has become 400 Shares. You started to believe your networth is moving up...

Just the joy is not over as yet...another year..another announcement that Wipro wanted to convert all 100 Rupees Equity to 10 Rupees Equity and decided to split. The quantity of your shares in the year 1986 has jumped from 400 to 4000 shares! You now firmly believe, this is the company that is investor friendly and continue to extend your support.

The year 1987 was another surprise...this time around you are not surprised because you have the habit of receiving Bonus shares every now and then...so this time was also another 1:1 bonus, and you are a proud owner of 8000 Shares.. You have your wealth rolling and decided to ride the rewarding trend.

Time is moving on...you never get tired to get bonus news from Wipro, nor does Wipro gets tired to reward you..how long does it really go and how much do you keep getting.. let us go through the Risk and Reward magic in reality.


Year 1987 1 : 1 bonus Your Share Holdings 8,000
Year 1989 1 : 1 bonus Your Share Holdings 16,000
Year 1992 1 : 1 bonus Your Share Holdings 32,000
Year 1995 1 : 1 bonus Your share Holdings 64,000
Year 1997 2 : 1 bonus Your share Holdings 192,000
Year 1999 split to Rs 2 Your share Holdings 960,000
Year 2004 2 : 1 bonus Your share Holdings 2,880,000
Year 2005 1 : 1 bonus Your share Holdings 5,760,000

Now, you are in the year 2010 . What is your Networth?

Year 2010 3 : 2 bonus Your share Holdings 9,600,000

You are a proud owner of 9 Million and 600 Thousand Shares...Its mamoth, staggering, exhilarating..a whooping 408 crore Rupees!! At the rate of 425 Rupees per Share!!

Correct my mathematics, I would like to get corrected.

The Bonus journey continues...

The Exact Entry Points

When the share market is under correction, it often is a puzzle as to how to "bottom fish" the stocks. While there is no exact "holy" method to predict as to how long the broader market could fall, there are however some basic rules which could help in getting the stocks at the least price. Following the pattern of Support and Ressistance will help a great deal. Having said that what is the time duration that the Support and Ressistance levels are to be calculated? The one day calculation for stock markets will produce inelastic signals that it is very hard to compute and the signals will more likely to be false. A five day period stock study is more ideal, especially for people who like to quickly get in and get out of share markets.

To calculate the Resistance and Support, you need to understand the pivot point formations. Just look at the following diagram.



The support and resistance frequently get shifted from one level to another and your pivot point is exactly at the center of the distance between resistance and support. This means that when you exactly enter the trade near to the pivot point position, it is almost guaranteed that you will be quickly stopped out of the trade either in profit or loss. For our trading pattern with Risk to Reward Ratio at 1:3 you need to get stopped out quickly so that another trade is possible at the earliest. This will improve the volume of trade and profit accrues very rapidly, subject to the condition that all trades are closed only as per the trade system and not that you manually stop the trade. This is the key.

So exactly How can we calculate the pivot points and How do we enter? Well, you can measure them when you take the High Low and Close for the last period. Sum of High, Low and Close divided by 3 is the Pivot Point. When the price action direction is up i.e. from below the pivot point levels and interpolates with the rate at pivot point, it is a Buy signal and vice versa. Here, at this point, you will get a quick exit opportunity either with 2% loss or 6% profit. The important concept here is the more quickly you are stopped out, you make more trades within the boundary of our Risk to Reward System and more often than not, there will be one winning trade to every two losing trades. Or, for every 4% that is lost, you make one 6% profit. When there are twelve trades, it will easily be 8 losing trades and 4 winning trades. This will mean that 8x2 = 16 p.c. losing trades and 4x6 = 24 p.c. winning trades. When you are focussing on the correct set up and gradually improve your winning trades, your portfolio will consistently improve.

Here's a latest recommendation:



The Trading was closed at around Rs.890.00 on 6Aug10

I am available for one to one teaching on Money Management and Risk Management upon request. Get in touch with me for quotes.

The Trade Setup

While we take a careful approach towards the Money Management and Risk Management that is required for a Trade, it is equally important to have our own Trade Setup so that we do not lose any lagging time. Lagging time here means, we Buy some stock at a level that for the time being not going to appreciate. However, it may have a good potential to move towards our direction. Instead buying today would have given a much more better opportunity than yesterday.

Let us look at the following example.

Tata Motors current rate is Rs.825.50 and the indicators and its price movement suggests that it will reach its Resistance 2 level somewhere at Rs.860. But the price action now at Rs.825.50 is near to the Pivot levels and takes a gestation or a breather for another one day. So timing is important.

To calculate the pivot points, user this URL http://www.pivotpointcalculator.com/ and have your trade setup done accordingly.

Therefore, we need to determine whether the stock is in uptrend or downtrend. The following is a picture from google.com/finance drawn for the purpose of this tutorial. Look at the SMA-100 curve and the price candles on the daily chart.




The Current Rate is Rs.825.50 and the Daily SMA-100 (in transparent red rectangle) is Rs.774.99. It means the current market price is much above the Daily-100 is an indication of Uptrend for the next few days.

However, we want to be sure and firm that the weekly rates also be far below the SMA-100 so that we wait for Buying opportunities. Every time the rate takes a corrective action we buy such quantities exactly as per our Trade Setup rules. Now, let us look at the SMA-100 of weekly chart.



The current price level is 825.50 which is far ahead of the weekly EMA-100 rates and it is a double confirmation that the major trend is high. This setup gives a quick return and more frequently you will be stopped out in profit, as per the trade setup.

The key to big profits is the turnover that you perform during a given period of time, say one year or six months. When you exit your losing position quickly as per 1:3 Risk to Reward Ratio, (stop loss at 2% and profit at 6%) irrespective of the price movement, you will need to be stopped out by the system and "Not you will manually close the Open Trades".

Taming Emotion and Fear

What is Emotion and How Does it Disturb Trading

It has been often seen that the Trader books a profit of 1 or 2 p.c. on the Buy side and thereafter the scrip still keep moving up so far in excess of 5 p.c. The Trader feels that he should have waited for another some time so that he could have got more, instead he was stopped out at a small profit. This is an emotion of Greed.

Sometimes, the Trader has actually achieved his targetted profit and the price action has gone more than the target itself. The Trader doesn't want to book his profit as he wants the price action to move up further. He is now readjusting his profit level further high only to see a sudden fall in price. This is an emotion of Jealosy.

On other occasion, the Trader is seeing his price action going southways. The Stop Loss is not triggered though, but the time taken for the price action to move up and above the buy levels is more and the Trader is restless. The price action stops near the buy levels and creating doji and neither going up or down for a considerable time. The Trader impatiently comes out of the Trade at breakeven. After the price has settled near his buy levels, the price action eventually reaches the Traders profit target levels. The Trader feels he has done a mistake and feels for it. This is an emotion of Fear.

On another scenario, the Trader initiates a Trade, and for his joy, the price action started to move almost instantly to his favourable direction and books his profit at his targeted price. He feels very great. This is an emotion of Joy.

A professional and smart Trader does not give room to such emotion of fear, greed or joy. He believes in his Trade Setup and his Trading System and waits till he is stopped out of the trade by the system. He never adjusts his Stop Loss or Profit Targets, he keeps watching his Trading System do all the work for him. He never stares at the Trade Terminal. He is cool as a cucumber, solid as a rock as if his nerves are made up of steel!

A good Trader always believes in his system. His profit and loss targets are pre-determined and his Risk to Reward Ratio is very solid that he is least cared about price action that is moving around his open trades. He successfully executes his action plan constructed by him. He is like a magician and he believes in his trick.

Trade and Discipline

The trade set up is the result of the strategy formed by the Trader himself and he must stick to it. He needs a lot of discipline and not bothered about the price action at all. He never thinks about what went wrong because he need not have to. He is dependent on his trade system and the system is like his Fund Manager. He seldom disturbs his Fund Manager, instead he trust his Fund Manager. Or his Trade System in this case. The Trade System thanks his Trader for the trust reposed in it by way of profit.

The Trade Systems are formed by the Trader as per some strategy that helps the equity to maintain its strength and to reduce losses during tough times. So it is pertinent to obey the trade systems. Those strategies are to minimize the loss and to maximize the profit. If you are disciplined, the trade system takes care of your profits and the process keeps moving profitably in the long run. During this process, there are bound to be some losses and it is an integral part of the game and one must be ready to accept. I emphasise the readers to maintain strong discipline to follow the system formed by them.

The above table shows the result of the disciplined trader. Out of 7 gains and 8 losses, the trader is pretty sitting in profit.

View Money Management articles here

Money Management

Money, a Tool for Trade

Money is just a tool for Trade in real terms besides other tools like the trading system, timing, sentiment and other economic and political factors. When money is put to work, it should produce an output. This output is nothing but profit. When money is used like a tool, beware you need to use it properly, with proper Risk Management and knowing exactly how to retain those money during unfavourable conditions. These techniques help you to assess your equity strength and taking action at appropriate times that help your money grow. To maintain all these tools, you need a Journal that you will jot down all those trades and their results. This gives you a fair chance to analyze all your actions as where you acted smart and where you went wrong. Money Management is a combination of these factors that determine the equity strength.

Planning your savings vis-a-vis your earnings is the first step towards building wealth. How much can you save out of your earnings and what type of trade is suitable to your mental style and the probable risk associated with it and how to tame them are to be well thought of before taking up trade. When you understand them well you can slowly start taking small trades and along the path, you will come across new techniques and learn gradually in this exciting world of Stock and Currency Trade.

When you start to do a business, you forecast about the probability of profit, forgetting the loss probability that is hidden and associated with it. It is prudent to access the loss probability that could come on its way. Therefore, the Trader should analyze the loss probability and should ask the question whether this loss could affect the lifestyle that he is enjoying right now.

Therefore, risk to loss and reward to gain should have a correct ratio in order to build wealth. The experienced and seasoned Traders have their Risk to Reward Ratio to 1:3 and make themselves available for trading for a longer time.

The secret formula to successful trading lies in the Money and Risk Management itself and not in the other emotional systems. There is no holy grail that the markets should behave in the formulated trading system. The markets are so inconsistent that it does not move in the same direction always. It is the technical analysis that help you to stay away from irrational markets. The volatality sometimes does not understand the technical analysis and moves too far South that it hits the leverage of the average trader. The Risk Management plays a very important role at these situation and it stops you out from the losing trades much quickly than even you think. It moves sometimes at the speed of thought that humans go out of clue.

A wise Trader takes up huge volumes of trade over a longer period of time, moves one at a time in small proportions. He never puts in more than 10% of his equity in one trade and puts a stop loss at 5% of the executed trade. It is explained in the following illustration.

Equity Balance : 10,000$
Trade Committed 10% of Equity : 1,000$
Stop Loss 2% of Trade Committed : 20$
Profit Margin 6% of Trade Committed : 60$
Risk to Reward Ratio : 1:3

The above formulae helps the Trader to recover from his losses at every single win to every 3 loss. When there are 20 trades, the number of winning trades will improve and can put the Trader into a sizable profit.

Stock and Currency Trading Help for Beginners

Preface

I had been in trading various stuff like dolls to timber and as I grew up started to trade the stocks and currencies. There is no one on this earth who had passed all the test before tasting success. "Success" is measured by various parameters and there is no limit to quit in either way - be it a profitable journey or be it a journey of loss. Loss is a vitamin that stimulates you to see the success and it has a more powerful influence to learn more and as the journey keeps moving, it moves like a convoy. Interestingly, the purpose of the convoy is to keep moving.

As I grew old and after winning so many little battles, I slowly started to prepare the big battles, not victorious yet though, but assured and confident, and my body language started feel much better and reassuring. Battles especially bigger ones cannot be fought solitarily, and need the support of young ones along the journey, so I thought to educate the ones and share my experiences to the younger ones who can get prepared for the big battles much more quickly than me, avoid the silly mistakes that I committed and take you through the journey of this interesting and enterprising Stock and Currency Trade.

Risk Management

Before we commit to do anything, we need a roadmap and a plan to ensure that the path is leading to the road of destiny. Once the way is clear, we need to work hard to execute the designed plan. Specializing the trade or profession is the key. While our destiny is Success in Trade, we need to analyze all the attributes that are in the Trade, so that while we are in danger, our exercise come very handy to come out of such tight situation. Trading is not just winning small scores but it is a habit to build upon it. A smart Trader is not one who just keeps winning trades after trades, but how it was achieved is rather important. During a winning streak, all the stakes go in your way like a single way traffic, but during a losing streak, how good you are to sustain the earned profits is the question that needs to be judiciously answered. Sometimes wins come very easily in fluke, but such victories are very short lived. One big breeze can blow all the profits. A new Trader may be losing a seres of trades, but his acumen towards Risk Management is smart and over a longer period of time, the results show that he has won a few Big Battles and lost more smaller ones. It is because, he is prepared to exit trades that are moving against his direction and quickly books his loss at a small ratio and makes the big moves at the most right times. He waits for the True Signal to emerge and go for the larger stakes.

Trading is just the preparedness to book loss as the profit is booked in the normal course. Loss is an integral part of Trade and we need to accept that losses will be more and gains less, but the return of gain should be large in wiping off the deficit. In otherwords, Trading is the art of preserving the equity in conjunction with the inflanatory trend that prevails.

When a trader whose equity was 100K at the beginning of Year-1 and doubles his money at the end of Year-6 is a moderate trader or a normal trader. Though 100K had fetched him a profit at 100%, his emotion and feelings tell him that he has achieved really 100% return. Whereas, the truth is he has achieved less than 100% because he is not aware of the inflation calculation that is prevailing. In simple terms, the current inflation rates in United States as on July is 1.0533% [source :http://www.rateinflation.com/inflation-rate/usa-inflation-rate.php ] and for the last six years inflation rates could be more than 1.0533 p.c. and that is reduced from the earnings. In otherwords, Inflation is nothing but "Too much of money chasing too few goods" . United States has a good and strong economy while comparing to many other countries. Other countries like Japan is around 1.3520% for the last year http://www.rateinflation.com/inflation-rate/japan-historical-inflation-rate.php?form=jpnir check respective source on a detailed inflation study. It is important that a Trader should precisely know his Rate of Return on his investment.