TRDING - GAME OF PROBABILITY

Always remember trading is a game of probability, u should guess the best possible probability by using technical analysis. We will see how these probabilities work and what is the possibility we are seeing right now.

JUST SEE THIS POST http://kolhapuritrader.blogspot.com/2011/04/200-sma.html posted on 18 apr 2011.As mentioned 200 sma has given support on daily chart and nifty rallied from that level as shown in the chart below

Also on 17 april it has been mentioned that nifty is consolidating in the range of 5700-5950 and as can be seen in the following chart nifty has taken support at 200 ema on hourly chart.

So looking at these possibilities if trader has initiated buy position on 19 April with proper stop loss he must had profit of 200 points within 2 days since nifty had made high of 5912.80 on 21 april. Right now we also not trading these probabilities since it requires lot of follow up and monitoring of charts, in performance suggesting trades according to our trading system which requires less monitoring. Here just trying to explain how probabilities of technical analysis work, sometimes they fail also hence u have to change your view according to changes in chart.

Now let us see what is the possibility we are looking right now---
see how nifty is facing resistance that is unable to go above resistance line, and taking support that is unable to go below support line as shown in the daily chart below

Also see that it is resisting at important Fibonacci level on daily chart as shown below

 Many technical traders use fibonacci retracement to identify major support and resistance.Fibonacci retracement is created by taking major peak and low on a chart and dividing vertical distance between this peak and low by the key fibonacci ratios of 23.6%, 38.2%, 50% , 61.8% & 76.4%. Right now 61.8% retracement acting as resistance to nifty, hence short term trader can sell nifty here with proper stop loss.

BUT SEEING LAST WEEK CLOSE WE ARE HAVING FEELING OF NIFTY WILL TAKE OUT THESE RESISTANCES WHICH WILL BE MAJOR BREAKOUT FOR NIFTY ( i.e. IT STARTS TRADING ABOVE 5940-50 )  AND POSSIBILITY OF MAKING NEW LIFE TIME HIGH IN THIS FINANCIAL YEAR. BUT THIS VIEW WILL CHANGE IF  ----
1) It breaks today's low of 5791.55
2) daily close below 5693.25
3) weekly close below 5177.70

WILL IT BREAKOUT IN THIS OR NEXT WEEK ONLY ? WE HAVE TO WAIT AND WATCH .

NOTE : TO VIEW ENLARGED CHARTS CLICK ON CHARTS

KINDLY NOTE HENCEFORTH IN PERFORMANCE SHEET WE WILL MENTION NIFTY SPOT VALUES.

MUTUAL FUNDS

In jan 2008 I presented power point presentation regerding FINANCIAL PLANNING to 15-20 colleagues. I have checked if any of my colleague have started investing in diversified equity mutual funds since then what would have been his compounded annulised returns.

MUTUAL FUND SCEME                  SIP RETURNS              ONE TIME  RETURNS

BIRLA SUNLIFE                                        22.6 %                                 9.0 %
FRONTLINE EQUITY

BIRLA SUNLIFE MIDCAP                          22.22 %                               4.56 %

FI BLUECHIP                                            23.31 %                               8.55 %

FI PRIMA PLUS                                        21.1 %                                6.22 %

HDFC EQUITY                                         31.02 %                               13.7 %

HDFC TOP 200                                        26.59 %                               12.08 %

ICICI PRU DYNAMIC                                 24.37 %                                9.85 %

ICICI PRU TOP 100                                 19.12 %                                5.12 %

RELIANCE GROWTH                               20.91 %                                5.94 %

RELIANCE VISION                                   18.22 %                               2.65 %

SBI MAGNUM CONTRA                           15.57 %                               2.85 %

These returns are from 1 feb 2008 to 1 apr 2011. Incidently the market had top in jan 2008, and crashed due to global financial problem, eventhough one had started at peak then also his S.I.P. returns are good. Always remember TIME IN THE MARKET IS MORE IMPORTANT THAN TRYING TO TIME THE MARKET. Also from above table it is clearly visible that s.i.p. is better than one time investment, it saves our skin eventhough by badluck we start investing at the top of market this clearly indicate that DISCIPLINE IS VERY VERY IMPORTANT FOR EQUITY INVESTMENT.

JUST SEE THIS LINK     http://www.valueresearchonline.com/story/h2_storyview.asp?str=16861

SHORT/ MEDIUM/ LONG TERM INVESTMENT

All of you must have heard about short term, medium term and long term investment. But have u ever thought what is really meant by short/medium/long term and how it affects your decision regarding choosing the investment vehicle? Let’s try to find the answers.

FROM THE TRADERS PERSPECTIVE -----holding period for different time frames is as follows

SHORT TERM --- from few minutes to few hours, for this purpose he analyzes 5min or 15 min time frame charts technically.

MEDIUM TERM --- from few hours to few days, for this purpose he analyzes hourly / daily chart.

LONG TERM --- from few days to few weeks, for this he analyzes daily/ weekly chart.

Most of the traders don’t consider fundamental analysis but they rely on technical analysis.

FROM THE INVESTOR PERSPECTIVE ----- here there is lot of variation regarding holding period for different time frames in general public as well as experts. I personally follow following holding period for different time frames

SHORT TERM --- up to 3 years.

MEDIUM TERM --- 3 to 7 years.

LONG TERM --- more than 7 years.

The main reason for which we invest is to meet our future goals, which could be either short, medium, or long term in nature. You can able to decide in which product you  will invest if you can able to take decision regarding for how much period you are going to invest.

SHORT TERM objectives are usually met through debt assets, which are less volatile, as one cannot take risk with short term capital. Assets like fixed deposit, recurring deposit, P.P.F., MUTUAL FUNDS LIKE fixed maturity plans, short term debt funds, liquid funds are used for short term investment.

MEDIUM TERM objectives are usually met through combination of debt and equity assets.

LONG TERM objectives such as kid’s education and their marriage ( of course if you start your investment/ financial planning in early age then only this will become long term goal !!! ), and for retirement I think equities is the ideal asset class. This can be done by direct stock investment or equity mutual funds.

               Historical data shows that equities provide the highest returns among all asset class after adjusting for inflation. The investment risk associated with volatility may be higher in initial period it smoothens out over long term.

              Past studies have reported that returns from equity over long term have been in the range of 12-15% annualized. In fact, if you look at the most recent data (as on 31 march 2011), the BSE SENSEX has generated a compounded annualized return of 17.6% over the last 10 years. Let’s look the returns of  some of the diversified equity mutual funds over the last 10 years which I suggested here --- http://kolhapuritrader.blogspot.com/2011/04/best-equity-diversified-mutual-funds.html

1)      FRANKLIN INDIA PRIMA PLUS – 27.95%

2)      FRANKLIN INDIA BLUECHIP – 26.88%

3)      HDFC TOP 200 – 31.65%

4)      HDFC EQUITY – 32.92

5)      ICICI PRUDENTIAL TOP 100 – 22.94%

This is one method to decide in which asset class to invest, the other method is according to ASSET ALLOCATION will post regarding asset allocation later.

PERFORMANCE

Henceforth we will update performance of  our trading system and mechanical trading system here https://spreadsheets.google.com/spreadsheet/pub?hl=en&hl=en&key=0Asb4BEed06SldDAzQWVwU3E1WEdBdWQyb0RmY3JEY3c&output=html.

ALSO THERE WILL BE PERMANENT LINK ON RIGHT HAND SIDE OF BLOG.

200 SMA

As shown in the following chart will 200 sma will become rock solid support? We have to wait and watch to find the answer.

TO SEE ENLARGED VIEW CLICK ON CHART.

DEATH CROSS OF NIFTY

Nifty chart is showing death cross in last month, whenever time permits  will post about what is meant by death cross, golden cross and what r its implications, will b explained by proper charts.

If possible will try to explain how market changes its mood in same post!

Right now nifty is consolidating in the range of 5700-5950, so there must b people on bullish as well as bearish side. Long term investors can hold there holdings with proper stop loss while short term traders can trade the above mentioned range untill there is clear breakout or breakdown.

BEST EQUITY DIVERSIFIED MUTUAL FUNDS

This is short list of best equity diversified mutual funds on long term scale. These are large cap oriented funds. Most of the time these mutual funds have bitten benchmark in bull as well as bear market. That means they have given more return in bull market and fallen less in bear market. BUT ALWAYS REMEMBER PAST PERFORMANCE IS NOT GUARANTEE OF FUTURE PERFORMANCE.

SO HERE IS THE LIST----

1)      FRANKLIN INDIA PRIMA PLUS

2)      FRANKLIN INDIA BLUECHIP

3)      DSP BLACKROCK TOP100 EQUITY

4)      HDFC TOP 200

5)      HDFC EQUITY

6)      BIRLA SUNLIFE FRONTLINE EQUITY

7)      ICICI PRUDENTIAL DYNAMIC

8)      ICICI PRUDENTIAL TOP 100

Remember this list does not end here, there are also other good funds, you can get very good information regarding mutual funds if you follow www.valueresearchonline.com regularly this site is dedicated to education of retail investors.

 IF YOU ARE INVESTING IN STOCKS DIRECTLY OR VIA MUTUAL FUND ALWAYS REMEMBER S.I.P.!!!

INFORMATIVE POSTS

From today onwards whenever possible and time permits will try to post informative post related to capital (stock) market, financial planning, asset allocation, insurance, mutual funds, fundamental/ technical analysis. So requesting u to let us know ur interest of topic, queries at our email kolhapuritrader@yahoo.in

INITIATED FIRST TRADE

Today at 1pm mr. market told us to buy nifty so bought NIFTY~F:2-MONTH (26MAY2011) AT 5904.
So the possibility which told here ( http://kolhapuritrader.blogspot.com/2011/04/first-trade.html ) became the reality within two trading sessions.

FIRST TRADE

Possiblity of initiating first trade of this financial year has been increased due to todays price action, most probably this will happen in coming 4-5 days, likely it will b on buy side, let MR. MARKET will tell us when to buy, uptill then wait patiently.

NOTE- DON'T TRADE ACCORDING TO THIS RIGHT NOW POSTS MAY B DELYAED.

HAPPY AND PROSPEROUS NEW YEAR! GET RICH SLOWLY!!!

Hi! this is my first post, on the occasion of gudi padwa decided to start new blog regarding financial planning, investing, trading. The main idea is to share ideas with each other, give answers to queries related to above topics, so any queries will be welcome.

 In future may start recommodation for trading, at present i will post performance of nifty trading for this financial year starting 1-4-2011. But dont trade right now using these recommodationns because they may not be realtime, may be posted with delay.

ONCE AGAIN QUERIES WILL BE WELCOME