Swing Trading Experiment

    I was quiet busy for sometime now and could not make posts here. This happens usually when I am busy with work or when I am trying something new on the market. Well this time it is both.
  I found some interesting ideas on http://www.swing-trade-stocks.com/ and did back testing and live trading. It is just over a month and the results looks promising. Any way, proper money management is the key. I will write an update about this later.
   I have updated the portfolio also. I haven't done quiet a lot of trading during this time. Most of the stocks did well during this time, so I just purchased few more. I have opted for a fixed brokerage scheme with my broker, so I have to do a minimum amount of trading every quarter to take advantage of the schemes(One of the ways they make you trade more!) . Apparently when the market went south today, most of my stocks fared really well. I see it this way. My stocks are stronger than the general market and in my experience, if market continues to go down for another 2 days, these stocks will also give up and starts sliding down. That doesn't mean that I sell them today, Patience is the key here. Wait till it hits the stop loss, ignore everything else(financial TV, News paper, index etc)

Automated Trading - Getting Historical and ongoing Data

An important requirement for automated trading is the availability of data. The success of trading depends on how you look at the data. Back testing is the most important aspect of automated trading and with out enough data, we can't make any reliable decisions from back testing.

here is few links for getting historical and current stock market data

NSE India - historical data
http://www.nseindia.com/content/equities/eq_historicaldata.htm

NSE India - daily data
http://www.nseindia.com/content/equities/eq_markettoday.htm

BSE India - daily and historical data
http://www.bseindia.com/mktlive/bhavcopy.asp

NASDAQ
http://quotes.nasdaq.com/aspx/masterdataentry.aspx?page=historical-quotes

Some NSE historical data as zip file
http://groups.google.com/group/nsebse_eod/browse_thread/thread/14a895b56769b860/468743dcdddce451?lnk=gst&q=historical+nse+data&rnum=1&pli=1

Getting Trading Ideas

There is no shortage of ideas available over internet, stock market literatures blogs etc.

Technical analysis provides many ideas based on the movement of price and volume assuming that

what happens in the past will repeat in future. fundamental analysis does it by using the financial data.

But trading some idea with out really understanding it and proper pre-planning can be suicidal.

Following steps will help in you to increase the profitability and cut losses.

1) Validate the trading idea -Understand reason why you think the price is expected to move in your favor.

2) Back testing - Look into historical data and find out whether the the idea was successful in the past.

    Get historical data and automate this process and test in such a way that you simulate the exact way your           account will behave with real trading(Portfolio level back testing). This can take a lot of time, I have some testing running for few days, be patient. This will save you money.

3) Paper Trading - Many times real trading gives entirely different result from back testing results, do paper

    trading for sufficient period before you actually start trading a new idea

4) Control the risk - Decide how much of your portfolio, you want to risk in a trade.

5)Cut your losses - Ones you start a trade, 3 things can happen, price remain at current level, price moves according to your expectation or it moves against your expectation. Be prepared for all three outcomes before starting the trade and again be patient, separate your emotion from the trade.

6) Be creative, don't stick to one idea, trade different ideas at the same time. 

Here is what I am trading now

• Buy when there is an established uptrend
• Buy when there is a consolidation and it starts to move up after and uptrend
• Buy or sell when there is an expected trend change

Automated Trading - What you need

Here is few items you need to automate your trading
1) You have a basic idea about stock markets and trading manually around some specific method/idea
2) Basic understanding of software programming
3) Softwares like excel spreadsheet, Microsoft access to start with or oracle, weblogic server, or custom software like amibroker(These are the ones I use, I started with basic microsoft applications and found that they sucked for back testing performance and used oracle and weblogic, which runs really fast but requires a dedicated machine preferably, the startup time of a pc with oracle installed is very long. Currently I use amibroker for most of the time, this has a cool front end and super fast back testing capabilities.
4) historical data from stock market(at least for 2 years)

Happy Republic Day

Indian markets are closed today. Happy Republic Day to all.

Gold Gold Gold

http://www.boston.com/bigpicture/2010/01/gold.html

Company Review - Infosys Technologies Ltd

     When you write about Indian stock markets, Infosys technologies Ltd(NSE - INFOSYSTCH, Nasdaq - INFY) is one of the companies you always see on the top of the lists. It is like google for US markets.
Many reasons why I wanted to write about this company here.

1.  I have worked with this company for more than 5 years!(as a matter of fact the longest employment I had so far). 
2.  This is the first security I owned
3.  I had no interest in stock market and I was forced to buy the stock as I had stock options at good profit.
4. Very capable management and ability to see the control of future, First in many new initiatives which became a standard later
5. IT at its best, I experienced the impact of IT on a daily basis, in terms of new technologies and quality.

I don't have any positions now because most of my trades are in the mid cap sector now.

Market in deep red but Taneja rocks

Many of my positions hits stop loss. But Taneja is up 7% today.

TANEJA AEROSPACE

Bought TANEJA AEROSPACE(BSE 522229) today.

Currently at less than 10% pf the previous peak, a risky buy. Looks like it is crossing the resistance line with good volume.  

Heikin - Ashi Charts - A better way of Candle Charts

Standard Japanese candle charts are created with OHLC(Open, High, Low and Close prices). Heikin-Ashi uses a modified OHLC values, which gives a clean look to the charts by eliminating the disturbances and by projecting the trend. See the two charts below.


Standard candlestick chart

Heikin-Ashi candlestick chart

Here is the formula(AFL) to create Heikin-ashi chart for amibroker users.

HaClose = (O+H+L+C)/4;
HaOpen = AMA( Ref( HaClose, -1 ), 0.5 );
HaHigh = Max( H, Max( HaClose, HaOpen ) );
HaLow = Min( L, Min( HaClose, HaOpen ) );
PlotOHLC( HaOpen, HaHigh, HaLow, HaClose, "Modified " + Name(), colorBlack, styleCandle );
_SECTION_BEGIN("MA15");
P = ParamField("Price field",-1);
Periods = Param("Periods", 9, 2, 200, 1 );
Plot( MA( HaClose , Periods ), _DEFAULT_NAME(), ParamColor( "Color", colorCycle ), ParamStyle("Style") );

Beware of the Markets!

I got 3 buy signals on Channel Guide India Ltd, in last 6 months and I was feeling bad since I din't buy it.

See where it is now. This should be a classic example of how risky the market is and one should be fully aware of this before starting to to trades. I don't see anything other than market manipulation behind this.

What is a Trading System

Wikipedia describes a Trading System as "A trading system is a group of specific rules, or parameters, used by traders to identify entry and exit points to trade a security or futures".

 It is also known as Algorithmic Trading. A completely automated trading system will be the one which is able to place orders also by itself based on the signals generated by the system.Most trading systems are created based on technical analysis, or just utilize the price discrepancies in the market.

e.g. If a security is being traded in two exchanges and there is a small difference in price, buying from one market and selling in the other will generate a small profit.

We will discuss more about creating trading system based on technical analysis.

"The lost Decade" an Interresting article on itulip

http://www.itulip.com/forums/showthread.php?p=141535#post141535

My pick for the new year

Bought Pratibha Industries ltd(NSE - PRATIBHA) yesterday.

Indian Markets opening an hour early today 01/04/2010

BSE and NSE exchanges will open at 09:00 AM(10:30 PM EST) today. This should be helpful especially for Indian investors in USA.

Percentage Gain - The Magic of Compounding

Below table shows the total return value of $10,000 invested with different gains assuming the returns are reinvested at the end of each year.

Indian Markets - NSE/BSE Holidays for 2010

1/26/2010	Republic Day
2/12/2010	Mahashivratri
3/1/2010	Holi
3/16/2010	Gudi Padwa
3/24/2010	Ram Navmi
4/1/2010	Annual Closing of Banks
4/2/2010	Good Friday
4/14/2010	Ambedkar Jayanti
5/27/2010	Buddha Pournima
8/19/2010	Parsi New Year
9/10/2010	Ramzan ID
9/30/2010	Half Yearly Closing of Banks
11/5/2010	Diwali / LaxmiPuja
11/17/2010	Bakri ID
12/17/2010	Moharram