SEBI's recent move the do away with Mini-Nifty trading in Futures and Options will drive away more small retail traders from the market.
With no. of algo traders growing continuously; and the slowing market showing little meaningful movement, retail traders have been forced to exit the intraday market in possibly hundred of thousands. Now SEBI's new dictate will undoubtedly shrink their group further.
But after 10 years of almost daily observation and a whole lot of experimenting, I am of the definite opinion that Nifty Futures trading is the comparatively the best and - I will not hesitate to say this - the easier way to make money from the stock market.
But to achieve this, 3 things are necessary.
1. The RIGHT knowledge: Without the RIGHT technical knowledge it is foolish and speculative to trade intraday. The knowledge needed by the ntraday trader is the know-how of analysing the live market. While technical analysis is the bedrock, TA per se is not the answer to perfection in intraday trading. For conventional TA that we generally refer to and which many traders are reading up on, is inadequate knowledge to trade intraday.
a. The time frames of a study being done with data culled over a period of 8, 10, 14, 21 days or even more an never be perfected by data generated in 2/3 hours or even maximum five and half hours. It will be illogical to expect both the results to be similarly accurate.
b. Intraday price movements are often drastically affected by sudden news of events hitting the market. TA being a sophisticated averaging system in actuality, tends to smooth out once-in-a-while deviation of price movement from the normal flow.
c. Software which support intraday analysis are mostly reflective of large price movements which we call trends. Only in case of strong and longish trends are properly caught in such software. at times of prolonged period of sideways movements, these software are liable to produce whipsaw trades, leading to repeated losses.
2. The RIGHT Tools of the Trade: Every trade needs its own tools. Without using the RIGHT tool, nobody can become proficient and successful in the trade. If I want to become the best furniture maker in the town, I have to have the knowledge relevant to the trade and the perfect tools to help me excel. I can't make a good carpenter using a broken saw. Simple. The RIGHT tool for intraday trader is the live analysis software with proper charts and fast data feed.
A point of caution: Intraday live charts produced by software are basically VISUALS. The software doesn't speak or lets out a whistle (some do give out sound, arrows or even activate some alert mechanism to draw the trader's attention). So it is very important that:
a. The software is designed in such a way that the visual element which signals a buy or a sell situation is not lost or remain so unclear to the trader that the trader misses the signals completely or cannot be clear in his/her mind about the occurrence of the signal. I have found most brokers' software have this element missing and major signals showing buy or sell situations become difficult to determine.
3. The need for TOTAL DISCIPLINE: Someone had said, trading is a mind game. Firstly, it is NOT A GAME. It is pretty serious stuff for millions of the traders who trade daily to run their homes. And it is not just the mind which affects intraday trading. Intraday trading demands TOTAL DISCIPLINE. Beginning with the DISCIPLINE to control your speculative tendencies to using ONLY the BUY and SELL signals (visuals, remember) coming in the live analysis to trading as per the calculations which should give 100% accurate target levels of the price. And self doubt, any over ambitiousness, any speculative tendencies which always lurk in the mind of the trader - "I think..." will vitiate the trading and lead the trader into losses. The dispassionate analysis, observation and execution of trades both in entering a trade and on squaring up, need to be according to the knowledge learnt.
Any trader who allows personal thought, gut feelings, hot tips or even pure hope to determine his/her actions at any time during the trade, will in all probability, end up losing money. Eventually.
It is disheartening to see intraday traders trading as if they are in a casino. They take 'Bets'. And how can you blame them when India's largest circulated business paper invites traders with large ads to take a bet on the market with Ashu, their TV presenter, at 8 am.
Mind you, Ashu isn't a qualified technical analyst. He just used to reel out speculative trading calls. That's the height of irresponsibility which escaped both SEBI's attention as well as of the Chairman, Press Council of India, retired Justice Markandey Katzu's.
A suggestion for SEBI: Instead of running ads for supposedly for Investors' Knowledge, take some initiatives to actually promote and encourage learning among retail intraday traders. Secondly, with scores of so called analysts and education centres running technical analysis classes, evolve a system for checking and grading the efficacy and efficiency of those training systems so that lay traders with no means of assessing a particular training system do not have to speculate on which course to attend.
With no. of algo traders growing continuously; and the slowing market showing little meaningful movement, retail traders have been forced to exit the intraday market in possibly hundred of thousands. Now SEBI's new dictate will undoubtedly shrink their group further.
But after 10 years of almost daily observation and a whole lot of experimenting, I am of the definite opinion that Nifty Futures trading is the comparatively the best and - I will not hesitate to say this - the easier way to make money from the stock market.
But to achieve this, 3 things are necessary.
1. The RIGHT knowledge: Without the RIGHT technical knowledge it is foolish and speculative to trade intraday. The knowledge needed by the ntraday trader is the know-how of analysing the live market. While technical analysis is the bedrock, TA per se is not the answer to perfection in intraday trading. For conventional TA that we generally refer to and which many traders are reading up on, is inadequate knowledge to trade intraday.
a. The time frames of a study being done with data culled over a period of 8, 10, 14, 21 days or even more an never be perfected by data generated in 2/3 hours or even maximum five and half hours. It will be illogical to expect both the results to be similarly accurate.
b. Intraday price movements are often drastically affected by sudden news of events hitting the market. TA being a sophisticated averaging system in actuality, tends to smooth out once-in-a-while deviation of price movement from the normal flow.
c. Software which support intraday analysis are mostly reflective of large price movements which we call trends. Only in case of strong and longish trends are properly caught in such software. at times of prolonged period of sideways movements, these software are liable to produce whipsaw trades, leading to repeated losses.
2. The RIGHT Tools of the Trade: Every trade needs its own tools. Without using the RIGHT tool, nobody can become proficient and successful in the trade. If I want to become the best furniture maker in the town, I have to have the knowledge relevant to the trade and the perfect tools to help me excel. I can't make a good carpenter using a broken saw. Simple. The RIGHT tool for intraday trader is the live analysis software with proper charts and fast data feed.
A point of caution: Intraday live charts produced by software are basically VISUALS. The software doesn't speak or lets out a whistle (some do give out sound, arrows or even activate some alert mechanism to draw the trader's attention). So it is very important that:
a. The software is designed in such a way that the visual element which signals a buy or a sell situation is not lost or remain so unclear to the trader that the trader misses the signals completely or cannot be clear in his/her mind about the occurrence of the signal. I have found most brokers' software have this element missing and major signals showing buy or sell situations become difficult to determine.
3. The need for TOTAL DISCIPLINE: Someone had said, trading is a mind game. Firstly, it is NOT A GAME. It is pretty serious stuff for millions of the traders who trade daily to run their homes. And it is not just the mind which affects intraday trading. Intraday trading demands TOTAL DISCIPLINE. Beginning with the DISCIPLINE to control your speculative tendencies to using ONLY the BUY and SELL signals (visuals, remember) coming in the live analysis to trading as per the calculations which should give 100% accurate target levels of the price. And self doubt, any over ambitiousness, any speculative tendencies which always lurk in the mind of the trader - "I think..." will vitiate the trading and lead the trader into losses. The dispassionate analysis, observation and execution of trades both in entering a trade and on squaring up, need to be according to the knowledge learnt.
Any trader who allows personal thought, gut feelings, hot tips or even pure hope to determine his/her actions at any time during the trade, will in all probability, end up losing money. Eventually.
It is disheartening to see intraday traders trading as if they are in a casino. They take 'Bets'. And how can you blame them when India's largest circulated business paper invites traders with large ads to take a bet on the market with Ashu, their TV presenter, at 8 am.
Mind you, Ashu isn't a qualified technical analyst. He just used to reel out speculative trading calls. That's the height of irresponsibility which escaped both SEBI's attention as well as of the Chairman, Press Council of India, retired Justice Markandey Katzu's.
A suggestion for SEBI: Instead of running ads for supposedly for Investors' Knowledge, take some initiatives to actually promote and encourage learning among retail intraday traders. Secondly, with scores of so called analysts and education centres running technical analysis classes, evolve a system for checking and grading the efficacy and efficiency of those training systems so that lay traders with no means of assessing a particular training system do not have to speculate on which course to attend.
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