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D. Murali

Chennai, March 7

Over the week since the Budget day, we have been witnessing wild swings in the markets. `To decode what's happening in the bourses, Business Line contacted Mr Pradeep Chandrasekaran, Country Manager for Safety in the Market (www.sitm.com.au), `one of Australia's longest running investment training organisations', established in 1989.

Your first reactions.

Two long awaited corrections, which have got underway in the last few weeks, caused me sit up. The first has proved that the law of averages is alive and kicking - yes, I am referring to the five-in-arow loss for the Australian cricket team. The second has proved right another old saying - the bigger they are, the harder they fall. And what a fall it has been for the stock markets!

We were heading to 15,000, less than a month ago. Did global meltdown hit us?

When discussing the current fall in the Indian markets, it is important to note the date on which the market actually peaked - the 9th of February. This is important because the current fall in the market got underway before the presentation of the Union Budget (on the 28th of February) and the sell off in the world markets (which started on the 27th of February).

Why I am highlighting this is to show that the Sensex fell off its own weight and not because of any external factor.

In technical parlance, the simplest explanation is that the bulls ran out of time.

What is the secret of trading success, according to you?

One of the prerequisites for trading success is to have the ability to anticipate and take quick decisive action. Most of the traders become unstuck in the market because of their inability to identify a change in trend well in time. The fallout of this is that by the time they come to grips with the fact there has been a change in trend, it is probably too late in the day to close out their existing positions, leave alone reverse them.

Any technique you'd suggest?

Perhaps, the easiest way to identify a change in trend is by the use of swing charts. These charts were developed and used with great success by the legendary American trader W. D. Gann. More recently, David Bowden earned his stripes by improving upon Gann's works to come up with his ABC methodology.

So, is there any mantra for success that traders can universally apply?

The answer to that is that there is no short cut to hard work. Traders would do well to note the following if they are serious about succeeding while trading:

* Never trade unless you are sure of the trend. When in doubt, get out.

* Spend as much time as is possible in study and preparation.

* Spend little or no time in front of a trading screen.

* Employ strict money management rules.

* Be quick to take losses.

* Never, never trade without a stop loss.

* Always crystallise the rupee risk of a trade before initiating a position.

* Keep good records.

Any takeaways from the index volatility we have been seeing of late?

An interesting point to note about the current fall in the market is that the Indian markets turned nearly two weeks before the bear contagion engulfed the world markets in the last week of February.

Perhaps the rest of the world will start tracking the Nifty more closely now for omniscient signals.

Broken-hearted bulls will now look for some solace from the Indian cricket team, which will do well to emulate the Nifty by providing the lead to the rest of the world.

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