The Hindu Business Line : Come into my trading room

IN Trading for a Living, Dr Alexander Elder spoke about the three Ms (Mind, Method and Money). In Come Into My Trading Room: A Complete Guide to Trading, he teaches you to manage your money and time, as well as strategy, so that you can enter the markets with confidence and exit with profits. As the back cover of the book announces, the book offers a complete introduction to trading essentials, an overview of trading psychology, a practical overview of technical analysis, a step-by-step guide to risk control, exact instructions for keeping records, and so on. Come, come there is more:

The percentage of successful traders is higher among women. They tend to be less arrogant, and arrogance is a deadly sin in trading. Women traders are much more likely to ask a simple question — where's the money? They like to take profits and focus on avoiding losses instead of trying to prove themselves right. Women are more likely to bend with the wind and go with the flow, catch trends and hop off a little earlier, booking profits.

Markets are more efficient during flat trading ranges, when people are apt to use their heads. They grow less efficient during trends, when people become more emotional. It is hard to make money in flat markets because your opponents are relatively calm. Rational people make dangerous enemies. It is easier to take money from traders who are excited by a fast-moving trend because emotional behaviour is more primitive and easier to predict. To be a successful trader you must keep your cool at all times and take money from aroused amateurs.

Beginners make the common mistake of trying to follow too many markets at once. Some look for software to scan thousands of stocks and quickly bog down. Serious beginners should pick no more than two or three dozen stocks and track them day in and day out. You need to get to know them, develop a feel for how they move.

There is only one rational reason to trade — to make money. Money attracts us to the markets, but in the excitement of the new game we often lose sight of that goal. We start trading for entertainment, as an escape, to show off in front of our family and friends, and so on. Once a trader loses his focus on money, his goose is cooked.

Markets can confound traders. They often run in two directions at once — up on the weekly charts, and down on the dailies. A market can reverse without sending you an e-mail about its change of plans. A sleepy stock can get so hot that it burns through stops, while a formerly hot stock becomes so cold it freezes your capital along with your fingers.

In science, if you're not a star by the time you're 25, you'll never be one. Trading, on the contrary, is an old man's game, and now increasingly a woman's. Patience is a virtue and memory a great asset. You learn best by making many small trades and analysing your performance. The more you trade, the more you learn. Play for small stakes to reduce the pressure and concentrate on quality.

A good read, whether you trade or not.

20-year Week

A MIX of hard news and features, the book The Best of The Week contains twenty-five stories, culled from the period between 1982 and 2002. The hard-hitting reportage, the meticulous research, the sheer diversity of the subject matter and the distinct styles add to the reading pleasure, promises the blurb. Excerpts:

Madhava Rao was extremely lucky in getting a donor heart so quickly, when more than 400 patients die awaiting donors every year in the US, after registering for heart transplant. In fact, in a year, 75,000 Americans need new hearts but the availability is only 2,000 or so. (First Indian with a new heart, July 1985)

Dr Bashisht Narain Singh could very well have been another Dr Srinivasa Ramanujan. He had that profound intellect that makes a genius, but instead of winning laurels, Dr Singh was thrown by a callous government into the confines of Ranchi Mental Hospital. And a few months ago he just disappeared. (A genius vanishes, January 1990)

In Tamil Nadu, the number of people who have not met a Tiger is meagre. The organisation is highly systematic, with each district being allotted a specific assignment.

The task cut out for Coimbatore was manufacturing guns and grenades and getting spares for AK-47 assault rifles; Salem for treatment of the wounded and for purchasing medicines; Erode, for dyeing the battle fatigues; Madurai, for intelligence-gathering; and Thanjavur for smuggling. (Tracking the Tigers, August 1991)

Removal of the uterus is an in thing. According to Montreal Health Press, this is more common in countries where doctors are paid per operation than where doctors are salaried. Seven out of every ten women above 55 in the US have lost their uterus. But in Britain, where medical services are nationalised, only two women in ten have been thus deprived.

No such statistical studies have been done in India. (Careless doctors, greedy hospitals, January 1992)

At fourteen, when Sachin was disappointed in not getting the prize of the best school cricketer of the year, Sunil Gavaskar soothed him with a letter whose gist was, `When you see the records of cricketers who have won the prize, you will see one name is missing, one who has proved everybody wrong. Hence, do not worry.'

Read it over the weekend.

(Books courtesy: Fountainhead, Chennai. E-mail: fhbooks@satyam.net.in)

Tailpiece

"I think they have a cloning expert in the accounts department."

"What makes you think so?"

"The totals tally!"

hindubusinessline@hotmail.com

D. Murali

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