Trading Goals

Recently, I received an email from a dear friend who had asked couple of questions on trading. I thought it might be useful to all of us as we all, at some point of time, keep asking these questions, especially when we are starting out.

I am reproducing some extract from that email communication (with few changes to maintain confidentiality), just in case it is helpful to some or all of us.

1) I read what was referred by you on Wiki for GANN theory. I am impressed with the theory but again there are enough cases against it as well. I mean there is no certainity in the theory as per the case studies. What are your thoughts on that? Arent the odds too high? May be i am missing something.

Response: To your first question, I would just use example of someone starting any business. It is not that a particular business model that fails, it is the people who fail. Why? Because they give up. They want immediate results. One has to decide whether it is a business (part time or full time) OR just a hobby OR just a wish to make money. So, there may be lot of examples against GANN’s success, it doesn’t prove that his techniques do not work. The fact that GANN made lot of money, tells us that there was something that he knew about the market movements.

Later, from 1985 to 2000, David Bowden from Australia (pls visit www.sitm.com.au ) also made lots of money using GANN techniques. So, my take is that if anyone can make money using a particular technique, we ALL can also do the same, if we are willing to learn and duplicate what they did.

David did a great work by simplifying GANN techniques which can be understood by any one, even a layman, provided the person is willing to put in work required as per their goal from trading. He made it ‘simple’ and simple doesn’t mean ‘easy’.

There are no free lunches. You have to put in the time, work and efforts required. It is no get rich quick funda. As David put it, “I don’t do extra-ordinary things, but I do ordinary things extra-ordinarily well.” Anyone who wants to become an expert has to learn and practice, in any field. You would have put in 4 years in engineering before becoming an engineer and then few years working to become better at what you do. That’s with any education or learning, and it’s the same here. I have learnt and used these techniques over last 4 years (since Oct 2006). If one devotes about 2 hours a day, and put in the work required, he/she would be in a position to forecast the stock/market movements with precision.

2) How do we trade? I mean what should i do? Buy/Sell a Particular SHARE and sell/buy it at a date/day recommended by you? Or should i do call/put on the actual Index? (If you feel i am jumping the gun too much just SAY SO – Or just reply will be answered on my blog or something on those lines)

Response : I would advise not to jump in straight away. To be able to advise you, I would need some more information like:

- whether you have a long term horizon or short term

- whether you want to learn trading or just trade. In other words, do you want a fish or want to learn fishing

- how much money do you want to make from stock markets (a target, may be every month, every year, in 2 years, 3 years, 5 years)

- Do you see it as a business, hobby or just checking

If the horizon is long term, then first just learn some simple concepts that I am sharing on www.sumitkgupta.com . These are applicable to all stocks and any market. Pick up one stock (any market) and one index (say NIFTY). You can find charts on them on Yahoo Finance. Here is a link to NIFTY bar chart on yahoo finance. It is an intra day chart i.e. for 1 day at 5 minutes interval. (http://ping.fm/SyFVu )

Start looking at Bar charts. Have a daily routine (1-2 hours daily, if you are serious). Don’t worry if you don’t understand anything. You didn’t learn walking, riding a bike or driving a car in first attempt. Believe me, effort is worth putting in. (I have a target to become a billionaire in 5 years trading in stock markets. August, 2015 And it’s done. Period. )

Once you respond, I will come back to you with a broad plan.

3) While answering above question – please note that my initial trading budget is only Rs. 25000. So i have no idea what and where to start with? I mean what is your advice shold i start with Indian markets or Oz Land?

Response: Capital is not an issue. You can start with any amount good enough to buy 1 (one) share.

I will cover more on this as well as few other techniques that one can use to learn trading, by trading without putting in any money, when we reach that stage.