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2 | ATMASPHERE JULY 2012
CONTENTS
Letter from the President - Page 3
Editor’s Note - Page 4
GuruMeeting - Meet with Mr. Larry Berman, an Interview by Sushil Kedia - Page 5
ICHIMOKU KINKO HYO - A Complete Trading System by Anil Padia - Page 13
Quant...um Leap: Graduating from Manual Analysis to Automated Trading by Manish Jalan - Page 17
Trading is not Investing by Joe Ross - Page 20
Testy Bytes by Kora Reddy - Page 23
Book Review - Super Trader by Meghana V Malkan - Page 26
Past Events’ Update - Page 28
Forthcoming Events - Page 30
This newsletter is produced by the Association of Technical Market Analysts. All comments and editorial material do not necessarily reflect the organization's
opinion nor does it constitute an endorsement by the Association of Technical Market Analysts or any of its officers, of any products or services mentioned.
Sources are believed to be reliable at time of publication, but not guaranteed. The Association of Technical Market Analysts and its officers, assume no
responsibility for errors or omissions.
JULY 2012 ATMASPHERE | 3
LETTER FROM THE PRESIDENT
Dear Colleagues,
ATMA is an inclusive effort. Our goal is to include all professional Technical Analysts in a thriving professional community to achieve
common goals of learning together, knowing together & growing together. One thing you can do to expedite this goal is to forward this
monthly newsletter with excellent reading material to all fellow Technical Analysts who you believe will enjoy reading this as much as
you do with a suggestion that they too can obtain a totally free subscription by visiting the subscription page on the ATMA website and
filling up their details.
ATMA is very near to a breakthrough that we have dreamt of since inception - our own E-Library of commercial grade books and not just a collection of
Research papers! Good volunteers who may step forward to take ownership of this initiative will help expedite it further. With the launch of the E-library in
the foreseeable future, it would clearly be possible to take the best of the publications in or field across the length & breadth of India in the most cost effective
way. No longer, a Gunjan of Hoshiarpur or a Madhavan of Goa will have to regret inability to visit the physical library at the BSE Building!
As our monthly newsletter progresses further, Meghana has major plans. One of them would be to institute a reward for Article of the Month! She is working
out details of what will qualify a submitted article as one such. This would be possible to institute when we start receiving many more articles & given in some
months only when the criteria are met. Competition is good for expanding collaboration!
In the very near future, all our eyes are set on the BSE Trading Hall where we are hosting Mr. Larry Berman on 1st September 2012 & Mr. David Keller on the
6th October 2012 respectively. Both events are “By Invitation Only” & “For Members Only”. Look forward to meeting all ATMA members at these two great
events!
Sincerely,
Sushil Kedia
4 | ATMASPHERE JULY 2012
EDITOR’S NOTE
Here’s presenting you with the third issue of ATMASphere!
The GuruMeeting feature of this issue contains an interview of Mr. Larry Berman, Past President, MTA interviewed by our President.
Here he reveals the tools that he uses out of the technical analysis tool kit, his view on Elliot Wave Analysis; including his interactions
with the Guru of Elliot Wave – Mr. Bob Prechter himself. He also gives us a sneak peek into the agenda for his Mumbai visit next month.
In this issue -
1. Anil Padia brings in the readers to the Ichimoku Trading System and explains its basic concepts and parameters.
2. Joe Ross, a trader, educator and author presents an interesting write-up on the difference between trading and investing – from a psychological view point.
The educative journey in our regular features continues. In the ‘Quant…um leap’, Manish Jalan introduces the concept of ‘Alpha Generation’. Kora Reddy
explains how Excel could be used as a backtesting tool in ‘Testy Bytes’.
The Book Review section reviews the “Super Trader” by Dr Van Tharp.
We always appreciate your feedback and look forward to hearing your thoughts on ATMASphere. You can email us at [email protected]. You can also
subscribe to ATMASphere completely free by clicking here.
Sincerely,
Meghana V Malkan
JULY 2012 ATMASPHERE | 5
GURUMEETING
MEET WITH MR. LARRY BERMAN, AN INTERVIEW BY SUSHIL KEDIA
Larry Berman, Past President MTA Sushil Kedia, President, ATMA
Interview Transcript
LB: Larry Berman SK: Sushil Kedia
SK: Hello everyone and welcome to the July edition of the Guru meeting. We
are very excited to host Mr. Larry Berman, past president of the MTA and
currently a board member in that capacity. He has been a vice chairman of
IFTA, President of the Canadian Society of Technical Analysts and he leads
the business of ETF Capital Management. He brings to the table more than
two decades of investing and trading experience using an integrated
approach of Technical and fundamental Analysis. Very much welcome to you
Mr. Berman. How do you do?
LB: I am doing alright, how are you doing Sushil?
SK: I am doing fine too, thanks. Let me come straight to what excites all of us
most as members of the MTA and members of the ATMA. What attracted
you towards technical analysis?
LB: Well it is actually going back to the late 80’s. I was coming right out of
University. I got a job in a brokerage firm and one of the guys that worked
there who was sitting next to me used to be a floor trader in Chicago. I was
trying to figure out what investments to put clients in and back then we were
selling mutual funds. He had a chart book. He kept drawing point and figure
charts by hand. He calculated stochastic by hand. Back then there weren’t
any good computers like we have today. Although there were some, I
remember the firm we had - The Lotus 123 Application. I developed a macro
that could read price series input in a column and could create a point and
figure chart. I started creating point and figure charts by computer through a
lotus programme. That kind of thing got me into it. He said something
important to me very early in my career “It does not matter what the
analysts write on the reports, it matters what people do with their money.”
And to me that was an epiphany and I said “Yeah!! If everybody says it is
bullish, the stock should go up” but it does not go up, that means probably
everybody is in. And so I started reading lot of books about the crash that
just happened in 1987 and what was going on in the market. That really
sparked my career in terms of looking at things fundamentally. Shortly
thereafter I started a CFA program on the fundamental side. I was then
introduced to the CMT program in 1991 and quickly started that as well. I use
a balance of fundamentals and technicals but 95% of my investment decision
6 | ATMASPHERE JULY 2012
is about risk management. And for that you have to use technicals.
Fundamentals really do not help you with risk management.
SK - So Larry which specific tools and indicators find your favour? What are
the tools and indicators that you work most with?
LB - One of the tools I use most is behavioural finance (understanding mass
psychology). When I am in India next month speaking to your members, one
of the topics I am going to be covering is trying to identify what your
personal trading strengths and weaknesses are from the perspective of
behavioural finance. How our mind works? I go across the country in Canada
here and try to speak to investors. I do it through my weekly TV show. We
have done a series of analysis asking people questions. One of the simple
questions is related to trading decisions - You own a stock and you have a
position and it has got an open profit of say $1,000. You know there is an
event risk coming up the following week which is earnings. If the earnings are
good it would go another $500 up or it could get cut at half. So what would
you do? You take the risk or you not take the risk and you close the position.
And how you answer that question is going to help you as a trader and
investor. It helps you identify what tools you should be using. What tools I
use may not be appropriate for other people to use because of the way they
think about investing. One of my favourite tools many years ago was MACD. I
found that it had some limitations. I then developed a hybrid of MACD that
looks at market cycles. I will show your members my Trading Cycle indicator
at the conference. I like the RSI and that is a very good indicator for
identifying shorter term trading opportunities but I look at a multi time-
frame approach. So when I get an oversold RSI reading on a daily and a
weekly chart I then know to increase my investment size. Let’s say, my
maximum position on any one trade might be 5% of the portfolio. If my daily
is oversold but weekly is in the middle of the range, then I may only do half a
trade. I use indicators kind of differently and I use a lot of behavioural
analysis gauging which tools are going to work best in different market
environments.
SK - Larry we are aware from our many conversations that you keep in close
contact with Mr. Robert Prechter who is very popular in India and you have
done lot of Elliot Analysis yourself. So what is your view on how Elliot analysis
adds value to the repertoire of Technical Analysis?
LB - That’s a great question. Bob is a good friend of mine and I have had a
very good pleasure of presenting him with an award that the Canadian
Society of Technical Analysis came out with in 1999 shortly after the passing
of Jack Frost. Many may know that Bob did his seminal work on Elliot
Analysis with Jack in his book that came almost 30 years ago now. So when
Jack passed away, the CSTA came out with the Annual Jack Frost Memorial
Award and I presented Bob with the initial award in 1999. Ever since then we
have been close friends. We chat periodically about markets. I think Bob is
one of the smartest guys on the planet. Bob influenced the core part of my
thinking on Technical Analysis. It is all about time frames. Bob tends to take
very long term cycle view of things. He focuses a lot on the Super Cycles. Bob
has been talking about the Grand Super Cycle peaking for a long time now. In
fact he was on my TV show last year talking about the year 2016 for being
the next ultimate bottom for the Grand Super Cycle. For me personally, what
happens between now and 2016, I do not know. My clients are concerned
JULY 2012 ATMASPHERE | 7
about what is going to happen for the next quarter or two. So when it comes
to using Elliot wave or any other technical tool for that matter, you have to
be in the right time frame that is important for your investors. We know
Elliot wave is a great tool for fractal analysis and understanding multiple time
frames. Just because Bob Prechter or anyone who practices Elliot Wave
Theory might be bullish or bearish, do not take that and make your
investment decision. Understand what markets it works well and what
markets it doesn’t work well because no indicator works well in all markets.
If you haven’t figured that out yet the markets will school you eventually. If
you have been in the market long enough then you will understand that no
opinion is smart enough and it is really about risk management. Well again,
looking at Elliot Wave I distilled the essence of it that made sense to me and
developed a set of tools that help me navigate the market through the
cycles. I don’t use Elliot wave in particular as in 1/2/3/4/5 and a/b/c. I
developed a set of tools that I will share with ATMA members next month
when I am speaking in India.
SK - That would be so kind of you. That brings to mind that Elliot Wave is
extremely popular in India and yet in my interactions with many of my
colleagues in Western part of Europe I find that the popularity of Elliot Wave
is not so much. Any particular reason you might attribute to why Indians are
so much fascinated by Elliot Wave and it is not practiced so heavily in Europe
as well as USA?
LB - I have some ideas there. I think it depends on the breadth and maturity
of the markets. So for example if you are trying to evaluate the S&P 500,
everyone knows that is the benchmark in the world that everyone focuses
on. So in S&P 500, you have got 500 stocks from diversified sectors, so you
can do Market Breadth analysis and you can do Relative Strength analysis.
From the perspective of a Portfolio Manager being in the right stocks at the
right time when they are outperforming is far more important than
understanding the wave counts. Even though the wave counts are interesting
and can be helpful, being in the right stocks at the right time makes more
sense. I learned one thing from Ralph Acompora many many years ago and
this was before he made his Dow 10000 call when he was in a firm on Wall
Street. I made an internship with the MTA very early in my career in the early
90’s and studied the techniques of all the Wall Street guys and got to know
them really well. One of the things Ralph said to me was that it was great
forecasting the Dow and knowing the wave counts but you also got to know
the 30 stocks and you got to know what they are doing. If the markets are
going to go up then 25 of 30 have be able to go up and the big ones with the
big dollar values; since the Dow is dollar weighted; are going to lead the
charts. So when you are looking at an Index, do the wave counts but know
that an IBM at 190$ is ten times more important to the Index than GE at 18$.
So it matters more what the wave counts of the IBM are than it does on GE
even if we know that GE is bigger company than IBM as per market cap. I
know that the Indian markets don’t have tremendous amount of breadth to
them although my knowledge of Indian markets is small and limited to the
main index Sensex. So I am really looking at India, looking at the few big
stocks and looking some the global ETFs that proxy the Indian Markets. Elliot
Wave tends to be very popular in markets that don’t have a lot of breadth,
volume statistics those kinds of things. In currency markets, Elliot Wave is
important because you cannot really do a Relative Strength analysis, nor can
8 | ATMASPHERE JULY 2012
you do any breadth analysis. A lot of tools that equity market investors may
look at are not available for currency markets. So I think in some of the more
developing markets in the world Elliot Wave is a more natural way of looking
at things whereas when you are into a very matured market you can look at
other statistics like Market Breadth or Relative Strength to really get a better
assessment of the potential of an Index overall. When you are talking about
individual stocks I am not really sure why someone would go to Elliot Wave
over chart pattern per se although within Elliot Wave in wave 4 we get
triangles. When you recognize the wave structure you recognize the triangles
and find out that you are into a wave 4 which can give an advantage. Some of
the combinations of techniques can help. I think if you are just looking at
Elliot Wave by itself, it probably is a weak form of analysis. When you
combine it with volume, when you combine it with momentum indicators or
trend indicators then you are getting a more complete picture. So Elliot wave
is very good fundamental building block but I think you need more than just
one technique weather it is Elliot Wave or Gann Analysis or any other
technique or for that matter including Dow Theory. You need more than just
looking at the index and making a projection to get a sense of what is
happening under the hood. I sometimes think technicians are more of auto
mechanics where we lift up the hood of the car and see that carbonator has
some gunk on it and see that the fan belts are frail. And what that means to
the technicians is that the advance decline line is breaking down, it is not
making new highs, there is a bit of weakness in momentum and therefore
the engine is probably going to slow down and potentially break down on the
road. So that is how I think about things.
SK - We have also heard some good stuff about Ralph Acompora from you.
For the current generation of technicians and the new ones getting into the
market, which other earlier technicians’ work would you recommend for
getting your hands better into the hood?
LB - The biggest influence on me in my career has been work of J M Hurst.
Many people understand his work in terms of market cycles, trading
envelopes and trading bands. That has been a huge influence in my career. I
will give you an example. If you are trading stocks, it does not matter which
one, say for example Tata Motors, what you want to do is understand how
the stock trades like the back of your hand. Know where the lines are. So you
can look at the price history of something and know what the average
trading range is in the last quarter or month or a week or a year. Let’s say the
average trading range of the stock in a year from high to low is 25% and you
have gone back 20-30 years, you have a pretty good sense that if you are in a
trade and you have got 15/16/17 percent profits, there is a good chance that
you are getting to the top of the range so when I think about things, of where
I bought them and what the price targets might be, it is not about wave
counts, it is about probability. It is understanding what normal behaviour is.
When volatility increases you can expand your trading range, when it
decreases you decrease it. And when I approach things from my probability
stand point it really elevates my analysis and my performance in the markets
because investing is more about probabilities and statistics than it is about
getting the right wave counts or getting the right forecasts. Forecast is great
but Risk Management is the most important thing and to me that is about
statistics and probabilities more than any specific technique and forecast.
JULY 2012 ATMASPHERE | 9
SK - So Larry, which kind of markets get your attention most? As an ETF
Investor, you pretty much have an access to the whole universe. But out of
that which are your favourites?
LB - This is a good question. For many years in my career, I was an analyst
and it is really only in the last 6-7 years that I have taken on portfolio
management role. I have worked for banks and I have traded proprietary
books for banks where you have no one to report to except the risk manager
and the focus is extremely short term. You have day-to-day P&L. You have a
fiduciary responsibility to a client. One of the clients who is a 30-year old can
have a big time frame, another one who is 85 does not have huge time
frame. They have very different risk tolerances. You have got to understand
the difference between that kind of approach to the markets and that has
really changed my perception of things. It very different from being an
analyst. You are making a forecast based on some techniques and are
running money and having a P&L and showing people what we do adds
value. There is quite a big distinction between the two ways of using
technicals - as a practical practitioner and as an analyst giving a price target -
both are very different.
SK - Larry, do you find time for any hobbies or past times? What kind of
hobbies do you indulge in?
LB - Absolutely, when I was much younger, I played competitive baseball. The
baseball unfortunately developed arthritis in my hips and then baseball
wasn’t something I could really do in a great way anymore. So I migrated into
golf. I am an above average golfer, I am low handicapper. I love the game, I
love the mechanics. I think it is one of the greatest challenges. Like the stock
market, every time you play it, it is different. Some days, your swing works
and you are in a groove. It is just like making a call in the market where you
get the way it can. Like some days you get every little tick and you shoot a
72. And the next day; the same course and same golfer, you do not
understand it and you have a negative P&L on the day. Same golfer, same
skill set. To me, golf is a lot like markets, but it also gets me away from the
screens. Over the years, looking at the tick tick tick, sometimes it is too much
and you got to take a step back. Golf is a game of strategy where you make a
good shot and you have got 180 yards to carry over and you have a shot into
a well-guarded green. It is kind of being in a profit situation or a loss, how do
you manage that risk. And so I really enjoy the game of golf. To me it is a lot
of strategy and I love it to teach it too. That is probably my biggest hobby
outside of spending time with my kids these days. We launched the
Independent Investor Institute in 2011 where we teach individual investors
everything from day trading skills to managing their own portfolios will asset
allocation of ETFs.
SK - That is fantastic Larry. What is your belief - what is the differentiating
line and what are the factors that make or break a good analyst from
becoming a good investor or a trader?
LB - That is a great question. The transition for me was hard. Standing up in
front of a room of traders and sales people when I worked for a Bank as a
strategist for 10 years; it was easy for me to get up and say “listen the charts
are bearish here and it time to sell stuff”. The reality is most sales guys sell
stocks; they do not short stocks, although there is the hedge fund crowd.
10 | ATMASPHERE JULY 2012
This reminds me of an incident. I said one day “Listen I think the market can
come off 10%, I am all in cash” and I really felt good about things. I was trying
to say things are going to get bad here for a while. But none of the sales guys
wanted to hear that. One of the guys called me off to the side afterwards and
said “Listen, we have got to sell stocks to these people so why don’t you tell
them what could they buy to protect themselves in the down market?” So
that was very interesting to me. As a portfolio manager, I have got the
functionality and the variability to go in cash for a while. We set up business
that way because that is the best way to deal with people instead of Long
Only world. Especially as we are all aging as a society and we need to keep
our money as we retire. Making a transition from the analyst and saying “Hey
it’s rolling over, it’s bearish”. Ok, how much money do I take off the table?
Do I take the same money off the table as a guy who is 30? As a guy who is
65? Probably not! So there is no one mutual fund that works for everybody.
For our business we set up really customized portfolios for clients. So we
have different models and different trading techniques. Some designed
through Relative Strength and sector rotation; others are designed long-
short. Whereas some others are designed as pairs trades. So there a lot of
different techniques. Transitioning from being an analyst to actually running
money and having fiduciary obligations, whether you are a prop trader at a
Bank or running money at a pension fund, it is vastly different. And what
helped me make the transition was understand the end client’s need and not
approaching it from the perspective of making a market call based on a chart
pattern. That really helped me transition from one side to the other.
SK - Larry, given the fact that you are a qualified Chartered Financial Analyst
as well as a Chartered Market Technician, for a lot of newcomers in the
business (though some people can remain a newbie for quite some time)
there has been an ongoing debate in the business that has been popping up
again and again - Fundamental Analysis v/s Technical Analysis. There are few
like you have been practicing what may be called `Fusion Analysis’. So what
have you got to address to this set of people who are hoisting a flag of
Technical Analysis v/s the flag of Fundamental Analysis? What would be your
comment to that?
LB - I think there is a lot of confusion out there about what TA is. There are
people who are educated PHDs from MIT and the top schools in the world
that haven’t a clue how to manage money. Just because you are educated
and have credentials doesn’t make you good. What makes you good is
learning from your mistakes. A fundamental analyst that is bullish on a stock
and has a buy recommendation where there is 30% upside and standing at
the table and saying “I like the company fundamentals”. And then all of a
sudden the stock comes down and then he says “By the way we have a
problem” and then the analyst downgrades the stock. That is a lousy analyst.
When you incorporate technicals and fundamentals, what the charts tell you
is that - what Bob French told me almost 25 years ago - pay attention to what
people are doing with their money and not what the analysts are writing
about. So you got to understand that the markets are smarter than you are.
Regardless of what technique you use, technicals or fundamentals or quant
or some hybrid, some fusion or whatever it is, understand that the markets
are always right and it is all about managing risk. And these things whether it
JULY 2012 ATMASPHERE | 11
is looking at PEs and cash flow ratios and fundamentals valuations - is it a fair
price to pay for this stock? If it is...Great! Then it should go higher from here
if things are good. If it is not going higher when it should go higher then you
got to cut your risk. May be stop your position in half, buy a little lower as
long as the longer term trend is positive. It is that combination of thinking
that is going to drive success to younger guys coming up in the business and
that is understanding the risk management side. I think that every question
that you have put forth to me, I am always coming back with Risk
Management, Risk Management, Risk Management because over my career,
that is all that has been a bottom line to me. Whether you are a stock trader
or whether you are an analyst at a firm getting a recommendation list; when
you are wrong and are stopped out, look for the next opportunity and that is
what it is all about.
SK - Larry we are so excited about hosting you here in Mumbai before the
ATMA Membership and the wider market community on 1st September. It
will be useful if you could tell us what are the topics that you are going to be
teaching us at the meeting in Mumbai in September?
LB - Couple of different topics I am going to focus on Sushil. A big part of it is
understanding your limitations and the positive side of being an investor or a
trader. We are going to spend a good block of time looking at behavioural
finance. It is growing field. There is a new book that the MTA is considering
adding to the Body of Knowledge. I have read the book and done lots more
research in the last year and a half. I am going to share with the ATMA group
and the broader community there some of the things that I have learned
from the behavioural side of things. I am going to point out a lot of things
that the people watching the presentation will say “Ahh...you know what? I
do that!” Recognizing that you have a limitation is going to help you fix the
problem. If you are consistently using an RSI and you are making trades and
are losing, getting stopped out; you are wondering why it is not working for
you and you are getting frustrated. It is probably because your brain isn’t
wired to think in a certain way. There have been a lot of studies done. Andy
Lo for example has been doing fantastic work looking at the neuron science
of traders. The same part of your brain is working and firing when you are
being chased by a wild animal as if you are in a position and you are losing
money. It is the same chemical response in your brain. How do you react to
the trade? “Oh, I have got to get out! I have got to stop out!” or “I am going
to sit with it. I am going to buy more!” If you have that gambler’s fallacy and
you continue to load up on that position ultimately you are going to blow up.
You are not going to be successful. So I am going to spend a lot of time
talking on that. I am also going to spend a lot of time talking about some
techniques that I have developed over the years that have helped me. There
is a technique that I have developed called Trading Cycles. The people out
there who like Elliot Wave are going to love this type of analysis. This is
because it gives you a very very strong visual. Think of this phrase and what I
am presenting there is going to come to life - Where is this stock now or this
market now or this currency now relative to every point in history that it has
traded in the past? If you understand that a market does this, you have a
cycle like a sign wave, where are we now in the cycle? Forget the fact that in
earlier terms you had cycles upon cycles upon cycles. I am trying to distil
what I call The Trading Cycle. Then I will be talking about techniques that I
use for our clients in terms of swing trading, how we manage risk for clients,
12 | ATMASPHERE JULY 2012
how we get into positions and how we get out of them. I think when you
encompass the whole day, from the start till the end, it is going to be
something for short term traders, it is going to be something for the guys
working on prop desks, and it is certainly going to be a lot of value added for
people who manage portfolios for clients. So there is going to be something
for everybody. And in the meantime, you can watch my TV show live on the
internet. It is a half-hour show every week dedicated to technical analysis.
You can Google Larry Berman or Berman’s Call on BNN and watch it. It is a
live show on Monday at 11.30 to 12am EST. I talk a lot about trading
techniques – what is going on in the market. I think it will be very exciting to
me to meet up the ATMA Members. I am certainly looking forward to it.
SK - Larry would it be convenient for you to request Mr. Prechter to join in
this meeting from distance? And perhaps you can have a 60 or 90 min chat
with him or a brief presentation as a part of your own larger presentation?
Would it be possible?
LB - I would talk to him about it. He is definitely open to the idea. He has
offered some or the other experts at Elliott Wave International to come out
and speak at conferences. Bob doesn’t like to travel a lot but I am trying to
convince him. I cannot promise anything at this point but I will continue to
ask him. I don’t know if can do a 60 or 90-minutes but hoping that he can do
something remotely that would be great.
SK - As soon as you can extract a commitment from him for a 30 to 60
minutes interaction like this with you right at the BSE Trading Hall where we
are hoping to see you, I think that is going to be very exciting. We at India
follow Bob Prechter very closely. Concluding this present meeting of ours, I
have one last question for you – what is the message that you wish to give to
new comers in this business so as they can be as successful as somebody like
you?
LB - Number one - understands that the market is smarter than you are. If
you get that, then that is your number one rule, you are going to do two
other things. You are going to learn from your mistakes. And third is you are
always going to act in the best interest of your clients; whether that client is
yourself or you have a fiduciary obligation. If you do things well, I think you
are all going to be very very successful in your careers.
SK - Thank you very much Mr. Berman. It was a pleasure to be discussing so
many good things with you. We look forward to meeting you personally in
Mumbai and to learn from you the whole day on the 1st of September this
year. Thank you very much. Have a nice day!
LB - My pleasure.
JULY 2012 ATMASPHERE | 13
ICHIMOKU KINKO HYO - A COMPLETE TRADING SYSTEM
BY ANIL PADIA
What a trader essentially looks for in a chart is
1) TREND
2) BUY/SELL SIGNALS
3) MOMEMTUM
4) SUPPORT/RESISTANCE
He generally employs different theories, tools, indicators, studies on his chart
to get the whole picture. For e.g. to gauge the trend he may employ the Dow
Theory, higher highs and higher lows. Similarly he may be relying on the
MACD or MOVING AVG CROSSOVERS to get trading signals and looking at 10
other indicators for Momentum and Support/Resistances.
Since TRENDS stand out spectacularly on historic charts, it looks very simple
to identify the trend but traders generally struggle to identify it right at the
BEGINNING.
This is where ICHIMOKU KINKO HYO system stands out. Not only does it
identify the trend in its nascent stage, it is possible to get the WHOLE picture
of the market including the main SUPPORT/RESISTANCE and exact
ENTRY/EXIT levels. Also it defines the strength of the signals generated
thereby helping the trader to know if the markets are entering the
MOMENTUM phase.
In short it is a multi-functional charting system and is also referred to as “One
Glance Equilibrium” chart or THE CLOUD THEORY.
Standard settings and parameters of the system.
The standard settings are 9, 26, and 52. The base number of the formula is
26. It is based on the moon cycles as the no. 26 is the approx. no. to express
a full moon cycle, the no. 9 represents one and a half moon cycle and the
no.52 represents a double moon cycle.
DEFINITIONS
Ichimoku Kinko Hyo is constituted by five lines:
Tenkan-Sen (Conversion line)
(Highest High + Lowest Low)/2 for the past 9 periods.
Kijun-Sen (Standard line)
(Highest High + Lowest Low)/2 for the past 26 periods.
Chikou Span (Lagging Span)
Current price - shifted backwards 26 periods.
Senkou Span A (Faster Span A)
(Tenkan-Sen + Kijun-Sen)/2 plotted 26 periods ahead.
14 | ATMASPHERE JULY 2012
Senkou Span B (Slower Span B)
(Highest High + Lowest Low)/2 of 52 periods,
Plotted 26 periods ahead.
The latter two lines – Senkou Span A and Senkou Span B – form the unique
Kumo feature of the system. The gap between these two lines is shaded to
give the Kumo (CLOUD). The picture below explains the 5 lines.
The 2 main strategies
1) The Kumo Break out
2) Tenkan sen/Kijun sen cross.
1. The Kumo Breakout.
The Kumo Breakout is the TREND identifier of the system. The Price and the
Chikou span are considered to determine the trend.
a) Price versus Kumo
One of the most basic fundamentals of Ichimoku is: if the price is above the
Kumo, the trend is bullish, and if the price is below the Kumo, the trend is
bearish. It is very visible and easy to determine if the overall trend is bullish
or bearish with this method. It follows that every trend begins with a Kumo
breakout, when price breaks out from the Kumo cloud on the upside or on
the downside. When price is moving In the body of the Cloud, it shows
sideways trend.
b) Chikou versus Kumo
However, for a perfectly formed Kumo breakout Chikou Span has to break
out from the Kumo too to CONFIRM the direction. Chikou Span can be above
the Kumo (bullish trend), below the Kumo (bearish trend) or in the Kumo
(neutral, undecided trend). Chikou Span is a very important trend
confirmation tool, so it is necessary to always reckon with the analysis.
JULY 2012 ATMASPHERE | 15
The Tenkan/Kijun crosses works like any other Moving Average cross. It is
used as a signal to BUY or SELL. The most striking feature about it is we don't
just get a buy/sell signal but also the strength of the signal depending upon
its location vis-a-vis the Kumo.
Strong buy signal: cross happens above the Kumo
Strong sell signal: cross happens below the Kumo
Neutral buy/sell signal: cross happens in the body of the Kumo
Weak buy signal: cross happens below the Kumo
Weak sell signal: cross happens above the Kumo
Support and Resistance
All Ichimoku lines are support and resistance lines; however they don't have
the same strength.
The strength order (strongest to weakest) of the support levels would be:
1. The bottom of the Kumo
2. The top of the Kumo
3. The Kijun-Sen
4. The Tenkan-Sen
The strength order (strongest to weakest) of the resistance levels would be:
1. The top of the Kumo
2. The bottom of the Kumo
3. The Kijun-Sen
4. The Tenkan-Sen
How to trade based on the Ichimoku system.
These are the minimum requirements that you should always check to be
able to make a trading decision with Ichimoku:
- the price vs. Kumo
- Chikou Span vs. Kumo
- Tenkan-Sen vs. Kijun-Sen
Always check them in this order.
16 | ATMASPHERE JULY 2012
It is always recommended to trade only in the direction of the higher
timeframes. I would advice to check at least two higher timeframes, so if you
for example want to enter on the 15M timeframe, check the H1 and H4
charts first. If you enter on the H1 chart, then check the H4 and Daily charts
first, etc. When checking the higher timeframes, please check at least the 3
minimum requirements. Always start from the higher time frames and
proceed to lower time frames and never enter against the higher
timeframes. (It is possible to enter against them with some special Ichimoku
techniques, but at the beginner stage the best thing is to always trade in the
direction of the higher trend.)
In summary, The Ichimoku Kinko Hyo system is a visual TREND following
system.
It is one of the few systems that give the complete picture that an Analyst is
looking for at just one glance. It truly is the King of indicators and trading on
it is like a high level art.
Anil Padia is the head of the R & D Dept & is managing
the proprietary desk of KEDIA SHARES AND STOCK
BROKERS. He possesses a rich experience of more than
25 years. Having led more than 100 seminars since
2006, he has an in-depth knowledge of trader
mentality. He has been a coach to several hundred people who over time
became successful traders or advisors. He has been practicing Technical
Analysis actively and trading the markets for more than two decades.
JULY 2012 ATMASPHERE | 17
QUANT…UM LEAP: GRADUATING FROM MANUAL ANALYSIS TO AUTOMATED TRADING
BY MANISH JALAN
The Alpha Generation
Dear readers, let us continue the
journey of Quant…um leap by
delving deeper into the world of
Algo trading. Continuing to build
momentum from my last article
where I gave a detailed insight
into back-testing, I would like
build upon the framework and
this month and talk about alpha generation. Alpha is finance world usually
describes the return in excess of the risk borne by a trader / investor. But in
the Algo world it describes your ability to use filters and conditions which will
reduce your peak to trough draw downs – without sacrificing your returns. In
addition the alpha should be able to boost the returns of the existing
strategy.
Like always, let me start this topic too with an example. In all my workshops,
the most common topic which people like to get an answer to is the success
in trend following systems. Not long ago, we had one of our clients stating to
me that in Gold and Silver in MCX, he has been using a 120 min candles with
5-20 Moving average crossover with strikingly good success ratio. All through
2011, the strategy was able to generate great returns. Suddenly towards the
end of Jan’2012, Gold started hovering around Rs. 29,000 and Silver started
hovering at Rs. 53,500. The movement in Gold and Silver had become greatly
restrained and range bound. Needless to say, the next 3 months for the client
was a disaster and he lost 50% of the P&L of 2011 in the next 3 months.
Sounds familiar! – Welcome to the tricky world of systematic trading. My
client knew that the model is good and can run for a very long period of time.
What he didn’t know was – when to start the model, when to stop the model.
Alpha generating filters does exactly that – it details out the area / phase in
the life of Algo trading when you should run your models with larger quantity
and phases or periods when you should probably not be running the model
or be running it with highly reduced quantity and leverages.
Now comes a million dollar question – what are those Alpha filters? Of
course there are filters and conditions which traders come across everyday –
which can be so useful – but it skips their eyes. The key to trade a trend
following system is to identify if the market in general is not in mean-
reverting mode – for you to get whip-sawed. There are lots of mathematical
and statistical tests available to make sure that we can use some of these
techniques to identify areas of mean reversions in market (and hence avoid
trading on the these areas. One such technique which we will discuss in this
month’s article is called Variance Ratio Test (VRT).
The basic logic of a VRT test is simple and very intuitive. It says that if a series
is mean reverting in nature then the variance of the series is not increasing
over time. Hence, if we compare say 1 period variance of a time series to say
18 | ATMASPHERE JULY 2012
a 5 period variance – and 5-period variance turns out to be less than 1 period
variance – it says that in any given 5 periods the series has got a mean
reverting nature. The exact formula of this test is as under
Where, k represents the period for which the Variance Ratio Test is
conductedand VR (k) represents the outcome of the variance ratio test.
As evident from the formula above, we are looking for time series of nature
where, VR (k) > 1, to identify spots in the cycle of an asset class, such that
they are in mean aversion / trending mode. When the outcome of this
Variance Ratio Test value is 1 or less then 1, then the time series is under
mean reversion / range bounded and hence any sort of trend following
system fails on these kinds of asset classes. Tests of these natures are very
simple and can be easily done using an Excel spreadsheet or Matlab / R tools
and can immediately help us realize the soft spots where a certain kind of
trading strategy needs to be best avoided to curtail severe drawdown. Other
statistical tests which are fairly common and used widely are co integration,
Absolute Return Ratio tests, Granger causality etc.
Filters need not always be mathematical in nature. Traders across arena have
always worked on more logical filters based on their experiences – then use
rote mathematics. For example a trader might use a simple filter saying that
if he is doing a trend following system then he will take position in a fresh
trade, only after 3 consecutive trades based on the same strategy has gone
wrong. This way, he does not lose money in range bound markets and
increases his chances of making money by putting capital on the 4th trade,
after 3 of them have gone wrong in simulations. Again plain yet intuitive
manners on making sure that you
reduce drawdown in the markets.
Alpha can also be derived, by using a
combination of more than one
technical parameter – to further
strengthen the signal strength and
hence reduce the probability of a
drawdown. For example a trader might use say a close of the stock, above its
20 day’s high to enter into the trade. But at the same time he might want to
also see that the RSI of the stock is more then 50 – so that is shows strength
in terms of prices, for the stock to keep moving ahead. Additional technical
filters, like RSI, Bollinger, Stochastic, William % R etc. are only re-
confirmation of the fact that already existing trade shall have a higher
probability to keep moving in the favorable direction rather than dying away.
Apart from filters, many traders are also smart to identify the equity curve of
their strategy and form their trading strategies accordingly. For example if in
a given month the returns have been quite good in a strategy and more like a
2-sigma event, then the following month – a smart trader might not run the
same strategy – as the chances of a pullback increases. In a vice versa
fashion, in case there has been a draw down period in a strategy, then excess
alpha can be generated by nominally increasing the trade size in the same
JULY 2012 ATMASPHERE | 19
strategy, so that one can benefit from the sharp recovery, which usually
follows a lackluster and drawdown based period.
To put things in perspective, there is no fixed rule as to how Alpha can be
derived from a quant based strategy, but the paths are enormous. The more
a team stays with their strategies the more they understand the areas which
need constant improvisation and the areas where alpha can be generated
from an existing strategy. Some people take the path of mathematics and
some judgments are made on experience and past observations. Yet, some
improvisation is achieved by doing thorough back-tests of the strategy with
the Alpha overlay and seeing their behavior in the past.
The Quant…um leap journey will continue in the coming months with more
sections, more insights and more leaps… Let the journey be the destination!
Manish Jalan is the Chief Strategist and Director of
the Algo trading firm Samssara Capital Technologies
LLP. Prior to his new found Indian venture, Manish
was a Quantitative Prop Trader in Tokyo, with Merrill
Lynch Prop Desk handling USD 100 Million portfolios.
Manish has worked closely with many Indian brokers and numerous
International banks in algorithmic trading, trend following strategies,
statistical arbitrage, factor modeling and back testing. Manish is a B.Tech
and M.Tech from IIT Bombay in Mechanical Engineering.
20 | ATMASPHERE JULY 2012
TRADING IS NOT INVESTING
BY JOE ROSS
This article is written from the perspective of a trader. Traders encounter
problems and situations quite different from those of an investor. Traders
generally do not hold positions for many weeks, months, or years.
Many traders do things that aren’t in their own best interests - even though
common sense warns of the consequences. Why do smart people make such
mistakes? And how can they reverse the pattern? What is behind self-
defeating behavior - and how can we change negative patterns?
What is self-defeating behaviour? It is any
behaviour that keeps people from reaching
their goals. It ranges from holding a grudge
against someone you care about, to being
afraid to pursue a career change.
Each time we engage in self-defeating behaviour, we suffer in two major
ways:
• We have to put energy into repairing the outer damage -- making peace
with people we hurt... and/or straightening out projects that were fouled up.
• We have to deal with the inner damage that we’ve done to ourselves --
shame, guilt and the resulting belief that we don’t deserve happiness. These
mental messages can lead to even more self-defeating behaviour.
Self-defeating behaviour also undermines your credibility. People who
engage in a lot of it may be pitied, but they are never respected.
What are the most common types of self-defeating behaviour? By far,
procrastination is the most common. We put off tasks that intimidate or
overwhelm us—ignoring the fact that the more we put them off, the harder
they become.
Procrastination isn’t an issue of laziness but of loneliness. Most tasks we put
off are things we’re trying to accomplish in isolation. Asking someone to help
you or ride hard on you can help you focus.
When there is no one handy to turn to, I have found it helpful to think about
people from my past who believed in me when I did not believe in myself.
I am motivated by my desire to honour the people who said to me, “You’re
better than this. Just get it done!”
Another common self-defeating behaviour is not admitting that you made a
mistake. You cannot learn from a mistake—or do things differently—unless
you acknowledge that you made one.
Why do people get in their own way so often? Self-defeating behaviour
actually starts as a way of coping. When you are tense or upset, you grasp at
whatever will make you feel better at that moment.
What makes self-defeating behaviour so hard to change is that it works. You
do feel better—in the short term. And the prospect of feeling better
overrides your concern about consequences.
JULY 2012 ATMASPHERE | 21
Example: You start to enter a trade but then freeze up before making the
actual entry.
How do people get in their own way relative to the market action? One
mistake is to insist on being right all the time.
Amongst traders, a common self-defeating behaviour is failing to listen to
the market. Traders feel anxious and want to regain control, so they do not
pay attention to what is actually happening.
Example: You draw a trendline and then convince yourself that prices must
retrace to that trend because they have done so before.
Therefore, a better approach is to learn about how to think through sticky
situations.
Example: “How do you make the decision that a market is dangerous? What
are some things you could do next time you want to stay in a trade later than
you planned?”
What’s the best way to stop defeating yourself?
Learn to reflect instead of react.
The next time you are faced with the consequences of negative behaviour,
take out an index card and write down your answer to this question—“If I
could do this over again, what would I have done differently?” Carry the card
with you, and look at it the next time you are tempted to do the same foolish
thing.
Asking a friend to be your “sponsor” can also help. The two of you pick a
habit that each wants to change. Check in with each other at least once a
week to offer encouragement and hold each other accountable—but, never,
ever trade with someone as “partners.” Trading is a lonely business - accept
that truth.
How can we get ourselves to stop and think
instead of acting automatically? The key is
awareness. Here is a simple technique called
the Six-Step Pause. You can use it any time
you are upset or under stress.
• Physical awareness - Where do you feel the
tension? Pinpoint it—a knot in your stomach?
Tight shoulders, etc? - and give the sensation a name.
• Emotional awareness - Attach an emotion to the physical sensation.
Example: “I feel angry... bored... afraid, etc.”
• Impulse awareness - Complete the sentence, “This feeling makes me want
to...” Fill in the blank with your immediate emotional reaction.
• Consequence awareness - Answer the question, “If I respond this way,
what’s likely to happen?” Think through all the possible consequences.
• Solution awareness - Complete the sentence, “A better thing to do would
be...”
22 | ATMASPHERE JULY 2012
• Benefit awareness - Finish the sentence, “If I try that strategy, the benefits
will be...” List as many as possible.
With practice, you will run through the steps quickly, and be on your way to
breaking self-defeating patterns.
Throughout the years I have been writing, I have often written about mind
set—having the right frame of mind for your trading so you become a winner.
I have stated that it is our job to trade the present, not history, and not the
future. This is vastly different from investing where you pay attention to both
the past and the future.
The future is the next bar on your chart. You cannot possibly know how it will
develop, how fast prices will move, or where it will end up. Since none of us
know where the very next tick will be, it is impossible to know where the tick
after that will be or the tick after that, etc. All we know at any one time is
what we are seeing. Interestingly, what we are seeing may not be true.
If we are day trading, we are not sure that what we are seeing is a bad tick,
especially if it is not too far astray from the price action. Yet those are the
kinds of errors we have to put up with in the trading business.
If you don't know where the next tick is, how can you possibly know where
the next market turning point will be? Can you see into the future?
Maybe you like to trade astrologically. Those people are always trying to peer
into the future.
In the auto business they have a saying, "There's a fool for every seat."
Likewise, there's a fool for every fortuneteller who claims he can see into the
future.
You could always do as one charlatan did and run the biorhythm for each
market based on the day it first started to trade. Or, you can cast the markets
horoscope based on the same date. With the biorhythm, you'll know what
time of day the market should be on its highs, and what time of day it will be
on its lows, and if you believe that, you have no business trading.
They will tell you that you will know which day the market will be ecstatic
and reach a new high, and which day it will be down in the dumps and make
a new low. However, you'll find that from time to time the market will reach
new lows on the day it was supposed to reach new highs. Well, that's easy
enough to explain. You can tell everyone "We've had an inversion. Until the
market inverts again, the lows will be the highs, and the highs will be the
lows!"
Joe Ross, a long-time trader, educator and author,
teaches spread trading and day-trading of futures,
Forex, and stocks. Joe still actively trades, tutors and
writes. You can reach him at the Web site
www.tradingeducators.com.
JULY 2012 ATMASPHERE | 23
TESTY BYTES
BY KORA REDDY
As I told in the last month article here a series of articles on how to use MS-
Excel for doing backtesting report.
Excel as a Backtesting Engine
The inspiration to implement “excel as a backtesting engine” comes after
reading Dr Brett Steenbarger’s insightful approach to improving trader
performance, which includes investigation of market history. In Chapter 10 of
his excellent book, The Daily Trading Coach: 101 Lessons for Becoming Your
Own Trading Psychologist (Wiley Trading, he illustrates with a detailed
example how one can use Excel to find market patterns that can help you
generate trading hypotheses.
In my previous two articles I’ve mentioned what parameters that one needs
to consider while backtesting, I will provide a simple excel work book
methodology in my next few columns, to calculate the some of the critical
parameters mentioned in my two previous articles after forming a trading
hypothesis.
Frame Good Hypotheses
I encourage you to keep hypotheses simple. In general, we will generate the
most robust hypotheses if we don’t try to get too fancy and add many
conditions to our ideas. (For example ideas derived from quantum
mechanics, machine learning, and neural networks falls into fancy
categories). The simplest patterns will tend to be the most robust.
Use Historical Patterns in Trading
A trading guru declares that he has turned bearish because the Sensex has
fallen below its 200-day average. Is this a reasonable basis for setting your
trading or investing strategy? Is there truly an edge to selling the market
when it moves below its moving averages?
When you hear such an advice, ask yourself a question that is simple and
straightforward, such as, “What typically happens the next day, the next
week, the next 20 days, the next 3 months etc, after falling below 200 Day
Moving Average”
We will test the above hypothesis in this article with “excel as a backtesting
engine “
Excel Basics
I’m not going to teach you, the basics of Excel, here BTW.
Your first step in searching for market patterns and themes is to download
your historical data into Excel.
Go to http://beta.bseindia.com/indices/IndexArchiveData.aspx and
download the Sensex OHLC data since Jan 1999 till date.
Tip: When you download data for analysis, save your sheets in folders that
will help you organize your findings and give the sheets names that you’ll
24 | ATMASPHERE JULY 2012
recognize. Over time, you’ll perform many analyses; saving and organizing
your work will prevent you from having to reinvent wheels later.
As a rule, each column in Excel (labeled with the letters) will represent a
variable of interest. Usually, my column A is date, column B is open price,
column C is high price, column D is low price, and column E is closing price.
Column F might be devoted to volume data for each of those periods (if
that’s part of what I’m investigating, I left it blank, for the moment, as
currently, the volumes have simply dried up in India and across the globe);
columns G and above will be devoted to our trading hypothesis of interest (in
this case, our trading guru’s advice “Sensex crossed below 200 Day moving
average”)
Tip: Consider setting up separate data archives for daily and weekly data,
so that you can investigate patterns covering periods from a single day to
several weeks. You’d be surprised how many hypotheses can be generated
from simple open-high-low-close price data alone.
Each row of data is a time period, such as a day. Generally, my data are
organized so that the latest data are in row 2 and the later data fall
underneath. I save row 1 for data labels, so that each column is labeled
clearly: Date, Open, High, Low, Close, etc. This labeling is helpful when we
are processing the data, that is when we start using the two most used
commands that Microsoft ever invented, called ctrl+c, ctrl+v.
Create Your Independent and Dependant Variables
Your independent variables are what we might call candidate predictors.
They are variables that we think have an effect on the markets we’re trading.
In this example, we are investing to our trading guru’s sayings, “markets
turned bearish because the Sensex has fallen below its 200-day average”.
Let’s say that we’re investigating the impact of our trading hypothesis, of
Sensex turning bearish after crossing below 200-day average (independent
variable) on the next day’s return for the Sensex (dependent variable).
Independent Variable
So we will write our formula for our testing hypothesis in column G, which is
= IF (AND (E2<AVERAGE (E2:E201), E3>AVERAGE (E3:E202)),"BEARISH", 0
Which means today’s closing price less than 200-day average and yesterday’s
closing price is above yesterday’s 200 -day moving average. And I labeled it
as a “200DMAbearish” column
Dependant Variable(s)
Now let’s create our dependent variable (nothing but our trading guru’s
secret money making, machine), in cell H3, with next day’s return for the
Sensex and in column I3 with next day’s percentage returns.
Don’t this in H2/I2 column as excel is bit smart and throws this error:
#VALUE!
H2 will be = “E2-E3”
I2 will be =”H3*100/E3” or “= (E2-E3)/E3*100”, depending in your laziness.
JULY 2012 ATMASPHERE | 25
Conduct Your Historical Investigations
Now we’re ready to explore the data, I mean, press ctrl+c and ctrl+v, from H3
cell to Hxyz cell, I3 to Ixyz (depending on the data you downloaded). In the
attached sheet I’ve downloaded data from 16-July-2012 to 1-Jan-1999, but I
stopped at H3133 and I 3133 cells, for reasons
1) I want to test my hypothesis in the new millennium
2) For me to calculate 200-day average I need at least data points
I usually label H3 as t+1, I3 as t+1%, as in change tomorrow in points, and
change tomorrow in percentage
You can download the Excel Workbook updated till now by clicking here or
the icon below,
Sensex.xls
I’ll continue this in my next column
Kora Reddy is the author of the recently released
book High Profit Trading Patterns published by
Vision Books and is currently co-founder of a
quantitative trading portal (http://stocksiq.in) for
analyzing and back testing of listed stocks on the
Indian Stock Market.
26 | ATMASPHERE JULY 2012
BOOK REVIEW - SUPER TRADER
REVIEWED BY MEGHANA V MALKAN, CMT
Success in trading and investing is driven
basically by these factors - Tools
Management, Trade Management, Risk
Management and Emotions Management.
One needs to adopt a holistic approach for
becoming a successful professional trader.
This is exactly what Super Trader is all about.
The book begins with Dr Tharp’s challenge to
produce consistent, above average trading
profits given any market situation - up, down or sideways. Drawing on his
decades of experience, he has created a simple plan designed to help anyone
to master the market.
Dr Van Tharp Ph.D. is a legendary trading educator, an author and the
founder and president of the Van Tharp Institute. A certified Master
Practitioner of Neuro Linguistic Programming (NLP); he is a professional
coach and a consultant to traders and investors. With his unique model of
successful trading and investing, he helps people better understand their
strengths and challenges vis-à-vis trading and investing.
Throughout the book, Dr Tharp asks pertinent questions every aspiring trader
must ask himself. He helps one to make the transformation from an average
trader to Super Trader. He has designed a five-step approach to help traders
reach this goal.
The book is broken down into five integral parts of successful trading -
1. The Importance of Working on Yourself
2. Developing A Business Plan
3. Key points in developing a Trading System
4. Position Sizing strategies
5. Monitoring oneself to produce Optimal Trading Performance
In the first part, Dr Tharp states that working on oneself is one of the most
vital steps that have to be accomplished first. A trader never trades the
markets; he trades his beliefs about the market. One therefore needs to
examine one’s beliefs at all times. The other important components of
working on oneself are - self-appraisal, commitment, responsibility,
disassociation, discipline, balance and confidence.
The next is developing a business plan
which is the overview of the big picture
influencing the markets a trader trades.
This is a working document which in fact
helps a trader with the other four steps
listed above. Apart from the personal
assessment of the trader, the plan should include the following - a vision of
the big picture, one’s business systems, trading strategies and contingency
plans.
JULY 2012 ATMASPHERE | 27
In the most stimulating section, Dr Tharp discusses trading strategies. It is not
hard to develop a strategy that will work fine in each type of market, which
most traders do. One needs to develop a strategy that works well in all
market conditions and fits one’s view of the big picture.
Correct money management is a highly
effective concept, yet it still remains
relatively unknown by many traders and
investors around the world. Position Sizing
is hugely ignored by many, including most
professionals. The next step therefore is
developing a position sizing strategy that
maximizes the probability of meeting one’s objectives.
Finally, a trader who follows all the above steps would have a well written set
of rules to follow. Not following them is a mistake, according to Dr Tharp.
And mistakes in trading could be very expensive. The final part stresses on
monitoring one’s mistakes and continuing to work on oneself, thus
minimizing their impact. This is the path to produce consistent above-
average profits.
Super Trader is for someone who is serious about taking their trading to the
next level. Using the lessons in the book, one can approach trading more
persuasively, systematically and above all enthusiastically. Put this plan to
use instantly and stride your path to success in the world of trading.
Meghana V Malkan, a graduate in Law and a CMT, is
the co-founder of Malkansview - an Institute which
conducts training programmes on Technical Analysis
and Behavioural Finance. She is a proprietary trader
across asset classes. She also trains and coaches
professional traders.
28 | ATMASPHERE JULY 2012
5th ATMA BANGALORE MEETING
Date - 17th June, 2012
Held at - Sri Bhagawan Mahaveer Jain
College, Bangalore, Karnataka.
Attended by - 27 Participants
Topic of study: Understanding Technical Analysis the CMT way
Presenter: Dr. Musa R Kaiser, MBBS, MD, has deep and rich
experience of 10+ years in studying & tracking the Indian
financial markets.
Focus of study in brief:
CMT Journey & Experiences
What are Chart Formations?
Why Charts?
Time, Money, Life.
Crystal Ball
What will come in the way?
CMT-Body of Knowledge & CMT Certification
After CMT
13th ATMA DELHI MEETING
PAST EVENTS’ UPDATE
Date - 23rd June, 2012
Held at - India International Centre
Annex Building, New Delhi
Attended By - 21 Participants
Topic of study - Learn Day trading techniques using moving average, retracements and volatility
Presented by - Mr. Sunil Minglani, is a Technical Analyst, for about 11 years and is been sharing his knowledge through his institute ‘SkillTrack’ (www.skilltracktechnicals.com) for more than 5 years.
Focus of the Meeting:
Identify potential breakouts and breakdown
Some important reversal patterns in intra day
Day trading psychology
Stock selection for day trading
Moving averages
Interpreting volatility
JULY 2012 ATMASPHERE | 29
21st ATMA MUMBAI MEETING
6th ATMA BANGALORE MEETING
PAST EVENTS’ UPDATE (CONTD….)
Date - 23rd June, 2012
Held at - Assembly Hall, St. Xavier's College,
Mumbai, Maharashtra
Attended By - 60 Participants
Topic of study - Technical Analysis - A Game of Probability
Presented by - Mr. C. M. Patil, Founder of Market Rahasya Group
Focus of the Meeting:
Trading on Technical Analysis is a different ballgame. The
success depends on how you turn the odds in your favor when
you actually trade.
Understand a Law of Probability
Identifying opportunities favoring your trading position
Analyze your chances to Win
Trading on Trend Lines & Chart Patterns by taking
advantage of Law of probability.
Date - 22nd July, 2012
Held at - Sri Bhagawan Mahaveer Jain College,
Bangalore, Karnataka.
Attended By - 40 Participants
Topic of study - Introduction to Quantitative Trading
Presented by - Mr. Kora Reddy, author of the recently released book “High Profit Trading Patterns” published by Vision Books & co-founder of a Stock Screening and quantitative trading portal http://stocksiq.in
Focus of the Meeting:
Quantitative trading often involves the use of mathematical
models to describe and predict market movements.
The session covers the core concepts and quantitative
techniques used in the back testing, along with a hands on”
experience of how back testing is done on Nifty Index.
At the end of the session, participants are expected to develop,
an understanding of the core concepts in quantitative trading
and a deep appreciation of the process of using mathematics
and statistics to analyze the profitability of a trading model
30 | ATMASPHERE JULY 2012
22nd ATMA MUMBAI MEETING
Date: 28th July, 2012
Venue: Walchand Hirachand Hall, IMC Building,
Mumbai, Maharashtra
Timing: 4:00pm to 7:30pm
Presenter: Mr. Mukul Pal, CMT & President of the MTA Central
and Eastern European Chapter.
Topic of study: Trading Time CYCLES
Focus of Meeting shall be:
Introduction to Time CYCLES
A brief history of Time CYCLES
Cyclicality in Price Performance
Asset and Stock selection using Performance CYCLES
Combining Conventional Technicals with Performance
CYCLES
Understanding Market Perspective with Performance
CYCLES
Building portfolios using Performance CYCLES20th
ATMA MUMBAI MEETING
14th ATMA DELHI MEETING
Date: 28th July, 2012
Venue: India International Centre
(Annex Building), New Delhi
Timing: 9:00am to 12:30pm
Presenter: Mr. D Parsad, a Dynamic Stock Market Professional
who is proficient in both Fundamental and Technical analysis
Topic of study: Practical Applications of Candlesticks
Focus of Meeting shall be:
The 12 Major Signals
When and where to use or ignore the Signals
Advanced Applications with Western Technicals
Candlesticks - Psychology behind the Patterns 2
ATMA MUMBAI MEETING
FORTHCOMING EVENTS
32 | ATMASPHERE JULY 2012
Guidance
ATMA offers Refresher Programs for
candidates appearing for CMT Exams.
The programs -
1. Offer important guidance on writing
the exams
2. Help clarify any doubts about the
exam curriculum
3. Discussion of ideas, prep tips, memory
aides and other tools
Benefits of Membership with the ATMA
Education
Become an expert in Technical Analysis
through our self study e-learning tools:
- Live Technical Analysis webcasts
- Repository of Technical Analysis
Information
- Monthly Newsletter
- Podcasts, Library, e-library and more...
Networking
Connect with other professionals from around the country through Educational Meetings, Members’ Discussion Forums and through ATMA network on social networking sites etc.
Meet the experts at Seminars & Conferences
Apply for your ATMA Membership Today!
As a member of ATMA, you receive unlimited access to: Live Charts with more than 90 indicators, live weekly webcasts, a Repository of Technical Analysis Information, Educational Chapter Meetings, Podcast Interviews with Industry Experts, Monthly e-Newsletter, a Job Board, the ability to participate in our members-only exclusive social network, and access to our Library as well as e-Library, Membership Privileges card and more…
To know more about how to become an ATMA member, click here
If you are an MTA member, you get the privilege of ATMA Membership - at no additional dues. To know more about how to become an MTA Member, click here
JULY 2012 ATMASPHERE | 33
