What to do when stop losses hit continuously

Hi friends,
                  As the topic says "What to do when stop losses hit continuously"
There is no sure shot thing to come out of this situation,Its a painful situation.

A lot goes through a traders mind during that phase,
What wrong i am doing ?
Did i analyze the scrip wrongly?
Did i force the trade ? etc etc.

And all this time the calculation of loss continuously happens in
background ,So with each new stoploss hit the urge to win back becomes
stronger and stronger.
Eventually trader think to win back most of the loss in a trade and ,Thats how
he increases the stakes on trades and if the loss continues it adds to the agony.

I have managed to come out of this situation only by decreasing my stake on
each trade ,Till in get my winning rhythm back.
How you come out of such situation!!

If you do something different to win back do share your methods.

Regards
Rish 

>Price or Time what is more Important?

As a Trader I have witnessed many moods of market Good ,Bad and ugly.

Good would be trending market or a market with direction .

Bad would be sideways market or Directionless.

Ugly would be a state of market where Bulls and Bears both are scared ,Bull scared to long
and Bear scared to Short.

We witness Good and bad market more often
This UGLY part usually comes near bottoms or near tops which usually tests every traders
Patience.

There is a saying in Hindi "BHAV BHAGWAN HAI"Price is god"

In a trending market Price plays an important role but in bad and ugly phases of market
Time plays a vital role compared to price.
For example we tend to see many stocks hovering near a price for days together only when
it makes a pattern or a situation is satisfied it starts its further move up or down.In other words
when time gets over Price reverses.
Time cycles+ Price cycles taken together produces near perfect trading opportunities
I am talking about Trade setups which take care of both time and price.

Elliott wave theory is Price centric where as GANN theory is Time centric if a trader
uses both these theories together he would be able to increase his good trade chances
by leaps and bounds .
Any thoughts on this fellow traders:)

Regards
Rish

RESEARCH REPORTS

>In Trading keep things simple

Interesting facts with great inference…………

Case 1

When NASA began the launch of astronauts into space, they found out that the pens wouldn't work at zero gravity (ink won't flow down to the
writing surface). To solve this problem, it took them one decade and $12 million.

They developed a pen that worked at zero gravity, upside down, underwater, in practically any surface including crystal and in a temperature range from below freezing to over 300 degrees C.


And what did the Russians do...??
.
.
.
.
.
.
They used a pencil.


Case 2

One of the most memorable case studies on Japanese management was the case of the empty soapbox, which happened in one of Japan ’s biggest cosmetics companies. The company received a complaint that a consumer had bought a soapbox that was empty. Immediately the authorities isolated the problem to the assembly! line, which transported all the packaged boxes of soap to the delivery department. For some reason, one soapbox went through the assembly line empty. Management asked its engineers to solve the problem. Post-haste, the engineers worked hard to devise an X-ray machine with high-resolution monitors manned by two people to watch all the soapboxes that passed through the line to make sure they were not empty. No doubt, they worked hard and they worked fast but they spent a whoopee amount to do so.

But when a rank-and-file employee in a small company was posed with the same problem, he did not get into complications of X-rays, etc., but instead came out with another solution. He bought a strong industrial electric fan and pointed it at the assembly line. He switched the fan on, and as each soapbox passed the fan, it simply blew the empty boxes out of the line.


Moral: Always look for simple solutions. Devise the simplest possible solution that solves the problems.
Always focus on solutions & not on problems. So at the end of the day the thing that really matters is HOW ONE LOOKS AT THE PROBLEM and Resolves it early .

In trading its proved again and again simple things work again and again,Of course need to
wait for that set up and trade only when you see that setup.

Many traders trade with many indicators with each indicator giving conflict signal
which confuses trader which in turn holds trader from taking a decision.

I think Trading is mostly about money management on a scale of 100 its 70 for
money management and 30 for trading skills:) I guess many will agree with me
on this.

I have learned ,To trade only when opportunity arrives and of course i don't mind
increasing my stake on a particular trade when i get hints its coming my way...



RESEARCH REPORTS

>Fast movers??Look for failed signals and patterns!!!

Seasoned traders would second my thought when i say simple rules when followed
during trading result in consistent profit rather than following a complex strategy
followed by too many rules.

Some one rightly said "KISS" keep it simple stupid:).
The single most important thing for a trader(short term) is to follow the price and
volume action.
Yeah you got it right am talking about "Tape reading".The tale of tape lies in
listening to stock speak through the patterns created by buyers and sellers ,
All other indicators are secondary after all they came into picture only
because of price and volume action:).

Jeff cooper rightly said

"Stocks don't move, they are
moved." Wall Street can be a perverse place; not everything is always as it
seems. Sometimes a breakout is generated to facilitate a large player who needs
to unload inventory. Sometimes a flush-out is orchestrated to facilitate
accumulation by smart money. It pays to believe what you see, but with a twinge
of cynicism.
Because fast moves often come from false moves, larger-than-average profits
can result when most traders are caught on the wrong side of the market. Some
of my best gains have come from being on the wrong side of a situation, getting
stopped out, and going the other way.

Lets take an example of failed head and shoulder pattern..
Ideally stock should have fallen big time below red line but instead it started its
journey in reverse direction an ideal case of failed pattern.

Another pattern to look for is a Triangle

Lets take an example of Bank of IndiaThe chart is self explanatory its a flat based triangle it gave breakout in the direction
of breakout ,Both the times it ended up moving in reverse direction with force.

These are few example out of many available ,So usually a fast move is seen after
a failed pattern,Do leave comment or example if you saw any of such failed patterns
or signals.

Regards
Rish



RESEARCH REPORTS

>Bear market Trading

Bear market gives birth to enough obstacles to demoralize a trader.
What would you do when you see every other trade you execute
runs towards stoploss or you execute a trade and even after few hours
of trade you see the script price is hovering near the same level you
executed.

No doubt its a daunting task its like a Alaskan guy trying to stay in Sahara
desert for a month,Ofcourse it would be quite difficult but with a set of rules
and habits the hostile condition of desert can be made bearable.

Same way in a bear market the conditions turn hostile for a trader.
Which we can try to repair by set of rules and habits which should be followed
strictly.
First and foremost thing to be followed in a Bear market is to avoid averaging
Of course its not a complete no no if you know whats your trading strategy.
The biggest drawback of averaging is it holds much of capital which in turn
stops trader from getting into new trades.

Second and I follow this rule religiously never chase a breakout in Bear market
either it may be too early or too late.
Always buy stocks near supports in a bear market ,Breakouts are usually a great
shorting opportunities in Bear market (Ofcourse lot of calculation is required to
reach to this conclusion)Don't be surprised if you see a stock falling from breakout
many times a good example of this was the movement in Reliance stock in nov
and dec 2008 and it tested patience(Patience is integral part of trading) Stock
kept falling from 1180 levels again and again untill finally it rose Reliance analysis .

These are two very basic rules which should be followed strictly ,If you think more
rules should add up in this list do drop an Comment.

Regards
Rish

RESEARCH REPORTS

>Bear market and Stoploss

Bear market,Things are quite bad brokers are tensed they are not able to reach their respective brokerage targets,Traders are feeling the heat no easy money by trading in out.

Is there any way to survive Bear market!!!!

Of course easiest would be not to trade:).

Well that's not possible.
Trader will trade

Many Traders or investors have one thing in common in thinking.
Bear market good for investment...
buying in falls would fetch good return...

Now here few valid points to discuss
how long you ready to wait..
A trader who sits in front of live charts would he be able to see his holding getting ripped off 50-80%.
Secondly,How to analyze which fall is good to buy,and which is not.

Answer would be not an easy task.
With the kind off falls we are witnessing in individual stocks Its a daunting task.

Atleast we can figure out how much we are ready to loose if the trade goes against us.
In more technical terms we need to define risk appetite.
There's a very catchy saying "A trader with out risk is like a nude girl in a boy's hostel"

You just cannot risk more than you ready to loose
Also cannot hold on to it as it keeps your money stuck in a bad trade discouraging to to get into a new trade and of course Capital gets eaten up its a cascading effect .
Lets take an example say a trader gets into a trade he makes 2k loss a amateur trader would
risk double capital to recover 2k loss+ 2k profit and may end up losing 4k.
Some one so rightly pointed out
Trading is serious Business.Accept it or forget it:)

Stop loss is best tool to define ones risk,Without stop loss its kind off gambling or wishful thinking
I came across many traders who say every time we put stop loss it gets hit.
Take this with a pinch of salt if your sl hits in more than 50% of your trades think about something else trading is not your cup of of tea.




RESEARCH REPORTS

>Day Trading in Bear Market

Day trading is something which excites and attracts everyone especially young ones.
Ask any seasoned Trader and he would be of the opinion, Day trading is fascinating
but equally dangerous .It becomes disastrous if the risk is not defined in a particular
trade.

Day trading to many is adrenaline rush,When a particular trade goes their way
Well it turns out to be equally depressing when trade goes against them.

Day trading requires a set of qualities and strict rules which need to be
followed to show fruitful results.

Qualities would include, A trader need to be energetic,Good reflexes and a quick
decision maker and lastly the most important one "Concentration".

These qualities are usually seen in young traders (25-35) age group.

Concentration is something which comes by practice many try meditation to
get a sound concentration.

According to a survey Good day traders are not Doctor's or Engineer's
they are Pilot's.

Fine now different kinds of market requires specific set of tactics to try to break
Them up(To trade).
BEAR market poses the biggest challenge in front of traders.
As in Bear market there is a saying"Expect the unexpected".

Like in
Bull market they say no high is final high.
Bear market slogan is No low is final low:).

So to trade such market Trader need to change his trading style thinking etc
in short he need to transform himself to adapt to the conditions.

Like chameleon does by changing his color according to the background.

First and foremost rule never trade first breakout in a bear market.
The first breakout usually gets sold heavily.

Now here we have two methods Fellow traders can try both and see which one
serves them well:).

Either buy the next breakout or buy the first breakout retrace find a good support
retrace by using Fibonacci.

Secondly never underestimate the Bear market rallies if you cannot trade bear market
rallies avoid trading them, You may end up loosing most of your money what you made
by shorting BEAR market.Shorting BEAR market rally without any study or clues is
like trying to find water digging in desert . Whole 1 year return of a Bull market
can come in one month BEAR rally.

Of course big money is to be made when Bear rally ends.Timing plays an important role
Look for clues ,Chart patterns,Waves etc to come to conclusion.

Lastly the disheartening thing Bear market tends to see failure of many chart patterns
Waves etc which makes it tedious for a trader to find a trade setup out of
cacophony.

More ideas to follow in next post
Do leave comments about your experience about trading Bear market.

Regards
Rish


RESEARCH REPORTS

>Discovering your Trading Personality

This looks like a small issue but it can do wonders for you in Trading read on!!!

Traders come in many different shapes and sizes. There are male traders, female traders, fat traders, skinny traders, beautiful traders, ugly traders, slow traders, fast traders, professional traders, amateur traders, fur traders … and the list goes on.

Each trader has their own personality, their own personal schedule, their own appetite for risk, their own pain threshold and their own bankroll.

Some traders might have several things in common, but most will be different. The point is each of you are unique. And depending on your personality, personal preferences, and situation, how you trade will be a driving factor in determining your success.

In order to figure out how you should trade, you must first uncover your own “trading personality.” Your trading personality will determine the trading style and method that’s compatible for you.

Trading is not like a t-shirt. There is no one-size-fits-all. There is no single plan for all traders.

I challenge you to perform a self-assessment on your personality, behaviors, beliefs, and mindset. Do you consider yourself disciplined? Are you risk averse or a big risk taker? Are you indecisive or spontaneous? Are you patient or a firecracker? Would you prefer to go bungee jumping or visit a museum?

An excellent way to help you with your self-assessment is to keep a trading journal. It will help you to analyze your thought processes after the trade, and identify your strengths and weaknesses in your trading. Understanding your personality is one thing, but understanding it while you trade is a totally different story. A trading journal allows you to review your wining and losing trades and pinpoint specific reasons on why you won or lose.

RESEARCH REPORTS

>How to regain your trading consistency

A reader recently wrote to me the following:

I was a successful consistent trader who always hit singles and doubles ($1000-$3000 a day) for 48 months in a row without having a losing month (1999-2003).Then one day I struck out. I lost $38,000 in one stock and had my first losing month as a trader ever. Since then I have not had two consecutive winning months and in fact have only had a handful of profitable months since then. I am still looking for the road back to consistency. No matter how close I get I always find a way to screw it up even if it is on the last day of the month. Or I give back the month with just some silly unimportant trade that turns into a disaster. It is like I subconsciously look for these situations just so I can mess up.

This is not such an unusual scenario. One large loss can trigger a cascade of attempts to make back the money, further mistakes, and expanding losses. The key is breaking this cycle of losing money, attempting to make the money back with aggressive trades, and continuing to lose.

The first thing I'd have our trader look at is where he is placing stops and targets for his trades. Note that his successful period was 1999-2003. That was a period of much higher price volatility than we've seen since then. What constitutes "singles and doubles" in a high volatility environment is a home run trade in a slow, low-volatility market. It is entirely conceivable that our trader is placing targets too far from his entries, allowing small gains to reverse on him. Similarly, he may be letting trades get too far away from him simply because he is calibrated to a higher level of volatility.

A good way to test these hypotheses would be to study trades over the last several months. If losing trades are larger than winners on average, and if many losers start out as winners, that would suggest that our trader needs to adjust to the post 2003 environment.

To break the cycle mentioned above, the first step is to drastically reduce trading size. I would cut size to 1/4 the average at the most. The goal is to keep a little skin in the game, but take P/L (and the push to make back money) off the table temporarily. The initial objective is not to make money, but to regain a trading rhythm by getting back to singles and doubles.

The next step is to identify those singles and doubles. That means deconstructing the account statement and identifying which trades are making money and which aren't. I would break the data down into time of day, stock/index being traded, long/short, and size. I would also look to see if there are large outlier trades to the downside that are pulling down P/L, and if there are some trades that are making money consistently.

Once our trader has identified what's working, the idea is to keep position size fixed and *only* trade those setups that have been working. This is the foundation to build upon. These setups can be written down and mentally rehearsed ahead of the trading day to build consistency. The idea is to not increase size *and* not trade other patterns until consistency is achieved with smaller size and the most successful setups.

There is only one cure for trauma, and that is repeated experiences of control and safety. We want trading to be routine, not highly emotionally charged.

Finally, I would encourage our trader to take a look at how he is viewing his situation. Note above that he talks of the $38,000 loss and the silly trade that "turns into a disaster" as if these are things happening to him, not things that he is actively doing. A simple strategy would be to have the trader write down the four things he is responsible for prior to each trade:

* The Entry
* The Target(s)
* The Stop
* The Position Size

We can't control whether any individual trade will be a winner, but we can control how much we are willing to bet on each trade. Outsized losses don't happen to a trader; they are actively caused. It is harder to allow those things to occur if you're talking aloud those four trade parameters and have them written in front of you.

So there it is in a nutshell. My advice is to get small, get selective, and take responsibility for what can be controlled.

Brett N. Steenbarger, Ph.D.

RESEARCH REPORTS

>Overcoming Market Panic

When I was a beginning trader, I naively believed that a 100-share trade was no different from a 10,000 share one, since both could be executed with the same entries, exits, and money management. What I failed to appreciate is that the risk of any trade or investment affects our ability to evaluate it calmly, rationally, and objectively. A head of a brokerage firm, which offered free simulated trading to new traders, once told me that 80% of the traders made money in the (very realistic) simulations, but only 20% were successful once they traded real money. The difference, he observed, was the emotional impact of having actual money on the line.
In this same vein, a reader asks the Doc:
When I was younger and fitter I played soccer. My skills were okay, but I tended to panic when I possessed the ball and heard the opposition hurtling towards me.
Unfortunately I've carried this kink in my think over into my share trading.
I love trading. I've been learning and applying in earnest for the past year and have managed to overcome several barriers. However, three times I have panicked during a broad market sell off and sold out as I watched my paper profits disappear.
The latest example was yesterday. I'd struck a purple patch recently and the paper profits were looking very healthy. However, my positions began retracing without hitting my stops and those paper profits disappeared like sand slipping through my fingers.
When the market dropped yesterday, I found this too much to handle and I sold out at just above break even!
I know I won't be a good trader until I learn a few strategies to conquer this these panic attacks.
I have a few observations and suggestions for our earnest and motivated trader. But first, let me ask you—the reader—to review what he wrote and identify what you think is the most important thing he said. One way of doing that is to figure out what you would first ask him if you were counseling him directly. Would you inquire about:

• The soccer experience
• His emotional reaction to sell-offs
• Yesterday’s market incident
• His desire to be a good trader
• Or something else?

My first question to our trader would be “something else”. I would say to him, “That’s interesting; you say you’ve managed to overcome several barriers. Could you tell me about those barriers and how you overcame them?”

Why would I ask this? Simple: Whatever he did to overcome his earlier barriers may hold the kernel of a solution for his current dilemma. Those solutions reflect the genuine and unique strengths of each individual. Instead of focusing on the problem and unwittingly reinforcing the notion that he is the problem—Note how easily he jumps from the issue of handling sell-offs to the larger, personalized problem of “I know I won’t be a good trader”—it makes sense to apply his known strengths to the challenge at hand. This reinforces the important message that even very good traders face huge hurdles to success.

This approach is known as solution-focused brief therapy, and it is particularly effective as a change strategy for those of us facing normal life dilemmas. Let’s say you come to me with a trading issue and I find out that you recently worked out a marital problem. You and your spouse learned to be better listeners by not taking disagreements personally and, instead, using them to identify each other’s needs and desires. Right away, we might then take a look at how you’ve been able to listen to your spouse and how you became able to not take differences personally. Perhaps this same strategy could work when it comes to listening to the market and not allowing your self-esteem to ride the market’s ups and downs!

The working assumption of the solution-focused therapist is that somewhere, at some time, each of us has successfully dealt with situations that are similar to the present dilemma. Depressed people aren’t always depressed, so how about finding out what they’re doing when they’re feeling better about themselves? Couples with problems don’t always argue; what are they doing right when they’re getting along? And our trader is not always panicking in the market, even when markets don’t always move his way. It would be worth identifying what he’s doing during those times: the kernels of solutions are often hidden in exceptions to problem patterns.

As it happens, I faced a dilemma much like our trader’s early in my trading career. I became panicky whenever I increased my size, as even normal movements against my position felt too risky. I overcame that problem when I examined how I handled risk in other areas of my life. For example, whenever I tackled a new project as a psychologist, such as writing a journal article, I always made sure that there was a guaranteed home for the article before I had finished it. I did this by consulting with editors ahead of the writing. My logic was that, by securing my publication, I could free myself to focus on the process of writing.

Similarly with trading, I learned to take guaranteed profits when positions went my way. Once a trade moved in my favor by the amount I was willing to risk on the trade, I immediately created a trailing stop on the position that guaranteed a profit. As a result, a winning trade could never become a loser. As the position moved in my favor, the stop moved with it, locking in an increasing profit. The security of knowing, “This trade will be a winner, no matter what” provided the reassurance I needed to counteract fears of risk. In my work with high frequency traders, I’ve used the same rationale to create trailing stops on daily profit/loss, so that, once the trader is up by a certain amount of money during the day, the stop point for the trading session is moved to a level of assured profitability.

My solution may not be yours; the beauty of solution-focused counseling is that it allows each person to craft solutions based on their experience—not the abstract advice of a guru. If you can identify the occasions when you’re already a good trader, the chances are good that an analysis of those occasions will start you on the road toward solving the next market challenge.

Brett N. Steenbarger, Ph.D



RESEARCH REPORTS

>Few Trading tools you must have!!!

Hi Friends,
Today am summing up few of the good trading strategies +psychological
trading mentality article posted by me .They are the gems to be read again and again
So pick ur choice from the following.:)Few of the following articles are inspired by
good trading psychology books.

The Reality of the Chart

TRADING FLEXIBILITY

Do You Need Real-Time Data?

DISCIPLINE

If you like them do coment would encourage me to post more:)

Regards
Rish

RESEARCH REPORTS

>Loosing out in this fall??

Hi Friends,
With stock market plunge,We hear so much about the losses what Traders and Investors incurred due to this NIAGRA fall what we witnessed in Stock Markets.
Investors ,Traders are so tensed,stressed that usually full day goes thinking what next:).Markets Tend to overshoot in both directions let it be the year 2007 bull which
looked as if the rise would be perpetual.
Same with 2008 BEAR which looks like this fall would never end:).
Relax BULL or BEAR overshoot happens both sides,If you find it too stress full take some time out get freshened up and come back again.
May be the following story would help you,Keep reading!!

A Professor began his class by holding up a glass with some water in it. He held it up for all to see & asked the students “How much do you think this glass weighs?"

'50gms!' ..... '100gms!' .....'125gms' ...the students answered.


.



"I really don't know unless I weigh it," said the professor, "but, my question is:

What would happen if I held it up like this for a few minutes?"

'Nothing' …..the students said.

'Ok what would happen if I held it up like this for an hour?' the professor asked.

'Your arm would begin to ache' said one of the student

"You're right, now what would happen if I held it for a day?"

"Your arm could go numb, you might have severe muscle stress & paralysis & have to go to hospital for sure!"
….. ventured another student & all the students laughed

"Very good.

But during all this, did the weight of the glass change?"
asked the professor.

'No'…. Was the answer.

"Then what caused the arm ache & the muscle stress?"

The students were puzzled.

"What should I do now to come out of pain?" asked professor again.

"Put the glass down!" said one of the students

"Exactly!" said the professor.

Life's problems are something like this.
Hold it for a few minutes in your head & they seem OK.

Think of them for a long time & they begin to ache.
Hold it even longer & they begin to paralyze you. You will not be able to do anything.

It's important to think of the challenges or problems in your life,
But EVEN MORE IMPORTANT is to 'PUT THEM DOWN' at the end of every day before You go to sleep..

That way, you are not stressed, you wake up every day fresh &strong & can handle any issue, any challenge that comes your way!


Regards
Rish

>Shipping companies analysis

Hi Friends,
Shipping companies are still struggling ,And are hit badly as the BALTIC dry index
continues to fall.

In my last post Baltic Index the nemesis of Shipping companies had clearly warned not to put any money in shipping companies till Baltic shows some support or upward bias,Since then the Baltic has fallen from 2900 to 1221 a whooping 1679 points.Side by side shipping companies continue to bleed.
In near term fundamentally nothing much looks diffrent from the present situation.So better watch out for BALTIC DRY INDEX for clues.

Saving money is making money in present situation.
Regards
Rish

>Displined Trading(Van Tharp)

Discipline Factors

Respond-ability
Beliefs
Low self-esteem.

“I would feel much better about myself, if I were more secure financially."

Feelings getting in the way of trading or investing. Fear and anger are not useful to
trading success.
Conflicts between internal parts of ourselves. For example, conflict might occur
between your excitement part and the part that wants to make money.

Download and read the ebook from this link....Displined Trading(Van Tharp)

Regards
Rish

>Surviving BEAR!!!

A bear market refers to a decline in stock prices of at least 15-20%, coupled with pessimistic sentiment underlying the market. Clearly no stock investor looks forward to these periods. Don't despair, there is hope! In this article we will walk you through some of the most important investment strategies and mindsets that one can use to limit losses - or even make gains - while the stock market is performing in such a manner.

Be Realistic!
First off, having a realistic mindset is one the most important things to do during an economic slowdown. Remember that it's normal for the stock market to have negative years - it's all part of the business cycle.

After a raging bull market, it's easy to forget the bad times. To expect the market to grow at a 20%+ rate forever goes against everything we can learn from history. Occasional slowdowns are inevitable.

Where to Invest in Bear Country
There are a number of things you can do to protect yourself from bears - and maybe even eke out some gains. Let's take a look:

1. Play Dead - Stay on the Sidelines
During a bear market, the bears rule and bulls don't stand a chance. There's an old saying that the best thing to do during a bear market is to play dead - it's the same protocol as if you meet a real grizzly in the woods. Fighting back would be very dangerous. By staying calm and not making any sudden moves, you'll save yourself from becoming a bear's lunch.

Playing dead in financial terms means putting a larger portion of your portfolio on the sidelines in the form of money market securities. In a bull market, it is detrimental to have uninvested cash around because it isn't working to get the best potential return. This isn't true in a bear market because cash will hold its value (and earn at least some interest) when stocks head south. When the right buying opportunity comes along, you'll have the flexibility to go for it. Of course, this means you have to be timing the market to some extent, a task that is tough, if not impossible, to do precisely. However, the point is that during a bear market, even if you take some cash out of the market later rather than sooner, this may still prove to be a good decision if the bears rule for a sustained period.

2. Value Stocks
Bear markets can provide great opportunities for investors. The trick is to know what you are looking for. Beaten up, battered, underpriced: these are all descriptions of stocks during a bear market. Value investors often view a bear market as a buying opportunity because the valuations of good companies get hammered down along with the poor companies and sit at very attractive valuations. However, value investing is an art; not every stock in a bear market is a bargain, but this is a time when some real bargains can definitely arise. Take Warren Buffett, for example. He often builds up his position in some of his favorite stocks during less than cheery times in the market because he knows that the market's manic-depressive nature can punish even good companies more than warranted.



3. Short Selling
Another approach to a bear market is to adopt a more aggressive strategy. A short position allows an investor to profit as the stock heads downward. Keep in mind that the ability to profit on the other side of a stock is accompanied by substantial risks.
4. Bonds and Asset Allocation
Asset allocation proves itself during times of stock market underperformance. During economic boom times, investors are kicking themselves for not being all in equities. The exact opposite is true during times of economic hardship and stock market downturns. Having a percentage of your portfolio spread among stocks, bonds, cash and alternative assets is the core of diversification. How you slice up your portfolio depends on your risk tolerance, time horizon, goals, etc. Every investor's situation is different.

5. Defensive Industries
There are equity securities that generally perform better than the overall market during bad times. These industries have become known as defensive industries, or non-cyclical industries, because they refer to the defense they provide your portfolio in times when the stock market plummets. Here we are talking about the companies that reside within the industries that provide goods and services that consumers, governments and the economy as a whole will need come rain or shine.

A simple example would be household non-durables (things that get used up quickly) like toothpaste, shampoo, shaving cream, etc. Regardless of whether the economy is booming, people will still need to brush their teeth, wash their hair and shave. Despite this, there is still an element of stock selection within historically defensive industries.


Conclusion
As all these tips suggest, caution is the name of the game. By having your money on the sidelines or invested in bond funds, value stocks, defensive industries and, under certain circumstances, on the short side of a stock you'll be well-positioned to endure a bear market much more gracefully.Staying realistic and avoiding panic will also help you keep your assets out of harm's way.

>Bailout or Bold out

Nice insightful article

If you think the biggest cost of the $700-billion bailout package is going to be higher taxes down the road, you're wrong.

The biggest cost is going to be the sheer destruction of the purchasing power of your money, an outright devaluation of the dollar that's going to occur, no matter what.

Don't get me wrong. I am not against the bailout package. It had to be done. We can debate free market philosophy for the next 100 years. We can debate the details of the package, too. But in the end none of that matters.

Because if Washington didn't act on this crisis, if they let AIG, WaMu, and others fail, the alternative — a deflationary depression several times worse than the Great Depression — would be a lot more painful, destroy a lot more lives and families, and take many more years to recover from.


So for now let's put all the philosophical debate aside and discuss this crisis in practical terms.

Where's the money going to come from?

Washington doesn't have $700 billion. Nor did it have the $592 billion it's already shelled out since August of last year, when the crisis began.

In fact, the U.S. government was broke before this bailout package. Now, it's even more broke.

So the money has to be borrowed from the public. Yet again. From investors in this country and from other countries. By issuing loads more government notes and bonds. Loads more IOUs.


Right now, it seems like investors around the world still have enough faith in the U.S. government to lend it most of the $700 billion. But it remains to be seen what interest rates they'll want to receive.

So we should be able to borrow most of the money for the bailout package.

And what about the amount that the public isn't willing to lend to the Treasury? No problem there either. The Federal Reserve will just print up the balance.

You see, the ultimate source of all money in the U.S. is either debt, or monopoly money created by the Federal Reserve. Or some combination of the two.

Either way, it's not real money. It's fictitious money. It's nothing but a bunch of IOUs and electronic credits and debits.

It's nothing more than a promise to pay you something of value. If you wait around long enough to get paid.

So we have that settled. We'll be able to borrow the money, or print it up. Either way, it's clear: The U.S. government, already in hock past its eyeballs, has to go even deeper in debt. A lot deeper.

So the next question is ...

What's the $700 billion really going to cost us?

No one knows for sure. But I'm going to take some guesses here.

First, if you buy the line that the Treasury is aiming to make money on the bailout, on behalf of the taxpayers — you and me — think again.

Since real estate prices were the trigger behind the losses, it's safe to assume that if the Treasury is going to make us any money on this deal then the assets underlying all the losses to begin with will need to somehow rise in value for us to make a profit.

That means property prices are going to have to regain all they've lost, and then some, for there to be a profit on that $700-billion investment.

I repeat: Property prices are going to have to regain all the value they've lost, and then some, for the Treasury to show us a profit on this $700-billion investment.

That's simply not going to happen. Not in my lifetime. Property prices might bottom out and start moving back up. But property values are not going to exceed their previous peak in my lifetime or likely yours.

Oh, and keep in mind, it's not really $700 billion. You have to add in the $592 billion the Fed and the Treasury already pumped into the economy prior to this bailout package. So the total so far is $1.29 trillion.

Second, there's the interest expense on all the IOUs that will have to be issued.

Let's take the total so far, the $1.29 trillion. Apply a conservative 5% interest rate the government is going to have to pay to borrow the money.

That's another $64 billion per year in interest expense costs. Compounded over 5 years, that's over $350 billion. 10 years, $807 billion.

Where's that money going to come from?

And if we're to profit from the bailout, that just means real estate prices not only have to get back to their previous peak, they have to exceed that peak by the amount of the interest expense that has to be paid to show a profit.

More proof we're not going to profit.

Third, raising taxes isn't going to help, either. There's no way the economy can handle higher tax burdens right now. And even if it could ...

Recouping part of the $1.29 trillion (ignoring the interest expense cost) through taxes is not a profit for the taxpayer. It's a burden. A cost.

So I ask you again, where's the profit potential for the U.S. taxpayer?

Answer: There will not be any profits. Period.

So the real cost of this bailout will be at least $1.29 trillion. And if real estate prices don't stabilize soon, the cost could easily mushroom to $1.5 trillion. Or $2 trillion. Perhaps even more. Not counting the interest expense!

And again, how's it going to be paid for?
Money Cut

The one and only answer: By a substantial devaluation of the U.S. dollar. By inflating it away. By eventually raising asset prices fictitiously through inflation, through more smoke and mirrors, via an eventual massive dollar devaluation.

In fact, there's precedent for it: The Great Depression only ended after Roosevelt devalued the U.S. dollar in January 1934 by raising its exchange rate with gold from $20.67 to $35.00. That was a de facto 69% devaluation of the dollar.

The same thing is going to have to happen this time around. Only you won't see any President, or anyone in Congress or the Fed actually coming out and saying the dollar needs to be devalued.

They won't have to. The markets will do it themselves. Notwithstanding an occasional knee-jerk rally in the buck, the dollar is toast. No ifs, ands, or buts about it.

Already, some measures of money supply, the ultimate source of devaluation of a currency and inflation in the economy, show money growth running at an annual rate of more than 14%.

And in the last two weeks, that rate has exploded even higher, to an annualized growth rate of, get this — over 200%!

There is no way that kind of monetary growth can be anything but inflationary.


This investment news is brought to you by Money and Markets. Money and Markets is a free daily investment newsletter from Martin D. Weiss and Weiss Research analysts offering the latest investing news and financial insights for the stock market, including tips and advice on investing in gold, energy and oil. Dr. Weiss is a leader in the fields of investing, interest rates, financial safety and economic forecasting. To view archives or subscribe, visit http://www.moneyandmarkets.com.

>Naked American Financial System

Amazing write up must read:)





The United States is supposed
to have not just great markets
and great enterprises, but also
great regulators. The Federal
Reserve and the Securities and Exchange
Commission are respected
and feared the world over. Those great
markets also rely on institutional
mechanisms, like the rating agencies
— all of which are now Americanowned.
The amazing thing about this
entire pack is that the financial crisis
has shown all of them to be as naked
as the emperor who strutted out in
what he thought were his new clothes.
What, for instance, was the SEC
doing when the great investment
banks (Bear Stearns, Lehman Brothers,
et al) were leveraging their equity
30 and even 40 times? If a company
runs $600 billion worth of assets
on an equity base of just $26 billion,
then if those assets drop in value
by just 5 per cent, the company
goes bankrupt — which is what has
happened. If the SEC wasn’t looking
at the problem, what were the rating
agencies doing when they gave these
firms the best ratings in the book?
If the risks are blindingly obvious today,
why could the Fed not see them
and ask for corrective action from the
lawmakers or by the SEC?
It seems obvious now that the
whole investment banking model is
simply not viable. They made fat
profits because they ran risky, overleveraged
businesses; and they were
not regulated in the way that traditional
banks are, so they did not
have any defences in place for when
things go wrong. That explains why
it is banks like Bank of America
which are now gobbling up the investment
banks, and why Morgan
Stanley is running for cover to Wachovia
and others.
When Enron went bust, it was run
by a bunch of Harvard MBAs, advised
by McKinsey, and its accounts audited
by one of the big accounting
firms (which imploded). It turned out that the
accounting firms were busy
getting money from their clients
for doing consulting work — which
created a conflict of interest when
it came to proper auditing. That same
problem now affects the rating agencies,
which were getting a lot of work
and therefore revenue from the investment
banks. So did they go soft
in their ratings of the investment banks
— and mislead the markets? In any
case, did the people in the rating agencies
actually read and digest the thousands
of pages of legalese associated
with every complex financial instrument
before they gave a rating,
for which the fee was relatively modest?
You can guess.
In other words, it is not just the
investment banking model that is
broken, it is the entire system of complex
financial instruments that no
one fully understood, so that risk
was not properly measured — and
that is lethal when things start unraveling.
The trading practice that
makes things unravel even faster in
such a situation is called ‘going short’
— a practice long frowned on by Indian
regulators for being destructive
of value, but advocated by market
fundamentalists as being an
inalienable part of an efficient market.
Now, surprise, the SEC is talking
of banning ‘shorting’ because
that is causing the selling stampede
behind the bankruptcies!
Someone said the other day that
the worst is over. Don’t bet on it.
All the assets owned by the firms that
have gone bust (trillions of dollars
worth) have to be sold, and it will
be a fire sale at knocked down prices.
That means enormous destruction of
asset value, and someone has to feel
the pain. AIG, for instance, has been
given two years to sell down, so it
is going to last a while.
Closing thought: It isn’t funny any
more to say that the Indian financial
regulatory system shines because
of its innate caution.
T N Ninan

World financial crisis and its impact-A.K.Prabhakar

Are bad times here to stay in 2008?

3more months to end the year and Global financial crisis seeing no end we have September 30, Tuesday, which is the deadline for hedge fund investors to put in requests to get their money back by year’s end 90day notice period. The redemption requests have been pouring into hedge funds well ahead of the Sept. 30 deadline. More pressure can be seen in the last few days, hedge funds, control nearly $2 trillion in assets and indication are that 10% of withdrawal can be seen.

Read more here.... Look Out for Bloody Tuesday

Will the $700billion package save the crisis?

This can be a temporary relief and never a permanent solution many times I get a feeling if U.S has turned into socialist and using good money to buy bad asset to save mismanaged corporate, instead of allowing them to die natural death. I have attached a file which says 1,479 FDIC member banks are at risk of failure with total assets of $2.4 trillion. So we are no way near to solution. , the sixth-largest U.S. bank by assets, hunts for a merger partner – reports. The bank suffered a record $9.11 billion loss in the second quarter.Read more here...Final bailout

Will India face the same problem?

India has a better system of banking and with majority of banks being PSU where Govt hold more than 50% stake we don’t have a problem. India is a better regulated market in terms of Banking and NBFC as RBI norms are strict and regular monitoring and stricter NPA norms are followed, recently also RBI warned KOTAKBANK to reduce equity market exposure as it exceeded the limits prescribed.

Special mention:

Ex-RBI Governor Y.V.Reddy was very smart enough to check asset bubble by hiking interest rate and reducing liquidity into the system and it did effect growth but he was strong to say I would compromise growth to control inflation. And warned Govt that real crude prices were not reflected in inflation so first correct that in response to FM statement to cut interest rate. When Fed was cutting rates he stood his way with higher rate and tighter liquidity.

Recap: Market summary for April 7th 2008-A.K.Prabhakar (for use of ANANDRATHI)

Market always discounts bad & good news at faster pace maybe a layman can be laggard, Inflation worry was there for almost 1years and RBI governor refused to bow down to political pressure to cut interest rate when FM wanted to reduce interest rate to improve growth, the same man (FM) now says we compromise growth for inflation. And the mess which has been created by political bosses for there whims and fancy has impacted us now. Good thing about political stupidity is they can’t face midterm election now and hard fight over inflation will happen. The art of living lies not in eliminating but in growing with troubles, growth doesn’t come without inflation but we need some visionary moves to control inflation and stimulate growth at the same time. If someone were to watch the moves of China they are accumulating oil wealth for long time and the reforms are faster and timely compared with any countries in the world. As Sitaram Yechury pointed out after visiting china, China is putting there hand on left and turning (doing everything) Right’.

Remember: The bigger the boom generated by manipulation of money and credit, the bigger the ultimate bust.

Read more here....Economy in Trouble, No Matter Bailout Outcome

Opinion: Bad times never last, but time is the best cure for any problem maybe by February or March 2009 market can show a bottom and enter a consolidated phase before an up move and I doubt a new high for next 3years but come 2009 good time for stock market starts and wise investment would give best returns.

A.K.Prabhakar

Lehman Brothers Holdings Inc

The 158-year-old firm was founded by brothers Henry, Emanuel and Mayer Lehman, Jewish immigrants to the US from Germany, in 1850. Henry set up a general store in Alabama in 1844 and was later joined by his brothers. In 1850 they set up the merchant bank in New York after having made money in railway bonds. Lehman Bros, which till June 2008 had not reported a quarterly loss even once, had earlier survived many an economic crises, like railroad bankruptcies of the 1900s, the Great Depression in the 1930s, and the collapse of Long-Term Capital Management in the 1990s.

Regards,

A.K. Prabhakar

>Did that 7.3% two-day jump impress you(DOWJONES)

A nice commentary about the 2 days humongous rise in dowjones .

Did you breathe a sigh of relief when the Dow Jones jumped by 779 points last Thursday and Friday? Did that 7.3% two-day jump impress you?

I Wasn't. Let Me Give You Three Reasons Why.

First of all, I don't trust any rally that is based upon a government rescue. The price tag for bailing out Fannie Mae, Freddie Mac, and AIG is already in the $700 billion range and almost certain to rise if Washington Mutual and Morgan Stanley (and others yet to be revealed) join the list.

By the time the rest of the anything-for-a-commission crowd comes clean with their financial sins, I would be surprised if the government's bailout tab DOESN'T EXCEED 1 TRILLION DOLLARS!

We're not talking about play money either.

We're talking about real dollars that you, I, and our children will be paying for decades. Instead of celebrating, I believe that the bailouts are a reason to be even more worried about the state of our economy and the U.S. stock market.

Second, I believe that the end-of-week rally you saw last week was not because of the government bailouts but because of the temporary ban on short selling. Last week, the SEC banned short selling on 799 financial companies. And they just happened to announce this dramatic change right before a 'triple witching' Friday.

Triple witching is when stock index futures, stock index options and individual stock options all expire on the same day. A triple witching day only happens four times a year. It is also called "freaky Friday" because of the exaggerated moves it often creates.

Last Friday would have been volatile enough because of triple witching. But the SEC only threw fuel on the fire by banning short selling. Once the ban on short selling expires on October 2, the selling pressure could return in droves.

Third and most important, if you're going to remain invested in the stock market, you're making a huge mistake by ignoring the Super Ball bounce going on over in Asia.

I don't see the Chinese, Japanese, Indian, Taiwanese, South Korean, or Singaporean governments spending billions of taxpayer dollars to bail out a bunch of greedy and irresponsible corporations.

I don't see any of the Asian economies in danger of rolling into a recession either.

Money and Markets issues can be republished. Republished issues MUST include attribution of the author(s) and the following short paragraph:

This investment news is brought to you by Money and Markets. Money and Markets is a free daily investment newsletter from Martin D. Weiss and Weiss Research analysts offering the latest investing news and financial insights for the stock market, including tips and advice on investing in gold, energy and oil. Dr. Weiss is a leader in the fields of investing, interest rates, financial safety and economic forecasting. To view archives or subscribe, visit http://www.moneyandmarkets.com.

>Shorting ban???? not likely

Friends ,
We saw orchestral rises in stock markets world over in last few days.

Let me give my 2 gray bytes to this SHORTING saga.World over we saw massive onslaught by bears since a month or so with in between deep cuts ,We saw all major world indexes making new 2008 lows kind of cascading effect of American financial turmoil.
Did we see its effect on INDIA?

In my words to a lesser extent as compared to world markets.There every financial index was making newer lows every other day(They deserved it their banks were on weak foundation) ,But here back home in INDIA Banks were the one which were holding on and are near to there 2008 highs(Tried alot to figure out why they held strong one valid reason i think is they selling dollar what they bought near 39and presently near 46+).

So under such scenario asking for shorting ban is INDIA looks bit a wishful thinking. Overall with out BEARS Markets wont be good for trading :)Also the kind of fall BRICS countries faced recently INDIA is the only one which is least affected .Why UK ,Russia banned naked shorting there because it was going out of control.Also if any of you read an .pdf File from HSBC they tittled that article as
"INDIANS ARE THE LONE BULLS IN WORLD"
so asking about ban on shorting is not justified.

Regards
Rish

Do give your comments.