Success mantra

Do not Strike when Angry

Yashiko was a wealthy samurai warrior in ancient Japan. He cut a fine figure; his armour and sword were of the finest workmanship. His ornaments were of the finest variety: silver, copper, gold and bronze. Even the toggles on his tunic were priceless netsuke: masterfully carved figures of animals, insects, dragons and fishes, made of the purest ivory. He lived with his wife and elderly mother in an elegant tiled house in the best quarter of the town. He frequently drank the rarest and finest of teas, and often dined in the most expensive restaurants. His wife Ayako was considered the most beautiful woman in the kingdom, and his aged mother was much celebrated for her wisdom and learning.
Life was good for Yashiko. He had a handsome salary from the emperor, regular revenue from his many properties, and a hefty stake in a porcelain trading business. But even all this wealth was not enough for a man like Yashiko. To keep from getting bored (which was uncomfortably often) the proud and greedy samurai decided to start a moneylending business for poor people.
“After all, it takes money to make money,” thought Yashiko. “You never know when a rainy day or a water flood or the wind dragons may come and wipe everything away. Life is at best uncertain. A day is bound to come when more money will be needed than what is presently being returned to me by my investments. The poor are always with us, and the poor always need money. I can charge them a high rate of interest and not have to lift a hand. What a clever way to make some extra cash! I wish I had thought of it long ago. Why, moneylending is practically a licence to mint money! I shall begin my new enterprise, at once! At once!”
Down at the docks, Michiko, a poor fisherman, had experienced an unlucky year with his business. Regretfully, he took out a sizeable loan from Yashiko so he could feed his wife and
children. A year later, the loan had not been repaid. The proud samurai strapped on his deadly sword and strode off to find the fisherman and collect what was his due.
“I’ll show him who’s boss,” thought Yashiko. “One look at me and my sword and he’ll come running with the money.”
Upon seeing Yashiko marching forcefully towards him, full of his own importance, the ragged fisherman bowed humbly before the proud samurai.
“O Revered Sir! Great Samurai! Noble Warrior! It has been a very bad year again for me. I do not have sufficient funds to repay you.”
“What!” shouted Yashiko furiously. “After all this time! You scoundrel! After all the time and patience I have shown you! A whole year has gone by and you cannot even show me a single yen in repayment! Now I am going to kill you!” Menacingly, he drew his sword.
Fearing his life was about to end, the fisherman spoke up loudly.
“Revered sir, for sometime now I have been studying martial arts. One of the lessons my master has taught me is that you should never strike another when you are angry.”
“Hmmmmm,” thought Yashiko. “This is a clever fellow.” Just to be on the safe side, he lowered his sword.
“Your master is wise,’ said Yashiko carefully. “And I myself, as a student of the art of the sword, have heard that lesson many times. To be honest with you, O fisherman, I have such a temper that I often act without thinking. I tell you what I will do. You shall have another year to repay your debt. If you do not repay me in one year, I will come and take your life away with this sword.”
“Thank you, kind sir,’ murmured Michiko, bowing low.
Yashiko composed himself and walked away, his honour intact. By the time he had dined out at his favourite restaurant and arrived home it was nearly midnight. Seeing no lights in his house, he crept in quietly, not wishing to wake the servants or disturb his wife and aged mother. As he entered the house he lit the bronze oil lamp in the hallway. There he saw his wife whispering secretly to a strange man in the darkened living room at the end of the hall. “What is the meaning of this insult!” shouted Yashiko. Swiftly he drew his sword, ready to kill them both instantly. Just then the words of the fisherman echoed in his fevered brain.
“Never strike when you are angry.”
Yashiko paused and took a deep, laboured breath. Then his wife lit a candle. To his amazement, he found himself face to face with not only his wife, but his beloved mother too, who was dressed like a man in his warrior clothing.
“What is the meaning of this? Are you both completely crazy? Is this a joke? I almost killed the two of you! I demand an explanation—immediately!”
“O Revered Husband,” murmured Ayako, “You, my lord, as a samurai, are the guardian and sole protector of this house. Because you had not returned by dark, Mother and I were afraid. We decided to dress Mother up in your clothes to keep away intruders.”
“Oh, my God! Oh, my ancestors!” wept Yashiko. He shivered at the thought that because of his terrible temper, he had nearly killed what he loved most in the world - his beloved wife and his adoring mother.
A year later, Yashiko went to see the poor fisherman down at the docks. Michiko, upon seeing the samurai walking towards him, bowed humbly before him.
“It has been an excellent year’s fishing, my Lord! Please accept the money I owe you, plus interest.” “Keep your money, dear man,” replied Yashiko gently. “You don’t know it, but your debt was paid long ago.”
Bhagawan says on the subject of anger:
One's anger is one’s greatest enemy and one’s calmness is one’s own protection. One’s joy is one’s heaven and one’s sorrow is one’s hell… assume silence when you are invaded by anger.
Or remember the name of the Lord. Do not try to remind yourself of things which will inflame the anger more... That will do incalculable harm. A man consumed by anger can never be free of misery. For the decline in human qualities today, pride and anger are primarily responsible.

Some questions to consider as you review your last years trading results and plan for the upcoming year

I fond the following questions posted by YTC are very helpful while reviewing.

Golden rule for trading

Golden rule for trading is:
Feed the stop loss order into the system immediately when the initial trade is made. This help to take away the emotionally driven subjectivity in analysis.

This will prevent any major capital erosion from the losses. As far as I have seen this is one of the best money management aspect in any trading. Before entering the trading itself one will know the maximum loss from that trade. If you are not comfortable with  such a loss either reduce the quantity or skip that trade.

Fraud detection

Notes from 8iholdings.com investment division update int
on the topic fraud detection is very interesting. Need to keep an eye on these aspects while analysing the company.

Learning’s from Berkshire Hathway annual letter 1982

Warren Buffett in his 1982 letter to investors, talking about two of his managers Phil Liesche and Ben Rosner, he wrote –

Both Ben and Phil ran their businesses for Berkshire with every bit of the care and drive that they would have exhibited had they personally owned 100% of these businesses. No rules were necessary to enforce or even encourage this attitude; it was embedded in the character of these men long before we came on the scene. Their good character became our good fortune. If we can continue to attract managers with the qualities of Ben and Phil, you need not worry about Berkshire’s future.

The lesson for an investor is that in stock market, you’re not just in the business of finding good businesses. Your real job is to find people who are running good businesses. That brings good fortune.

How not to trade

Following is the actual trading journal for the week of March 14-18, 2016.

1. Green indicates long entry. Number '1' indicates this is the 1st order for the week/day. 7562 is Nifty sport price at the time of entry. 'B' indicates it is Buy. Green also indicates Buy.
2. Red indicates it is a Sell. 'S' indicates it is a Sell.
3.  Vertical line indicates the start and end period of the day.
4.   Indicates the DLema for the day.
5. DHema for the day.

My goal with this chart is to analyse the trades visually and take a note of all the errors. This should help me to improve myself over a period of time.

To increase the success in trading :
1. Reduce the no. of errors
2. Gain insight into the market

To better #1, there are two ways to achieve it.One is to reduce the overall number of trades and the other is to reduce the number of wrong trades. This will invariably increase the number of successful trades. One has to sit patiently and wait for a good risk reward trade to appear on the screen.  For this one need to gain more insight into the market movement and analyse it with a technical analysts eye.

For ex: In the below chart we can see
1. When the market 7553 DHema on 14th, the next day all rise should be used to sell Nifty as long as it stays below DHema with DHema as the SL or 20 point as SL. (This is strictly for intraday, for carrying this short into next day market has to move below DLema and close below it.)
2. Another low risk entry point was when Nifty moved below DLema-30 near 7405 area. Enter long with 30 points as SL. This was moving back above DLema and closing above it. This will eventually go above DHema. So wait for it.

On the lighter side, If I had just reversed the color of my trade entries from green to red then I would have just achieved spectacular profit :-)

Please note: None of these are any recommendations. They are just learning's and notes from my observations.