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CONTENTS

Letter from the President - Page 3


Editors Note - Page 4
Heikin-Ashi by Gunjan Duaa - Page 5
Technical Research At Fidelity: Behind The Scenes summarized by Meghana V Malkan - Page 8
The Camarilla Trading System Part 2 by Dr. Bhooshan Shanbhag - Page 12
Testy Bytes by Kora Reddy - Page 16
Spread Trading-III by Andy Jordan - Page 25
Book Review The Mind of Wall Street by Somnath M - Page 30
Forthcoming Events - Page 33
Past Events Update - Page 34

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.

2 | ATMASPHERE

OCTOBER 2012

LETTER FROM THE PRESIDENT


Dear Colleagues,
Last month has been the month at the ATMA. Firstly, we turned two years old on 29 th September 2012. We received Mr. David Keller,
CMT President of the Market Technicians Association, Inc. to be a key speaker on 6th October 2012 in partnership with the BSE
Brokers Forum at the BSE International Convention Hall. Shri Ramesh Abhishek, IAS Chairman Forward Markets Commission
inaugurated the new office of the ATMA situated on the first floor of the BSE Rotunda Building, right next to what was earlier the BSE Trading Hall and now the
BSE International Convention Hall. Shri Abhishek inaugurated the worlds first E-library, the R N Elliott ATMA E-library of Technical Analysis. We had the good
fortune of Mr. Robert Prechter, Jr. deliver a memorial address on this occasion. Shri Vibhav Kapoor, Group Chief Investment Officer, IL&FS delivered a
remarkable Keynote Address. The chain of actions produced some structural strengths of the ATMA. Our Executive Team, lead by Namrata Thakur has
installed a certain degree of conviction in my faith that ATMA is on its course to become the worlds largest, most credible and dependable organization of its
kind. We discovered twenty six new student members, who are students of the BSE Training Institute undertaking an MBA in Financial Markets who became
the proverbial vertebral column supporting the spine that the ATMA Executive Team has come to be for the organization.
We did formally announce at this event the availability of ATMA services across Nepal, Bangladesh and Sri Lanka too. Given our regional presence now, a redesign of our logo is on the cards, amongst many things. Some significant impact special initiatives for women and students are underway. We will announce
those shortly.
Finally, for now, let me share my immense excitement at the opportunity I have to speak for the first time in two years at a Mumbai Monthly Educational
Meeting. I look forward to meeting as many of our members on the 24th November 2012.

Sincerely,

Sushil Kedia

OCTOBER 2012

ATMASPHERE | 3

EDITORS NOTE
This months issue contains a summary of the seminar held on 6th October, 2012 where the Association of Technical Market Analysts
jointly with the BSE Brokers Forum and the Market Technicians Association, Inc hosted the MTA President Mr. David Keller at the BSE
Convention Hall. The event also marked the inauguration of new premises of ATMA at the BSE Building and the much awaited
inauguration of the worlds first E-Library of Technical Analysis at the hands of Shri Ramesh Abhishek, IAS Chairman, Forward Markets
Commission, India.
Further in the issue Gunjan Duaa, CMT describes the Heikin-Ashi a Japanese Technique based on the candlestick theory. He elaborates on this with the help of calculations and
its usage in trading.
The Camarilla Trading System was introduced by Dr. Bhooshan Shanbhag in the August issue. He explains this system with additional inputs.
In continuing the thread on Spread Trading from the previous issues, Andy Jordan further explains the method of finding the right trades using Futures Spread
Trading.
Kora Reddy back-tests Gap Trading strategies further in Testy Bytes
Somnath M reviews The Mind of Wall Street by Leon Levy and Eugene Linden.

Please let us know what you are doing and allow us to share your application of the tools of technical analysis to the readers of ATMASphere by sending an
email to editor@atma-india.net. You can subscribe to ATMASphere completely free by clicking here.
Sincerely,

Meghana V Malkan

4 | ATMASPHERE

OCTOBER 2012

HEIKIN-ASHI: THE TRENDING CANDLE

Calculation of Modified Bars.

BY GUNJAN DUAA

Normal candlestick charts are composed of a series of open-high-low-close


(OHLC) bars set apart by a time series. The Heikin-Ashi technique uses a

The most widely used Quote in the financial markets all around the world is

modified formula:

Trend is My Friend. This Quote is very much true but to find the trend is I
think is the most difficult of all. So, we can add that Trend is my friend, If It

1. The Heikin-Ashi Close is simply an average of the open, high, low and close

can be found

for the current period.

Most profits (and losses) are generated when markets are trending.

HA-Close = (Open(0) + High(0) + Low(0) + Close(0)) / 4

Japanese Candlestick Technique is widely used by many traders to help them

2. The Heikin-Ashi Open is the average of the prior Heikin-Ashi candlestick

locate trend amid erratic market volatility. Heikin-Ashi is a Japanese

open plus the close of the prior Heikin-Ashi candlestick.

Technique based on the candle stick theory but taking it to a higher level for
trend determination, so in a way we can call it a Better Candlestick.

HA-Open = (HA-Open(-1) + HA-Close(-1)) / 2


3. The Heikin-Ashi High is the maximum of three data points: the current

The Heikin-Ashi technique means the Average Bar in Japanese used in

period's high, the current Heikin-Ashi candlestick open or the current Heikin-

conjunction with candlestick charts to improve the isolation of trends and to

Ashi candlestick close.

predict future prices.


HA-High = Maximum of the High(0), HA-Open(0) or HA-Close(0)
Heiken means average and ashi means pace, taken together Heikin ashi

4. The Heikin-Ashi low is the minimum of three data points: the current

represents the average pace of prices. Heikin-Ashi candlesticks are not used

period's low, the current Heikin-Ashi candlestick open or the current Heikin-

like normal candlesticks. Instead of finding reversals on a single or a

Ashi candlestick close.

confluence basis we use them for identifying trending periods, potential


reversal points and classic technical analysis patterns.

OCTOBER 2012

HA-Low = Minimum of the Low(0), HA-Open(0) or HA-Close(0)

ATMASPHERE | 5

Signals

The Chart Attached above shows the Difference between Heikin-Ashi (Upper

Green Candle with no lower shadow indicates Uptrend: hold Long Positions

Chart) and the normal Candlestick (Lower Chart). In the Heikin-Ashi, we see

When the candles are green one can add long positions and should not go

that the candle with no shadows have a strong trend. The candles with no

short.

upper shadows have strong downtrend and the candles with no lower

A candle with upper and lower shadows, the one which looks like a doji

shadows have a good uptrend.

indicates a trend change. Aggressive traders can take a trade opposite to the
trend while others can wait till the change of trend

Heikin-Ashi as explained is the average candle so we can see a big red candle

Red Colored candles indicate a downtrend

and a hanging man gives a Doji candle, which is the right candle because

When the candle is colored one can go short and add positions

after a big red day and then a hanging man really means that the sellers and

Red Colored candles which have no higher shadows indicate a strong

buyers are not sure.

downtrend

6 | ATMASPHERE

OCTOBER 2012

How to use Heikin-Ashi chart in your trades?


In the Above chart we can see that classical patterns can be used with the
Heikin-Ashi for finding the trades, uptrend and downtrend can be know by
the candles without shadow but when the candles are Doji or have more
shadow space than the body there if we find classical patterns like Triangles,
flags or channels, those can be traded on a price breakout above the highest

Want to feature in ATMASphere which is


perhaps one of the largest circulated Technical
Analysis Newsletters of its kind, in the whole
world? Here is your chance.

or below the lowest point of the pattern. In the chart i have taken Fibonacci
of the price high and low, market respected that and the trend changed from
there.

(Demo space for Advertisement)

In the Chart I have market points where the Doji candle has reversed the

Size: 18.5 cms (height) x 12.6 cms (width)

trend (Point 1 to Point 6), at each of this point after the trend a Doji has
taken shape, below that i have added Stochastic at the Doji point stochastic
has given a reversal as well, so it is a simple trading system which one can
use for trend determination.

Gunjan Duaa, a graduate in commerce and a CMT, is a


proprietary trader. He develops his own trading systems

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combining Technical analysis, Quantitative analysis and


Behavioral Finance techniques.
He writes for many websites and takes active interest in
teaching people about Technical analysis and behavior of crowds at
different market scenarios.

OCTOBER 2012

For More Details:


Contact editor@atma-india.net or
Call up on +91-22-2272-2862

ATMASPHERE | 7

TECHNICAL

RESEARCH

AT

same floor and right next door to the Trading Hall! It was indeed a

FIDELITY:

BEHIND THE SCENES

moment of deep gratification.


3.

Session by Mr David Keller, President of MTA - David Keller, CMT,


President of MTA spoke the whole day at the event on Technical

SUMMARIZED BY MEGHANA V MALKAN, CMT

Research at Fidelity. Mr. Keller explained the modus operandi of


The Association of Technical Market Analysts jointly with the BSE Brokers
Forum and the Market Technicians Association, Inc organised an event on 6

th

October, 2012 at the BSE Trading Hall.


This event would be remembered for decades to come, not only in the
history of ATMA but also in that of the Technical Analysis community. Mr.

research at Fidelity, showing across some of the photographs of the


Fidelity chart room. He discussed the kinds of indicators and charts used
by them for analysis and explained different charts in Indian and global
markets. In the concluding part, he spoke on the qualities that go into
making a successful trader.

Ramesh Abhishek, IAS - Chairman, Forward Markets Commission presided

The seminar then concluded with a highly interactive Question & Answer

as the Chief Guest at the Event. More than 350 members from the financial

session.

markets community graced the occasion.


The photographs of the event can be viewed by clicking here.
Following are the momentous episodes that transpired on this glorious day
David Keller, CMT, is a Managing Director of Research
1.

The World's First E-library of Technical Analysis The Association is in


the process of building the worlds first E-library on Technical Analysis
which has been named The R N Elliott ATMA E-library. The same was
solemnised through an E-inauguration by Robert Prechter. Mr Prechter
was present live from Chicago to address the gathering, beaming on the
jumbo screens of the BSE Trading Hall. The euphoria amongst the crowd

for Fidelity Investments in Boston. He manages the


Technical Analysis team at Fidelity Management and
Research, as well as the legendary Fidelity Chart Room.
He is currently serving as President of the Market
Technicians Association and a Director of the MTA
Educational Foundation.

was evident.
2.

Inauguration of the New ATMA Office The Association, less than two
years young, proudly inaugurated its new office - a bigger, better and
more efficient premises - right at the BSE Building itself, right on the

8 | ATMASPHERE

David Keller, CMT was formerly a Technical Analysis Application Specialist


with Bloomberg L.P. in New York, and was a regular contributor to
Bloomberg Markets magazine. He is the editor of the book "Breakthroughs
OCTOBER 2012

in Technical Analysis: New Thinking from the World's Top Minds",


published August 2007 by Bloomberg Press.

Meghana V Malkan, a graduate in Law and a CMT, trains


and coaches professional traders. She is the co-founder
of Malkansview (http://www.malkansview.com) - an
Institute which conducts training programmes on
Technical Analysis and Behavioural Finance. She is a proprietary trader
across asset classes.

OCTOBER 2012

ATMASPHERE | 9

The Dream... has come True! Almost!


World's FIRST E-Library of Technical Analysis
;
|
,

||

Endless evaluations of legal structures,


payment formalities, technologies and this
sweat and toil of nearly 20 months is now
fructifying! The world's most reputed,
largest and oldest vendor of E-libraries has
considered positively all our pitching and
discussing and despite the fact that we may
be there smallest customer today agreed to
mail over a contract to us!

Giving food to a hungry person is indeed a great donation, but the


greatest donation of all is to give a person education. Food gives but a
momentary satisfaction whereas education empowers the person for his
entire life.

This vendor has digitized the top 10000 libraries around the world! And yes,
your very ATMA is going to be now served by this very vendor! Not only are
we going to buy and stock up E-books and audio books we will be in time
able to generate funds to have training videos in this online library.

Each ATMA Member is at this point going to be able to give as much to each
other as each is going to be receiving in course.

The work ahead, for all of us..

The Dream, that is how I have always called it for myself, the establishment
of an E-Library that contains not just research papers and manuscripts but
commercially published good books on subject areas related to us, is now
within reach. Almost there..! Yes! Books on Technical Analysis, Trading
Strategies, Quantitative Finance, Back-testing, Algorithmic Trading,
Investment Psychology, Hedge Funds, Behavioral Finance & lots more!
Even before succeeding at launching ATMA, I have aspired with my blood,
flesh and soul to be able to bring up this concept. In fact, right at the day of
our launch we inaugurated an E-library that contains many decades of
research papers and journals! But the commercially published books could
not be integrated so far and a true professional self-service e-library has
had to wait. With painstaking work some of us scrounged and searched
endless websites, made endless calls liaisioning and networking with some
of the best publishers across the globe trying impressing upon them India is
a safe country and we are as ethical as any other professional enterprise in
any other corner of the world to be allowed to host a digital library of books
| ATMASPHERE
-10
both
e-books as well as audio books.

Make out a list of the top 20 books you wish to see


on this library and if you wish to make the list of top
20 books you have read as a Technical Analyst, trader
or a markets person make that too! Make a list of top
authors if full names of books dont come to mind
immediately. Make your wish lists! Mail them to
librarywishes@atma-india.net
&
they
will
automatically be forwarded to all volunteers working
with me and Gunjan Dua on this DREAM PROJECT.

Write out your lists


Email to TEAM
Let team compile
Team draws map
Evolutionary Goal
Charity begins at
home and do the
now! Let
your opinion, ideas,
desires be known.

The Challenges ahead..!


To build a highly useful collection of e-books that make our money work well for us in
this massive ongoing investment, we have to carefully select every good book
available and yet also avoid frivolous or very esoteric purchases. Building a great
library is an evolutionary goal. Come participate in this path-breaking initiative that
will change the orbit of our Association, forever. Well, there may not be enough
money, enough books, enough types of books, enough of this or enough of that, yet
what you will along with patience over time to live through when there will be
enough of everything, have one thing now which will never come again: be the
OCTOBER 2012
architects of the world's first e-library on Technical Analysis.

OCTOBER 2012

ATMASPHERE | 11

THE CAMARILLA TRADING SYSTEM PART 2


BY DR. BHOOSHAN SHANBHAG
In the last issue of Atmasphere (August 2012) we have seen the Camarilla
Trading System and its applications. However, the system does not end here.
It is true that the system is basically a pivot-point type system and is mainly

Let us see an example. Reliance Industries (August Futures) on 22nd August

designed for intra-day trades. However, it can also be applied on breakouts.

had following levels- High = 818.50, Low = 809.10, Close = 811.40. The 10
Camarilla levels that can be calculated at the end of the day are

We have seen in the earlier article (Atmasphere, August 2012) that the
system gives four support and four resistance levels. However, if the
calculations are extended further, then we also get the fifth level on either
side of the stock closing price of yesterday. These levels are above H4 or
Below L5, and decide the breakout level on higher and lower side
respectively. If markets manage to cross the H4 or L4 levels, which are stop
loss levels for short and long positions respectively, then H5 and L5 levels

Now the next day, i.e. on 23th august, Reliance Industries August Futures
opened just below H3, at 813.75. This indicates going short with stop loss
beyond H4 = 816.57. The stock first reached L3, the profit booking level =
808.80. However, the fall continued beyond L5 (801.06) and the stock made
a low of 791, and closed at 797, which is below L5 indicating breakout on the

become active. If these levels are getting crossed, or preferably, if the market

lower side (breakdown). On the next day, 24th August the fall continued and

opens outside these levels, then it indicates upside and downside breakout

the Camarilla levels for 24th august were-

respectively. That is, if market opens above H5, go long keeping a stop below
H3 or if it opens below L5, then go short keeping a stop above L3 levels. If
market retraces to H4 or L4 levels, positions should be added with Stop Loss
below H3 or above L3 respectively.

12 | ATMASPHERE

OCTOBER 2012

The actual lowest levels for 24th August were 781.85, which was below L4

would stop out at H4 or L4, still keeping the trader in profits for the day if

(784.90) but above L5 (772.50) for the day, warranting profit booking, which

both the positions are religiously taken on Camarilla calculations.

was any way expected as L3 (791.10) was reached for the day.

In Nifty and Bank Nifty also we get the similar trend on the breakout and if
we check the price moves over the last one month, similar trend is observed.
However, Bank Nifty shows more gap-up-gap down openings and the
positional trades have a lower success rate in Bank Nifty. I have also tried the
system on MCX silver contracts and it works superbly. MCX Gold has shown
relatively lower volatility in the last month and though the system is
applicable successfully to gold as well, the profit levels are relatively low,
mainly due to low volatility in the underlying in this period.
How should one exactly take the positions? On a day calculate the camarilla
levels based on previous days high, low and close. Trader can place six
orders in all-

Minute Chart of Reliance Industries Futures (August 2012)

1. Sell at or slightly below H3 This level would initiate short or book


profit in long.

If we put a glance at the minute chart of RIL (Futures) for the two days, the

2. Buy above H4 for stop loss in short positions created below H3.

intraday movement of the contract becomes clear.

3. Long above H5 for breakout longs.

Thrice in the last one month, reliance gave breakout signal, twice on up side
and once on lower side, and each of these positions would have been
profitable. Moreover, on almost all the days, levels L3 as well as H3 were
reached and loss booking was rarely observed. Most of the times, the loss

4. Buy at or slightly above L3 for book profit in short created at H3. This
level can be used for creating intraday longs as well.
5. Stop loss at L4 should stock fall after creating long at L3
6. Sell below L5 in the event of breakdown.

booking was required only when it was followed by a breakout (crossing L5

If a trader can be present near the trading terminal, then only 2,3,4 and 5 can

or H5 levels) on the same day. This means, the trader would have booked

be placed. Order 2 should be deleted if first 3 is triggered followed by 4.

profit first from H3 to L3 (or vice versa) then taken a counter position, which

Similarly order 5 should be deleted if 4 is hit first followed by 3. It was

OCTOBER 2012

ATMASPHERE | 13

observed that the positions taken after first 30 minutes of market


stabilisation gave better success rate than those taken immediately on
opening.
Positions contrary to existing trends could be avoided if the trader wishes so
by placing only the orders in the direction of the ongoing trend and placing
book profit orders only after the position is created initially. In my opinion,
the technique is a very good scalping technique and can be practised in
stocks, indices as well as commodities that have good volumes.

Dr. Bhooshan Shanbhag (M.Sc. Ph.D.) has been


associated with financial markets since 1993. Holding a
Ph. D. from the University of Mumbai, he has a strong
research background and has three research papers in
international journals to his credit. He is active in
teaching Technical Analysis and specializes in trading derivatives. He is on
the panel of experts for myiris.com and is also a regular writer for
investment weekly Informed Investor for over three years.

14 | ATMASPHERE

OCTOBER 2012

Wide variety of useful materials to win, any day, any time...

ATMA Social Awards

So many good things to win. Ramki Ramkrishnan, an ATMA trustee has kindly
added five copies of his best-seller E-book, the Five Waves to Financial
Freedom recently for all to win. Kora Reddy has promised to the catalogue
Winning is so important, for all us,
every day. Yet a winning attitude is
ever more important throughout our
lives. How about a win-win. You win,
your fraternity wins and everyone
can win? Well thats exactly what is
happening with the ATMA Social
Rewards...

Competition is good
More so when one is competing in
a win win enterprise such as the
ATMA Social Rewards.

five copies of personalized in your name, autographed copies of his book on


Quantitative Trading too. More and more is coming. Polish your social media
skills and do visit the website of an organization you own, daily. Win-Win....
yes you can win.

You can notice the points earned


by you and others in the
Leaderboard. You can earn points
every day.

The MyATMA private network on our website is in full swing too. Have you
been not posting things on the groups you have joined there, have you not
been sharing videos or other content on your Facebook type walls, have you

ATMA Social Rewards

not been inviting friends and using the Personal Messaging feature there....

This simple idea is in full swing now.


You will notice the Activities in
ATMA Social Rewards information
box on the www.atma-india.net on
almost every page and yes on the
home page itself too. Just click on
the button in there and start
winning. Simple as that. A Reward is
the award and the best thing is you
can choose which one....

oh I see, you dont see how the points on MyATMA can be encashed....

OCTOBER 2012

hmmm... that is going to be coming too soon. Keep polishing your social
networking skills on MyATMA and keep accumulating those points, they will
be usable as a very very private and special MyATMA Rewards also start,
Growing Catalogue...

which only our members can participate in. Oh yes, the karma points on the

Redeeming of points as per the


catalogue to claim valuable gifts
and prizes is simple. Try it, today.

Discussion Forum too will be encashable in some grand scheme. ATMA is a


winning idea and a win-win with each of its owner the larger design of things
in the pipeline.
ATMASPHERE | 15

TESTY BYTES

Below is the trading strategy performance summary, since 1st Jan 2000 till

BY KORA REDDY

16th Oct 2012.

Gap Trading Strategies - II


Definitions
1) A Full Gap Up is defined as one when the opening price of a day is
higher than the previous days high price.
2) A Gap Up is one when a days opening price is higher than the previous
days close, but not higher than the previous days high.
3) A Full Gap Down is defined as one when the opening price of a day is
lower than the previous days low price.
4) A Gap Down is one when a days opening price is lower than the
previous days close, but not lower than the previous days low.

Trading Strategy Performance Summary Report


Trading signal as per
Total net profit
6017.42
strategy
Gross profit
37,725 Gross loss
Outlier adjusted profit
Profit factor
1.19
factor
Total number of trades
663 Percept profitable
Number of losing
Number of winning trades
344
trades
Average profit per
Average profit per trade
9.08
trade %
Median trade
-2.91 Median trade %
Average winning trade
Average winning trade %
Largest winning trade

Ill consider the prior days closing direction to build few trading strategies

Largest winning trade %


Ratio average win/
average loss

and examine how they performed historically.

Max consecutive winners

After examining the plain gaps and their strategy performance, in this issue

Strategy 5a: Enter at Open upon a Full Gap Up open and exit at Close, after
the previous days close is up
Trading strategy rules
1)
2)
3)
4)
5)

Sensex opens with a Full gap up open, Open[0]>High[1] &


Previous trading days close is up , Close[1]>Close[2]
Entry at Open price
Exit at Close price same day
Profitable trading action based on the historical backtest
performance - SHORT

16 | ATMASPHERE

Max drawdown
Initial Account
Number of years analysed
Percentage winning years

109.67 Average losing trade


1.1 Avg losing trade %

Sharpe Ratio

0.32 T-Test

1.16
52
319
0.11
-0.04
-99.4
-804.82

8.04 Largest losing trade %


Ratio average win/
1.14
average loss %
Max consecutive
11
losers
Rs. Max drawdown %
1,12,466
Rs.
Return on Account %
10,00,000
Pessimistic Rate of
13
Return %
54% CAGR %
7.32 Recovery Factor

-31,708

-0.96

918.72 Largest losing trade

Luck Factor

SHORT

-5.97
1.14
9
-16
60.17
22.08
3.76
5.35
-1.91

copyright http://stocksiq.in

OCTOBER 2012

PS: gross profit /loss, net profit is calculated on Sensex points based, whereas
max drawdown is calculated on the assumption of buying 100 units of
Sensex.
Conclusion: the strategy doesnt have a trading edge, as highlighted in bold
by the Outlier adjusted profit factor and other key metrics in a trading
performance summary report.
Strategy 5b: Enter at Open upon a Full Gap Up open and exit at Close, after
the previous days close is down
Trading strategy rules

Trading Strategy Performance Summary Report


Trading signal as per
Total net profit
159.42
strategy
Gross profit
6,505 Gross loss
Outlier adjusted profit
Profit factor
1.03
factor
Total number of trades
88 Percent profitable
Number of winning trades
45 Number of losing trades
Average profit per trade
1.81 Average profit per trade %
Median trade
-0.65 Median trade %
Average winning trade
Average winning trade %

1) Sensex opens with a Full gap up open, Open[0]>High[1] &

Largest winning trade

2) Previous trading days close is down , Close[1]<Close[2]

Largest winning trade %


Ratio average win/ average
loss

3) Entry at Open price

144.54 Average losing trade


1.39 Average losing trade %
478.11 Largest losing trade
5.08 Largest losing trade %
Ratio average win/
1.09
average loss %

SHORT
-6,345
0.95
51
43
0.09
-0.02
147.56
-1.27
440.42
-4.24
1.09

4) Exit at Close price same day


5) Profitable trading action based on the historical backtest
performance SHORT
Given on the next page is the trading strategy performance summary, since
1st Jan 2000 till 16th Oct 2012.

Max consecutive winners


Max drawdown
Initial Account
Number of years analyzed
Percentage winning years
Luck Factor
Sharpe Ratio

9 Max consecutive losers


Rs. Max drawdown %
1,51,505
Rs.
Return on Account %
10,00,000
Pessimistic Rate of Return
13
%
46% CAGR %
3.65 Recovery Factor
0.08 T-Test

7
-15.58
1.59
-17.78
0.12
0.11
-0.48

Copyright http://stocksiq.in

Conclusion: do not think of fading ( that is taking in the opposite direction of


the open) the full gap ups posted after a down day , statistically is not
significant as seen by the T-test , over sample size of 88 trades in last 12+
years
OCTOBER 2012

ATMASPHERE | 17

Strategy 6a: Enter at Open upon a Full Gap down Open and exit at Close,
after the previous days close is up

Continued from previous page


Ratio average win/
average loss

Trading strategy rules


1) Sensex opens with a Full gap down open, Open[0]<Low[1] &

Max consecutive winners

2) Previous trading days close is up , Close[1]>Close[2]

Max drawdown

3) Entry at Open price

Initial Account

4) Exit at Close price same day


5) Profitable trading action based on the historical backtest

Number of years analysed

Below is the trading strategy performance summary, since 1st Jan 2000 till

Percentage winning years


Luck Factor
Sharpe Ratio

16th Oct 2012.

copyright http://stocksiq.in

performance - SHORT

Trading Strategy Performance Summary Report


Trading signal as per
Total net profit
2267.81
strategy
Gross profit
6,452 Gross loss
Outlier adjusted profit
Profit factor
1.54
factor
Total number of trades
82 Percept profitable
Number of winning trades
47 Number of losing trades
Average profit per trade
Average profit per trade
27.66
%
Median trade
-15.6 Median trade %
Average winning trade
Average winning trade %
Largest winning trade
Largest winning trade %

18 | ATMASPHERE

137.27
1.27
517.44
4.4

0.87

Ratio average win/


average loss %

0.94

5 Max consecutive losers


Rs. Max drawdown %
87,033
Rs.
Return on Account %
10,00,000
Pessimistic Rate of
13
Return %
62% CAGR %
3.48 Recovery Factor
0.28 T-Test

4
-7.07
22.68
6.2
1.61
2.61
-0.8

Strategy 6b: Enter at Open upon a Full Gap down Open and exit at Close,
SHORT

after the previous days close is down

-4,184

Trading strategy rules

1.42
57
35
0.15

-0.31
Average losing trade
119.53
Average losing trade %
-1.35
Largest losing trade
592.43
Largest losing trade %
-4.46
Continued next page

1) Sensex opens with a Full gap down open, Open[0]<Low[1] &


2) Previous trading days close is down , Close[1]<Close[2]
3) Entry at Open price
4) Exit at Close price same day
5) Profitable trading action based on the historical backtest
performance LONG

Below is the trading strategy performance summary, since 1st Jan 2000 till
16th Oct 2012.
OCTOBER 2012

Trading Strategy Performance Summary Report


Trading signal as per
Total net profit
400.22
strategy
Gross profit
18,634 Gross loss
Outlier adjusted profit
Profit factor
1.02
factor
Total number of trades
286 Percent profitable
Number of winning trades
146 Number of losing trades
Average profit per trade
Average profit per trade
1.4
%
Median trade
5.33 Median trade %
Average winning trade
127.63 Average losing trade
Average winning trade %
1.38 Average losing trade %
Largest winning trade
Largest winning trade %
Ratio average win/
average loss
Max consecutive winners
Max drawdown
Initial Account
Number of years analysed
Percentage winning years
Luck Factor
Sharpe Ratio

682.25 Largest losing trade


5.83 Largest losing trade %
Ratio average win/
0.52
average loss %

Strategy 7a: Enter at Open upon a Gap Up and exit at Close after the
LONG
-18,234
0.98
51
140
0.07
0.09
-130.24
-1.29
1314.22
-10.27

11 Max consecutive losers


Rs. Max drawdown %
3,02,588
Rs.
Return on Account %
10,00,000
Pessimistic Rate of
13
Return %
46% CAGR %
4.23 Recovery Factor
0.17 T-Test

1.07
6
-25.7
4
-26.83
0.31
0.13
0.67

copyright http://stocksiq.in

previous days close is up


Trading strategy rules
1) Sensex

opens

gap

up

open

2) Previous trading days close is up , Close[1]>Close[2]


3) Entry at Open price
4) Exit at Close price same day
5) Profitable trading action based on the historical backtest
performance SHORT
Below is the trading strategy performance summary, since 1st Jan 2006 till
21st Sep 2012.
Trading Strategy Performance Summary Report
Trading signal as per
Total net profit
1525.61
strategy
Gross profit
Profit factor
Total number of trades
Number of winning
trades
Average profit per trade
Median trade
Average winning trade

direction of close do not provide any significant trading edge either to go

Average winning trade


%

OCTOBER 2012

Open[0]>Close[1]&Open[0]<High[1]

Conclusion: Full gap down openings along with previous trading days

long or to short as shown by the above performance summary reports.

with

SHORT
18,725

20,251 Gross loss


Outlier adjusted profit
factor
290 Percent profitable

1.08

145 Number of losing trades


Average profit per trade
%
-0.05 Median trade %
5.26

139.66 Average losing trade


0.91 Average losing trade %

1.04
50
145
0.03
0
129.14
-0.85

Continued next page


ATMASPHERE | 19

Continued from previous page


Largest winning trade

699.24 Largest losing trade

Largest winning trade %


Ratio average win/
average loss

3.9 Largest losing trade %


Ratio average win/
1.38
average loss %

Initial Account
Number of years
analysed
Percentage winning
years
Luck Factor
Sharpe Ratio

1.06

Below is the trading strategy performance summary, since 1st Jan 2006 till
21st Sep 2012.
Trading Strategy Performance Summary Report
Trading signal as per
Total net profit
7448.58
strategy
Gross profit

Max consecutive
winners
Max drawdown

507.15
-5.13

9 Max consecutive losers


Rs. Max drawdown %
1,04,451
Rs.
Return on Account %
10,00,000
Pessimistic Rate of Return
7
%
71% CAGR %
4.3 Recovery Factor
0.16 T-Test

-22.01
15.26
-17.11
2.11

Profit factor

1.23

Total number of trades


Number of winning trades

423
216

Average profit per trade

17.61

Median trade

-6.07

Average winning trade

1.46
-0.39

Average winning trade %

Strategy 7b: Enter at Open upon a Gap Up and exit at Close after the
previous days close is down

Largest winning trade %


Ratio average win/
average loss
Max consecutive winners

Trading strategy rules

Max drawdown

copyright http://stocksiq.in

1) Sensex opens with a gap up open

Largest winning trade

Initial Account

Open[0]>Close[1]&Open[0]<High[1]
2) Previous trading days close is down , Close[1]<Close[2]
3) Entry at Open price
4) Exit at Close price same day
5) Profitable trading action based on the historical backtest

Number of years analysed


Percentage winning years
Luck Factor
Sharpe Ratio
copyright http://stocksiq.in

32,204

39,652 Gross loss

SHORT

Outlier adjusted profit


factor
Percent profitable
Number of losing trades
Average profit per trade
%
Median trade %

183.57 Average losing trade


1.19 Average losing trade %
829.07 Largest losing trade
7.32 Largest losing trade %
Ratio average win/
0.97
average loss %
7 Max consecutive losers
Rs. Max drawdown %
1,72,841
Rs.
Return on Account %
10,00,000
Pessimistic Rate of Return
7
%
71% CAGR %
6.13 Recovery Factor
0.23 T-Test

1.21
51
207
0.09
-0.04
155.57
-1.06
857.66
-4.9
1.12
9
-35.91
74.49
25.12
8.55
4.31
-1.22

performance SHORT
20 | ATMASPHERE

OCTOBER 2012

trading days direction of close do not provide any significant trading edge

Trading Strategy Performance Summary Report


Trading signal as per
Total net profit
5766.04
strategy

either to go long or to short at open.

Gross profit

Conclusion: Plain Gap up openings even after considering the previous

Profit factor
Strategy 8a: Enter at Open upon a Gap down and exit at Close after the
previous days close is up
Trading strategy rules
1) Sensex

opens

with

gap

down

open

Open[0]<Close[1]&Open[0]>Low[1]
2) Previous trading days close is up , Close[1]>Close[2]

Total number of trades


Number of winning
trades

159.03 Average losing trade

4) Exit at Close price same day

Largest winning trade

5) Profitable trading action based on the historical backtest

Largest winning trade %


Ratio average win/
average loss

Jan 2006 till 21st Sep 2012.

Max consecutive
winners
Max drawdown
Initial Account
Number of years
analysed
Percentage winning
years
Luck Factor
Sharpe Ratio
copyright http://stocksiq.in

OCTOBER 2012

110 Number of losing trades

Average winning trade


Average winning trade
%

Given in the next page is the trading strategy performance summary, since 1st

Outlier adjusted profit


factor
202 Percent profitable

1.49

Median trade

3) Entry at Open price

performance SHORT

11,728

17,494 Gross loss

Average profit per trade


%
-18.36 Median trade %

Average profit per trade

28.54

1.07 Average losing trade %


772.55 Largest losing trade
6.35 Largest losing trade %
Ratio average win/
1.35
average loss %
9 Max consecutive losers
Rs. Max drawdown %
96,099
Rs.
Return on Account %
10,00,000
Pessimistic Rate of Return
7
%
0% CAGR %
5.92 Recovery Factor
0.89 T-Test

SHORT

1.43
55
92
0.19
-0.11
127.48
-0.88
574.08
-4.44
1.22

5
-9.47
57.66
28.75
6.94
6
-1.91

ATMASPHERE | 21

Strategy 8b: Enter at Open upon a Gap down and exit at Close after the
previous days close is down
Trading strategy rules
1) Sensex

opens

with

gap

up

open

Open[0]<Close[1]&Open[0]>Low[1]
2) Previous trading days close is down , Close[1]<Close[2]

Continued from previous page


Average winning trade
1.19
%
Largest winning trade
796.43
Largest winning trade %
4.57
Ratio average win/
0.91
average loss

3) Entry at Open price

Max consecutive
winners

4) Exit at Close price same day

Max drawdown

5) Profitable trading action based on the historical backtest

Initial Account

performance SHORT
Below is the trading strategy performance summary, since 1st Jan 2006 till
21st Sep 2012.
Trading Strategy Performance Summary Report
Trading signal as per
Total net profit
2484.75
strategy
Gross profit
Profit factor
Total number of trades
Number of winning
trades
Average profit per trade
Median trade
Average winning trade

22 | ATMASPHERE

15,315 Gross loss


Outlier adjusted profit
factor
151 Percent profitable

1.19

87 Number of losing trades


Average profit per trade
%
-44.42 Median trade %
16.46

Number of years
analysed
Percentage winning
years
Luck Factor
Sharpe Ratio
copyright http://stocksiq.in

Average losing trade %

-1.43

Largest losing trade


Largest losing trade %
Ratio average win/
average loss %

-878
-5.82
0.83

9 Max consecutive losers


Rs. Max drawdown %
1,70,741
Rs.
Return on Account %
10,00,000
Pessimistic Rate of Return
7
%
29% CAGR %
3.86 Recovery Factor
0.21 T-Test

4
-19.8
24.85
-7.61
3.37
1.46
-0.53

SHORT
12,831

Conclusion: strategy 8a, that is going short at open and covering at close of

1.13

the trading day, after gap down opening when the previous trading days

58

close is up looks better off all the gap trading strategies tested so far, albeit

64

the profit expectation is a mere 0.2, which can cover the impact costs and

0.08

-0.23
176.04 Average losing trade
200.48
Continued on next page

the brokerage costs. Let me present few tweaks by slicing the data with the
aid of moving averages in my next article.
You can also reach me at kora@stocksiq.in with your queries on the trading
strategies presented and for any clarifications that you have.

OCTOBER 2012

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.

Membership Renewal
The Association of Technical Market Analysts always strives to evolve
its member services at all times. We look forward to continuing our
initiatives in the years to come and to serve you as members and
working with you as volunteers. We believe memberships of many of
our members would be due for a renewal.
To renew your membership, you can call the ATMA Office at +91-222272 2862 and renew over the telephone with any of the ATMA Staff
members.
OCTOBER 2012

ATMASPHERE | 23

Free ATMA Twitter Hour Seminars are Back!


Learning never stops! We do hear the duet "The Best Things in Life Are Free" between singers Luther Vandross and Janet Jackson! So
here it is, a totally unique learning experience that requires no registrations, no payments. Just get a Twitter identity for yourself,
follow @ATMAIndia on twitter and start tweeting your chart-links, our analysis, your recommendations for good readings, your
questions and your answers with the #MyATMA hash-tag. To find the contributions of other participants just search for tweets with
#MyATMA tag as well!
You are invited to the absolutely Free & fabulous learning experience at the Wednesday Evenings @ATMAIndia Twitter hours from 4.30 p.m. to 6.30 p.m.
Come by to discuss with the ATMA Members, expert ideas! No hassles for Registering, No forms to fill up! All you need is a
Twitter Account and just follow @ATMAIndia! That's all! Still don't have a twitter account? It takes you two minutes. Just go
to www.twitter.com and get one!
You know so much about Markets, Technical Analysis, Trading, Investing, Risk Management, Psychology, Coding, and
Strategy & yet always have felt the need to discuss it with like-minded folks at your convenience, at your pace without having
to travel and without having to spend a dime. Well Education like all the best things of life can be free and come in packets of
a size you find convenient, when you are willing to give as much as you take. Heres then, the @ATMAIndia Twitter Hours.
Come on in & give & take!
We urge that all of us discourage spewing out market views. Everyone already has many! Those are best kept reserved for each of us to
trade with on our own. A Bull & Bear inevitably fight and its best to fight it out in the pits, not at an educational event. Discuss ideas,
strategies, concepts, techniques. The Goal is not to achieve a lunch for just today but to share recipes for a lifetime!
Many ATMA members will be sharing their expertise and answering these queries. All you need to do to follow the massive 2 hour long
conversation from so many people is to keep the profile page of @ATMAIndia opened once you are logged into twitter.
Yes, we do look forward to not only your queries but as much sharing of your own wisdom as you will do with fellow
Technicians! Please focus on sharing wisdom & STRICTLY AVOID selling or promoting yourself!
Yes, start following @ATMAIndia on Twitter & add to your and others ever-increasing knowledge repository of Investing,
Trading, Risk Management & of course Technical Analysis, every Wednesday through @ATMAIndia Wednesday Twitter Hour
meetings! Forward this message to any friends, colleagues or associates you feel are like-minded and can contribute as well
as benefit! Surely then, the ATMA look forward to meeting with you on Twitter every Wednesday Evening 4.30 to 6.30 pm!
24 | ATMASPHERE

OCTOBER 2012

SPREAD TRADING - III

with each leg in a different market) are not the only way to find good
tradable spreads.

BY ANDY JORDAN
A technique often used by spread traders is to trade bull or bear spreads.
Futures Spread Trading - How do I find the "right" trades?
A bull spread is a spread in which the long side of the spread is the nearby
In approaching spread trading, many traders are overwhelmed by the
numerous possible spread trades available. Not only can a spread trader
trade one market against another, he can also trade different months of the

contract, and the short side is a more deferred month. Long a December
2012 Corn contract, and short a July 2013 Corn contract would be a typical
bull spread.

same commodity against each other, and even use ratios other than 1:1.
Even if he watches only a handful of commodity markets, he can end up with

A bear spread is simply the opposite: going long the more deferred month,

100 or even more possible spreads to follow, so many beginning spread

and going short the nearby month.

traders just don't know where to start. In this article I present several ideas

The terminology of bull and bear spreads is derived from the bull and

on how to select the right spread trades.

bear market definitions of the underlying (outright) markets. The idea of a

Let's start with spread selection using fundamental research.

bull spread is that in a rising market the nearby months will move up more
strongly than the deferred months, and therefore the spread is expected to

Fundamentals-oriented spread traders often concentrate on a specific group


of markets such as the grains or the meats. They have either more insight
into a specific market because of their own background (farmer or producer),

move to the up-side. In a bear market, a trader would expect the opposite.
The nearby months are expected to fall faster than the deferred months.
Therefore, a bear spread would be the right choice.

or they use fundamental research from third parties. While charts are used
mainly for the timing of the entry and exit, analyzing the supply and demand

Heres an example: Let's say that, because of fundamental research

situation is the main concern for a fundamentals-oriented trader for finding

indicating that a drought might move Corn prices higher, a trader decides to

the "direction" of a trade. A simple method for finding a good spread is by

go long Corn, but would like to set up the trading idea with spreads. Because

searching for a market that is supposed to go up, and another related market

the trader is bullish on corn, he can select several combinations: Corn Dec.

that is supposed to go down. But as we discussed in the different causes that

2012 - Corn March 2013, or Corn Dec. 2012 - Corn July 2013. Both are bull

make a spread move (in Part II of this series), inter-market spreads (spreads

spreads. Because of better liquidity, he would probably choose the Dec. - July
combination. The chart below shows us the Corn Dec. 2012 - Corn July 2013

OCTOBER 2012

ATMASPHERE | 25

spread in mid-June of 2012. As we can see on the chart, during the past few

We notice the possible support at around 510 (gray line on the chart) as well

months the spread has been trading mainly sideways.

as at around -28 and -31 on the spread chart. Motivated by the fundamental
research that Corn might move higher, a trader might want to wait for a
breakout to the up-side before entering the trade. A few days later we had
the following picture:

Above is a chart of the spread. On the same day, December 2012 Corn
outright chart looked as follows:

26 | ATMASPHERE

OCTOBER 2012

Both December 2012 Corn and the spread have broken out to the up-side. It

As we can see, both the bull market trade in corn and the bull spread trade

might be time to enter the trade.

would have worked out just fine. The question then is why would a trader

After a couple of months, we see the following charts:

choose the spread trade over simply going long Corn?


The answer is that a trader might want to take some volatility out of the
trade, which results in greater flexibility with risk. While December 2012
Corn was moving about $1,200 per day during the breakout, the spread
moved only about $200 per day during the same time.
Traders with small accounts would especially prefer the spread over the
outright trade due to the smaller risk. Less risk allows them to trade more
contracts with greater flexibility.
But what if a trader wants "more action"? What if he wants more volatility?
Then he simply selects wider legs for the spread. He might choose the Dec.
2012 Corn - Dec. 2013 Corn to immediately get more volatility. Instead of a
$200 move per day on the Dec. - July combination, he would get $400 on the
Dec. - Dec. combination, thereby increasing volatility.
General speaking, a spread trader is often able to reduce or increase the
volatility of the trades which results in being able to reduce or increase the
risk he wants (or is able to take). He can match the volatility for the trade to
his own risk tolerance.
Bull and Bear spreads are, of course, only one of the ways a fundamentaloriented trader might want to set up the trades. Depending on the
complexity of their research, they often set up much more complicated
spreads such as:

OCTOBER 2012

ATMASPHERE | 27

Andy Jordan was born in 1965 in Germany, but is

Long 1 Dec. 2012 Corn, short 2 July 2013 Corn, and long 1 Dec. 2013 Corn.

currently living in the Caribbean. He studied

They often combine the different trading months of a market into one spread

mathematics

that reflects more of the demand and supply situation they expect in the

administration

several trading journals that he is able to day trade


today's markets, spread trading has always been his favorite. In addition to
his spread trading Andy is the Managing Editor of Traders Notebook. He

Spreads tend to trend longer than the underlying futures. Spreads

also conducts an extensive mentoring program for spread traders, and he is

move because of real fundamental information. They are less

the developer and instructor of the entire mentoring program. You can

affected by the market manipulation traders experience in the

reach

underlying. Spreads often trend when the outright futures move

http://www.tradingeducators.com

him

at

andy@tradingeducators.com

&

visit

his

website

sideways.

Spreads do not require as much liquidity as a straight trade in the


underlying commodity.

Because of low margins, spreads offer more efficient use of available


capital;

in

mathematics. Even though Andy has demonstrated in

to trade a spread instead of making the trade in the outrights. But there are

outrights:

business

Regensburg and Hagen, and holds a PhD in

future. The ability to do this is just one more reason why a trader may choose

even more reasons to choose trading spreads instead of trading the

and

Spreads benefit from correlation and seasonality.

In Part IV of this series, we will talk about how to use "seasonality" in spread
trading. While seasonality in the market comes mainly from the supply and
demand cycles of a trading year, I am not sure if I would put seasonality into
the fundamental corner because it is mainly a technical calculation done by
computers. In my opinion, it is somewhere between fundamental and
technical trading.

28 | ATMASPHERE

OCTOBER 2012

Now, the more important point:

Most important priority: Career Development


of ATMA Members
Why are we after all part of this grand
exercise called the ATMA, the Association
of Technical Market Analysts?
To be excellent, to be renowned for our pedigree embellished with great
knowledge and ethical conduct, to be sound in our approach at what we do
in our profession, to be trusted, to be reliable, to be empowered with an all
encompassing feeling of being organized together as a big team?
Yes, perhaps all of this is true! Yet, all of this is aimed at one key goal and all
of these goals will be fulfilled ONLY if each and every ATMAite is
empowered with the abilities, skills and attitudes to succeed at the career
each has chosen!

Right at the inception this vision was incorporated into the design of our
website. A powerful JOBS-BOARD exists where not only our members can
build their fully visible CVs they can also build additional CVs with
anonymous values in key fields such as name of current employer etc. etc.
All of us must TORTURE TEST this tool, now and as many problems or
errors or deficiencies are found must be noted and written to
webmaster@atma-india.net. Have patience while you critique the
deficiencies! Dont stop at just pointing out what is lacking, but have the
tenacity to stretch your thinking into proposing a solution. Difference
between criticism and leadership is that leaders identify what is missing
and figure out how to fix it! Own ATMA now! Some few of us at the fight
are getting bored of being its solitary owners.
OCTOBER 2012

Those amongst the ATMA membership who have a vision, a strategic string
of thoughts in place, who have had their brush with changing several jobs
and who would know how the inner world of HRM might be working, please
polish your shoes and step forward your best foot!
I have to build on an EMERGENCY basis a POWERFUL, INDEPENDENT &
FUNCTIONAL Career Development Committee
Why cant we host some webinars inviting Social Media Gurus who can teach
ATMA members how to promote themselves in a dignified way on Twitter,
Facebook, LinkedIn, Klout, Google Plus? Why cant we bring in some Partner of
a global recruitment firm to teach our younger ATMA members how to write
good CVs and cover letters and how to network to be on the frontline for
discovering the best jobs?
Go take a look at the Career Development Centre on the website of our parent
organization the http://www.mta.org
I need a team of strong-willed, independent minded mad men and women
who have a solitary goal: beat Sushil Kedia & his early team & create an
admirable Career Development Centre which is at least at par with the MTA
and perhaps way more!!
Get going ATMA! Long way to go and yes the world must yield the place to us
the Technical Analysts that we deserve!
Does ATMA belong to you? If not, who does it belong to?!
Then within the Job-board is a feature for incorporating the profiles of your
companies with a nice write up and logo you can make yourself a featured
employer on this powerful tool that this mad 43 year old man could envision
even at inception when he had no ideas of how a website is built. If I can
stretch my brain and body so far, what stops you mightier younger, energetic
smarter folks to beat me blue and black?

ATMASPHERE | 29

THE MIND OF WALL STREET - BOOK

The book begins with the larger age old theme Good times breed laxity,

REVIEW

about bad times. The psychological factor - an upbeat market that leaves the

Laxity breeds unreliable numbers and ultimately unreliable numbers bring

public unmindful of bad news, whereas in a down market, no one trusts good

REVIEWED BY SOMNATH M

news, has been proved again thru the series of events from 1960s from
1990s.

A legendary financier on the perils of greed

Behavioural finance is a concept that reasons the market behaviour when it

and the mysteries of the market

deviates from fundamentals, technical or economics. Fundamentals are

By LEON LEVY with EUGENE LINDEN

sometimes no so fundamental after all, has been precisely highlighted thru


the M1 indicator of Fed.

Behaviour is patterned. Beginning with this

Levys thought is that market is not efficient, for he says for an astute

premise, a veteran of over fifty years on Wall

investor, the worst situation is an efficient market rather the factors that

Street, Leon Levy has pioneered many of the

creates opportunities are emotions such as fear, changes that creates

innovations and investment instruments that

unknowns. He justifies his thought thru the Public Utilities Holding Company

are familiar parts of todays financial world.

Act of Franklin D Roosevelt, which brings the change in utilities holding

The description of events, start of speculative

companies.

frenzy firms, their explosive growth and corrosive slump gives good insights

At one point, Leon explains the caveat of overreachers. Evil doers start out

of the Wall Street players, their mind and psychology. In many ways the

honestly, but as their companies grew, the markets demanded ever more

1906s were a dress rehearsal for the late 1990s. The explanation of the

growth, and they all discovered one fundamental truth: sustaining

events that Leon traversed four decades from 1960s featured the

performance over time is very hard. Faced with a choice of disappointing

devaluation of the dollar, the oil embargo, commodity inflation that flared

their shareholders they cheated. He goes on listing few scale of corruption

the better part of the decade (1960 -1970), the rise and fall of junk bonds,

in America.

the great bubble mania of 1990s has made precisely with lively experience.
When investing normally an investor look into what to buy and when to buy,
but beyond that there is an importance of understanding the time frame of
30 | ATMASPHERE

OCTOBER 2012

an investment, Leon crafts with his experience with Milwaukee Road. The

do markets. Investors get swept up in moods, and so do markets. And this

interplay of thoughts and feelings that causes someone to buy or sell at any

interplay creates investment opportunities.

particular moment may involve factors far afield from the health of the
company or the state of the market.

Leon was neither a fundamental analyst nor a technical analyst, but he


traversed the fifty plus years in Wall Street successfully during which he

When analysts sit down to analyze a stock, sector, or market, however, they

spent most of his time as a partner of Oppenhiemer funds, and then with

tend to look upon markets as rational and efficient. The dangerous outlook

Odyssey Partners. Thru his experience of ups and downs, he highlights the

on economic health based on the rational and efficient market behaviour is

vital role of psychology in markets.

explained thru the short case study thru the collapse of LCTM (Long Term
Capital Management).

Thoughts of Mind (driven by greed and fear) differ from one generation to
other generation. In each generation the role of psychology in understanding

The change in dynamics from old economies to new economies rather than

the market will have its own uniqueness and may or may not be repeated in

heralding the era, the shift in attitude toward risk exposed a neglected but

the next generation. But knowing how the fore-runners were and how they

hugely important attribute of all markets, past, present and future: the role

have benefitted from understanding the of role of psychology during their

of psychology. The shift in attitude toward risk exposed has explained thru

times will definitely a good experience of learning, If you too feel so the same

the Leveraged Buy Out (LBO), its success and failures thru emotions is a good

way then this is a book that one must read.

highlight in the book.


In the last part of the book Leon shares his experience in trading with Euro
dollar, how he benefited by betting on the economy rather than on the
stocks and a brief on Thailand crisis.

Somnath M is an Affiliate Member of MTA and ATMA.


Having worked earlier with Kotak Mahindra, HDFC and
ICICI, he is currently working as a Technical Analyst with

If human nature makes markets inefficient and moody, and the caribou
factor defeats the most exquisite analysis of financiers, it is natural to ask

India Infoline Premia. He has an experience of 7 years


into the stock market.

how anyone might hope to make money in the markets. Leon answers to his
this question as Why should the market be any more perfect than the very
human emotions and calculations that drive it? Investors overreact, and so

OCTOBER 2012

ATMASPHERE | 31

Women in Technical Analysis


A Necessary Initiative:

Are markets a mans world? Is Technical


Analysis a mans domain? Answer is clearly no,
since markets as the final masters are the
ultimate level playing field. Yet, for various
legacy reasons markets have continued to be
dominated by men, so far.

Increasingly a larger and larger percentage of women are excelling at markets


and we do know many good Technicians such as Connie Brown, Louise
Yamada, Katie Stockton to just name a few have made their mark on the
globe! Its time for India to discover its own Ms. Browne, Ms. Yamada & Ms.
Stockton!
The goal clearly is also to include any number of women Technical Analysts
you know and who are not yet ATMA members, to bring to the main-stream.
Speak to them, let them know the exceptional work ATMA has been
producing and get them to become members so that there are at least a 100
women members of ATMA in the very near future to take your representation
to at least 20% and hopefully as numbers grow the spiral effect will someday
take you closer to 35% or even more than 50%!
Of the 500+ members of ATMA active at this point, only 24 are women. That's
an abysmal number. The truth is a far bigger percentage of women are
technical analysts than the percentage women members in ATMA! Why? I
dont have any good answer, but would guess that networking, professional
link building and such other extracurricular activities havent been easier for
women.
Here is a special initiative for You - the women Technical Analysts of India,
way more organized, crisper and resourceful than what has been done so far
for the general membership, at large.
32 | ATMASPHERE
We've have instituted a separate committee altogether titled, "Women in
Technical Analysis". If you can think of a better name that may be turned

We've have instituted a separate committee


altogether titled, "Women in Technical
Analysis". If you can think of a better name that
may be turned easily into a good &
RESPECTABLE acronym using the first letters of
each word, please do suggest.
ATMA will fund an extra monthly meeting on any good educational topic
EACH Month for AT LEAST the next 12 months under the Women in Technical
Analysis series where the speaker, the delegates and the volunteers will all be
women. A well appointed 80 seater conference hall with all modern business
amenities in perhaps one of the most secure & safe buildings of Mumbai
right at a well known Commodity Exchange is being worked out as a
permanent venue!
This would make Mumbai the only city in the world of Technical Analysis
where there would now regularly be TWO monthly meetings, it would also be
a first of its kind anywhere in the world, Educational Monthly Meetings only
for women!
So here is a special committee to be comprised
ONLY of women, FOR the women and BY the
Women at the ATMA. Your mandate as a
Committee is way larger: To represent, ascertain,
decipher and then achieve the goals for Women in
Technical Analysis.
"I am surprised & IMPRESSED that you have
critical mass to hold a women-only meeting! Its
a wonderful thing if you can pull it off. Id love
to speak to the group someday"
- Katie Stockton , Vice President, MTA
Oh the Women Technical Analysts of India, write
to us for membership enquiries on:
membership@atma-india.net
and
for
volunteering on volunteer@atma-india.net!

Soliciting Women
Volunteers:
While a formal new fully
empowered Committee
is being built as Women
in Technical Analysis
you are welcome to join
all other Committees
too!
OCTOBER 2012

FORTHCOMING EVENTS
6th ATMA PUNE MEETING

26th ATMA MUMBAI MEETING


Date: 24th November, 2012

Date: 25th November, 2012

Venue: M. C. Ghia Hall, Mumbai

Venue: B.V. Rao Conference Hall at

Timing: 1.45 pm to 6.00 pm

Deccan Gymkhana Club, Pune, Maharashtra

Presenter: Mr. Sushil Kedia (B.Com. Grad. CWA, PGDBM, FRM,


CAIA, CMT) - Founder President of ATMA

Timing: 1.45 pm to 5.45 pm

Topic of study: Art of War & Technical Analysis

Presenter: Vivek Marne, a qualified Chartered Accountant.


He is passionate about Technical Analysis, and a self taught
Elliott Wave Technician. He currently runs his own firm.

Focus of the Meeting:

War is the highest embodiment of human conflict


Every decision is a resolution of some conflict
Principles of warfare are applied to all business
achievement processes
As Technical Analysts, whether we trade or we invest,
there are meals for a lifetime in studying parallels
between war and our work
Sun Tzus Art of War is on the top-10, must read list of
books of Mr. Kedia and he will likely take the gathered
through a delectable journey of numbers, charts,
philosophy, sociology, mathematics, anthropology,
physics and all of it centered around how knowing the
Art of War improves each piece of work we do as
Technical Analysts.

OCTOBER 2012

ATMA MUMBAI MEETING

Topic of study: Trading Systems and Money Management


Focus of the Meeting:

Segregating trading and analysis

Trading system & its pre-requisites

Overview of one of the popular Trading System-Turtle Trading System

Key money management rules

Back-testing data and quantifying risks

ATMA MUMBAI MEETING

ATMASPHERE | 33

PAST EVENTS UPDATE


7th ATMA JAIPUR MEETING

th

16 ATMA DELHI MEETING


Date: 29th September, 2012
Held at: India International Centre
(Annexe Building), New Delhi
Attended By: 30 Participants

Date: 29th September, 2012


Held at: Bhagawan Mahaveer Jain College,
Jaipur, Rajasthan
Attended By: 10 Participants
Topic of study: Dow Theory & Its applications on Trend Analysis

Topic of study: Learn Long/Short Trading Using Technical

Presented by - Mr. Kunal Saraogi, CEO of EquityRush, Fund

Presented by Mr. Rajat Gupta, a member of MTA and ATMA.


He is pursuing CMT and is an independent market technical
analyst

Manager and renowned market commentator

Points of study in brief:

Points of study in brief:

How to analyze the Trend in all time frame

Analysis

Rationale for a long and short strategy

Stock selection mechanisms

Identifying outperformance

Fine tuning strategy

Does timing still have a role?

Role of beta

Use technical tools in combination with fundamental tools to


determine direction of trend
Use technical tools to spot changes in direction of price
trends

Identify new and existing trends

34 | ATMASPHERE

OCTOBER 2012

PAST EVENTS UPDATE (CONTD)


25th ATMA MUMBAI MEETING

2nd ATMA AHMEDABAD MEETING

Date: 6th October, 2012

Date: 13th October, 2012

Held at: BSE Convention Hall, Dalal Street, Fort,

Held at: AMA Seminar Hall, Ahmedabad

Mumbai, Maharashtra

Gujarat

Attended By: 350 Participants

Attended By: 19 Participants

Topic of study: Technical Research at Fidelity: Behind the

Topic of study: Swing Trading & Elliot Wave

Scenes

Presented by: Mr. Nimish Bhatt, who holds 20 years experience

Presented by - Mr. David Keller, CMT, Managing Director of

into stock trading & investing. He handles client portfolio from

Research for Fidelity Investments in Boston. He is currently

past 10 years. He also provides technical support for query

serving as President of the Market Technicians Association and a

building in Metastock, Amibroker & E-signal Advanced GET.

Director of the MTA Educational Foundation.


Points of study in brief:

Technical Indicators

Combining Technical and Fundamental Analysis

OCTOBER 2012

Points of study in brief:

Self Introduction

Introduction to Elliot wave

Introduction to Swing Trading

Combining Swing Trading with Elliot Wave Patterns

Visualization

ATMASPHERE | 35

PAST EVENTS UPDATE (CONTD...)


CMT REFRESHER COURSE WEBINARS

8th ATMA BENGALURU MEETING

Held on: 16th October, 2012

Date: 25th October, 2012

Attended By:

Held at: Sri Bhagawan Mahavir Jain College,

Level 1 - 42 Candidates

Bengaluru, Karnataka

Level 2 - 40 Candidates
Level 3 - 18 Candidates

Attended by : 40 Participants
Topic of study: Technical Analysis using Candlesticks

Presented by Mr. Vishal B Malkan, CMT, a Trading Coach and


Founder of Malkansview - an Institute that provides training in
Technical Analysis & Behavioral Finance
Focus of the Webinars -

1. Review of significant topics from recommended readings.


2. Clarification of doubts about the curriculum.
3. Guidance on writing the exams papers of each level.

Presented By: Mr. Vishal B Malkan, CMT, a Trading Coach and


Founder of Malkansview - an Institute that provides training in
Technical Analysis & Behavioral Finance
Points of study in brief:

Rare but powerful Candle Patterns

Candlesticks + ADX A highly influential combination

Blended Candle and Bull & Bear Traps

Momentum trading with Candlestick Patterns

4. Discussion of ideas, concerns, prep tips, memory aides and


other valuable tools.

36 | ATMASPHERE

OCTOBER 2012

PAST EVENTS UPDATE (CONTD...)


5TH ATMA PUNE MEETING
Date: 28th October, 2012
Held at: B.V. Rao Conference Hall,
Deccan Gymkhana Club, Pune, Maharashtra
Attended by : 30 Participants
Topic of study: Trading the markets using Point and Figure
Charts
Presented By: Mr. Prashant Shah, CMT, CFT and a member
of IFTA. Prashant is working as Associate Vice President with
IIFL in Pune.
Points of study in brief:

Introduction of Point and Figure Charting methods


Characteristics and Construction of Point and Figure
charts
Understanding Point and Figure patterns and counts
Practical use of patterns and price projections
Understanding Point and Figure set ups in combination
with line and candlestick charts
Techniques of Developing trading setups using Point and
Figure methods

OCTOBER 2012

ATMASPHERE | 37

38 | ATMASPHERE

OCTOBER 2012

Benefits of Membership with the ATMA

Apply for your ATMA Membership Today!


OCTOBER 2012

ATMASPHERE | 39

40 | ATMASPHERE

OCTOBER 2012