CONTENTS

 Letter from the President - Page 3

 Editor’s 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 world’s 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 world’s 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 re-
design 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

EDITOR’S NOTE
This month’s 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 world’s 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
BY GUNJAN DUAA
The most widely used Quote in the financial markets all around the world is
“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
can be found”
Most profits (and losses) are generated when markets are trending.
Japanese Candlestick Technique is widely used by many traders to help them
locate trend amid erratic market volatility. Heikin-Ashi is a Japanese
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.
The Heikin-Ashi technique means the “Average Bar” in Japanese used in
conjunction with candlestick charts to improve the isolation of trends and to
predict future prices.
Heiken means average and ashi means pace, taken together Heikin ashi
represents the average pace of prices. Heikin-Ashi candlesticks are not used
like normal candlesticks. Instead of finding reversals on a single or a
confluence basis we use them for identifying trending periods, potential
reversal points and classic technical analysis patterns.
OCTOBER 2012
Calculation of Modified Bars.
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
modified formula:
1. The Heikin-Ashi Close is simply an average of the open, high, low and close
for the current period.
HA-Close = (Open(0) + High(0) + Low(0) + Close(0)) / 4
2. The Heikin-Ashi Open is the average of the prior Heikin-Ashi candlestick
open plus the close of the prior Heikin-Ashi candlestick.
HA-Open = (HA-Open(-1) + HA-Close(-1)) / 2
3. The Heikin-Ashi High is the maximum of three data points: the current
period's high, the current Heikin-Ashi candlestick open or the current Heikin-
Ashi candlestick close.
HA-High = Maximum of the High(0), HA-Open(0) or HA-Close(0)
4. The Heikin-Ashi low is the minimum of three data points: the current
period's low, the current Heikin-Ashi candlestick open or the current Heikin-
Ashi candlestick close.
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

that the candle with no shadows have a strong trend. The candles with no
When the candles are green one can add long positions and should not go
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

buyers are not sure.

Red Colored candles which have no higher shadows indicate a strong
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
Want to feature in ATMASphere which is
Heikin-Ashi for finding the trades, uptrend and downtrend can be know by perhaps one of the largest circulated Technical
the candles without shadow but when the candles are Doji or have more Analysis Newsletters of its kind, in the whole
shadow space than the body there if we find classical patterns like Triangles,
world? Here is your chance.
flags or channels, those can be traded on a price breakout above the highest
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
Block a similar advertising space for 6 months at 30,000
use for trend determination.
INR and for 12 months at just 50,000 INR. A Full Page
Advertisement, which is twice this space, can be
obtained for 6 months & 12 months at 60,000 INR and
Gunjan Duaa, a graduate in commerce and a CMT, is a
100,000 INR respectively.
proprietary trader. He develops his own trading systems
combining Technical analysis, Quantitative analysis and
Behavioral Finance techniques.
For More Details:
He writes for many websites and takes active interest in
teaching people about Technical analysis and behavior of crowds at
Contact editor@atma-india.net or
different market scenarios. Call up on +91-22-2272-2862

OCTOBER 2012 ATMASPHERE | 7

 same floor and right next door to the Trading Hall! It was indeed a
TECHNICAL RESEARCH AT FIDELITY:
moment of deep gratification.

BEHIND THE SCENES 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’ research at Fidelity, showing across some of the photographs of the
th
Forum and the Market Technicians Association, Inc organised an event on 6 Fidelity chart room. He discussed the kinds of indicators and charts used
October, 2012 at the BSE Trading Hall. 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
This event would be remembered for decades to come, not only in the
making a successful trader.
history of ATMA but also in that of the Technical Analysis community. Mr.
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
for Fidelity Investments in Boston. He manages the
the process of building the world’s first E-library on Technical Analysis
Technical Analysis team at Fidelity Management and
which has been named “The R N Elliott ATMA E-library”. The same was
Research, as well as the legendary Fidelity Chart Room.
solemnised through an E-inauguration by Robert Prechter. Mr Prechter
He is currently serving as President of the Market
was present live from Chicago to address the gathering, beaming on the
Technicians Association and a Director of the MTA
jumbo screens of the BSE Trading Hall. The euphoria amongst the crowd
Educational Foundation.
was evident.
David Keller, CMT was formerly a Technical Analysis Application Specialist
2. Inauguration of the New ATMA Office – The Association, less than two
with Bloomberg L.P. in New York, and was a regular contributor to
years young, proudly inaugurated its new office - a bigger, better and
Bloomberg Markets magazine. He is the editor of the book "Breakthroughs
more efficient premises - right at the BSE Building itself, right on the
8 | ATMASPHERE 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
; largest and oldest vendor of E-libraries has
| considered positively all our pitching and
, be there smallest customer today agreed to
||
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.
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 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
-10 | ATMASPHERE
both e-books as well as audio books.
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,
discussing and despite the fact that we may
mail over a contract to us!
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.
The work ahead, for all of us.. Write out your lists
Email to TEAM
Make out a list of the top 20 books you wish to see Let team compile
on this library and if you wish to make the list of top Team draws map
20 books you have read as a Technical Analyst, trader Evolutionary Goal
or a markets person make that too! Make a list of top
authors if full names of books don’t come to mind Charity begins at
immediately. Make your wish lists! Mail them to home and do the
librarywishes@atma-india.net & they will now! Let
automatically be forwarded to all volunteers working your opinion, ideas,
with me and Gunjan Dua on this DREAM PROJECT. 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
architects of the world's first e-library on Technical Analysis. OCTOBER 2012
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
become active. If these levels are getting crossed, or preferably, if the market
opens outside these levels, then it indicates upside and downside breakout
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
lower side (breakdown). On the next day, 24th August the fall continued and
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
(784.90) but above L5 (772.50) for the day, warranting profit booking, which
was any way expected as L3 (791.10) was reached for the day.
Minute Chart of Reliance Industries Futures (August 2012)
If we put a glance at the minute chart of RIL (Futures) for the two days, the
intraday movement of the contract becomes clear.
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
booking was required only when it was followed by a breakout (crossing L5
or H5 levels) on the same day. This means, the trader would have booked
profit first from H3 to L3 (or vice versa) then taken a counter position, which
OCTOBER 2012
would stop out at H4 or L4, still keeping the trader in profits for the day if
both the positions are religiously taken on Camarilla calculations.
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 day’s high, low and close. Trader can place six
orders in all-
1. Sell at or slightly below H3 – This level would initiate short or book
profit in long.
2. Buy above H4 for stop loss in short positions created below H3.
3. Long above H5 for breakout longs.
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.
If a trader can be present near the trading terminal, then only 2,3,4 and 5 can
be placed. Order 2 should be deleted if first 3 is triggered followed by 4.
Similarly order 5 should be deleted if 4 is hit first followed by 3. It was
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


ATMA Social Awards
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 that’s exactly what is
happening with the ATMA Social
Rewards...
ATMA Social Rewards
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....
OCTOBER 2012
Competition is good…
More so when one is competing in
a win win enterprise such as the
ATMA Social Rewards.
You can notice the points earned
by you and others in the
Leaderboard. You can earn points
every day.
Growing Catalogue...
Redeeming of points as per the
catalogue to claim valuable gifts
and prizes is simple. Try it, today.
Wide variety of useful materials to win, any day, any time...
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
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.
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
not been inviting friends and using the Personal Messaging feature there....
oh I see, you don’t see how the points on MyATMA can be encashed....
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,
which only our members can participate in. Oh yes, the karma points on the
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.

Trading Strategy Performance Summary Report
Gap Trading Strategies - II Trading signal as per
Total net profit 6017.42 SHORT
strategy
Definitions Gross profit 37,725 Gross loss -31,708
Outlier adjusted profit
1) A “Full Gap Up” is defined as one when the opening price of a day is Profit factor 1.19 1.16
factor
higher than the previous day’s high price. Total number of trades 663 Percept profitable 52
Number of losing
2) A “Gap Up” is one when a day’s opening price is higher than the previous Number of winning trades 344 319
trades
day’s close, but not higher than the previous day’s high. Average profit per
Average profit per trade 9.08 0.11
trade %
3) A “Full Gap Down” is defined as one when the opening price of a day is
Median trade -2.91 Median trade % -0.04
lower than the previous day’s low price.
Average winning trade 109.67 Average losing trade -99.4
4) A “Gap Down ” is one when a day’s opening price is lower than the Average winning trade % 1.1 Avg losing trade % -0.96
previous day’s close, but not lower than the previous day’s low. Largest winning trade 918.72 Largest losing trade -804.82
Largest winning trade % 8.04 Largest losing trade % -5.97
After examining the plain gaps and their strategy performance, in this issue Ratio average win/ Ratio average win/
1.14 1.14
I’ll consider the prior day’s closing direction to build few trading strategies average loss average loss %
Max consecutive
and examine how they performed historically. Max consecutive winners 11 9
losers
Rs. -
Max drawdown Max drawdown % -16
Strategy 5a: Enter at Open upon a Full Gap Up open and exit at Close, after 1,12,466
the previous day’s close is up Rs.
Initial Account Return on Account % 60.17
10,00,000
Trading strategy rules Pessimistic Rate of
Number of years analysed 13 22.08
1) Sensex opens with a “Full gap up open”, Open[0]>High[1] & Return %
2) Previous trading day’s close is up , Close[1]>Close[2] Percentage winning years 54% CAGR % 3.76
3) Entry at Open price Luck Factor 7.32 Recovery Factor 5.35
4) Exit at Close price same day Sharpe Ratio 0.32 T-Test -1.91
5) Profitable trading action based on the historical backtest copyright http://stocksiq.in
performance - SHORT

16 | ATMASPHERE OCTOBER 2012

PS: gross profit /loss, net profit is calculated on Sensex points based, whereas Trading Strategy Performance Summary Report
max drawdown is calculated on the assumption of buying 100 units of Trading signal as per
Total net profit 159.42 SHORT
strategy
Sensex. Gross profit 6,505 Gross loss -6,345
Outlier adjusted profit
Conclusion: the strategy doesn’t have a trading edge, as highlighted in bold Profit factor 1.03 0.95
factor
by the Outlier adjusted profit factor and other key metrics in a trading Total number of trades 88 Percent profitable 51
Number of winning trades 45 Number of losing trades 43
performance summary report.
Average profit per trade 1.81 Average profit per trade % 0.09
Median trade -0.65 Median trade % -0.02
Strategy 5b: Enter at Open upon a Full Gap Up open and exit at Close, after
-
Average winning trade 144.54 Average losing trade
the previous day’s close is down 147.56
Average winning trade % 1.39 Average losing trade % -1.27
Trading strategy rules
-
1) Sensex opens with a “Full gap up open”, Open[0]>High[1] & Largest winning trade 478.11 Largest losing trade
440.42
2) Previous trading day’s close is down , Close[1]<Close[2] Largest winning trade % 5.08 Largest losing trade % -4.24
Ratio average win/ average Ratio average win/
3) Entry at Open price 1.09 1.09
loss average loss %
4) Exit at Close price same day
Max consecutive winners 9 Max consecutive losers 7
5) Profitable trading action based on the historical backtest
Rs. -
Max drawdown Max drawdown % -15.58
performance – SHORT 1,51,505
Rs.
Initial Account Return on Account % 1.59
Given on the next page is the trading strategy performance summary, since 10,00,000
Pessimistic Rate of Return
1st Jan 2000 till 16th Oct 2012. Number of years analyzed 13
%
-17.78
Percentage winning years 46% CAGR % 0.12
Luck Factor 3.65 Recovery Factor 0.11
Sharpe Ratio 0.08 T-Test -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 up’s 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
 …Continued from previous page
Strategy 6a: Enter at Open upon a Full Gap down Open and exit at Close,
after the previous day’s close is up Ratio average win/ Ratio average win/
0.87 0.94
average loss average loss %
Trading strategy rules
1) Sensex opens with a “Full gap down open”, Open[0]<Low[1] & Max consecutive winners 5 Max consecutive losers 4
2) Previous trading day’s close is up , Close[1]>Close[2] Rs. -
Max drawdown Max drawdown % -7.07
87,033
3) Entry at Open price Rs.
Initial Account Return on Account % 22.68
10,00,000
4) Exit at Close price same day
Pessimistic Rate of
Number of years analysed 13 6.2
5) Profitable trading action based on the historical backtest Return %
Percentage winning years 62% CAGR % 1.61
performance - SHORT
Luck Factor 3.48 Recovery Factor 2.61
Below is the trading strategy performance summary, since 1st Jan 2000 till Sharpe Ratio 0.28 T-Test -0.8
16th Oct 2012. copyright http://stocksiq.in

Trading Strategy Performance Summary Report
Total net profit 2267.81
Gross profit
Profit factor
Total number of trades
Number of winning trades
Average profit per trade
Median trade
Average winning trade
Average winning trade %
Largest winning trade
Largest winning trade %
Strategy 6b: Enter at Open upon a Full Gap down Open and exit at Close,
Trading signal as per
SHORT after the previous day’s close is down
strategy
6,452 Gross loss -4,184 Trading strategy rules
Outlier adjusted profit
1.54 1.42 1) Sensex opens with a “Full gap down open”, Open[0]<Low[1] &
factor
82 Percept profitable 57 2) Previous trading day’s close is down , Close[1]<Close[2]
47 Number of losing trades 35
Average profit per trade 3) Entry at Open price
27.66 0.15
% 4) Exit at Close price same day
-15.6 Median trade % -0.31
- 5) Profitable trading action based on the historical backtest
137.27 Average losing trade
119.53 performance – LONG
1.27 Average losing trade % -1.35
-
517.44 Largest losing trade
592.43 Below is the trading strategy performance summary, since 1st Jan 2000 till
4.4 Largest losing trade % -4.46
16th Oct 2012.
Continued next page…

18 | ATMASPHERE OCTOBER 2012

 Trading Strategy Performance Summary Report
Strategy 7a: Enter at Open upon a Gap Up and exit at Close after the
Trading signal as per
Total net profit 400.22 LONG
strategy previous day’s close is up
Gross profit 18,634 Gross loss -18,234
Trading strategy rules
Outlier adjusted profit
Profit factor 1.02 0.98
factor 1) Sensex opens with a “gap up open”
Total number of trades 286 Percent profitable 51
Open[0]>Close[1]&Open[0]<High[1]
Number of winning trades 146 Number of losing trades 140
Average profit per trade 2) Previous trading day’s close is up , Close[1]>Close[2]
Average profit per trade 1.4 0.07
% 3) Entry at Open price
Median trade 5.33 Median trade % 0.09
Average winning trade 127.63 Average losing trade -130.24 4) Exit at Close price same day
Average winning trade % 1.38 Average losing trade % -1.29 5) Profitable trading action based on the historical backtest
-
Largest winning trade 682.25 Largest losing trade
1314.22 performance – SHORT
Largest winning trade % 5.83 Largest losing trade % -10.27 Below is the trading strategy performance summary, since 1st Jan 2006 till
Ratio average win/ Ratio average win/
average loss
0.52
average loss %
1.07 21st Sep 2012.
Trading Strategy Performance Summary Report
Max consecutive winners 11 Max consecutive losers 6 Trading signal as per
Total net profit 1525.61 SHORT
strategy
Rs. -
Max drawdown Max drawdown % -25.7 -
3,02,588 Gross profit 20,251 Gross loss
18,725
Rs.
Initial Account Return on Account % 4 Outlier adjusted profit
10,00,000 Profit factor 1.08 1.04
factor
Pessimistic Rate of
Number of years analysed 13 -26.83 Total number of trades 290 Percent profitable 50
Return %
Percentage winning years 46% CAGR % 0.31 Number of winning
145 Number of losing trades 145
trades
Luck Factor 4.23 Recovery Factor 0.13
Average profit per trade
Sharpe Ratio 0.17 T-Test 0.67 Average profit per trade 5.26 0.03
%
copyright http://stocksiq.in Median trade -0.05 Median trade % 0
Conclusion: Full gap down openings along with previous trading day’s -
Average winning trade 139.66 Average losing trade
129.14
direction of close do not provide any significant trading edge either to go Average winning trade
0.91 Average losing trade % -0.85
%
long or to short as shown by the above performance summary reports.
Continued next page…

OCTOBER 2012 ATMASPHERE | 19

 …Continued from previous page
Below is the trading strategy performance summary, since 1st Jan 2006 till
-
Largest winning trade 699.24 Largest losing trade 21st Sep 2012.
507.15
Largest winning trade % 3.9 Largest losing trade % -5.13 Trading Strategy Performance Summary Report
Ratio average win/ Ratio average win/ Trading signal as per
1.38 1.06 Total net profit 7448.58 SHORT
average loss average loss % strategy
-
Gross profit 39,652 Gross loss
Max consecutive 32,204
9 Max consecutive losers 7 Outlier adjusted profit
winners Profit factor 1.23 1.21
Rs. - factor
Max drawdown Max drawdown % -22.01 Total number of trades 423 Percent profitable 51
1,04,451
Rs. Number of winning trades 216 Number of losing trades 207
Initial Account Return on Account % 15.26
10,00,000 Average profit per trade
Average profit per trade 17.61 0.09
Number of years Pessimistic Rate of Return %
7 -17.11
analysed % Median trade -6.07 Median trade % -0.04
Percentage winning -
71% CAGR % 2.11 Average winning trade 183.57 Average losing trade
years 155.57
Luck Factor 4.3 Recovery Factor 1.46 Average winning trade % 1.19 Average losing trade % -1.06
Sharpe Ratio 0.16 T-Test -0.39 -
Largest winning trade 829.07 Largest losing trade
857.66
copyright http://stocksiq.in Largest winning trade % 7.32 Largest losing trade % -4.9
Ratio average win/ Ratio average win/
Strategy 7b: Enter at Open upon a Gap Up and exit at Close after the 0.97 1.12
average loss average loss %
previous day’s close is down Max consecutive winners 7 Max consecutive losers 9
Rs. -
Trading strategy rules Max drawdown Max drawdown % -35.91
1,72,841
1) Sensex opens with a “gap up open” Rs.
Initial Account Return on Account % 74.49
10,00,000
Open[0]>Close[1]&Open[0]<High[1]
Pessimistic Rate of Return
Number of years analysed 7 25.12
2) Previous trading day’s close is down , Close[1]<Close[2] %
Percentage winning years 71% CAGR % 8.55
3) Entry at Open price
Luck Factor 6.13 Recovery Factor 4.31
4) Exit at Close price same day Sharpe Ratio 0.23 T-Test -1.22
5) Profitable trading action based on the historical backtest copyright http://stocksiq.in

performance – SHORT

20 | ATMASPHERE OCTOBER 2012

 Trading Strategy Performance Summary Report
Conclusion: Plain Gap up openings even after considering the previous
Trading signal as per
Total net profit 5766.04 SHORT
trading day’s direction of close do not provide any significant trading edge strategy
-
either to go long or to short at open. Gross profit 17,494 Gross loss
11,728
Outlier adjusted profit
Profit factor 1.49 1.43
factor
Strategy 8a: Enter at Open upon a Gap down and exit at Close after the
Total number of trades 202 Percent profitable 55
previous day’s close is up Number of winning
110 Number of losing trades 92
trades
Trading strategy rules Average profit per trade
Average profit per trade 28.54 0.19
1) Sensex opens with a “gap down open” %
Median trade -18.36 Median trade % -0.11
Open[0]<Close[1]&Open[0]>Low[1]
-
Average winning trade 159.03 Average losing trade
2) Previous trading day’s close is up , Close[1]>Close[2] 127.48
Average winning trade
3) Entry at Open price 1.07 Average losing trade % -0.88
%
4) Exit at Close price same day -
Largest winning trade 772.55 Largest losing trade
574.08
5) Profitable trading action based on the historical backtest Largest winning trade % 6.35 Largest losing trade % -4.44
performance – SHORT Ratio average win/ Ratio average win/
1.35 1.22
average loss average loss %
Given in the next page is the trading strategy performance summary, since 1st
Jan 2006 till 21st Sep 2012. Max consecutive
9 Max consecutive losers 5
winners
Rs. -
Max drawdown Max drawdown % -9.47
96,099
Rs.
Initial Account Return on Account % 57.66
10,00,000
Number of years Pessimistic Rate of Return
7 28.75
analysed %
Percentage winning
0% CAGR % 6.94
years
Luck Factor 5.92 Recovery Factor 6
Sharpe Ratio 0.89 T-Test -1.91
copyright http://stocksiq.in

OCTOBER 2012 ATMASPHERE | 21

 …Continued from previous page
Strategy 8b: Enter at Open upon a Gap down and exit at Close after the
Average winning trade
previous day’s close is down 1.19 Average losing trade % -1.43
%
Trading strategy rules Largest winning trade 796.43 Largest losing trade -878
Largest winning trade % 4.57 Largest losing trade % -5.82
1) Sensex opens with a “gap up open” Ratio average win/ Ratio average win/
0.91 0.83
Open[0]<Close[1]&Open[0]>Low[1] average loss average loss %

2) Previous trading day’s close is down , Close[1]<Close[2] Max consecutive

9 Max consecutive losers 4
3) Entry at Open price winners
Rs. -
4) Exit at Close price same day Max drawdown Max drawdown % -19.8
1,70,741
Rs.
5) Profitable trading action based on the historical backtest Initial Account Return on Account % 24.85
10,00,000
performance – SHORT Number of years Pessimistic Rate of Return
7 -7.61
analysed %
Below is the trading strategy performance summary, since 1st Jan 2006 till
Percentage winning
29% CAGR % 3.37
21st Sep 2012. years
Luck Factor 3.86 Recovery Factor 1.46
Sharpe Ratio 0.21 T-Test -0.53
Trading Strategy Performance Summary Report
copyright http://stocksiq.in
Trading signal as per
Total net profit 2484.75 SHORT
strategy
-
Gross profit 15,315 Gross loss Conclusion: strategy 8a, that is going short at open and covering at close of
12,831
Outlier adjusted profit the trading day, after gap down opening when the previous trading day’s
Profit factor 1.19 1.13
factor
Total number of trades 151 Percent profitable 58 close is up looks better off all the gap trading strategies tested so far, albeit
Number of winning the profit expectation is a mere 0.2, which can cover the impact costs and
87 Number of losing trades 64
trades
Average profit per trade the brokerage costs. Let me present few tweaks by slicing the data with the
Average profit per trade 16.46 0.08
% aid of moving averages in my next article.
Median trade -44.42 Median trade % -0.23
- You can also reach me at kora@stocksiq.in with your queries on the trading
Average winning trade 176.04 Average losing trade
200.48 strategies presented and for any clarifications that you have.
Continued on next page…

22 | ATMASPHERE 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 +91-22-
2272 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. Here’s 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
BY ANDY JORDAN
Futures Spread Trading - How do I find the "right" trades?
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
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
100 or even more possible spreads to follow, so many beginning spread
traders just don't know where to start. In this article I present several ideas
on how to select the right spread trades.
Let's start with spread selection using fundamental research.
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),
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
situation is the main concern for a fundamentals-oriented trader for finding
the "direction" of a trade. A simple method for finding a good spread is by
searching for a market that is supposed to go up, and another related market
that is supposed to go down. But as we discussed in the different causes that
make a spread move (in Part II of this series), inter-market spreads (spreads
OCTOBER 2012
with each leg in a different market) are not the only way to find good
tradable spreads.
A technique often used by spread traders is to trade bull or bear spreads.
A bull spread is a spread in which the long side of the spread is the nearby
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.
A bear spread is simply the opposite: going long the more deferred month,
and going short the nearby month.
The terminology of “bull” and “bear” spreads is derived from the bull and
bear market definitions of the underlying (outright) markets. The idea of a
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
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.
Here’s an example: Let's say that, because of fundamental research
indicating that a drought might move Corn prices higher, a trader decides to
go long Corn, but would like to set up the trading idea with spreads. Because
the trader is bullish on corn, he can select several combinations: Corn Dec.
2012 - Corn March 2013, or Corn Dec. 2012 - Corn July 2013. Both are bull
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
ATMASPHERE | 25
spread in mid-June of 2012. As we can see on the chart, during the past few
months the spread has been trading mainly sideways.
Above is a chart of the spread. On the same day, December 2012 Corn
outright chart looked as follows:
26 | ATMASPHERE
We notice the possible support at around 510 (gray line on the chart) as well
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:
OCTOBER 2012
Both December 2012 Corn and the spread have broken out to the up-side. It
might be time to enter the trade.
After a couple of months, we see the following charts:
OCTOBER 2012
As we can see, both the bull market trade in corn and the bull spread trade
would have worked out just fine. The question then is why would a trader
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 fundamental-
oriented 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:
ATMASPHERE | 27
Long 1 Dec. 2012 Corn, short 2 July 2013 Corn, and long 1 Dec. 2013 Corn. Andy Jordan was born in 1965 in Germany, but is
currently living in the Caribbean. He studied
They often combine the different trading months of a market into one spread
mathematics and business administration in
that reflects more of the demand and supply situation they expect in the
Regensburg and Hagen, and holds a PhD in
future. The ability to do this is just one more reason why a trader may choose
mathematics. Even though Andy has demonstrated in
to trade a spread instead of making the trade in the outrights. But there are
several trading journals that he is able to day trade
even more reasons to choose trading spreads instead of trading the
today's markets, spread trading has always been his favorite. In addition to
outrights:
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 him at andy@tradingeducators.com & visit his website
underlying. Spreads often trend when the outright futures move http://www.tradingeducators.com
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;
 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


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 ATMA’ite 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! Don’t 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
Now, the more important point:
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 can’t 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 can’t 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
REVIEW
REVIEWED BY SOMNATH M
A legendary financier on the perils of greed
and the mysteries of the market
By LEON LEVY with EUGENE LINDEN
Behaviour is patterned. Beginning with this
premise, a veteran of over fifty years on Wall
Street, Leon Levy has pioneered many of the
innovations and investment instruments that
are familiar parts of today’s financial world.
The description of events, start of speculative
frenzy firms, their explosive growth and corrosive slump gives good insights
of the Wall Street players, their mind and psychology. In many ways the
1906s were a dress rehearsal for the late 1990s. The explanation of the
events that Leon traversed four decades from 1960s featured the
devaluation of the dollar, the oil embargo, commodity inflation that flared
the better part of the decade (1960 -1970), the rise and fall of junk bonds,
the great bubble mania of 1990s has made precisely with lively experience.
30 | ATMASPHERE
The book begins with the larger age old theme – Good times breed laxity,
Laxity breeds unreliable numbers and ultimately unreliable numbers bring
about bad times. The psychological factor - an upbeat market that leaves the
public unmindful of bad news, whereas in a down market, no one trusts good
news, has been proved again thru the series of events from 1960s from
1990s.
Behavioural finance is a concept that reasons the market behaviour when it
deviates from fundamentals, technical or economics. Fundamentals are
sometimes no so fundamental after all, has been precisely highlighted thru
the M1 indicator of Fed.
Levy’s thought is that market is not efficient, for he says for an astute
investor, the worst situation is an efficient market rather the factors that
creates opportunities are emotions such as fear, changes that creates
unknowns. He justifies his thought thru the Public Utilities Holding Company
Act of Franklin D Roosevelt, which brings the change in utilities holding
companies.
At one point, Leon explains the caveat of overreachers. Evil doers start out
honestly, but as their companies grew, the markets demanded ever more
growth, and they all discovered one fundamental truth: sustaining
performance over time is very hard. Faced with a choice of disappointing
their shareholders – they cheated. He goes on listing few scale of corruption
in America.
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
OCTOBER 2012
an investment, Leon crafts with his experience with Milwaukee Road. The
interplay of thoughts and feelings that causes someone to buy or sell at any
particular moment may involve factors far afield from the health of the
company or the state of the market.
When analysts sit down to analyze a stock, sector, or market, however, they
tend to look upon markets as rational and efficient. The dangerous outlook
on economic health based on the rational and efficient market behaviour is
explained thru the short case study – thru the collapse of LCTM (Long Term
Capital Management).
The change in dynamics from old economies to new economies – rather than
heralding the era, the shift in attitude toward risk exposed a neglected but
hugely important attribute of all markets, past, present and future: the role
of psychology. The shift in attitude toward risk exposed has explained thru
the Leveraged Buy Out (LBO), its success and failures thru emotions is a good
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.
If human nature makes markets inefficient and moody, and the caribou
factor defeats the most exquisite analysis of financiers, it is natural to ask
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
do markets. Investors get swept up in moods, and so do markets. And this
interplay creates investment opportunities.
Leon was neither a fundamental analyst nor a technical analyst, but he
traversed the fifty plus years in Wall Street successfully during which he
spent most of his time as a partner of Oppenhiemer funds, and then with
Odyssey Partners. Thru his experience of ups and downs, he highlights the
vital role of psychology in markets.
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 market will have its own uniqueness and may or may not be repeated in
the next generation. But knowing how the fore-runners were and how they
have benefitted from understanding the of role of psychology during their
times will definitely a good experience of learning, If you too feel so the same
way then this is a book that one must read.
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
India Infoline – Premia. He has an experience of 7 years
into the stock market.
ATMASPHERE | 31

Women in Technical Analysis
A Necessary Initiative: Are markets a man’s world? Is Technical
Analysis a man’s 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! It’s 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%!
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.

Of the 500+ members of ATMA active at this point, only 24 are women. That's "I am surprised & IMPRESSED that you have Soliciting Women
an abysmal number. The truth is a far bigger percentage of women are critical mass to hold a women-only meeting! It’s Volunteers:
technical analysts than the percentage women members in ATMA! Why? I a wonderful thing if you can pull it off. I’d love
to speak to the group someday" While a formal new fully
don’t have any good answer, but would guess that networking, professional
empowered Committee
link building and such other extracurricular activities haven’t been easier for - Katie Stockton , Vice President, MTA
is being built as “Women
women. Oh the Women Technical Analysts of India, write in Technical Analysis”
to us for membership enquiries on: you are welcome to join
Here is a special initiative for You - the women Technical Analysts of India,
membership@atma-india.net and for all other Committees
way more organized, crisper and resourceful than what has been done so far
volunteering on volunteer@atma-india.net! too!
for the general membership, at large.
32 | ATMASPHERE OCTOBER 2012
FORTHCOMING EVENTS

26th ATMA MUMBAI MEETING 6th ATMA PUNE 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, Timing: 1.45 pm to 5.45 pm
CAIA, CMT) - Founder President of ATMA
Presenter: Vivek Marne, a qualified Chartered Accountant.
Topic of study: Art of War & Technical Analysis He is passionate about Technical Analysis, and a self taught
Elliott Wave Technician. He currently runs his own firm.
Focus of the Meeting:
Topic of study: Trading Systems and Money Management
 War is the highest embodiment of human conflict
 Every decision is a resolution of some conflict Focus of the Meeting:
 Principles of warfare are applied to all business
achievement processes  Segregating trading and analysis
 As Technical Analysts, whether we trade or we invest,
 Trading system & its pre-requisites
there are meals for a lifetime in studying parallels
between war and our work  Overview of one of the popular Trading System--
 Sun Tzu’s Art of War is on the top-10, must read list of Turtle Trading System
books of Mr. Kedia and he will likely take the gathered
through a delectable journey of numbers, charts,  Key money management rules
philosophy, sociology, mathematics, anthropology,  Back-testing data and quantifying risks
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 ATMASPHERE | 33

PAST EVENTS’ UPDATE

th
16 ATMA DELHI MEETING 7th ATMA JAIPUR MEETING

Date: 29th September, 2012 Date: 29th September, 2012

Held at: Bhagawan Mahaveer Jain College,

Held at: India International Centre

Jaipur, Rajasthan
(Annexe Building), New Delhi

Attended By: 10 Participants

Attended By: 30 Participants
Topic of study: Learn Long/Short Trading Using Technical
Analysis
Presented by - Mr. Kunal Saraogi, CEO of EquityRush, Fund
Topic of study: Dow Theory & Its applications on Trend Analysis
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

 Rationale for a long and short strategy  Use technical tools in combination with fundamental tools to
 Stock selection mechanisms determine direction of trend

 Identifying outperformance
 Use technical tools to spot changes in direction of price
 Fine tuning strategy trends
 Does timing still have a role?
 Identify new and existing trends
 Role of beta


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: Swing Trading & Elliot Wave

Topic of study: Technical Research at Fidelity: Behind the
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:

Points of study in brief:  Self Introduction

 Technical Indicators  Introduction to Elliot wave
 Introduction to Swing Trading
 Combining Technical and Fundamental Analysis
 Combining Swing Trading with Elliot Wave Patterns
 Visualization

OCTOBER 2012 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
Attended by : 40 Participants
Level 3 - 18 Candidates
Topic of study: Technical Analysis using Candlesticks
Presented by – Mr. Vishal B Malkan, CMT, a Trading Coach and
Presented By: Mr. Vishal B Malkan, CMT, a Trading Coach and
Founder of ‘Malkansview’ - an Institute that provides training in
Founder of ‘Malkansview’ - an Institute that provides training in
Technical Analysis & Behavioral Finance
Technical Analysis & Behavioral Finance
Focus of the Webinars -
Points of study in brief:

1. Review of significant topics from recommended readings.  Rare but powerful Candle Patterns
 Candlesticks + ADX – A highly influential combination
2. Clarification of doubts about the curriculum.
 Blended Candle and Bull & Bear Traps
3. Guidance on writing the exams papers of each level.
 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