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HEDGE YOUR POSITION; SAFETY BETTER THAN SORRY

From : Prasanna Manvi at 12:51 PM - Jul 01, 2010 ( )

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Dear Members,

Summary of Nifty this July series:

25^th  - 50 Points

28^th  + 60 Points

29^th  - 75 Points

30^th  + 55 Points

1^st  - 70 Points

We can notice severe volatility in the markets due to severe global volatility hence watch out.

Always remain hedged in your positions, otherwise volatility can wipe out your capital in no time. 

Just remember what happened in January’ 2008 when the market (Nifty) crashed by more than 1800 points there were large number of suicides across India.

Just remember we are all in this to earn profits and to bring joy and happiness in the eyes of our near and dear ones not to see tears in their eyes over our tragedy.

If carrying F&O single direction positions over night is very dangerous carrying them over the week end is almost suicide.

Warren Buffet calls Short term / intraday trading as FWMD (Financial weapons of mass destruction).

Anything can happen over the week end, Rate hike either in our country or any Asian / Europe / US country,  Debt issues can come in from Greece, Portugal, China, problems can come in from any place, any direction at any time hence watch out stay hedged.

Remember It is better to be safe than sorry.

Remember it is better to prepared for the worst than always expect the best, if good things happen it is most welcome but it is wrong to always take position assuming the market will move in a particular direction it is best to always ask ourselves a question good if the market in the direction I am planning but god forbid what if the market moves in the opposite direction, am I ready? Will I be in a position to stomach it ? is this a money I am willing to lose ?

If it is a money you are not ready to lose then either don’t trade OR trade by hedging it completely i.e if you buy this month FUT then sell next month FUT or sell this month fut and buy next month FUT. In case of Options if you buy 5200 CE then buy 5200 PE OR sell 5200 CE and sell 5200 PE.

Remember even if it amounts to blocking a huge money writing options always makes sense due to the fact that options premium always reduces due to the factor of time decay, but one need to be also extremely cautious since writing options is unlimited loss if the market goes in the opposite direction.

ALWAYS REMAIN HEDGED OTHERWISE YOUR CAPITAL CAN BE WIPED OUT.

Don’t use 100% of your money for trading.

Always trade with money you are ok to lose.

Control GREED do not try to double your money in week / month because when you try to do that you take a huge risk. It is best to target 5% to 7% in a month, even then just imagine 60% in a year, and now show me one Bank or financial institution in the world which delivers 60% per annum return. If people well educated in the Share investment and financial risk management do not promise this why should you or me take huge risk and put ourselves in to serious stress and strain to earn this 60%.

Also don’t put all eggs in same basket, distribute your investment, invest in Land, Gold, Bonds etc..

Have you taken Insurance policy for Hospitalization for your family members, if not do this immediately without wasting any further time, because one never knows how (God forbid) accident / diseases can strike us. Let God provide all of us excellent health but once again we need to prepare ourselves for the worst hence it is best to take out a good family group cover of Hospitalization insurance which will ensure in times of need we need NOT sell our assets like gold / property to pay hospital bill.

Also read this articles:

http://highprobability.blogspot.com/2008/01/stock-market-ruined-my-life.html

http://www.rediff.com/money/2008/jan/22mkt2.htm

Trader takes own life over large losses
http://www.chicagobusiness.com/cgi-bin/news.pl?id=31449&seenIt=1

Mortgages Ltd. chairman's death ruled a suicide
http://www.azcentral.com/arizonarepublic/business/articles/2008/07/24/20080724biz-colesdeath0724.html

Suicide Madoff investor was 'honorable man'
http://www.msnbc.msn.com/id/28368421/

Billionaire Merckle commits suicide
http://www.ft.com/cms/s/0/f9557fac-dc05-11dd-b07e-000077b07658.html

Real-Estate Executive Found Dead in Apparent Suicide
http://online.wsj.com/article/SB123127267562558295.html?mod=special_page_campaign2008_mostpop

Private equity boss kills himself
http://www.guardian.co.uk/business/2008/sep/28/privateequity1

http://www.thaindian.com/newsportal/uncategorized/punjab-teacher-commits-suicide-after-share-market-crash_100140026.html

http://www.business-standard.com/india/storypage.php?leftnm=crash&autono=311445

http://in.rediff.com/money/2008/jan/21msg.htm

http://www.livemint.com/2008/07/16225504/The-market-crash-this-time-is.html

Please share your thoughts, thanks

Happy Trading

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Dear Prasanna..u r right...Mkts are highly volatile and even Sls are triggering both sides...it is better to hedge rather than feel sorry afterwards

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Great sir...good for people like me.. Can i have your number..I have some doubts...

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