Ashwanis Workshop Notes

Ashwani Gujral’s
Workshop
Day 1
Agenda
Day 1
• Trading Psychology
• Money management/Trading plan
• Buy and sell events
• High probability Locations
• Intraday trading- individual stocks
12/17/2018 www.ashwanigujral.com, ph 09871066337 2

Agenda
Day 2
• Pivot theory
• Bank nifty intraday
• Swing trading
• Investing for traders

CREDITS
RANDE HOWELL MARK DOUGLAS OLIVER VELEZ
FRANK OCHOA VAN THARP

Learning Objectives
• Trading Psychology
• Risk Management
• Trade Location
• Buy/sell event
• Trade Management

Trading Psychology
• Why is it important?
Trading is like a sport

Trading psychology
Fears of trading
• Need to be right
• Fear of missing out
• Fear of losing
• Fear of winner turning into a loser

Closing the Gap Between Potential and
Results in Trading Psychology

Trading psychology
• The better person is generally the better
trader
• Cutting bad business, bad relationships
• Moving on is the attribute of a mentally strong
person
• Trader is an entrepreneur, winning 60 pc is
enough

Trading Psychology
What is needed?
• Mentally strongest win
• A simple strategy
• Good money management
• The probabilistic mindset

Did you know, which legendary pacer inspired
Imran Khan to change his bowling action

Quiz 1
• Which is more important?
– The method
– The psychology

End of Section 1

Answer to Quiz 1
• The psychology can be the difference between
a winning and losing trader
• Different methods can lead to producing

profitable trades
• So psychology is more important

Money management
• Risk only 1 pc per trade
• Winning rate can even be 50 pc
• Ride winners two times of losers
• Add to winning trades

The math of trading
• Take a sample of 100 trades
• 50 winners and 50 losers
• Winning trade make 40 points, loser takes 20 away
• Winning position is 8000 shares, losing position is
4000
• Gross win Rs 1,60,00,000
• Gross loss Rs 40,00,000
• Net 1,20,00,000

Success rate not important
• Winning 60 pc of the time is enough
• My win rate is 58 percent
• The other 42 percent I try to reduce damage
• Half of losing trades close at breakeven
• Hence actual losing rate is about 20 pc
• Made 300 pc on bank nifty this year

My money management
• Total liquid cash is for eg, Rs 5,00,00,000
• Divide it into 10 stakes
• Use one stake at a time
• Take a risk of 1 pc of overall liquid cash on any
trade
• MAX LOSS PER TRADE 100 POINT ON BNF
• MAX LOSS PER DAY – 10LK
• MAX LOSS PER WEEK- 30LK

My Money Management
• Average win is 5lk/Average loss is 5lk
• Assume total trades to be 10 in a month
• Winning rate 60 pc
• In 6 trades, we make 30lk
• In 4 losing trades, we are able to close 2 at
breakeven
• So net profit is 30-10= 20 lk per month
• Which is about 50 pc on total capital

The objectives of my money
management
• Risk of ruin since I am primarily futures trader
• Plays on the high win rate of system
• Avg winner and avg loser are often similar in size
• Get some monster winners to top up

performance

Trading Plan
A trading plan is a trader’s Business plan
• Total trading capital
• Risk per trade
• Instrument selection
• Time frames
• Trade set up
• Entry triggers

Trading Plan
• Initial stop
• Adding
• Trailing stop
• Exit plan
• Tools
• Emotional and psychological preparedness
• Record keeping- outcomes and journaling

My Trading plan for bank nifty
• First assess whether the market is trending or
range bound
• If ranged, figure out boundaries
• If trending, look for intraday dip/rallies to act
• These are locations
• Look for the right candle setups and these
locations
• Look for approximate targets
• All of this should be part of pre preparation

Quiz 2
• What is order of importance of the three
aspects of trading plan?
– Entry
– Trade management
– Risk management

End of Section 2

Answer to Quiz 2
• The order of importance is
– Risk management
– Trade management
– Entry

Why I use different methods
• Index trading- pivot method
• Individual stocks- moving average

The moving average method

Introduction to Candles

CANDLESTICK CHART

Buy Events

Sell Events

How to choose the right stocks
• Preconditions
– Big declines/rallies
– Range breakout/breakdown
– Change of trend

Big decline

Big decline

Big decline

Change of trend

Change of trend

Change of trend

Range breakout

Range breakout

Range breakdown

Range breakdown

Reversal trade

Example

Example

Trade Management
• Initial stop
• Trailing stop
• Choosing moving averages based on trend
• Parabolic run
• exits

Quiz 3
• Mark entry and add events on the following
chart

End of section 3

Answer to Quiz 3

Examples

Example

Example

Example

Flat 200

Example

Example

Example

Example

Example

Inclined 20 ma

Example

Example

Example

20 and 200 DMA

Example

Example

Example

Example

Example

Example

Example

Example

Example

Example

Example

General Market Tendencies
• Yesterday high/low
• Last week high/low
• Earlier support becomes resistance and vice
versa
• Range expansion and contraction
• 20 and 200 dma
• If market fails to make significant new high or
low, maybe turning
Yesterday High/Low

LAST WEEK High/Low

Earlier support becomes resistance and vice versa

Range expansion and contraction

Quiz 4
• Mark entry, add events
• Mark trailing stops and show exits

Quiz 4

End of section 4
and Day 1

Answer to Quiz 4

Ashwani Gujral’s
Workshop
Day 2
The Pivot Methodology

STRUCTURE OF MARKET
INITIATIVE BUYER
RESPONSIVE SELLER
RESPONSIVE BUYER
INITIATIVE BUYER

The Pivot calculations
• Pivot Point = (High + Low + Close) / 3
• Lower Pivot Point = (High + Low) / 2
• Upper Pivot Point = (PP – LPP) + PP
• R1 = (2 x PP) – Low
• S1 = (2 x PP) – High

VALUE / RANGE

Pivot points
• Trend following
• Open is key
• Mean reversion
• Range contraction

TRENDING PIVOTS - UPSIDE

TRENDING PIVOTS - DOWNSIDE

SIDEWAYS PIVOT

SIDEWAYS PIVOT

Trend following

Sell the rips

Buy the dips

Sell the rips

The open

The open

The open

The open

The open

The open

Mean reversion

MEAN REVERSION

MEAN REVERSION

MEAN REVERSION

MEAN REVERSION

MEAN REVERSION

Contraction

CONTRACTION

CONTRACTION

Quiz 5
• Where does the biggest opportunity lie
– Market opens outside range and value

– Market opens inside range but outside value
– Market opens inside range and value

End of section5

Answer to Quiz 5
• Biggest opportunity is when market opens
outside range and value

Expansion Examples

EXPANSION

EXPANSION

EXPANSION

EXPANSION

Playing news
• Expected and unexpected

Surgical strikes

Judges press conference

Sometimes you reverse it

OVERNIGHT EVENT PLAY - DEMONETISATION

OVERNIGHT EVENT PLAY– BREXIT DAY

OVERNIGHT EVENT PLAY– GUJARAT
ELECTIONS

OVERNIGHT EVENT PLAY– TRUMP DAY

OVERNIGHT EVENT PLAY– Moody’s
Upgrade

MID DAY EVENT PLAY– SURGICAL STRIKE

RAGHU RAM RAJAN EXIT

EXITS

EXITS – PARTIAL QUANTITY

EXITS – 200 / PIVOT

EXITS – PREVIOUS LOW/HIGH

EXITS – FOLLOWING 8 MA

EXITS – 3 TO 4 BAR EXIT

Quiz 6
• What is the first sign of a trade going wrong?
• Mark the exits in the chart

Mark the exits in the chart

End of section 6

Answer to Quiz 6
• If you are long and green bars start to get
cleaned out by red bars
• If you are short and red bars start to get

cleaned out by green bars

Answer to Quiz 6

How pivots and moving averages
match
• 200 period average on 5 min chart- daily pivot
• 200 period average on 15 min chart- weekly

pivot
• 200 period average on 60 min chart- monthly

pivot

200 period average on 5 min chart-
daily pivot

weekly pivot

monthly pivot

Section 7

SWING TRADING WITH PIVOTS

Preconditions
• Narrow pivots
• Trending up or down pivots
• Trading boundaries in sideways markets

Narrow Pivots

Narrow Pivots

Trending up or down pivots

Trending up or down pivots- Trade Management

Trending up or down pivots

Trending up or down pivots- Trade Management

RECENT EXAMPLE

Trading boundaries in sideways markets

Trading boundaries in sideways markets

When not to trade

When not to trade

Quiz 7
• What does price going through the pivots
suggest?

SWING TRADING

Answer to Quiz 7
• It suggests that the prevailing trend might be
ending
• A sideways trend is the most likely outcome

4 Phases of a market
DISTRIBUTION
DOWN TREND
UP TREND
ACCUMULATION

Swing Trading individual stocks
• Method 1
Look for a strong trend and enter corrections
• Method 2
Look for a parabolic move and take the other
side, preferably with macro news
Method 3
Look for averages to hold on other side and
then act

Strong Trend
• 20 and 50 Period Moving Average move
parallel like a railway track

RAILWAY TRACK

RAILWAY TRACK

RAILWAY TRACK

Buying after meltdown/melt up

PANIC BUYING

PANIC BUYING

PANIC BUYING

Averages hold on other side

Averages hold

Averages hold on

Averages hold on

Averages hold on

Quiz 8
• Which is the lowest risk buying method in
swing trading?

End of section 7

Answer to Quiz 8
• Panic low/high at the end of a parabolic move
often accompanied by macro news on
company

Investing by traders
• Method 1
– Look for a sector in flavor and look for no 3, no 4
players
• Method 2
– Look for relatively strong balance sheets of out of
favor businesses
• Method 3
– Look for panic in certain sectors where sector
valuation contracts because of external reasons

Factors I look at
• Consumer business with brands/scalability
• Lack of govt. policy involvement
• Manageable debt
• Market cap to sales/book value
• There is a lot of unknown so buy cheap

ACCUMULATION + NEWS

ACCUMULATION + NEWS

ACCUMULATION-NEWS

Choosing no 3/4 player in a sector in
flavor
• Asian Granito
– Kajaria and somany stocks had already done well
– Home improvement was an accepted theme
– In 2016 April, market cap was 458 cr, sales 957 cr
– Debt to equity 0.56
– Sales growing every year for last 5 years
– Bought at 165, today 609

Choosing No 3/4

Choosing no 3/4 player in a sector in
favor
• RPG lifescience
– Sun pharma, lupin etc at multiyear highs
– Pharma was an outperforming theme
– In April 2016, market cap was 360cr, sales 290cr
– Debt/equity 0.22

Choosing no 3/4

Out of favor
• Coromandel international
– 2 poor monsoons, Agri stocks out of favor
– Murugappa group company
– In April 2016, market cap was 5555cr, sales
11624cr

Out of favor

Out of favor
• Kalyani steel
– Metals was out of favor, Baba kalyani group
– Made steel products to be consumed by group
– In April 2016, market cap was 581cr, sales was
1455cr
– Debt to equity 0.56
– Sales growing for last 5 years
– Bought at 133, now at 407

Out of favor

Strong brands, Good management
• VIP Industry
– Well known brand, consumer stock
– In April 2016, market cap was 1442cr, sales 1234cr

Strong Balance sheet and Brand

Company with a moat
• Garware wall ropes
– Made all kinds of nets, fishing net, sports net etc
– In April 2016, market cap was 769 cr, sales was
829 cr
– Debt to equity was 0.13
– Bought at 350, today at 1019

Strong Balance sheet and Brand

Out of favor, strong brand
• Escorts
– 2 bad agriculture years, large investor buys
– In April 2016, market cap was 2206cr, sales was
3438cr
– Debt to equity was 0.23
– Bought at 180, today at 811

Out of favor

Quiz 9
• What is the most important aspect in
investment?

What do you need to succeed
• Mindset- forget certainty and embrace
probability
• Protect Capital at all times
• Make it large when it works
• Know your uncle point before you enter
• Exit at new highs/enter at new lows

Answer to Quiz 9
• To buy at a price where the unknowns and the
risks are priced in

Thanks for coming
• For one month online webinar – We will send
you the login details to your email id
+91-9871066337
[email protected]

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What are the main topics covered in the workshop?

What are the main topics covered in the workshop?

What are some important aspects of trading psychology discussed?

What are some important aspects of trading psychology discussed?

Ashwani Gujral’s

12/17/2018 www.ashwanigujral.com, ph 09871066337 2

12/17/2018 www.ashwanigujral.com, ph 09871066337 3

RANDE HOWELL MARK DOUGLAS OLIVER VELEZ

FRANK OCHOA VAN THARP

12/17/2018 www.ashwanigujral.com, ph 09871066337 5

Trading is like a sport

12/17/2018 www.ashwanigujral.com, ph 09871066337 6

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• Different methods can lead to producing

• So psychology is more important

12/17/2018 www.ashwanigujral.com, ph 09871066337 14

• Winning rate can even be 50 pc

• Ride winners two times of losers

• Add to winning trades

12/17/2018 www.ashwanigujral.com, ph 09871066337 15

12/17/2018 www.ashwanigujral.com, ph 09871066337 16

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• Plays on the high win rate of system

• Avg winner and avg loser are often similar in size

• Get some monster winners to top up

12/17/2018 www.ashwanigujral.com, ph 09871066337 20

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• Individual stocks- moving average

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