MEGA Thread on Moving Averages 🧵👇

In this thread, we will cover a lot of ways in which moving averages can be calculated

Goal of the thread is not to find the best MA but to explain the concept behind
I am sure you will find new ones on the list!

Lets start!
(1/11)

Simple Moving Average (SMA)

A SMA is a sum of past N values of PRICE divided by N

A SMA looks like below on the chart and is basis for more than 50% indicators out there (50% indicators show more or less same info as a SMA)

(2/11)

Exponential Moving Average (EMA)

The EMA places priority to price values that are recent. This enables it to be responsive compared to SMA.

Hints:
- Use it if you need a responsive MA
DEMA, TEMA are application of EMA over EMA to make it more responsive.
(3/11)

Weighted Moving Average (EMA)

The WMA is similar to placing priority to recent price changes. Its smoother because it adds weights rather than price fraction.

Hints:
- Jitteriness of EMA can be avoided with using WMA
- VWMA adds volume component to calculation

(4/11)

Hull Moving Average (HMA)

Perhaps the most elegant moving average and very smooth to look at.

HMA has reduced lag and also very responsive to price change.

Sudden price changes induce a overshoot which is rectified by the Jurik Moving Average (JMA)

(5/11)

Thread on 50 GOLDEN RULES of Warren Buffett ( One Rule Per Day)

Day 1:

4 Filters Of Investing.

Day 2:

To understand Investing you need not required to be a genius. Investing is not a rocket science.

Day 3 :

Personal Finance.

Day 4 :

Margin of safety.

Image Courtesy: Prof. Sanjay Bakshi blog.

Day 5:

Management.

India VIX and its implications, a thread 🧵:

What is India VIX?
India Volatility Index ie India VIX is a measurement of expected volatility in the near term usually over the next 30 days in the Nifty50 index.

This indicates how much the index can move either side where higher vix means market tends to move steeply up or down and lower vix usually indicates a stable or a steady pace move.

How is it calculated?
India VIX uses the computation methodology of Chicago Board of Options Exchange (CBOE), with suitable amendments to adapt to the NIFTY options order book.

It considers the current month and next month OTM strike option best bid and ask quotes which are traded in the Futures and Options segment of NSE.

Thread: Risk hai toh ishq hai ?

1) A lot of people talking about today’s freak trade in 37100 PE in BNF

We as traders are always exposed to various types of risk and it’s a part of our business.

Let me highlight certain risk faced in past years & also ways to manage it

2) Gap Risk

18th may 2009

Markets opened at 9:55 AM as this was the market opening time at that time
Nifty immediately hit an 20 % upper circuit at 10.01 am and the markets froze.
So markets were open only for 6 minutes.

There are many such instances of overnight gaps

3) Vega Risk

On 24th August 2015, the Indian markets declined close to 5.92%.

Nifty around 490 points but something unusual happened on that day.

Far otm Call options shot up inspite of such a huge fall😲

Vix shot up 64%

4)Gamma Risk

26th sept 2019

It was an expiry day and 30000 CE went from 50 to 1000+ in minutes and eventually closed at 0

This move caused lot of leveraged traders to lose a significant amount of their capital
Many such instances of gamma risk on expiry day

5) Flash Crash

31st may 2019

Flash crash in Banknifty of 1000+ points.

Friday’s high of the Bank Nifty was 31,783 and the low point of the index was 30,623

Such flash crash has been seen in many stocks as well on other instances

THREAD ON IRONFLY

These days the most preferred strategy for option sellers due to improved margins is IRONFLY. It's essentially a short straddle with long strangle. Long strangle acting as 'WINGS', which help in capping the unlimited risk associated with a short straddle.(1/n)

You can also view the position as a combination of Cal & Put credit spreads, if that makes it more easy for you.

There are 3 important things to understand while trading this strategy:

1) Initial size of the Wings
2) Risk Management
3) Adjustments

(2/n)

Since we are selling an ATM straddle, the 1st question is how far our wings should be? Ideally i sell .50 delta straddle & buy .20 or .10 OTM strangle, depending on my view on volatility. So the distance of wings depends on the IV setup. Higher the IVs, greater the distance.(3/n)

If you don't understand greeks, then ideally with 30 days to expiry (dte), wings should be around 300pts either side. If your trading in weekly then it should be not more than 200pts. Higher the premiums, higher the distance as we have more cushion of theta. (4/n)

It is important to understand that we need to reduce the distance of wings with time so as to manage our RISK in gap openings or sudden volatile move. So for eg. if you started with 300pt wings with 30dte, the wings wouldn't give the same protection when there is 7dte. (5/n)

How to get rich trading (without getting lucky)

Complete beginner’s guide to wealth of Rs 10 Cr in 10 years

Step 1: start trading live

1/n

Nothing can substitute experience of live trading

No amount of back-test, studies or indicators can substitute training your mind with screen time

As a beginner, In live trading, you will make losses almost everyday

2/n

So here are the conditions which you can’t violate in first year
If you can’t follow these rules, this document is not for you

Start with trading capital of Rs 1 lakhs

Max loss per trade 0.25%, i.e. 250 Rs

Max loss for the day, 1%, i.e. Rs 1000

Max 6 trades in a day

3/n

I know, these conditions will cripple you in terms of what all you can trade and how

But just like any start up, trading is also about making it through initial gruelling constraints of life

You will also learn, how to turn these adverse rules to your advantage

4/n

Btw, you can sell directional banknifty options, obviously you can buy options, can do cash stock trading and much more under these conditions

Think about it, you will be do all kinds of instruments, just that PNL will not be roller coaster ride or exciting like a casino

5/n

How to Get Rich (without getting lucky):

Seek wealth, not money or status. Wealth is having assets that earn while you sleep. Money is how we transfer time and wealth. Status is your place in the social hierarchy.

Understand that ethical wealth creation is possible. If you secretly despise wealth, it will elude you.

Ignore people playing status games. They gain status by attacking people playing wealth creation games.

You’re not going to get rich renting out your time. You must own equity - a piece of a business - to gain your financial freedom.