TradeParallel Technology and Education Services

TradeParallel, is a software development company under incubation, developing desktop and cloud-based, high probability, stock trade signaling, and productivity tools for the Indian retail stock trader. We automate strategies as a function of technical analysis for equities, derivatives, and commodities.

Kumaraguru Muthuraj, a Software Engineering Professional, created TradeParallel, to make the lives of retail traders easy by providing high probability trade calls on equities, derivatives, and commodities. After realizing success with mutual funds post 2007, in February 2019, Kumar observed easy-to-profit price-action patterns with his favorite scrip BEL and started with technical analysis. Ever since, he had been networking with retail traders, figuring out ways to consistently profit and have a success ratio of 7 on 10.

An investor should know stock picking through fundamental analysis. This essentially means what a CPA would do, ranging from understanding the business, management quality, balance sheets, financials, valuations, future valuation, risk, earnings, promoter holdings, interest coverage ratio to name a few and conclude if the stock should be bought and held for a few months to a few quarters or more. While a trader is aware of these points, alternately he looks at the trend, volumes, indicators, strategies and decides to hold the stock or derivative for a few hours to a few weeks. With trading, every stock has a character, so do commodities, and they behave differently at different times of the day. Note that large fund houses (and banks) that manage public money always build a portfolio for investment and trading that are hedged.

So, do you invest or trade? Even though a stock is bought for investment, guidelines need to be followed strictly for exiting during adverse situations. Typically, those retailers who buy stocks for investment hold when the stock falls and buy more and expect it to come up. They become long term and very long-term investors by compulsion only to book huge losses. Sometimes these retailers are lured by recommendation services that have a conflict of interest. With trading, you do your homework a day before or the weekend to pick the right stock for hourly, daily, weekly, or monthly income, thereby consistently earning and building wealth. Hedging can be of good help to reduce the risk for overnight positions. Stop losses are stringently followed otherwise, not in the mind but with the broker's RMS. One must follow both the approaches to be a successful money maker. Trading does not necessarily mean you do it every day. A few trades a month would be an excellent wealth-building strategy. You should not become an investor because you failed in trading.

Always remember that a stock price is futuristic and various good things about the company are already factored in. Small adverse news would bring down the price drastically.

Have you observed that you feel uncomfortable in certain rooms? If you had been trained to think freely, you will start correlating with an average human's height and the dimensions of the room. You will resolve to a Fibonacci ratio at the end. A high number of keywords search belonging to a certain category in Google indicates a flu that might be spreading amongst the people on Earth. Did you realize why a brewery stock named Corona crashed when the virus was spreading? You can call it Butterfly Effect, Memes, or anything. There are patterns in everything, everywhere; from a beehive, to the seeds in a Sunflower; let it be placement of branches in a beanstalk or spots on a leopard; from infinitesimal to infinite. You might ask yourself, how did Sir. Srinivasa Ramanujan come up with two (or three) volumes of patterns of numbers. There are still many patterns that are yet to be discovered and named.

Charts reflect the patterns about markets, factoring in everything around. Charts do not lie and convey what might happen next with a certain probability. All technical indicators derived out of data from Charts help a trader make the right trading decision; still, there could be external factors that will either increase or reduce the probability of his trade. An almost perfect buy call overnight could result in a 5% gap down the next day due to an adverse outcome of the OPEC meeting.

If you see patterns around you in everything, and trained yourself to think free, you can be a good technician. But why is Probability always used as a disclaimer in trades? Why do most traders lose money? Consider, tossing a coin. The Probability of an outcome is 0.5. Now consider doing it 100 times, will it be 0.5 or skewed? At what time will it converge to 0.5? Yes! When the experiment is done a million times. The same thing applies to trade; keep your capital fixed, take trades mechanically, based on technical analysis, and repeat it for a couple of months. The variables like risk: reward, capital, position size needs to be fixed to repeat the experiment. You will know your strike rate and if it is less than 6/10, there are mistakes you are doing and will have to relook at your indicator choices, time of trades, and timeframes.

To protect capital on overnight positions, always hedge.

A Professional Trading Course that I went through, from a reputed institute, trained me to be on the winning side; to look at price action patterns, and decide when to trade. The patented method helped me for months to consistently make money by spotting institutional investor trades. This required scanning stocks manually, every day for long hours, and picking the high probability trades. But I did not know to hedge. Institutions hedge, to reduce risk. This meant that even though you can spot patterns and be on the side with institutional investors, you cannot become them. After a ton of studying, my point of view is that until you become a hedge fund manager, managing public money, you can never call yourself a professional trader. I have a bias that, if you do not hedge, you are not trading but gambling. The core idea to hedge is to prevent losses and protect capital. There are stringent compliance requirements to call yourself a professional trader. Beware! there are trainers who would make you wear The Emperor's New Clothes!

Do not get carried away by advertisements pushed to your browser claiming that someone working from home is making $1200 every day by trading. Making money consistently is extremely difficult. During my trading lessons, one of the leaders in the space who was working formerly with UTI said that you call yourself a professional trader if you profit consistently and have a winning rate of 7/10. One of India's most successful traders would say that the first 3 years of trading is painful and if you cross the 5th, you are someone. Start with making 5K every day consistently and big money will follow. You must have a decade of hard work to be an overnight success. Here comes the fundamental principle that, if you reach your target, exit the position. If you are greedy, you might lose everything. Apply the general rules of Risk: Reward ratio. Be happy with small (consistent) gains and not be greedy. After observing BEL in February 2019, I found that this stock has reasonably high Beta to trade and there was a possibility to make 1% of your capital per trade. If you compound, you could become a millionaire in a couple of years. But this was not possible, because the Law of Probability takes over. Stocks have a certain personality and they behave differently at different times. A winning trade is good from the beginning.

During good days, when VIX is less than 20, you can take as many as you want in the direction of the trend, but the right zones. This is for full-time traders and not for other professionals. When VIX is high, as it was during the Corona season, you must trade less. The wealth-building trades are always taken during daily/weekly demand/supply zones and not intraday. Avoid trades during result days and corporate actions. On the day when the Supreme Court of India, issued orders to Telecom companies to pay their AGR dues, one of the worst impacted companies fell drastically while the other soared high. This was justified as one-man's loss is another's gain. Trading during these uncertain moments is gambling.

The methods applied with the capital of X will not work with 100X capital. This is precisely the reason why hedge fund managers and banks are different from retailers. You can make consistently 1% (or even more) every day on an average from a large capital, but positions need to be hedged with NIFTY futures or other means like Gold or Silver. You cannot simply divide the capital across your positions. A retail trader's typical portfolio has 3 to 5 positions, with capital distributed uniformly across positions or slightly skewed towards high probability score scrips. I choose to add Gold all the time as a hedge to neutralize losses if positions are held overnight. A good strategy that I am experimenting is, with Calendar Spread of Futures where one acts as a hedge to the other. But, when to unwind the hedge is a good question; the first 15 minutes in the morning when the volatility is high, or after the dust settles? Deploying a large capital in the initial years does not just reflect greed, but ignorance too. It is not a lack of knowledge that fails us, but the illusion of knowledge. Jumping into leveraged derivative positions too early would wipe off the capital. Even if your capital is small, the thumb rule is, use only 50% of your capital to take positions. Of the balance (say 70K), know what is the amount you are willing to lose? Say 1% (recommendation is not more than 2%). You will have to divide it by the stop size to get the number of stocks to buy (position size). If a stock is trading at INR86, and stop size is say INR0.60, the
     position size = Lesser of [(Capital / Entry Price), (1% of 70K/stop size)]
     =>Lesser of [70K/86, 700/.60] = [813, 1166] = 813 shares.
When you apply RRR religiously, one can measure the hit ratio of over 100 to 150 trades. For more positions, you must distribute the capital applying the above simple math.

Until you measure your success ratio, trade with a smaller capital.

I am a strong believer in mind over matter. In the year 2008, a colleague introduced me to a life-altering education program called Landmark Forum. Students of Vedanta would relate to what is taught there. This program is truly life-altering. A similar experience happened with a best seller Think and Grow Rich, by Napolean Hill. As a trader you need to change the way you think. If you had not, you need to seed the thought of free-thinking. Fundamentally, when something looks good, I practice it before judging it. If it sounds like eat the mangoes, don't count the trees, that's exactly what I do. These would help you be disciplined and figure out things for yourself.

There is one aspect of trading, if not followed, would wipe out all your gains. That is Stop Loss! Stop Loss is a part of the trade and cannot be in your mind. Brokers provide Bracket Orders as a part of their product offering; if not, you can create-manage Stops explicitly. Consider, your variables for trade are fixed - RRR, Capital, Number of Positions, Strategy, Trade discipline. If SL is not applied with discipline, it will wipe out your gains in the previous sessions. Traders who do not follow this wait, pray, wait when it shows positive signs, and eventually convert their positions to delivery and become investors. The intensity of a fall would be stronger to wipe out previous gains. Know that SL is a part of the strategy. Stops are calculated by different means. I use DATR for the time frame, which is effective. Other measures stop me out frequently! You must be a combative style trader if Stops are not followed. Stops are a part of Risk Management and if the risk is managed, there is only profit left out.

If you calculated your Stop size to be 0.40, the Profit should be at least 1.20 which is at least 3 times the Stop. This is essentially following the Risk: Reward of 1:3. If the technical indicators do not indicate a possibility of 3X profit, the trade is not worth it. Sometimes this can change based on your personal goals. Consider, you used a Calendar Spread with Futures, and the market is consolidating for a while in the zone and there are positive signs in the direction that you wanted to. You would unwind the hedge and let the profits run. Since the position is leveraged, the absolute profit will be much higher than what you would have got with RRR. For Buy Today Sell Tomorrow trades, the Bollinger Upper would be a good target that is governed by the DATR in the time frame you applied to enter the trade. But still, all trades have one thing in common, which is managing the Risk, either by Stops or Hedge.

The professional traders I follow, have one message in common that you must trade across all asset classes, not just commodities or Forex. If you trade just one class, it limits your potential to learn and mimic what professional hedge fund managers do. They mandate traders to be nimble and alert on opportunities that show up in different classes. For a beginner, you can start with equities as it's easy to relate to or perhaps a commodity with the lowest leverage. Classes that have a high beta, Options are not really for beginners. Day trading for a living is a difficult goal until you get your strategy right with a high win ratio over several hundred trades.

The Professional Trading Course for equities that I went through is for a premium and they teach a patented Demand-Supply style that works during non-eventful markets. When the VIX is high, it fails, and the only strategy that works is the 200-year-old Candle Stick trading when a few indicators are added on top of it. There are tons of books that I have put up on the website and you can try them over 2 to 3 years. I follow Bollinger Bands, Candle Stick reversals, Stochastics, 20, 50, and 200 MA. When a Support - Resistance for that timeframe overlaps with these, it becomes a high probability trade. Strategies for equities, derivatives, commodities might be different. Especially, there are heavyweight strategies for Options which could run into many pages.

A Charted Market Technician (CMT) or Charted Financial Analyst (CFA) provides a good foundation on the markets and will help one to get a job in any of the brokerage houses. There are compliance requirements mandated by SEBI that a person providing a view on a stock needs to have registered with them with a NISM certification. These credentials are internationally recognized. For a retail trader, these degrees may not be required. There are a lot of institutes that provide all necessary information to trade profitably and consistently. Some of the trading programs are at a premium. CMT / CFA is far cheaper, but you need to spend three years getting one. Know that we live in a World of sheep, so even if you know the stuff very well, you need to have credentials that people relate. Remember the old saying "If Einstein were to sell Relativity today, he must have an MBA".

There is data that about 60% of trades in Indian Stock Exchanges happen through algorithms. Big financial institutions have their Quants model the market with Artificial Intelligence / Machine Learning techniques to pick the trades and execute them. It is all automated. Some of the Quants do not work for these financial institutions, but their algorithms run for a few hours executing high-frequency trades, generating consistent income. You can choose to be a Quant, but programs that train you to be one are at a premium. A retail stock trader would be savvy with computers but not necessarily with programming. Programing might be challenging if you do not know statistics. Quants have great placement opportunities with Financial Institutions. Considering the trend, to become a successful trader, one should be with these Financial Institutions and do what they do. It is good to start with automating the strategies and then step up to AI / ML.

Read little, practice a lot is my strategy. The goal is not to read a ton and take no action. Jim Rickards would refer to Kissinger Cross (named after Henry Kissinger, former American Secretary of State) that, intelligence collection cannot happen infinitely; at some point, you need to act. The action is to practice trading.