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Article Archive For Nauzer J. Balsara, Ph.D.

  • A Guide To Pyramiding by Nauzer J. Balsara

    ARTICLE SYNOPSIS ...A Guide To Pyramiding by Nauzer J. Balsara Pyramiding, the process of adding to the number of contracts during the life of a trade, needs to be distinguished from the strategy of increasing or decreasing the trading size contingent on the outcome of a closed-out trade. Typically, pyramiding is undertaken with a view toward concentrating resources on a winning trade, but pyramids could also be used to average or dilute the entry price on a losing trade. Adding to a losing position is essentially a case of good money chasing after bad and so, in this article, Nauzer Balsara examines the concept...

  • Using Probability Stops In Trading by Nauzer Balsara, Ph.D.

    ARTICLE SYNOPSIS ...Using Probability Stops In Trading by Nauzer Balsara, Ph.D. Does controlling losses by using predetermined stop-loss points help? To find out, Nauzer Balsara selected randomly moving average crossover systems and ascertained the best stop-loss points to use. Then he tested the system over different data. We present his results. The goal of risk management is conserving capital -- getting out of a trade without incurring too much of an unrealized loss. The question here is how much is too much? An unrealized loss arises during the life of a trade, representing the difference between the curren...

  • Appreciating The Risk Of Ruin by Nauzer J. Balsara

    ARTICLE SYNOPSIS ...Appreciating The Risk Of Ruin by Nauzer J. Balsara Traders focus on developing trading rules and systems that identify market entry and exit points. A factor that is often overlooked is the percentage of trading capital available that is risked on trades. This article analyzes the risk of ruin by varying three parameters using a Monte Carlo simulation. The results can help you determine your chances of success. A trader is said to be ruined if his or her available capital falls below the minimum required to trade. The risk of ruin is a probability estimate ranging between zero and 1. A prob...

  • Avoiding Bull And Bear Traps by Nauzer J. Balsara, Ph.D.

    ARTICLE SYNOPSIS ...Avoiding Bull And Bear Traps by Nauzer J. Balsara, Ph.D. Bull and bear traps are gap openings that are reversed the same day and that can cost a trader dearly. S&C contributor Nauzer Balsara presents his method of analyzing market history to calculate the proper placement of stops to avoid being caught in such traps. A bull or bear trap occurs when a market does an about- face after an extremely bullish or bearish opening, leaving a trader who entered a position at the opening price with a possible loss at the end of the day. Bullish expectations are reinforced by a sharply higher or ""gap-u...

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