TOOLS OF TRADING PRO
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Here we shall put Question /ANSWER from ESTABLISHED PRO.PL give due weightage to gospels of trading truth
1. why they r superior ?ans. they are superior by experience and rationality.THEY JUST HAVE BETTER CONTROL OVER THEIR EMOTIONS AND ARE DISCIPLINES.they have better execution skill .
2. what time frame they trade?ans. as they found which suit them with comfort and making money.
3. how far they r subjective in trading ?
ans. no subjectvity.as per system ..entry -exit condition r predefined.however
some sentimental condition r checked.
4. what r the reason for their actual consistency ?
ans.right plan and implementation.improving success rate.
5. on what condition they dont trade ?
ans. condition not suiting their plan. when r/r ratio not favourable.
6. what is their contingency plan[enough is enough..now i am booking loss]?
ans. inbuild in the system.[hence nothing to worry]
7. what self sabotage u find most difficult to overcome..yet how u have done it ?
ans.not following the plan.distract by others openion...soln . follow price in a disciplined way.
8. do u think beginner trader[4yr amateur] can be like u oneday ?if yes. HOW!
Answer: yes . discipline and a solid implemention plan including slippage.....
understand market and good money management.[ignore media]
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1. why they r superior ?
There is nobody superior or inferior as far as markets are concerned.......and the time you do feel that you are superior,that will be when the market cuts you down to size.
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2. what time frame they trade?
Intradays and position trading.......love playing the weekly as well as the 5min charts.
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3. how far they r subjective in trading ?
Used to love words like "subjective","mystical","intuition" once upon a time.......nowadays,the attitude is more to objectification of the whole process.Do whatever it takes,an automated system,or set points of entry,exit and the discipline to always follow the rules of your trading plan.Whatever........but one cannot beat all this fear and greed and hope,by joining the crowd.One therefore stands aside,follows the rules,practically robotic,day after day.
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4. what r the reasons for their actual consistency ?
A trading plan of attack,and then the discipline to follow it to the tee.
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5. on what condition they dont trade ?
There are many,like achieving the targets and more for the month.Also not trading if taking a hit and a predefined percentage point is hit.Or if there is some sort of family emergency......etc etc.
Of course,importantly,when I have a rip roaring,rollicking bullish 60min,I do NOT trade the 5min and stupidly go short.There is enough profits to be made just following the trend of the 60min and trading the 5.
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6. what is their contingency plan[enough is enough..now i am booking loss
Hmm.......stop loss for every trade.Position sizing appropriately.Set Risk percent per trade.Monitoring average wins,losses,drawdowns......blah blahblah,think that what everybody here already knows.
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7. what self sabotage u find most difficult to overcome..yet how u have done it ?
Anticipating a move before it happens,trying to get in even before your trading strategy says so.........got licked many times doing that.But not too much of a problem these days .........now in only when the move happens.
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8. do u think beginner trader[4yr amateur] can be like u oneday ?if yes. HOW!
Any fool can be a trader,every beginner trader can one day become an experienced one.Every trader with a plan and strategy that works can make money off the markets.Why then are 99% people failing at the markets?They go by what a newsletter,a self proclaimed guru,their broker,etc tells them to do.They go by their gut feel,or their neighbour's gut feel.They believe that making money is an evil act.They believe that trading the markets is for spare change .They have yet to educate themselves.They have no plan,no modus operandi,no strategy,no plan of attack...
Approach trading like a business,have a business plan,a trading plan.We are in this to make money and lots of it,as in any business.But strangely,to make lots of money,you have to shift the mind's focus from making money to putting in that perfect trade.Although it's one and the same,you have to maintain focus on the trades.
Everything is cold,calculated strategy and then a disciplined implementation.We are in this to capitalise on other people's fear and other people's greed.......and for that,your own mind cannot work in the process of fear and greed.It has to be quiet.In the present moment.Practically like meditation.
Can anybody and everybody do it?Of course,provided you do all what it takes to be a trader.But sadly,that will never be the case........99% will always lose,not because it's difficult,but because these 99% will not approach it with a plan,with the required discipline.........That stat will always remain.
Can you be that 1%?Surely and definitely,provided you are willing to pay time and energy and focus to making yourself a great trader.
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so we clearly see some difference between pro and serious amateur.
no1. level of comfort and serenity.
no2. least subjective.
no3.worst scenario is already planned and mastery over implementation.
key word is discipline and practicing their tool.
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let us come to view the idea from PRO.
In order to succeed at trading, you must have an edge. Your edge begins with the knowledge you gain through your research and testing that a particular price pattern or market behavior offers a level of predictability and a risk to reward ratio that provides a consistently profitable outcome over time. Without it, one is just "playing" the market in order to have something to talk about on message boards. To get it, you have to know exactly what you're looking for and what to do with it once you've found it. This process is what the journal is all about.
The journal goes through several stages depending on where you are. Once you've decided where you want to concentrate your efforts (at this level, the journal may resemble a diary), then you begin the process of developing a system (or method, strategy, procedure, whatever you want to call it). Here the journal takes on a different character. Once you've developed a tentative/preliminary system, you begin testing/trading it, and the journal adopts a still different character.
The first step is to decide what kind of trader you want to be.
* What do you want to accomplish with your trading? Is it recreational? Supplementary income? A part-time job? Do you want to make a living at it? Even the greenest of the green knows whether or not he wants to make a living at it, trade only part time, trade for recreation, trade for the action, trade to have something to talk about with other traders (for whatever reason), trade only long enough to earn money to do or buy X.
* Do you have any idea what sort of trading is most comfortable? Long or intermediate-term trading? Short-term trading? Day-trading? Trend-trading? Scalping? (Note here that a short-term trader, for example, does not become a long-term trader just because his stop was hit and he didn't sell; a long-term trader doesn't become a short-term trader because he chickened out and sold too soon. Each of these approaches are selected deliberately and for thoroughly-considered reasons.) How patient are you? How adventurous? Are you a leader or a follower (most people think they're leaders)?
The second step is to decide what you're going to trade and when you're going to trade it.
* Have you found an instrument -- futures, stocks, ETFs, bonds, options -- that provides you with the range and volatility you require but also the safety that enables you to relax and trade in an objective and rational manner?
* Have you yet found a time (5m, hourly, weekly) or tick (1t, 200t) or volume (1K, 100K) interval that gives you enough trading opportunities but also gives you enough time to think about what you're doing? If you want to limit your trading to the "morning", are you physically and psychologically prepared to trade all day? If not, can you shrug off whatever opportunities you may miss by limiting the amount of time you spend trading?
The third step is to develop your system*.
A system consists of (a) a set of rules that you use to select profitable positions and (b) a set of rules that you use to manage the trade once you're in it. (*Note: again, whether you call it a system, a method, a strategy, a plan, a scheme, an approach, a procedure, or a modus operandi is not as important as sitting down and doing it.)
* Developing a system begins with deciding just what it is you're looking for. Therefore, begin by studying price movement in real time (or at the end of the day through "replay", if your charting program offers it). By "study", I mean to observe it with intent, not just read about it or listen to somebody talk about it. Note the conditions under which price rises, falls, drifts. Make every effort to avoid imposing your biases onto what you observe. You may see trading as a war, a competition, a game, or a puzzle. You may think you're out to kill somebody, outwit somebody, or are out only to detect the flow and slip into it, riding the waves as if you were sailing. None of this should be allowed to affect what you observe.
* Develop a set of preliminary hypotheses which exploit the profit opportunities presented by these movements, e.g. price began trending "here". Price broke out "there". Price reversed "there". What can I do to take advantage of that? What do I have to look for?
* Decide what strategy will best take advantage of what you think you've found. Are you looking to catch a reversal in the hopes that it will become a trend? Or are you looking to trade series of reversals within the day's or week's range? Or do you prefer to wait for a breakout and trade what may become a trend? Or would you rather wait for a retracement in what may be shaping up to be a trend? Limit yourself to only one strategy at the beginning.
Carefully define the setup which implements this strategy, preferably using old charts (attempting to define the setup by studying realtime charts is inefficient since you don't yet know what it is that you're looking for). This is called "backtesting". All else flows from this. Unless you know what you're looking for, you cannot test it, much less screen for it. If you have not tested it, you have no idea of the probability of its success. With no idea of the probability of success, any trades made are essentially guesses.
Therefore, focus on the setup. Once setup. Determine its characteristics. Define it so specifically and so thoroughly that you can recognize it without any doubt whatsoever in real time. Decide provisionally where best to enter, what the target ought to be, where the stop should be placed, and so on. Only after the setup is defined and tested (and it can't, ipso facto, be tested until it's been defined) can one even begin to think about trading it with real money, much less trading multiple setups. Attempting to shortcut this process merely expands the amount of time it will take to develop the necessary skills. Nothing is gained by painting the house before scraping it, cleaning it, and priming it since you'll have to do it all over again sooner rather than later.
* Forward-test what you have so far, again using old charts, preferably replaying them (if replay is not available to you, then scroll through them, bar by bar). In other words, "pre-test" the setup. Make whatever modifications are necessary to the setup, i.e., re-examine and re-define your strategy. Address risk management, trade management, money management in further detail. Determine the ratio of winning trades to losing trades (you will, of course, have to define "winner" and "loser", which is where risk management and trade management come in). Determine the ratio of profit to loss. Determine the maximum loss. Determine the maximum number of consecutive losers.
Note that beginners often use "win/loss" to combine two separate considerations into one, and failing to keep them separate can create problems. One is win:lose. The other is profit:loss. Between the two, the "lose" and the "loss" have two distinct meanings. Win:lose refers to the ratio of winning trades to losing trades. Profit:loss means, expectedly, the ratio of profit to loss.
You'll read that the % of winners can be less than the % of losers as long as the winners are sufficiently profitable, one's management is superior, etc. And, yes, theoretically, one can "win" less than 50% of the time if his profits sufficiently outweigh his losses. But if your real-time real-money test begins with a string of the losses anticipated by your backtest, you'll be out of the game almost before it begins. In fact, one can be left high and dry even if his % of wins outnumber his % of losses, as mentioned above, if there is insufficient control of the amount of loss OR if the losses occur in sufficiently high numbers at the beginning of the trial.Then there are commissions and assorted trading costs to take into account, which is why traders who actually trade find that, without size, all the postulations about percentage don't mean much in practice.
* Paper-trade this plan, in a simulated environment, as a semi-final test, until you are satisfied that it performs at least as well as it did during the previous testing phase. This may take several months or more depending on how many trials you perform. If your plan is not consistently profitable, go back however many steps are necessary to arrive at a potential solution. (See also Making High Probability Trades.)
* Trade the plan using real money in real time, spending only what is absolutely necessary on "tools" and trading the minimum number of shares, contracts, etc., allowable. If your plan is not consistently profitable, go back .however many steps are necessary to arrive at a potential solution. Recalculate your win rate and profit:loss ratio on a continuing basis.
* If your plan is consistently profitable in practice, increase your size to what is a comfortable level, maintaining a continuous loop of re-appraisal and re-evaluation. When things come unglued, back up as far as necessary to regain your footing.
Novices rarely do any of this. They borrow something from somebody or somewhere and perhaps modify it somewhat, but they rarely go through the defining and testing process themselves. Some just try whatever seems like a good idea and hope for the best.
If one has absolutely no idea where to begin, there is nothing wrong with using a canned strategy IF it is used only as a point of departure. In other words, the canned strategy, regardless of what it is or what claims are made for it, still has to be tested, which often entails taking what is unexpectedly vague to begin with and defining it to a level of specificity that enables the testing to take place (it should come as no surprise that those who do go through the process succeed and those who don't, struggle, often to the point of being driven out of the market). Examples of canned strategies that are reasonably well-defined include the Darvas Box, the Ross Hook, the Opening Range Breakout, O'Neil's Cup With Handle, Dunnigan's One-Way Formula. Some of these are more vague than others and will require considerable work on definition before they can be tested. But they serve as points of departure
A journal should be more than just a trading log – bought here, sold there, made this, lost that. It should be a record of your journey (that's why it's called a "journal"). If done correctly, a journal will reveal patterns. Patterns of what you're doing right and what you're doing wrong and when and how often and under what circumstances. Patterns of the behaviors of those who are trading your stock (bond, fund, option, whatever). Patterns of the market you're trading, of its cycles, of its stages, of what works at some stages and in some cycles and not in others. It will reveal much regarding your trading. It will also reveal much regarding your self.
Addressing the questions asked and defining and testing the setup are only the preliminaries. Eventually, one starts trading, if only on paper, and that is where the journal can make the difference between success and failure.
A journal is not just a record. It is also a plan. Before the first trade is ever made, even if only on paper, prepare for the day. Note any events that you should be aware of (reports, press releases, meetings, speeches, testimony, nuclear explosions, approaching meteors, etc). Write down reminders of any elements of the trading plan that you're having trouble with and what you intend to do about them, e.g., “don’t take any trades anywhere but at support or resistance” or “be wary of wide-range bars” (this may be necessary as early as the afternoon of the first day).
Above all, record your justification for each and every trade. Record your thoughts before, during, and after the trade, written in real time* (your perception of what looks to you like a potential setup will change substantially after the “setup” resolves itself, and when you ask, later, “what the hell was I thinking?”, your record of your thoughts -- your "self-talk" -- will tell you, so that the next time, in real time, you’ll have a deeper and more rational perspective). This is more than just the reason for the trade (“It looked like it was going to go up”). It is more than the rationalization (“It was time for it to go up”). It is more than the mystic prompt ("I felt it was going to go up"). It’s the justification for it, the explanation that one would provide to one’s boss or client if he were trading for someone else. If everyone wrote down the reasons behind and justifications for every trade, their learning curves would be accelerated dramatically.
SO THE TOOL IS NOTHING BUT HIMSELF BY WHICH PLAYING IN HIS STRONG ZONE HE CONSISTENTLY MAKES MONEY OUT OF MARKET [ANY INDICATOR OR INDICATORS WHICH SIGNAL CONFIDENT RATIONALISED BUY AND SELL]HE KNOWS HOW TO HANDLE SUBJECTIVITY..RUMOR...LOSS AND PROFIT...
