Reminiscences of a trade-learner , journey to become a PRO

[oilman5]

Now some basic.........for new learner on trading no further boring by fundamental
.................................................. .............................................
How to read the sentiment of the market… this is a core skill of every successful trader … discover the 4 key plays to look for….
The key to remaining emotionally DISENGAGED from the markets 24/7 …
this more than any other skill will make you rich…
How to employ the most sophisticated and effective risk management
rules used by professional traders… with their focus solely on capital
preservation … the pros use risk management to make massive amounts
of money…
your fail-proof ways to confirm before you commit to a trade
… All professional traders take making money very seriously … these are
the key tools they use to confirm their expectations before laying their
money on the line…
Discover successful trading strategies you may have been overlooking for
years… trading strategies … plus which to use when for maximum profits…
……………………….
When looking at charts on a stock everybody is looking at what the big patterns
are… Obviously understanding what the big patterns mean is extremely
important.
When I’m talking about patterns, I’m talking about things like double
tops and head and shoulders, Patterns are great because it’s a bigger picture but they’re made up of individual smaller components, which are the price points either through the day or if you are looking at a weekly chart, the weekly.
What those individual components really do is specifically show where the market sentiment is. And when you look at that sentiment over a sustained period of time, it gives you the trend from which you can then base your investment decisions
This is about being able to identify the overall trend based on the specific
sentiment as to where the buyers are at on a particular day. Are the buyers in
control of the day or is it the sellers that are in control?
Now you can’t have a buyer without a seller. The issue then becomes the
dynamic of price. If you’ve got two people, one is set on the sell side and one on
the buy side, and the seller is looking for say 100/- for that stock and the buyer
is only prepared to pay 98/-...
…the question is, will the buyer come up and pay 100/-or will the seller come
down and take 98/- Well that then depends on the dynamic within the stock,
the appetite for the buyer to really want that stock in that portfolio or the seller to
want out.
So let’s say you’re looking at the company that you’ve got a fairly bullish
expectation on, the buyer is more than likely to want to come and step up and
pay a little bit more.
Sellers are quite happy to sit back and wait ie not accept a lower price – and that sort of
dynamic then contributes to price actually moving up.
Once you understand that dynamic of what’s going on, the willingness of the
buyers to pay more / the willingness of the sellers not to accept less, you then have
a very, very good gauge on the sentiment on the individual price day.If sellers r willing to accept less value, with new sellers coming ……hammering the price down.
This allow you to make a more rational investment decision, which is based
on the actual momentum within the market.
........................................
expressing some basic.........for beginner on trading
.................................................. .............................................
In this special report – “Investment and Trading Strategies” you will
discover:
How to read the sentiment of the market… this is a core skill of every mega successful trader … discover the 4 key plays to look for….
The key to remaining emotionally DISENGAGED from the markets 24/7 …
this more than any other skill will make you rich…
How to employ the most sophisticated and effective risk management
rules used by professional traders… with their focus solely on capital
preservation … the pros use risk management to make massive amounts
of money…
your fail-proof ways to confirm before you commit to a trade
… All professional traders take making money very seriously … these are
the key tools they use to confirm their expectations before laying their
money on the line…
Discover successful trading strategies you may have been overlooking for
years… trading strategies … plus which to use when for maximum profits…
……………………….
2]The key to remaining emotionally DISENGAGED from the markets 24/7 …
this more than any other skill will make you rich…
we have…….The fear of losing money or the fear of missing out on potential opportunities to make it. …. the greed factor of wanting more money and greater returns
on our money.
Understand that everyday where something might be in a really, really strong
uptrend and it might be looking like it’s rolling over BUT you still see waves of
buying interest coming into the stock. Even though you can tell that the overall
trend is beginning to fail after sometime.
WHY ?The uptrend is coming to an end thus it’s purely people buying in towards the late
stages of its rally based on greed and ignorance. They have seen people make so
much money they finally get their act together and want to have a crack at it –
only to be buying in right at the very top.
That’s purely emotion that dragged them in there. If they took a step back and
did some analysis on the overall trend and how it’s performing and whether the
momentum within the trend is increasing or reducing, they’d be far more objective and make better decisions.
3)Trading System :
The way to avoid this is to build a trading system or process. The consequence of
having a trading system or process is that it enables you to have a very black and
white, non-emotional approach to trading.
With the trading plan we have a series of check list. The first three or four are absolutely non-negotiable.
By having a series of questions within your trading plan, you are looking at each
individual component of the trade in an objective way. You arrive at either a yes
or no answer. Once you have four, five, yes or no answers in place, you’re then able to read that in a way that says yes, there is a trade here or no, there isn’t.
We’re talking about the trade set up, what your specific entry triggers may be to
get into the trade, the points of confirmation by price /volume that you are looking for.
When all those ducks line up u shoot……….thats you’ve got a trade.EXECUTE.
Whereas if you’re thinking emotionally and a stock is really running hard – and
you think you should get in now before it’s too late – that’s very much a random
approach to the market. As a consequence, you’re going to have much more
random results in the overall performance of your portfolio.
It then almost depends on what sort of mood you have… whereas
you should be working towards having consistent results day in and day out by
having a mechanical, very robust approach to picking your stocks irrespective of
your frame of mind. The check list system works regardless of how you are feeling. It will force you to get the facts out on the table and study them as objectively as possible
………………………………………………………………………

 

[oilman5]

How to employ the most sophisticated and effective risk management
rules used by professional traders
… with their focus solely on capital preservation … the pros use risk management to prevent big loss.
I think that especially with beginners, risk management is not understood very
well and people don’t understand that you can greatly increase your returns by
having some definite risk management rules .
Just by having a stop loss in place, you’re limiting your downside risk before you
do anything else.
Once you’ve conditioned yourself to accept that you must use a stop loss as a
trader, the next step is to fashion a methodology for setting that level which is
the most appropriate level for either the kind of trading you’re doing or the
instrument that you’re trading or the approach that you’re taking in the market,
and so on.
For example, if you put your stop loss too tight, you will continually get stopped
out of profitable trades – where the stocks have just pulled back to pause or rest
for a couple of days and hit your stop loss level before it subsequently moved
back up.
It is very, very important to establish these levels where they will:
a) Do the job in terms of preserving your capital,
b) Will not be so tight as to see you disadvantaged, being stopped out early
of trades that have the potential to run on for even greater profits.
While some of the simple rules that we talk about are very simple, getting them
to be a habit and actually applying them with discipline every time you trade is
tough to implement.
As You are battling against human nature. That fact only reinforces
why you have to manage your emotion out of trading in order to accurately and
diligently use your stop losses.
One of the first levels that we put stop at might be below holding support.
If you have a stock that has been falling down, say it’s consolidated around about
100/- and it started to move up and you’re deciding to buy into the stock at say
102/-. Having your stop loss, below that 97/- level is really quite sensible
because 100/- being support several times, your expectation is the stock may
then come down and touch that 100/- level again.
If you put your stop right at 100/- above you are invariably going to get
stopped out. So instead of having at100/- just have it slightly below, maybe
97/- – just to give you a little bit of comfort and less likelihood of
getting accidentally stopped out.
Of course, the other way to look at this is if the stock does break down through
the holding support at 100/- consolidation has failed and the down trend is
continuing, in which case you’d want to get out. That’s just one methodology.
When you’re trading stocks that are perhaps a little bit more volatile or have
moved away from a level of support... one of the things I like to use is the ATR .
Look at the last 10 or so trading days of price action. Once I’ve had a look at those last ten or so days, I identify the most volatile day – anywhere there was the largest trading range. Once I’ve identified that, I then take an arbitrary amount which say for argument is 80% of that trading range. If you had a day where the biggest trading range the stock traded in was 5/- 80% of that will be 4/-, so I’d put my stop loss 4/- below my entry.
Now whether use 80% of the trading range, 100% of the trading range, maybe
120% of the trading range or only 50% of it is almost irrelevant. The key thing is
to arrive at a level for your stop loss in a structured way where you have a
process. When the process is consistent. Then you’re going to get consistent
results.
So it’s not just a question of 80% of the biggest trading range of the last 10 days
– you could use 60% of the biggest trading range over the last 20 days, it
matters not. What matters is the process used to get there is consistent. Once
you have consistent , at least you’ve got a degree of consistency from which you can then start to work on and improve.
Once you start to work on that, you can then fine tune
and improve the model and thus get increasingly better results.
One of the other rules for stop losses is what we call the 2% rule.
Traders universally regard the 2% rule as the golden rule.
You never risk more than 2% of your overall trading capital on any one trade. Let’s say you have 500,000/- to trade with, the most you’ll be prepared to lose on any one trade
would be 10,000/- (being 2% of 500,000).
When you start to look at three or four approaches to determining your stop loss
combined, you can then start to choose which level suits you best. You might
just use a fixed percentage stop loss, which a lot of people do when they’re first
starting out.
So to give an example, you might use a 5% stop loss, you’re not going to risk
any more than 5% on your trade, so if you’re buying into it, a 100/- stock that
means if the share price falls to 95/-, that’s where you’re going to be getting out
- that’s 5% less than your entry price – no emotion or doubt, just an exit out of
the trade.
Again, you’re arriving at that process in a fairly structured way, and that fixed
percentage rule is one of the more basic ways of approaching the market but it
still gives you a very good degree of consistency because you’re doing the same
thing every time you trade.
..................................................................................................
Some other strategies include the use of leverage.
When you talk to people about leverage they often see it as quite scary and risky.
I counter that by saying not knowing what you’re trading is just as risky because
you’re going to get smashed in the market anyway.
By learning and having a fairly robust trading plan, all we’re doing then is
leveraging off our ability to pick stocks correctly.
Let’s just say for argument’s sake, 6 times out of 10, you know you’re going to
pick a winning trade that’s going to make you 15%. And 4 times out of 10,
you’re going to pick a bad trade that’s going to enable you to lose 5%.
On the basis that you’ve got good risk management on your downside with your
stop loss constraining any loss to 5%. But when you make money, you’re letting
your profits run quite hard. So why wouldn’t you introduce a factor of gearing?
Gearing with a margin loan,futures, option etc.
All you’re really doing is amplifying your upside, your downside you are
constraining to 5% still. So if you’re confident in taking the trade, why not gear
up and actually leverage off picking the right idea and really making some serious
money out of it.
Rather than make a 10,000/- out of the trade, if you’ve got ten times gearing, why
not make 100,000/- out of it. And then on the downside, okay, you could say that
your losses are also augmented but if they are preserved at 5% and your upside
is 15%, you’re going to come out ahead.
Again, it makes perfect sense if you have a process and if the process is objective
And constrains your risk and enables you to let your profits run.
And herein lies a problem. When you talk about trading, everybody says show
me the leverage……….. racy stuff that looks really interesting and there’s big zeroes on the end of everything and yeah, the percentage numbers are big.
But the work seems to be on learning how to pick the stocks and more
importantly, not just pick the stocks, but actually manage those positions through
good money management skills. That’s the area that’s not as rosy. It’s not as
exciting – but it is an area where the hard work needs to be done.
But what people fail to realize is without the work being done all you’re ready for a fall. And if you’re using leverage, an even bigger fall.
So first take the baby steps in terms of learning and to understand and read the charts
properly, how to overlay your fundamentals, how to pull that information together
into a robust, proven, unemotional, simple checklist, process orientated trading
plan that really anybody can follow.
If you can make money using that trading plan. Once you’ve got a comfort level whereby you actually have a belief level that the plan is working for you, then you can start to apply the leverage and that’s really where the reward comes in for the efforts that you put in.

Up trending “bullish” market: Long equities
Up trending “bullish” market: with price rise Long equities with leverage
Down trending “bearish” market: sell stock and Short futures.
Sideways trending market: use swing strategy

 

[Champion]

Thanks Oilman.

 

[oilman5]

So now we are approaching slowly towards reality
..............................................................................
First a learner should be guided by inquisitiveness , not by greed.
if greed is driving force to look at market, pl throw away that wrong notion first.
2nd
..... It takes time to learn . patience is a virtue.
if u dont have it , develop and practice it.
3rd
.......Do u understand the value of discipline and reading and syncronizing in life ?

if not spend some yr to do this.
here i find the root cause of failed trader,........they failed here.
4th
......
r u an independent personality ? Most learner may differ, its not an wish, but necesity .
BY simple term , u can consider/calculate other's contribution to your daily life monitorily and pay back it .
So u r +ive , not a liability.this concept i found exceptionally useful in trading ,all sorts of business and understand strategic thought process .
A leverage personality on the otherhand lives on mercy of others. ....good for service work , but a total NONO trade learner.
NOW we see,why novices lives on confusion and novices cant solve/overcome this 4steps
......before seeing the blue print of trade learning ...this principle r to be in your heart.

 

[oilman5]

So a novice understands (a)inquisitiveness
(b)time to learn . patience is a virtue
(c) discipline and reading and syncronizing in life
(d)independent personality
........So many novices without understanding this are making a hard knock on market-wall ,forgetting workdone principle ........force x distance. so their effective effort o.
..................
Instead they should understand what is reqd............if its not with him/her , he has to cultivate it,....thats why behavior modification.
Soon other 2 factors......mother of any venture,......time management and knowledge comes

Another exceptional quality PERSISTENCE......its unique in trading field, insistence to comeback to fight for another day.
.............
Pros know when not to come back, when to accept challenge.......but av joe never understand that Pro is superior , also know flexibility.
As a new learner ...... u reqd balance confidence . To create this balance confidence...... we normally follow some back testing, what works in past.....those in advanced stage of learning , plan for FUTURE market condition,
Some prepares with action guideline , with hypothetical WHAT IF scenario .IN any case ur own personal trade experience....r also to be correlated , a good trader adds also EQUITY CURVE analysis.[ some person calls it draw down /without money simulation test]

 

[waktem]

This is a good idea to share the views and a good guidance for the traders who just start trading.Also to be a PRO this is a very best idea to get the path to it.

 

[oilman5]

now we shall go in knowledge aspect.
.......................................
Theoritically a successful trader/broking community passes essence to close relatives/ favourite students of market...........but actually change of market condition always keep on toes,even experience traders, ........here a master trader fights against 3,
1.self /
2.other master traders
3.and market...........no novices r never his challenger, maximum a distractor of time,.....
(worst case if master is blocked to superiority feelings if he is surrounded by crowd of av joe,hence developing the ego of i am the best syndrome, )
...........................................
INVESTMENT PRINCIPLE
................................
how to utilise better return in future..........risk mitigation principle,valuation for a sector........which principle to be followed..........how demand/supply shift valuation ,
when to be contrarian; how far operator & money flow is superior.
visualisation and actual implementation r other key concept
........................................................
Since ordinary mortal can not handle all, so comes KNOWLEDGE MANAGEMENT......and strong filter to pass to u for oppurtunity only useful info.
System development is nothing but this syncronisation . we use computer to do it,Also the filter at which timeframe ur +ive expectency higher, ur comfort level better, added witha punchlist DO-dont.Basically use of computer/programming give us objectivity ,neutraling mood swing.
Simple parameters to get some idea on whether to trade or not, predictability factor,what set up is right for present market and for me.entry setup, exit guideline,when i shall HOLD ie. let TIME decide.........this questions r answered and programmed to find oppurtunity /danger.....now comes implementation. HERE mind should be neutral.I knew its easier to say than done,.......in 1991 i put order of 30000/-
in 1997 ...300000/- i had trouble to handle that , in 2006.......an order of 1500000/- big for me , but i can click 2000000/-...........and totally just like sipping water click for 5lakh
............its very long journey ,.........i mean this click/and resultant profit loss calculation should not affect u.[ and if affects pl stop overtrading]
..........................................
--------------------------------------------------------------------------------

CYCLICITY Principle works in all time frame.......bull/bear, in traders language seasonality/ for swing trader .......higher /low pivot.
Break out is nothing but spl condition of continuation thrust.
REVERSAL .......another strong principle on trading
........................
governing guideline behind this principle to be understood.............and when they can shift to HIGHER TIMEFRAME.THIS i call mastery in trading......macro/micro view appln.
SAY.....intraday profit......3%.........can i convert to swing , may get 8%
( 2DAY BACK I BOUGHT EIL@127-ITS 138/-NOW, CAN I GET ANOTHER +7/-).
SAY positional profit........20 % in month 1, can i convert to 6 month HOLD........50% return
Similarly........a quick fall of 4 % , must be stopped out,.......as otherwise it has potential big loss of 25% in a month

 

[oilman5]

variability of cyclicity ,time factor of completion of wave or ELLIOT WAVE........r itself variable ie. subject to market ........ie prediction can be easily proven WRONG by market........so they r not valid method of trading, but good to lecture & analysis.
........due to one's reactive nature, forward looking consideration , probabilistic scenario u can many a time WRONG in market..........so comes stop loss.
ENTRY set up has to be understood in the context of MARKET , sector rotation & moneyflow.........not vice versa.
CONCEPT of EXIT........is concept of maturity .......so it can be learnt with experience.
NEXT comes money management ,position size.............applying all these is trade management.
STATOR is a TRADE management software to write journal and studying EQUITY CURVE used by professional money managers.
so for advance learner simply follow diary writing ,evaluating trade & use of excel is OK .

 

[oilman5]

Market is reflection of human mind,.........so chart should primarily be used to understand that,then shift to highertime side,......whether trend continuation possible...if WHY.
if not reversal possibility ......why ???
similarly at bottom of cycle .......question what u see , can it be a money making oppurunity for me?
MEDIA hype has to be neutralised in your mind.......so see price volume....delivery
3elements r always present in market ,,,,,,,normal trading, speculation and big money flow.....
u should have a method to segregate them......this is my aim for objective analysis.....
I see fundamental......to get forward looking view of management .......and to understand new price discovery if further money chases the particular stock/sector/market..........same way,,,,,,,in danger which share be dumped first even by OWN management.(candidate for short).
...............................

SYSTEM DEVELOPMENT HINT
......................................
market condition trend UP or DOWN........use simple 2 MA cut ,5/20 very good
market condition TRADEZONE........use stockastic/%r
market condition volatile......USE EOD break out/ momentum scanner...... play for intra day.........dont worry on confirmed direction bias ..If u r not earning , then simply this market volatility/unpredictiveness DONT SUIT U.GET OUT FROM MARKET,join only at low volatility directional break.(i have studied/prepared about 2yr for this condition , in other market actual simulated past data , in a software OMNITRADER, where u can hIde data of right side/predict bar by bar & can see /compare vs. price actual blossoming)
CAUTIONARY NOTE:
any personal disturbance /other priority .......dont trade.
do u ask anyone for market condition,what to do now..............DONT TRADE

 

[oilman5]

since its for beginner........to develop knowledge use 4shared.com
just click .........search ........with word like investment.trading, cfa, candlestick,swing trade, forex, stock trade .......
u get good collection for free.
next use youtube.com ..........with similar search and u learn yourself the basic of theoritical knowledge
.............................................................................
basic clarity of a trader............a model for job fitment......pentagonal peg and 5sided hole..........
next comes psychology .Any novice when comes in market ,basically a donor to market, so collectively good pro try to save him by giving him free knowledge.
Problem starts......when av joe thinks.............he is capable , defended by wellwisher , a la ABHIMANYU style ......forgetting he has to die,.......as he dont know survival /nor forward prediction.
the basic SWOT........must be done.........so if u have emotional urge , plus many a goody goody values /other priority..........pl dont try to come.
yes actually 99% above failure rate is here.Just understand why iimc fresh boys r taken on as buddy trader with av 40lakh salary.......to teach them in 3-4 yr, with may give return of 25-30% later by the FI.AND 10% of them only get success. JUST understand filtering of them through JEE-CAT. u understand requirement.
a good trader is speedy -good analyst-forward looking-calm-objective + checks himself.
.........understand this is pre-requeste.
WAR is not a computer game,....u bleed here.......only blood is money.
KNOWLEDGE ...behavior modification........fitting what works for me......fine tuning comes last.
u know probably......IIM produce good investor , as their professors r failed trader.
..............................................
understand difference of predictabiliy vs. speculative.......
for me anything of happening chance upto 59% ........is speculation.so NONO

upto 65%.....i can not distinguish.
but 65% and above.....it may happen...........a zone suitable for set up/candidate for trade........price confirmation .......follows actual trade.
many a speculative idea r winner.........but a missed trade also......many a trade candidate move southward............that is part of my system.....to hit stop.
probilistic analysis suggest ..........i have to live on reality
................................
another imp thing to backtest on indicator based signal............its better in any particular timeframe with around 70 % accuracy level..........so find that holygrail .
no i have any.........but.........some r having , as they consistently earn out of market........i am aged now........can not afford search.......have to happy with my 60% tool...with complex understanding.......and book loss in other 40 % of time.
So when i cant understand ,have to be out of market .....to save from draw down. Understand reality........street fighting......only be learnt at street , by fighting only
........................................
why i trade stock ? because that is what i little bit understand ......moreover some fundamental scenario change i can understand better,atleast better than young fund manager.......so i have survival bias here , so i trade stock.
WITH around 100 stock list.........thats all, but plan to comedown to 60 ,as i cant handle properly .

............
for understanding trend aroon is very useful
for understanding range atr + price band is useful
for understanding thrust......volume accln/momentum very good.
for understanding reversal .......excessive + reversal candle like engulfing is sufficient.
........................................
for random style.......weekly pivot
for volatility play.........volatility comparison tool ..........pioneer work is done by director of tradingmarkets.......father of VIX tool
.............................
this is the right way to use ,........i am not talking of indicator specialist/ they know their tools and limitation........and have +ive expectency to earn from market by his system.
[+ive expectency= no of right trade x profit per trade - no of losing trade x lose per trade]
My personal bias on stock
...................................
i have to choose stock based on what i know better.......
in India .......certain sector behave differently with so called biasedness........as i am not from finance.........i dont play in bank share........[hey here opponent know better]
i definitely.........play in oilsector...since i worked in power ministry.........i have basic understanding.......so its upstream and user.
as i have some knowledge on spl engg product....naturally on some engg equipment/ its supply chain.
since i work in project........naturally cement and steel comes........so comes project execution and consultant.
naturally ......gas / oil pipeline producers
some pharma and computer co...........basically CRAM concept
i like tourism and hotel......as its concept easy to understand.
since i trade , naturally stock broking company r my watchlist
Apart from that some monopolistic company,which i have seen some years .
.............
i have poor understanding on export/import......here i lost in past,also in media sector........so i avoid them.
some commodity related cyclic stock i am studying..........may be after 1 yr i may add.