The Best Trading System

Discussion in 'Words of Wisdom' started by Tuna, Nov 19, 2016.

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  1. Tuna

    Tuna Smart Money - 'Wait, I can feel them'

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    Thanks everyone for all your comments as I would like to keep this thread interactive. However let me make small detour here before I come to hardcore trading concept.



    Finding the Devil inside - the Habits



    Well, there was something bothered me ever since I started losing the trades one after one, making bigger loss for covering older losses and blown accounts one after another. But there were similar new trader like me who were doing pretty well. 10 years ago, I wondered how and why that had happened and keeps on happening with every new generations of trader even today. Few of them will be ahead on the curve than others, always. We may call gifted traders.



    (Now below notes will border some sci-fi hogwash, some tid-bids to Astrology, Some Vedic concept and likes. But bear with me, probably at end all will make sense, and this is only one post on this non-trading concept, rest of will be on trading)



    The answer is in our DNA - the source of all the info flowing down to one from his / her family tree, which determines the habits of that person and probability of his / her reaction to an events (of panic, of greed, of anxiety). Yes, on each generation this gets changed a bit due the course of journey of life of that individual (he might be impatient person at childhood , but latter events in life taught him to be patience - an example).



    As you might have noted (mentioned on my first post on Nifty thread) that I am also an astrologer (hobby), I know how to analyze a chart of a person to know his/her basic attributes. I did it for mine and found out what was my weakness - nothing new though, I already learnt that by losing lakhs of rupees in market by then :cool:



    And now as per Vedic concept of Karma -> your current life you will reap the benefit of your good karma and suffer for bad karmas done over in past life. The past Karma in context here is not the only the one directly linked with you alone, but also to your ancestors (in high level) --> Same thing which is being passed to one via DNA (Let’s assume a Sci Fi concept)



    Astro House No # 8 in one’s chart is house of sudden up and down and speculative gain. A favorable planetary position shows that the person will do good in speculation. And favorable planets will be there in your birth chart if your activities related to that house lord, aspecting planets, vimshottori dasha of that planet all are mapped positively in your current life - based on past life activities.



    Puzzled?



    Forget all this. Let’s cut the long story short now. But this background is relevant.



    What I wanted to say before we jump to trading concept and systems - most of us are not traders by birth, where some are naturally gifted.

    The only way to close the gap - is do enough work (real trading), taking pain (losses), changing the embedded program in your DNA controlling your boot records (core habit) - to reach a level where you are in the right setup to trigger successful trading.



    You are the Trading system at that point.



    You may read millions of book on trading, blogs, attend seminar - unless you walk the path you will not learn it.

    That is why I hate paper trading - trust me, I never did it. Back testing is fine to see a trustworthiness of a system, but paper trading does not let your habitual drawback getting involved on the trading.

    Unless you put some real money, and see the trade going against you (but your system did not invalidated the setup yet, that is the trade is on), will you be able to hold your nerve? Paper trade will make it easy, real trade no way unless you have gone through enough molding in the heat of share markets.



    That is the Karma- I am talking about you need to perform.



    Now one important thing.

    Before you jump on to trading keep some basic checklist handy. I will not elaborate each of these, unless asked.

    You may google for each of these bold words (not meant for elders, they live with these) to get the details:



    1. Try to lose less money during the learning curve. Where I discourage paper trade, I will not advice anyone to trade to get ruined. You don’t have to blow account repeatedly like many of us to reach profitable level.



    Please identify :



    You affordable Captail at Risk in trading,



    Your Risk of Ruin ,



    Your Win Rate of the system you are trading with and calculate Position Size based on these 3 factors

    Maintain a Trading Journal (there are many on net, search by 'Breaking out Bad', I used his template these days). Go for free one. And maintain it honestly and review over weekend (if not daily ) to find the area of weakness (like your emotion going against you, you are not following your system etc)



    And most importantly



    Plan how to refill account in case it’s get blown out. Cause there will be dozens of time that you will fail, but you need to move on. If you give up midway, market will be happy to bid you good bye, like many traders who did not know how close they were before they gave up (I was in the brink 2 years ago). This last point will give you an idea (your refilling capability) on first point (Capital at Risk).



    You may start with 10 lakhs, and your blow that in 2 months, if you can not refill – that was not okay. Start with 25k or 50k instead, if get blown out, refill. This is absolutely important.



    Don’t try to hit jackpot with one big swing – never.



    Well, a long post.

    For a closing note, to be successful trader I will suggest one thing “Fail fast, Fail Often" at the beginning and map your habits (the hidden program in your core) which are required to be challenged and eventually changed.



    More to follow..



    Good Night Guys.
     
    Last edited: Nov 19, 2016
  2. arjit

    arjit Active Member

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    Very nice opinion and your experience too.keep it up,Tuna.
     
    Tuna likes this.
  3. Tuna

    Tuna Smart Money - 'Wait, I can feel them'

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    Now having the dance floor ready, lets rock and roll. Each of my weekend posts will be set of 3 posts

    1. My Trading Concept

    2. Trading Psyops

    3. Trading Myth Buster

    where 1st will show some sequential connectivity to previous posts for same genre later on, last 2 are independent topics on each post. Its' up to you how you connect them to your trading system (Again, I am not talking about AFL codes)
     
  4. Tuna

    Tuna Smart Money - 'Wait, I can feel them'

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    My Trading Concept # 1​


    When we build a technical system for trading with help of some indicators it is common to use combinations of few of those, 1st one to generate the entry/exit and the 2nd one as a filter to avoid the noise or whipsaws. We will probably perform back testing to validate and deploy the same to real test. Sometimes we fine-tune the attributes of the indicator default setting to make it more perfect.

    We also might have gained the experience that a trading system may work in a certain type of market (trending, sideways etc) and against a certain instrument (Low Beta scrip or index, High Beta one etc).
    Now all may work in back testing and sometimes in actual deployment as well.

    However, does that come anywhere to actual backtesting results provided you tried your best to follow the system religiously?

    I don’t know for others, but this model did not work for me. I tried various system based on indicators. I made profits, well mostly higher than loss at times, but frankly I did not came to market for that kind of profit margin. I wanted more.

    The problem is also well known – though we call few of those as lagging indicator (EMAs, MACD etc) and few as leading indicator (RSI, Stoch, Will R% etc) – as a matter of fact all are based on past price / volume data of that instrument and the mathematical model behind it tries to predict future (for the leading one). So, it is a no-brainer – all of those are lagging.

    Then why these works at times:

    • Traders repeat similar price actions at certain level
    • We might use some trading system which might be generating signals for entry in confluence with a critical mass of the other traders in the same direction (Buy/Sell), regardless that they are using some other system (I shall discuss more on power of confluence later as this is the fundamental unit of my system)

    The point 2 is more important than any other thing in the market. Now would you follow a SAR or a Mechanical system, AFL code or follow pure discretionary trading, is your choice – the success rate will be high only if point 2 is satisfied (or the other way, critical mass is trapped and you enter in opposite direction, shall discuss this later as well).

    Once market changes its style (sideways to trend or vice a versa), the center of confluence will move away from the present position (Hint: Alteration rule of Elliott Wave) .

    So, if your system was non-performing till now, you may suddenly find high win rate or the other way.

    Just one last thing (not my words): Using Indicators blindly for trading is like sitting on the front row of a tennis court and watching the match with a binocular.

    But do I consider Indicators useless? No.


    I follow below technical indicators for various of my systems:

    1. EMA
    2. VWAP
    3. Super trend
    4. Fractal Chaos Band
    5. ATR
    6. Commodity channel Index
    7. RSI
    8. MACD

    The lowest combination is 2, max is 4. I never generate buy/sell signal via indicators – or in other words, I don’t take those always. There will be an X factor which triggers my trade, indicators are my wingmen.
     
    Last edited: Nov 20, 2016
    Sam11, Vipul_84, masterjee and 16 others like this.
  5. Tuna

    Tuna Smart Money - 'Wait, I can feel them'

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    Trading Psyops # 1

    If you want discipline in your trading decisions, you need to get that in your life first. Try getting up at a fixed time every day (5-30 am or 6 or 6-30 am), and do this for 34 days. Should be enough to program that habit in your core. And will spawn its child program. Try it and let me know if this did not help.
     
  6. Tuna

    Tuna Smart Money - 'Wait, I can feel them'

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    Trading Myth Buster # 1​




    Perseverance can help you in becoming a successful trader - Hell Yeah?



    Try pushing your wall next to the front door every day for 30 minutes and let me know how many inches it moved after a year.



    Perseverance is an ingredient for anything in life and most of the cases it is the key. You need to have this quality in the trading career as well, but if you bank on this solely, trust me it will not make a cut here.



    Know your EDGE !! That's the only thing that matters.
     
    Last edited: Nov 21, 2016

  7. crude begginar

    crude begginar Member

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    Awesome BRO..MACHHA..ANNA..BHAYYA.. for your nice initiative

    :clap::clapping:
    I am one of silent follower. You are simply a HERO for many newbies like me:thumb::thumb:

    May God bless you !!!!
     
  8. Tuna

    Tuna Smart Money - 'Wait, I can feel them'

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    My Trading Concept # 2​


    Let me discuss one of my trading system today, I mostly use this for Nifty though this is not the only setup deployed. Let’s take these one by one. You can try this on BNF as well. But I tried only on Nifty. I will give chart on Nifty.

    Entry/Exit Mode: Manual, But you can code. But back test with fixed target of +16 point to exit (keep me posted on how it looks), not sure though how you program scratching the trade, that is vital

    Time-Frame: 3 min

    Target: Fixed +16 points, in case momentum noticed (Candle size, or ELDER Impulse with Red or Green), can trail

    Stop-Loss: ST Band or Entry +/- 16 which ever small

    Frequency: >= 2 every day (Some days more than 4).

    Concept: Trap-dooring short-term or Intra-day trader

    Lot-Size: Scalping (I generally go for double digit Lots in Nifty, using 70-80% of my capital, but capital at risk is fixed as the SL is fixed). However folks new to scalping, please try with 2 lot only till you get a hang of the system

    Win Rate: > 50% based on my last 50 trades since last 2 months data, 30% scratch (0), 20% Loss (1:1) – So effective win rate is close to 5/(10-3) = 5/7 = 71% with 1:1 R/R.

    Out of my 3 odd Nifty trading system, this one is my favorite and yielded max profit

    Now let’s get in the details. Apart from above mumbo jumbo it is a very simple setup. I use this as you need lightning speed of decision making for scalp trade.

    Component:
    1. VWMA (14) [ Used this always, but trying to replace it with VWAP on Kite, shall keep you posted if that improve my performance]
    2. Super trend (10,3)
    3. CCI (34,-34,34)
    4. Elder Impulse Candle on Kite(Not on Pi, optional)


    If CCI remains between 34,-34, use Setup 1, or otherwise Setup 2

    Setup -1 (Normal Scalping)

    Entry: Wait for Whipsaw to happen on VWMA (or a crossover following by a Doji on borderline of VWAP even if not crossed), Enter in direction of ST. Enter on the first signal candle.

    SL: ST Level. If it more than +16 point from point of entry Put your SL on (Entry +/- 16 for 1:1 RR)

    Once Trade is 10 points in favor, get the TSL to cost (Must do for scalping with truckload of position).

    Target: Fixed (limit order at +16 point from point of entry). Don’t get greedy. Get the hell out once profit target is met (Limit Order, don’t try market). Else you may get slippage.

    Setup-2 (Scalping with Trail)

    VWAP is not used for this. You can keep on chart but irrelevant.

    Entry: Wait for ST crossover in direction of CCI (if CCI negative and you got a ST crossover in positive side, wait for the next negative crossover) and enter on the closure of crossover candle. Don't wait for confirmation. We will make the confirmation candle for traders who will follow us.

    SL: = +/- 2 points on top/bottom of crossover candle based on short or long entry
    Target: Fixed +16 point. But you can trail this one by booking 50% at +16 point rest till Elder Impulse Candle not forming the blue neutral one.



    Summery:

    Must-do:

    • Once the trade goes in your favor move TSL at cost. (I generally do it of NF moves 8-10 point in my direction)
    • SL order at the earliest, even sometime can place SL order beforehand. This must be a SLM (Stop loss market order, not a limit order)
    • While entering (say you want 12 lots scalping, put 3 market orders one by one with 4 lots each to avoid max slippage. If you see price going in your favor as soon as you enter first batch (4 lots), don’t place further orders as your entry cost will see more slippage. But since 3 mins candle, you will get the fill at a 1-2 point bracket of your target price area in most cases).
    • Taking setup-1 in direction of daily trend (if visible) increases probability


    Avoid:

    Trading on Expiry Day using this system, big news days (There is different system for those days, will discuss).

    Advantage:

    • Minimum capital exposure time to market generally you are done with trade below 10 minutes time. Consider 12-16 point in Nifty with 10 -15 lots (X 75), to me it is decent profit. Now consider you get 2-4 opportunity of doing this a day. Even if you get 2 right,2 scratch, well I am done for the day in those cases.
    • Good for traders who has problem in holding long to ongoing trades as this trades gets over in max 10 minutes, else use Time-stop to get out.
    • Loss is pre-conceived as SL is fixed. No Psy turmoil of making monster loss or account blowing.

    Note for beginners:

    If you never did scalping, find your position size max limit. For example if trade goes wrong, you will lose max 16 points (1:1 RR) on Nifty. Now find out how much capital you can afford to lose. If it is just 2500/- RS, you can scalp only for 2 lots.

    Sample Chart:
    Charts on Setup 1 (also showing when to scratch trade in some cases)​
    . I am posting possible entry exits on current month NF as can not get last contract data. But should clarify what this is all about.

    [​IMG]

    [​IMG]

    [​IMG]

    [​IMG]

    Will post chart on Setup 2 tomorrow.​

    Below chart showing both setup 1 and setup 2 opportunity. Please note the second one where VWAP is giving a better entry point.

    [​IMG]

    with VWAP

    [​IMG]

    Another Setup 2

    [​IMG]

    Now let me post some failures where trade has gone to scratch to make sure that this is not holi grail and you need to manage your trade to ensure that you are moving TSL to cost.


    [​IMG]


    You can also use Timestop if the trade does not get into profit zone by 7 x 3 mins tick - get out.

    Hope this helps. Q&A Welcome if any.

    P.S- Don't use Bracket Order and don't ask me why (you will find out if you are smart enough)

    P.S2- Forgot to mention one important visual cue:
    For Setup-1: VWAP or VWMA should be between current price range candles and the ST level
    For Setup -2: VWAP or VWMA will be almost overlapping or will be above (for Bearish) or below (for Bullish) ST level based on CCI <-34 or CCI >34


    Otherwise these Setups are not valid.
     
    Last edited: Nov 27, 2016
  9. Tuna

    Tuna Smart Money - 'Wait, I can feel them'

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    Trading Psyops # 2

    “If you can’t take a small loss, sooner or later you will take the mother of all losses.” - Ed Seykota

    If there is anything in trading which is always correct, I believe this is the one. It took me years to program it on my psy-system, but trust me this belief is the best friend of yours on trading.

    Loss-making is natural, but holding to losing trade with the hope of getting the trade back in your favor is deadly. It might come back to your favor 5/10 times, but the rest of the 5/10 times when it does not come back to your side, it will blow your account.

    So it is better to get out of losing trade 10/10 times if set-up is invalidated.
     
    Last edited: Nov 27, 2016
  10. Tuna

    Tuna Smart Money - 'Wait, I can feel them'

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    Trading Myth Buster # 2​


    "Let your Winners Run"

    To where? Moon?

    Always looks good when you see the historical chart of a stock /index and see a trade entry where you actually went in short or long direction, went for a huge range and you repent that you got out too early. Happens to me every month.
    You also would have read that there are folks who nail such trade almost end to end, well may be.

    But if you can trade with small profit target (10,20 pips) based on your setup which has a good win-rate and can generate frequent entry signals, you need not worry. You will land up paying little extra brokerage that’s all.
     
    Last edited: Nov 27, 2016
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