Thoughts on Risk Management

[oilman5]

imp of basic programming for trade learner
.................................................. ............
if u ask me whether as a trader,..........u give programming or mba which comes first...........ofcourse programming . but programmer must know trading first.........so it creates oppurtunity to isolate.......wrong trade vs. profit making trade .
It cuts out sensitivity in trading and develop objective view.ASK Traderji why he is great ?........ofcourse mastraders' programming skill help them to reach icon status. so price speaks for them.......what may happen now.............Next various scanner search /give them oppurtunity in real time,.......just like a sharp shooter fights against sword champion from a distance.......... SO WINNERS R EXPECTED ........mind it many extra night they r awoke to prepare /test the tools in market.
the problem of new learner........they dont know what is winning idea in present market.......so their programming skill fails , instead what if scenario preparation, should study.........background of price movement.......from stable to a new zone,........after that high/close and X function and some strength study formula preparation can make a candidate for trial-trader

 

[oilman5]

Many yr back 1995, bhel-hardwar.......in the month of June ,in an open bridge tournament........on the 1st day of tournament, candidates r offered 2problems to solve..........prize 3000/- and 2nd soln giver to get 1000/-.........timeframe within 2days.
We r being in BHEL Quarter/guest house.........& mostly tried to solve them.Kanpur IIT team tried really hard,.......Present India top players of Ankeleshwaria.......and his partner really spent good time,.........novices.......were dreaming to get prize, sleeping at wee hr.Since i am with new partner 60+age, i have to mug system........so i admit to fail. After first day,........the prize money was not yet claimed, i hoped to solve it,.....Alas my partner pulled me out,..........as we r in main swing , he told me to concentrate further,.......to practice some tips......so i went back with him in an ashram where he was staying. Yes next day we played well,........sufficiently confident to win a prize...........i went back to Dehradun , highly proud, as some great name like Mr S Gupte offerred me, ........also some other businessman offered to join in professional group.
.....................Yes that was my first top winning tournament in bridge,.........but i knew now its shear coinsidence, i executed well, my partner........60 + , handled disciplined part, and we r lucky..........as most young/top callibre players r wasted their TIME .........to solve mathematical puzzle of null event.[1st problem has no soln]
I myself experimented vector modelling[being BE(MECH)] to solve,..........market price mathematically...............knowing now its big nly KISS works in market.this is actual trading.
Theoriticians r ...........just to be avoided in trading

 

[oilman5]

To understand view on stocktrading , just see the win of final match of Vishy......Topalov a child, The game idea is of SSganguly.......black creates a drawish style,......a simple ...Ba6......later Bb7........a poisonous La Dragon.......Topalov forget.......Anand had played many aggressive game in younger yr,......so small positional element,backed by a surprise ploy......f5 ,really can outwit on board. This style of SSGanguly is unknown......to many so called best rated player[read squant].

 

[oilman5]

after stoploss, only 2 things r left..............leverage on winner,keep urself with healthy attitude..................for av learner, reaching +ive expectency ' consistently earning out of market..........brings further quest.........bringing big winner. here on he become a discreationary trader(i know some of my friend dont like this word)......winning trade is a filter.........and he adds if he finds momentum /accln in volume or quickly reaching target.........yes this alone give u high return.........just check yourself with trend continuation idea.
................................


Healthy attitude........starts by questioning do i follow trade journal ?my right trade how far due to my execution skill/market favors me randomly........
next is how far smoothly i can trade and can it be transferred to others.......or otherwise unique to self.
WITH THIS WE R COMPLETING TRADE LEARNING.........next is practice.do it urself
In short term trade ,we search for bias ........bias for direction. imp is pivot.........pt of conflict.......known seller /buyer may take position to test market........based on their system.........actual system of earning is ........how bull/bear is losing battle ......so comes Oppurtunity........say yesterday,,.....upside conflict at Nifty 5280.......tells me many 3% probable upside trade exist for monday 5th april,but which has potential to go 8% ........they r to be taken.
Remember the flowers idea.........its the continuity ........breaking of higher pivot.......potential trade exists.
problem is in daystyle ........many may buy there,where as higher timeframe players r actually fading............so unless u know beforehand who may win..........mostly u shall in loser side,including self.
so u have to add some filter say simple 20dma with a some 1/2 hr price bar for continuation + volume accln filter..........u see winning trades r looking at u.
.........
hope it helps
bye bye
oilman5

 

[oilman5]

a core pt r presented here.'how to lose money in stockmarket'......pl avoid them
.................................................. .........................................
1]Trade in options without understanding and context of present market condition
2]not use stoploss
3]Cut your profits short and let the losses run
4]Select a method and start trading it because you are in a hurry to trade, not because the method is sound
5]Don't use any method or plan at all! ... Just buy as much as you can or short as much as you can
6]Take a position and go to sleep!
7]Listen and trade according to CNBC calls........JUST REVERSE ,ITS GOOD EARNING METHOD.
8] Never use your own brain for trading ... Never try to learn anything but taking position and squaring it off! Search extensively secret underground sources for TIP ...
9]Trade against trend ..........BUT THIS IS ONE OF MY EARNING METHOD.
10]Engage in extra-curricular activities during market hours AND Forget your commitment of trading seriously/mindfully .
11]Always assume that you are always right..even when proved wrong..take it as temporary setback and start with fresh vigor resuming your assumption that you are and will be always right..
12]There is only one rule....that is....TRADE WITHOUT RULE.....you will reach your goal.
13] If the basic hypothesis upon which a trade is entered does not exist, then one has to remain in the trade, hoping the situation to get more worse!
14] Emotions aka false ego....
Emotions aka i know all i longed/shorted this script and its going to follow me,i longed/shorted this script coz i know all about markets,always remember markets are not supreme,its the false ego in me.
.................................................. ....
Avoiding the methods of losing money mentioned in this thread would be quite helpful to become a successful trader
so as per modern concept key idea is
1] understand sentiment of present market
2] psychological neutrality
3] effective risk management
4] add/leverage when right.
5] where to put stop....../when not to play
6] preparation.......then only u can execute.....u have to develop a system which suits u
7] learn to play in atleast 3 types of market.......trend UP /DOWN ; VOLATILE , SIDEWAYS market.........mixing of them can be learnt later.
use very simple indicator..........but master over it.understand......price variation can be reflected in them.......so that......by seeing change in Indicator........u can develop to predict Right side of chart.
MA- X simply suggest trendliness, momentum tools use for strength.......support/resistance breaking tells us about future of a stock.
8] future of NIFTY and MONEYFLOW.......comes before everything.

 

[tnsn2345]

Have been following this post for quite sometime now.

Implementation of Risk Management according to me is quite simple and doesn't require much thought. However to derive a process could take time and research and could depend from individual to individual.

Oilman, you have given quite a broader persepctive on this subject covering almost everything from as many sources as possible. Appreciate if you could share your style of managing Risk on your individual trades, trading capital and on your total portfolio i.e. for each stage what has been your process, has it been different for each stage and how you implement it, pit falls during implementation and control /audit mechanism, if any.

Regards,

 

[oilman5]

this views r expressed as someone has asked to know something.............most of thing r expressed to enlighten that part.
i have expressed nothing on risk management.
if u ask me personally.........i try check whether high probability exists.
for intraday ........if i see , i am not getting my target.........time stop.
For swing , depends on particular stock..........time/particular % fall.......stop triggering
for intermediate term......its the fundamental reason of trade /or sudden big reversal .....then i trigger stop.
Naturally i have different A/c in broking house for that purpose.
For first 10 yr...........i have various approach and fouling.........not now.
If i am not on screen , no intraday.
If i dont understand reason behind trade, no trade.
.........so taking less trade,is my main risk management technique.

 

[vijayvaliya]

the logic of risk management and simplicity in trading is absolutely right.
But for stock trading.......pms exists ........and believe me ,fundamental really counts.
Result of stock/news has some role to play.
its the big fish .......they decide market.........so from certain characteristic & moneyflow u can with high accuracy tell.........where in particular direction trade is possible.Infact ur theory best work in forex........u may play there.
ps; if i come for summer national at Madras ,may meet u
regards
regards

I hope this post is a reply to my post. Thanks, I stay in mumbai at present. was in madras for 2 years around 20 years back

 

[vijayvaliya]

we study Trend to understand ..........trend reversal in near future possible or not..........so that's an oppurtunity.Be ready for possible scenario.
Again by seeing a Trend , check if in higher timeframe Continuity is possible(highly probable)........so that we shall not exit from a position,........if momentum also supporting then we may add........in Trend continuation.So trend itself not imp.......but Trend continuation -trend reversal.......chance of each of them happening and moving the same principle to higher timetrame........key theme of usefulness of trend.
when u understand trend exhaustion ,,,,,,,,,,,,so money making possible.Actually another 2MM principle is imp......Marginal trade & opputunity trade.
Marginal trade concept :you r in a position .......trade move in ur direction, u earn by booking profit..........only to see later ........trend is continuing ie. by simply holding u could have earn more.So u have to consider ur trade profit potential by creating ratio by profit booking ,divided by total move of stock in just next highertime frame.
OPPurtunity trade concept : here u r holding some position , so u r seeing some new oppurtunity , since ur money is blocked........u can not enter in potential trade, after some in ur time frame.......trade is making desired profit,......but for its on paper ,as u can not take the real trade,so restraint of fund .Similarly 3oppurtunity comes ,u put money on 2,......after some only to see thirdone gives better move.......alas for u its again a paper profit........TRADE oppurunity .
Elimination of this 2 mistake can improve ur trade return dramatically

sir,

I got the concepts, but can you go bit mathematical, or simpler in giving more insights into opportunity trade and marginal trading? If somebody want to create a system for margin trade and opportunity trade?

 

[vijayvaliya]

a core pt r presented here.'how to lose money in stockmarket'......pl avoid them
.................................................. .........................................
1]Trade in options without understanding and context of present market condition
2]not use stoploss
3]Cut your profits short and let the losses run
4]Select a method and start trading it because you are in a hurry to trade, not because the method is sound
5]Don't use any method or plan at all! ... Just buy as much as you can or short as much as you can
6]Take a position and go to sleep!
7]Listen and trade according to CNBC calls........JUST REVERSE ,ITS GOOD EARNING METHOD.
8] Never use your own brain for trading ... Never try to learn anything but taking position and squaring it off! Search extensively secret underground sources for TIP ...
9]Trade against trend ..........BUT THIS IS ONE OF MY EARNING METHOD.
10]Engage in extra-curricular activities during market hours AND Forget your commitment of trading seriously/mindfully .
11]Always assume that you are always right..even when proved wrong..take it as temporary setback and start with fresh vigor resuming your assumption that you are and will be always right..
12]There is only one rule....that is....TRADE WITHOUT RULE.....you will reach your goal.
13] If the basic hypothesis upon which a trade is entered does not exist, then one has to remain in the trade, hoping the situation to get more worse!
14] Emotions aka false ego....
Emotions aka i know all i longed/shorted this script and its going to follow me,i longed/shorted this script coz i know all about markets,always remember markets are not supreme,its the false ego in me.
.................................................. ....
Avoiding the methods of losing money mentioned in this thread would be quite helpful to become a successful trader
so as per modern concept key idea is
1] understand sentiment of present market
2] psychological neutrality
3] effective risk management
4] add/leverage when right.
5] where to put stop....../when not to play
6] preparation.......then only u can execute.....u have to develop a system which suits u
7] learn to play in atleast 3 types of market.......trend UP /DOWN ; VOLATILE , SIDEWAYS market.........mixing of them can be learnt later.
use very simple indicator..........but master over it.understand......price variation can be reflected in them.......so that......by seeing change in Indicator........u can develop to predict Right side of chart.
MA- X simply suggest trendliness, momentum tools use for strength.......support/resistance breaking tells us about future of a stock.
8] future of NIFTY and MONEYFLOW.......comes before everything.

reading posts no 48 to 56 .. is really good experience, i dont have the words (experience is not a correct word i feel). seeking more and more , also a lot more insights of your experience. Thanks a lot