Thoughts on "The A to Z of trading career - musings of a professional trader !!"

[headstrong007]

@Vipul_84, I am doing it, successfully with bank nifty weekly options for long. But, frankly speaking, even though I am consistent, I am not confident enough.
I lose many times using weekly options even my direction is correct bcoz of not enough momentum or slow grinding movement.
I choose mostly traded options which loose roughly 35-40 pt prem per day if there is no significant move in price and India Vix. So making money in this process is really tough.

U can't blindly follow any system, U have to take only momentum trades after synchronizing HTF and LTF charts which is the most difficult part, u have to understand the market structure and make notes of retracements in various waves & patterns formed in HTF.
Even most successful traders lose 20-40% premium quickly when there is no momentum but when u catch one big momentum trade 200%-300% is there.


I am using only a part of the profit from my future trading as there is big risk in such trades.
So, why I am engaging such trades?
1. to satisfying my ego that I can do the toughest job in trading. Trading is a mental game. It helps believe u r a grate trader.
2. I lose more times in such high risk high reward trading. But, when I win big its 200%-300% it gives me satisfication.
3. As the risk is limited, I can lose only premiums and too positions are taken from partial profits, it's easy on emotions, psychology building...I can easily ride on profit till the last/exact target in my mind, hence trying to perfect my execution.
4. I am trying to catch 60-70% gap up and gap down which are along the trend. But, mostly there is no gap up down and due to time decay, I lost more money. So, using these process, actually, I am trying to mastering only high probability swing trades, but it is also very difficult, practicing...
5. I am using it for the perfection of execution and building my trading psychology more powerful, actually profiting is the secondary goal.
I generate more easy money using day trading with weekly options, there I am confident as time decay is less but the reward is also less, its brick by the brick by brick accumulation of profits there in day trading.


*************
I believe this is the hardest way of making money... Try it only with parts of profits first. First, make sure u r a already profitable swing trader in future, can have the ability to ride on profits. Catching few jackpots must be ur habits. Only then, u'll try to catch those momentum jackpots using options swing.

And finally, making money in this process is most rewarding in trading. We see many options rise up 200-500% in big swing trends. The risk is also limited to premiums.. But, there is no easy money in this market. So it must be the hardest way of profiting in the long run. And anyone making money in this process is taking money from pro option writers, market makers etc, this must be the hardest job taking food from them.

 

[headstrong007]

BankNifty in a boring range around the 25000 sup, waiting, watching...shared some thought...
So, the long... post. Discard unnecessary points, note down good one, if anyone find anything..

In trading goals are different. Sometimes we make trades to make money, sometimes we make trades to test ourself, to gain experience, to explore, to build psychology etc etc..Everytime we make a trade to execute some plan or to experiment or to develop our skill we gain the valuable experience/practice.

So, trying and experimenting new things with minimum capital in risk is not a bad thing. But, u must know when to stop if u find those things are not working for you.

 

[lemondew]

A different view of markets in terms of backtesting, and maths. different from the chart view I read in other threads. Good going.

Question to all - It has been 6 weeks since i started posting these series of posts and guess its time to ask these questions -

1. Does the members only thread posts adding any value to your trading thought process? Any feedback about it?

2. Anything to change/add in the way it is being written there (elaborate with reasons pls)?

3. Any feedback about this thread?

Happy trading !!

1. Does the members only thread posts adding any value to your trading thought process? Any feedback about it?

2. Anything to change/add in the way it is being written there (elaborate with reasons pls)?

3. Any feedback about this thread?

 

[headstrong007]

Some feedback tomadan, just continue as u wish, u r a nice and very knowledgeable person..

This is a great thread, but most attractive part is there is not much negative energy effect in this thread, mostly bcoz thread owner is psychologically very matured and sensible person.
So I saw many members also actively sharing knowledge in TJ after a long time in a thread.
Presently there is only very few thread with active participation from many members without negative energy effect, Happy Sings simple coding thread is one of them, bcoz he is also a nice an matured person.
I am glad to see such a good thread after long time in TJ.

 

[praveen98]

Question to all - It has been 6 weeks since i started posting these series of posts and guess its time to ask these questions -

1. Does the members only thread posts adding any value to your trading thought process? Any feedback about it?
Yes Madan, it is adding value to the thought process and some times surprising the way it is pointing to some simple small lacunae in my approach to trading,which made the difference to bottom line. Thank you very much for starting the thread.
As you said it is much difficult to get in touch with a good mentor who can guide you through the process and teach nitty gritty of trading...and if somebody wants to take trading as serious profession one has to learn through trial and error... I hope by the time you finish the thread at least this will help as guide to aspiring trader who is serious about the profession and shortens learning curve and show pointers in the right direction.
2. Anything to change/add in the way it is being written there (elaborate with reasons pls)?
As such it is good enough...(If possible please elaborate Trading plan and provide some model Trading plan ...Many traders like me are in business without knowing this requirement to have a TP and need to internalize TP thoroughly, it helps a lot...)
3. Any feedback about this thread?
Great thought provoking discussion going on here, very educative...and sometimes difficult to understand technical discussion which forcing me to read , reread and reread to get the drift of the discussion.
Thank you

 

[lemondew]

Not sure if you guys come across this or face something like this.

Problem of identifying shift in market behaviour.
Are you trading systems which is always profitable during all conditions?

Lets say we have system. Last 4 years its profitable. 2012 - 2016
It is profitable on average for 9 months and loss making for 3 months on an average in last 4 years.

Now for 4 years before that 2008 - 2012. It is profitable on average for 3 months and loss making for 9 months on an average . But inverse of system is profitable. lets say system2.

In last 4 years recorded drawdown in system 1 has stretched for upto 5.5 months. In 4 years Total loss making months is 12 months, profitable is 36. Opposite for 2008 - 2012.The best performance is achieved when all trades are taken and we keep taking losses during drawdown.

Now 2017. Will the trend of 2012 - 2016 continue in future or we have 2008 - 2012 .How do we identify we are changing.

A quick switch on losses will lead to trading system2 in drawdowns during profitable years of system1. A slow switch will lead to big drawdown when the market actually shifts.

 

[madank]

(If possible please elaborate Trading plan and provide some model Trading plan ...Many traders like me are in business without knowing this requirement to have a TP and need to internalize TP thoroughly, it helps a lot...)

Sure Praveen. Guess I have written about trading plan elsewhere but don’t remember where though Will cover about trading plan in detail in a separate post.

Thanks for the feedback !!

How do we identify we are changing.

Believe it or not – this is every trader’s Achilles heel and there is no clear magic bullet solution for this problem. So, we cannot control the ‘uncertainty’ right? We worry only about the things we can control – RISK. But even with measured risk, there is only so much a trader can do w.r.t drawdown.

Even though some traders do claim that they can identify the trend change, it cannot be done consistently over a long run. Simply not possible. That is exactly why this profession requires long term commitment and focus from the trader. This inconsistency in predicting market turns (too many hardheaded traders have lost everything due to this ‘predicting’ market behavior) or dissociation from our system pushes the trader to keep focusing on risk (the only thing we can control).

One thought that comes to my mind - Fix a point where you will stop trading the system (typically some percentage level DD but not sure how to set a deadline for time DD – no choice but to weather it).

Alright folks – will post the next topic in a day or two. Thanks a lot for the kind words and for the time you guys took to write down some feedback !!

 

[headstrong007]

Although I am a day trader, I think positional trading is the first step before day trading, so I have to go through that.

Just a few tips to test and understand positional mechanical system better:-

Any positional mechanical system performance also depends on Volatility and market structure especially when gap up gap down increases.
I also track India Vix and various statistical data based on Daily OLHC like trading range H-L,O-C, PREV C-CURRENT O(GAP), O-H, O-L average etc on 5D, 21D,(approx 1month),65D(approx quarterly). If anyone compares positional system performance along above data, it may give some inside.
But, we have to research a lot to find such hidden characteristic of our system. When we understand the strength and weakness of our system under specific conditions we can apply it selectively or tweak the system for optimize performance.

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And another important thing, many time a good positional tech system failed big due to overnight big events like news from USA,EU or Pending Vote Result or big economic data release. Although a good system can predict mostly right direction, but during such big events few large drawdown due to overnight gap up-dn can put the big hole in our ledger.
As successful trading is all about managing the risk especially during the uncertain and volatile time. Many traders cut the risk during that time, but squaring off future position and shift to limited options or no position.
We must discard those known event days gap up or down from backtesting data, replace them with exit position prev day(say 3:27pm) and new position(say 9:18 am).
In this way, we can test a positional system more accurately by discarding the luck factors due to big overnight events.

 

[madank]

Thought of the day - Importance of patience in trading

One often wonders about that 'consistently being successful' in trading and the factors affecting it. A comprehensive understanding of trading and the markets is not enough to secure success. Often, the skill of patience is undermined in trading success. Hence, thought of writing a small post about it.

St. Augustine once quoted - “Patience is the companion of wisdom,” and if he lived in our era and had to say it about trading, he could have easily gone on to say that patience is a virtue that should never be disregarded when trading, nor ignored when learning how to trade Proper patience is essential throughout the life-cycle of any given trade, and is of acute importance when learning and practicing how to trade. Unfortunately, patience is one of the most challenging skills to develop as a trader.

In the book 'Talent Is Overrated' (I highly recommend this book, if you haven’t read it), Colvin cites research presenting that only through 10,000 hours of practice can world class performance be accomplished. He is not talking about ‘being there’ kind of practice but ‘Deliberate practice’.

Deliberate practice stresses repetition, but also stresses self awareness and the ability to analyze how we are performing and acclimatizing accordingly. It is a crucial stage in the development of a trader because it is at this time when both good and bad habits are formed. If a new trader is not patient and hurries through the process, because of their over-enthusiasm or need to make money, the chance for developing improper skills is amplified, and the odds are the student will become overly frustrated and either quit or attempt to accelerate their learning curve even faster.

Now, the question lingers in our mind - why are we impatient? Impatience usually stems from the underlying belief to prove oneself. If we have an underlying belief to "prove our worth", we may find ourselves hastening through things, eager to accomplish things – in myriad number of ways to prove our worth. The "need to prove oneself" belief may be formed by any number of life experiences, where we may have felt inadequate, incompetent, defenseless, stranded or unappreciated.

Patience is vital to consistent success when trading because it allows you to be selective in your trading decisions. The experienced trader will not be anxious to make a trade, but will patiently wait until a setup with a high probability of success is exhibited. Once in the trade, a patient trader will give the position time to progress and will not get out of the trade too early, but will exit the trade according to a pre-defined/ 'well thought-out' plan. And the patient trader will not have to be concerned with over trading.

As someone said - “People who do the common things in this life uncommonly well will command the attention of the world” . Trading is not rocket science - it is more of an art. It is the pint-size things we do well when trading and learning how to trade, that make the difference between success and failure. Novice traders must always be prepared to put in the practice needed if they want to achieve proficiency, and experienced traders must continue to exercise their skills if they want to achieve greatness. And that ‘elusive’ patience might be the missing link.

Hope this post resonates with some of your experience/thoughts and if it does, I would like to hear it !!

 

[lemondew]

Thanks madan ncube and others,

I have satisfied myself a little. I think I need to run my system patiently till it succeeds or fails. Wait patiently till it succeeds or fails.If it fails then I need to adjust and trade as per the changed circumstances.

In all this I think its best to have maximum ratio of average annual returns: the max loss after
which you believe the markets changed.

The allocated capital for max drawdown seems like a bait to make money in the process. It can be lost