To be a trader - 20 years'journey from novice to pro novice

[oilman5]

Followed from ST
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I would like to share an important phenomenon regarding oscillator overbought/oversold conditions. Whenever an oscillator like Stochastics,( or even RSI,ROC etc ) stays above the overbought limit for more than 5 bars without taking a dip from overbought to neutral zone....the market has a lot of steam left further to go up, market then continues upward journey,then comes down,then goes into overbought zone again but shows negative divergence and then only it comes down...till then it keeps making higher tops. This is a very strong bullish signal to trade.....

Mirror image for oscillator staying in oversold region for more than 5 bars...

The above phenomenon was what was happening towards the later part of the session yesterday (26-06-09).... I traded this observation yesterday and thought I will share with all....

I am posting Bank nifty fut 5 min chart of 26-06-09 which is used for day trading.....the top panel is a stochastic oscillator....I have marked 80 and above as overbought zone

The market goes from overbought to oversold and so on so forth in a trading or sideways market environment...so selling in overbought and buying in oversold zone is a good strategy....but somewhere markets start trending and that is where the trouble starts for our oscillator trader.

Observe in the chart that when market stays in overbought region for more than 5 bars ...it is extremely overbought and selling it is incorrect....market needs to dissipate this overbought reading and till then it will blast off on the upside and our oscillator trader will keep on selling in a market which is blasting off ....The correct action here is BUY....not sell...
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Slow line is basically the moving average of the fast line...done for smoothing...so if you are a very aggressive trader...start counting from fast line...if you are a bit relaxed type...start counting from slow line...the aggressive trader counting on fast line will have more trades,early entries but also more whipsaws.....part of the game we are in....



To understand the correct way of trading on oscillators let us study the Nifty futures 60 min chart.The stochastic oscillator is doing a great job till May 09end...calling each top and bottoms and our oscillator trader is on a high and feels that he has figured out everything in the markets and he is on his way to top the next batch of Market Wizards......But market has its own ways...we all know that.... All of us have been there....

The problem areas for the oscillator trader are as under :

1) Up trending market from 27-5-09 ,1:00 bar to 2-6-09 ,11:00 bar

2) Up trending market from 9-6-09 ,3:00 bar to 12-6-09 ,12:00 bar

3) Down trending market from 12-6-09 ,3:30 bar to 16-06-09,12:00 bar

4) Down trending market from 17-06-09 ,3;00 bar to 18-06-09 ,3:30 bar

If he can handle the above 4 markets successfully,our oscillator trader is the king....

Let us see how he can handle these periods...I will explain first two cases,rest 2 are mirror images...

1) 27-05-09 ,1:00 bar onwards.....

On 27-5-09 at 1:00 bar the stochastic oscillator goes into overbought zone and that is a mouth watering trade for our trader friend to go short ( most will trade like this and repent later ). He goes short and gets killed in the subsequent market acyion.

The Oscillator Entry Qualifiers For Short Tradeare as under :

1) The oscillator should have gone to overbought zone.
2) Wait for a bar where the oscillator flips...ie comes out of overbought zone and comes in neutral zone....
3) In doing step No 2 the oscillator should not have stayed in overbought zone for 5 bars and more
4) Wait for a downclose ( meaning close less than earlier day's close)
5) Ensure that by that time oscillator does not go very near oversold region
6) Sell when the low of the downclose bar is broken on downside.....

If you observe all 6 qualifiers you will see that there was no shorselling opportunity in this uptrend.....our trader friend is home safely....and made money in longs....

2) 9-6-09 ,3:00 Bar onwards

Oscillator went into overbought territory and stayed there for 9 bars.....so no shortselling ideas to be entertained....

Here the market will move to neutral zone,dissipate the extra bullish pressure ,then go to overbought region,fulfill all 6 qualifiers,give negative divergence and then change its direction to down...let us see what it did...

Come to 12-06-09 ,12:00 bar...after dipping into neutral territory the oscillator has gone to overbought zone again....it stayed there only for 1 bar.....next bar 1:00 it dips again into neutral zone,gives a downclose...Now all qualifiers satisfied...the low of the 1:00 bar cracked in 12-6-09 , 3:00 bar and that is an ideal sell entry....mkt never looked up after thatAlso note the classic negative divergence here,the mkt making new higher top oscillator making lower top....all perfect...

The other two are mirror images in downtrend.Our friends can easily figure them out well .....

 

[oilman5]

With this i am moving out from TA to psychology- the most important topic
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No one can identify the trend or sideways day at the beginning of the day...but as the day progresses, in first 40-50 min it is clear that whether it is a trend day or sideways day which we are trading.On first rally and decline, market gives indication of trend/no trend.-ST
with this comment , i start most imp aspect in trading ie. be ADAPTABLE OBSERVER- TRADE DECISIVELY WHEN U VISUALISE A MOVE , BUT BE READY TO BE WRONG.
To create this is NOT easy- yes i am trained to do like that . Some of those Pro material will be given here.

 

[oilman5]

TRADE PSYCHOLOGY
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For trading market, price reading & YOU –this 3 factor u have to learn & master . The 3rd is most important. YOU factor comes from trade psychology . Actual long haul a trader wants to trade , he has to give atleast 50% weightage to psychology.Better u r a trader, more systematic-disciplined u r, less weightage should be given.
There is major flaw for trade learner, they don’t give proper time & effort to master it.Financial novices fail in market because of simply this reason. So many a failed trader with psychology/clinical psychology background made a through study of av trade-learner ( mostly miserably failed trader) – and become successful as trade coach. Yes read them , its partially helpful. To name a few.
1] MARK DOGLOUS- TRADING IN THE ZONE,DISCIPLINED TRADER
2] VAN THARP- WAY TO FINANCIAL FREEDOM ,PEAK PERFORMANCE COURSE,SUPER TRADER
3] ARI KIEV-PSYCHOLOGY OF RISK,MASTERING TRADING STRESS,WAY TO WIN
4] Dr elder- COME TO MY TRADING ROOM,TRADING FOR A LIVING,ENTRY & EXIT
5] Dr Johnson-FROM PAIN TO PROFIT
6] Dr STEENBARGER-ENHANCING TRADER PERFORMANCE,DAILY TRADING COACH
Two lady trainer/psychologist
7] Adrianne Togharie- DISCIPLINE-DISCIPLINE
8] RUTH BARRON ROOSEVELT
Comments : Start pt is one , higher u move in number, better is the quality/maturity of trainer.The last 2 lady help basically stick to business ,throwing unnecessary psychological burden.Best trader whom I have met, suggest DON’T GIVE THAT MUCH WEIGHTAGE TO PSYCHOLGY .IT COMES AUTOMETICALLY ,IF U R SYSTEMATIC,RULEBASED TRADER.ENTIRE GAME FOR MAKING MONEY,……….U SHOULD HAVE SOMETHING NATURAL , SMALL CAN BE FINETUNED. OTHERWISE THIS TRAINERS WOULD HAVE BEEN TRADERS.

There is another approach- read from best trader, particularly when they have given insightful thought. Best one is PHANTOM OF PIT.Followed by WAY TO TRADE BY john piper.
3RD ONE = MENTAL FITNESS FOR FUTURE TRADER- NORMAN HALLETT
Book by Curtis Faith –WAYS OF THE TURTLE, TRADING FROM GUT.
Views from LINDA,,Victor S……….WISDOM from experienced trader/mentor published in net.
There is another imp concept – EMOTIONLESS TRADING. THEORITICALLY we should aim it.
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By going detail in psychology helps u, how to tackle market uncertainity,when NOT to play. It helps to implement –TRADING AS BUSINESS, EXECUTION AS A JOB.Clarify importance of decision making within fierce battle ground between bull& bear, and when to play for survival, when to shift to play for big win.
The fitment of what style u choose as trader, intraday-day trade-swing- intermediate position ,position for long haul- depends naturally on your personal trait,as well as time/correct knowledge availability.
PSYCHOLOGY HELPS U TO UNDERSTAND WHERE U R NOW.so u can plan ur behavior modification to be a right trader ,with suitable style. It definitely helps to eliminate your life’s valuable time –if trading don’t suit you.If u r not keen to read/watch price attentively- an easy going personality – DON’T WASTE TIME.

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since i am now seeing trading as an intellectual persuit, and trying to solve from angle of psychology-view may be different /little bit difficult to follow.But those who have followed Journey of a trader' and REMINISCENCE OF TRADER' and his self reasoning /analysis on trade - easily find the truthfulness in it .
PURPOSE IS MOST USEFUL.this gives clarity . in layman's term it may be vision.
With strong purpose , u can sustain trader in you.
Next comes trading as business. The paper trade/small a/c size trade/application of ta-fa -news play ALL THESE IS PREPARATION FOR LONG HAUL. R U FIT FOR TRADING BUSINESS IN OWN A/C????
the basic aim of the paper trade/small a/c size trade/application of ta-fa -news play
IS PREPARE PSYCHOLOGICALLY. throwing out euphoria trap, learning execution while losing (getting out early-lose booking should not deterent ) as well as develop an habit to ADD WINNER EARLY TO UTILIZE MOMENTUM .COMMON SENSE SUGGEST HOLD WINNER, but trade mastery is nothing but add winner.
pl understand simplicity in principle, but complex in practice - thats why its a skill- skill to make money.
first survival- THROW LOSER EARLY.
maturity-HOLD WINNER
TRADE TO WIN= ADD WINNER or leverage play.
probability of a trade going right at start in mind is very high,but actually NOT THAT HIGH. BUT WHEN IT SHOWS UP (considering long trade )- price is telling -YOUR MARKET READING IS RIGHT,confirmation comes- so use momentum to earn more.THEN WHY NOT ADD IN ACTUAL HIGH PROBABILITY TRADE????

there r two types of data- one u easily see .MECHANICAL DATA-PRICE AND VOLUME , u study it , just like other 40lakh indian . THEN U SEE A BUY OR NO ACTION , when many a interprete SELL,
YES IT BECAUSE OF INTERNAL DATA. from your past experience , your mind strongly suggest a bias to move up NOW. AT REACHING A THRESHOLD ,UR BRAIN A COMMAND -BUY NOW.so you execute directly or indirectly hrough dealer/rm. NOW AFTER ENTRY , U EXPECT TO MOVE UP, but goes down some tick, remembering you, it may go down- so u place STOP TO KEEP U IN SURVIVAL MODE. SUDDENLY SOME NEW BIG BUY ORDER GOT EXECUTED- PRICE GOES 4 TICK UP - u consider you have the skill to entry right......................
TIME WILL TELL AFTER EXECUTION (BUY-SELL BOTH) ATLEAST 100, IF NOT THOUSAND - HOW MUCH PROFIT U MADE , BE IN PAPER TRADE OR IN REAL TRADE - YOU HAVE NECESSARY PRE REQUESTEE TO BE A TRADER. this i tell BACKTESTING -not a foolish report generation for strategy preparation or confidence building.Pl play a game of predictability -by bar by bar with a 1yr back data, with buy/sell /dont do anything - this helps to react RIGHTLY ON MARKET.
ASKING NOVICE QUESTION, LIVING WITH EMOTION NO WHERE CAN MAKE U A TRADER.SO after 1st cycle on market or completion of blow out of a/c , pl see your internal data, by ASKING QUESTION
why i have taken the trades? how many of them moneywise right ?how much i am emotionally involved during the trade? reason of getting out- that time market condition .
WHAT IS THE SUPERIORITY OF TRAINING ? TO DEVELOP A SKILL TO ACT WHEN TIME COMES. IT IS THE CONTINUITY OF TRAINING LIKE MILITARY REGIME FOR LONG- CREATE THE WORD - prepared.
TA IS BASIC LOGIC FOR TRADIG.
ITS THE PREPARATION MAKES U A TRADER.
then only comes APPLICATION . do u understand how tough wwf fighters r trained for long entertaining fighting business. U R THE SAME GLADIATOR IN TRADING. SO TRAIN ACCORDINGLY. time again in past ,i have shown my skill to trade now,- but no more , as i dont require anything to show.NOR I BOTHER FOR TARGET OF RETURN %.if market offer opportunity i trade, and book profit at predefined target.
YES 1ST 10 YR IS REALLY HORRIFIC , AS I LEARN A LITTLE ONLY TO SURVIVE

 

[oilman5]

RATIONALITY VS ILLUSION
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A TRADE LEARNER THINKS /PLANS BOTH R LEARNING /STARTING PT. A novice is totally on illusion . Read SMART TRADER- u understand state of RATIONALITY- the thought process BASED ON REALITY.
AFTER 4YR- YOU ASK AND ANSWER THIS SAME QUESTION
] why u r trading?- FOR MONEY ,NOT FOR THRILL, NOT TO PROVE ANYTHING IN LIFE LIKE DECISION MAKING SKILL , NOT TO KNOW what is trading, not because let me try attitude, but because confident optimistic view I CAN. I MUST REQUESTEE TIME AND MONEY TO TRADE.
2] how much rate of return u plan- YOUR PAST TRADE RESULT/UR PORTFOLIO SHOULD BE GUIDELINE-NOT AMYTHING ELSE. no illusion ,imaginary peep show.objectively 20-50% return possible, higher than that a born liar. LIE has no place in trading. u earn more that by luck, ur risky trade turns into probably succeesful trade. ITS THE MARKET WHICH GIVES. YOUR CONVERSION MECHANISM MAKES THE RETURN.UR PLAN MUST TEST GROUND REAL OPPORTUNITY .for intraday 4-5 opportunity a day . for swing -2/3 opprtunity a week. for position 3-4 opprtunity a month. RETURN EXPECTED -1/2 % A DAY , 3-5 % A SWING, 10-15% A POSITION .PSYCHOLOGICALLY PREPARE UR MIND FOR THIS RETURN .

3] your inherent skill, by which other experienced trader loose against you.- THIS IS VERY IMP. I WAS A CHESS PLAYER,SO ADAPTABILITY , SUDDENLY IN SURVIVAL MODE, IF FOUND WEAKNESS IN OPPONENT'S MOVE -MAY SWITCH TO AGGRESSIVE PLAY. YOU MAY BE WELL ORGANISED , MAY BE GOOD AT OBSERVATION- THATS YOUR SKILL.you may enjoy car-race in computer game- maggie trade u should aim, indicator based entry/exit u should trade. you r lawyer - going for analytical argument- news play should be planned for. you may be good swimmer- so skill is your zone , go for system based mechanical trading.
you may be fish-catcher by hook, simply u can play long haul positional play - wait for price come near u, and buy - slowly take up and grab big profit out of it.
THATS WHY ROLE OF PSYCHOLOGY PLAYS HERE TO MAKE A SUITABLE TRADER WITH NATURAL STYLE.
OH U THINK , U HAVE NOTHING, JOIN AS TRADE PUNCHER- soon after thousand of trades - u shift to RM- now give call - and take actual trade against it. YOU R A SUPERLATIVE TRADER. THE DAY U THINK ,U KNOW MARKET U R GONE.
4] your acquired skill - time spend to learn- THIS IS BASICALLY PATIENCE GAME,KEEP ON TARGET/MILESTONE TO LEARN
5] how u cope up with earning ? - yes it may go to head(euphoria)- WRITE JOURNAL ,DONT TALK ABOUT RIGHT TRADE , INSTEAD VISUALISE
6] how u face psychologically the losing trade/ loss in your portfolio- CREATE IT MIND ITS PART OF BUSINESS, THATS WHY PRACTICE ENTRY AT LOW , WITH STOP. ULTIMATELY WINNER SHALL COME AS PER PROBABILITY -PORTFOLIO MOVE UP. ALSO IMPROVE YOUR KNOWLEDGE ON ECONOMY
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Psychology on trading
1] characteristic of highly successful people
2] imp of right attitude
3] Why discipline & understanding discipline
4] Achieving self discipline
5] understanding reality of price & how it affects our psychology
6] IMP of rules to avoid self sabotage
7] finding your weak pt- creating a method
GOING DEEPER IN PSYCHOLOGY
8] BODY –MIND –BRAIN
9] META –MESSAGE
10] CONTROLING YOUR EMOTION
11] ANCHORING SUPPORT FOR POSITIVE CHANGE
12] POWER OF BELIEF
13] ACHIEVING THE RESULT
14] ALIGNMENT
SPL TECHNIQUE
15] MEDITATION
16] HYPNOTISM
17] EFT-EMOTIONAL FIELD TECHNIQUE
..........this is how structurally trained in OTA

 

[oilman5]

SUCCESSFUL PERSON
1 STRONG SENSE OF PURPOSE.consistent winner identify first what i want ,then try to achieve that. Stick with perseverance & put well defined effort
2 PROPER GOAL SETTING-SMART , achievers visualize outcome clearly.Have emotion of winning – I KNOW I CAN.
3 POSITIVE ORIENTATION- EXPECT TO SUCCEED . take strength from past achievement- so more confident.psychologically believe failure is Temporary- learn from it.
4 ROLE MODEL ATTITUDE AT START – trust . achiever studied –success of others successful, then try best to copy .
5 SELF ASSURED. STRONG GUT BELIEF.
6 GOOD ABILITY TO PLAN & ORGANIZE. Methodical . prioritize , break the goal in parts , with detail in time
Approach to accomplish. Prefer one work at a time.

7 NECESSARY EDUCATION/LEARNING- spend heavy time to learn with clarity , go into crucial detail.

8 PATIENCE- understand strong value of preparation.all good achievers have strong patience.
9 PERSEVERANCE- resilience & stubborn to perform.
10 ENJOY WHAT THEY DO- enjoy the process and have passion.
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FAILED PERSON
Undisciplined.dont know what they want-poor clarity .driven by impulse.often No direction-poor decision maker.constantly change & find soln outside – may start many project without full commitment ,so cant finish.
VAGUE GOALS,may be achievable. Not ready to put extra effort.believes Reason. Say- i think i can do.
They dwell in past , while facing problem , they believe– soln may come from outside.Failure creates an avoiding attitude.
Have resent in mind.They have habit of blame,excuse,badluck. Don’t understand success reqd- intensed focus & perseverance.
UNDISCIPLINED develops self doubt.
SCATTERED IN MIND ,as well as poor priority concept. Waste time on trifle.having habit of chasing illusions.
LOOK FOR SHORTCUT. UNDERESTIMATE TIME TO BE SPENT FOR LEARNING
Attitude of getting now. So minor distortion create deviation for them.
Undisciplined belief in quickfix.- has panic in mind.so they r quick quitter.
Develop stress,boredom due to work
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note :this is based on successful traders and failed trader ,given the test and followed path of trade journey
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You may have a goal clearly in mind, but it must have three important characteristics:
1) Your goal must be realistic.
2) Your goal must be attainable.
3) Your goal must be measurable.If you want to be a successful trader, the first thing that you need to do is to set your trading goals.
...........an important message even in Larry Levins "Secrets of Emotion Free Trading", which has been a good reference for me.

Just as important as setting specific goals, you must visualize yourself successfully reaching those goals each and everyday. If you can’t see yourself in your mind’s eye as a success, there is no chance you will become successful. It just won’t happen!”

Not only must you have a goal and a plan to execute on the goals for trading, you need to think of your successful future and imagine how it is! Envision it.
Break that goal into achievable milestones, like that in a project plan, like building a house. You need land, you need money, you need an architect to design it for you, you need to have the resources and time to manage and monitor its progress.
For example, you may say to yourself, that you want to see Rs 2500 credited into your bank at the end of each week as a goal for the very short term and this is what you will do:

- I will paper trade my trading method for a week or a month and see whether it delivers Rs 2500 per week?
- Then I will do real trades for a week and evaluate the results.
- Did I achieve Rs 2500 at the end of the week? If not, why?
- Analyse, paper trade, real trades, evaluate...and repeat this cycle till your goals are met and then set a new goal with a whole new thinking behind to take the progress to the next level.

Its important that you are always in control!!! In control of what? You cant control the market............There is one control you have. You can decide when to enter and when to exit. Thats the maximum you can do.control yourself!!
So you can only TIME your entries and exits and the amount of money that you play with.. You would do things in your best interest by timing your actions like :

- Not risking more than 2% of capital as loss in any given trade.
- Exiting profitable trades, once a target profit is made. And not running after the profits.
- Always working with stop losses so that you dont lose large amounts.
REMEMBER -“A person with good self-discipline but a poor trading method will outperform a person with poor self-discipline but the best trading method currently available.”

We all want those huge winning trades. But one thing we must all remember is we can’t control what the market will do, so we must be prepared for whatever it does do. Thus, if we have a good winning run of 60 points when our objective was 75, we must gracefully exit before these profits evaporate even if that means missing out on a big winner. Thats the discipline that we need!
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Application of trading psychology
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Keep INSPITATION with you.

#1. Do a written reflection + analysis of each trading month of 2013 to note wins, lessons and improvements. Pretty amazing how powerful this exercise is.

#2. Then create your execution plan, month by month, with key milestones and rewards for winning. This gives you a decision-matrix to say a huge NO to all the distractions that get you off the activities that will ensure 2014 is your best year to date...
Building the big picture : Your vision and objectives for the long term

Evaluating whether you are ready for trading ?

What is your journey so far?

Common sense about trading-Risk and Money management, the basics

Trading methods pluses and minuses

Build your trading strategy

Start your pilot trading

Review and Scale up.

examine your fears, uncertainties and doubts about where you are to identify your emotional dilemmas and work through these like a professional approach.Review the progress month on month based on the business objectives and apply course corrections whenever needed.

 

[oilman5]

Success Factors - Learning to take a loss
Trading is not about always winning. Winning and losing are opposite sides of the same coin. You need to accept losses exactly the same way as you would accept your gains. Trading is the aggregate sum of winnings and losses which ultimately makes money for you.

Once you implement a good risk and money management strategy, you will learn that when you win you will win more than what you lose, when you make a losing trade.
Larry Levin says in his book "The Secret of Emotion Free Trading", “Your losing trades do not diminish you as a person. You are not your losing trades. You are also not winning your trades either. They are simply by-products of the business that you’re in.” In other words, your gains are the outcome of market movements and your risk management system.
"Losing trades are part of trading. The most successful traders in the world have losing trades every day. They do not get caught up in thinking that the losing trade is part of them. They realize it’s just part of trading, and the sooner they get rid of the losing trade, the faster they can look for the next opportunity to find a winning trade. YES -This is easier said than done, but nevertheless, it’s still the reality of how to make money in trading."
Mark Douglas, author of The Disciplined Trader states, “Execute your losing trades immediately upon perception that they exist. When losses are predefined and executed without hesitation, there is nothing to consider, weigh, or judge and consequently nothing to tempt yourself with. There will be no threat of allowing yourself the possibility of ultimate disaster. If you find yourself considering, weighing, or judging, then you are either not predefining what a loss is or you are not executing them immediately upon perception, in which case, if you don’t and it turns out to be profitable, you are reinforcing an inappropriate behavior that will inevitably lead to disaster. Or, if you don’t and the loss worsens, you will create a negative cycle of pain,that once started will be difficult to stop.”
“Keep in mind that fear is really the only thing that keeps us from learning anything new. You can’t learn anything new about the nature of the market’s behavior if you are afraid of what you may do or can’t do that is not in your best interests. By predefining and cutting your losses short, you are making yourself available to learn the best possible way to let your profits grow.”

If you can change what these losses mean to you and realize that getting out of a losing trade as soon as you define it as such, you will be able to release yourself from the stress that those losing trades probably cause you now. This is why learning to love taking a loss is so important. It puts you in a much better position to take the winning trades."

Not feeling good about a loss is a natural and instinctive reaction to a loss much like the joy of winning. We need to temper and control both of these feelings as we begin to trade.

What can you do about it? Accept the two events with the same calm attitude. Learn to switch off MIND when you trade so that you dont get wild emotions while trading. Take a break, DO anything that calms you down when a loss upsets you.
Time and patience will make you a TRADER
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TIMING & MONEY

We set out with a clear goal that we want to earn 10000 rupees a month and deploy Rs 100000 as capital. Will we meet our objective?

The answer is No!!

What you make or lose in each trade is a function of your capital deployed, the capital deployed each trade, the risk that you take and when do you decide to exit your trade.
THERE IS OTHER FACTOR - HOW MUCH MARKET ITSELF IS OFFERING. IT MARKET IS ROAMING WITHIN +/- 3% ZONE , U R PLANNING 8% RETURN , THATS NOT POSSIBLE.
RETURN ALSO IS A FUNCTION OF POSSIBILITY. THIS SIMPLE IS NOT KNOWN TO ACADEMICIAN.SKILL OF TIMING MAKE YOUR MONEY , SO WE USE PRICE READING SKILL TO UNDERSTAND MARKET. GIVE IT A NAME- UPTREND-DOWNTREND-SIDE WAYS, HIGH VOLATILITY -RANDOM OR UNPREDICTABLE - accordingly we shall apply some setup.
WHY PROBLEM THEN??- MOST OF US FROM OUR SERVICE CONCEPT /HOW WE BROUGHT UP-have ideas about the amount of time it takes to make a certain amount of money. These ideas do not apply to trading AT markets. You can win and lose in minutes, because of big moves that happen in your trading direction or against it.

Once you study your trading pattern and the actual profits that you are making, you can test and scale up your parameters - capital and capital/trade. You can study the patterns of your particular trading method and adjust them with market condition, varying capital deployed per trade and utilizing your trading discipline so that the trading can be scaled up (or down).Remember that you can have 2 winning trades followed by a losing trade or sometimes no trades for a long time, based on your trading method. A trade may complete and meet your target in 5 minutes or 2 hours. There is no way of predicting when the trade will complete.

Do not attribute any emotions to the way the market treats your trade or how quickly/long it takes. The only outcome that you can control is the losses that you suffer in a trade and the time when you exit a winning trade. Thats it. Follow the discipline to treat these two outcomes and you will have consistent results.
Remember, acting in your own best interest to protect yourself is much more important than finding winning trades. Don’t get caught up in thinking the market must keep going if it moved this far, this fast. It doesn’t have to do anything, no matter what it just did. Keep yourself prepared for whatever it does and you’ll have a much better chance to be profitable.

In aggregate, u Win more and Lose less - that is really trading business is all about.

 

[oilman5]

2 OTHER RULE FOR TRADING-Never get emotionally attached to a trade AND Trade what u see,in price at your timeframe. .......u trade intraday momentum, so 5 min. move up quickly ,u must join
U trade swing low buy , so price coming to that low, u must take the trade.If quickly coming to that swing low affects u to be fearful , U R EMOTIONALLY INVOLVED IN TRADE, pl throw away this amateurish MISTAKE.

Its 9.am and the premarket trading has started. The trend seems bullish and your overnight indicators seem to suggest that it would be wise to enter a long (buy) trade. And you do that exactly 5 minutes after the market opens. The trade goes up 10 points, but then gets stuck there for the next half an hour and then starts dropping. You average the trade with another buy, because this is the REAL winning trading for you today. But then you are forced to take a loss on your new stop loss, loosing twice of what you had planned- u r nothing but a NOVICE WHO IS SUPPOSED TO LOSE.
The message i want to convey is clear-. You entered, it because you believed, that it would reach its target, but if it doesnt, be ready to exit it as per your predefined rules. Do not move the goal post while the trade is in progress.

It is important to understand that just because you “think” something will happen in the market does not mean it will. Similarly, even if you do find a very obvious and “perfect” looking setup, you should always remember that the market is a dynamic and constantly ebbing and flowing arena where anything can happen at any time.

there is no SURE thing in the market.
Rather than allowing yourself to become emotionally attached to any trade or any idea about what the market might do, you need to learn detachment from your trades.
all the while keeping in mind that you must constantly manage your risk even on trade setups that look “perfect”. Always make sure you are trading according to the concepts of your trading method and rules, and not just on a “whim”, if you are a price action trader then follow the trail left by price instead of getting off track and giving into what you think the market “should” do or “might” do.
fully understand exactly why you need to only trade what you see instead of what you think,........doing it not so easy.some helpful tips-
• Stop and ask yourself before each trade “what I am doing?”, “what is the setup?”, “does it meet my trading plan criteria?”, “am I acting logically or emotionally?”, “am I controlling myself or is the market controlling me?”, “is there a setup or am I am just making one up”? These are all good questions to ask yourself before you enter any trade, doing this will make you think deeper about what you are doing and if a trade is warranted or if you are simply acting on emotion.
• If you are trading a specific trading strategy, like price action, make sure each trade you take is in accordance with the concepts that you have learned in. Ask yourself any or all of the above questions before every trade that you take, until it becomes second nature to only trade what you see. Eventually you will develop a refined discretionary trading perspective that will allow you to almost instantly look at a price chart and spot price action setups.

Always remember the more flexible you can be, the more successful your trading will be. In fact, the amount of money you make trading will be in direct proportion to how flexible you can be.

Being an active loser (as well as an active winner) is the only way to be successful. Again, the temptation to not cut your losses is always there. But it will do nothing but get you in trouble. Successful traders know that cutting your losses early by HABIT- is the 1st law of survival.
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WHY IT IS EASIER SAITH THAN DONE THE LAST POST????
BECAUSE OF OUR SELF IMAGE - TRADING EXECUTION IS NOT THAT EASY ,BECAUSE WE HAVE TO BREAK LOT OF BARRIER -WRONG IDEA FROM COMMON LIFE, WRONG IDEA OF INVESTMENT,WRONG IDEA ON TRADING. TRADING IS DECEPTABLY SIMPLE - BUY LOW,SELL HIGH , but price, market, market participant and mood of crowd -all 4 variable make it really difficult to guess , more difficult to implement.
Coming back to self-image since we now think from psychological pt of view-

We all have a picture of ourselves in our subconscious. This picture is called the self image. The self-image controls everything we do in life. It is what we believe to be true about ourselves. It may not necessarily be true, but it is what we believe to be true. Our self-image has a stronger hold on us than you could ever imagine. A good example is someone trying to lose weight. Many times people have the picture of themselves as an overweight person. They attempt to try and lose weight using willpower. They go to the gym, try and eat healthier foods and avoid fatty foods. All that is great. But the reason most people can’t lose weight (or they gain it right back) is because they have that powerful picture of themselves as an overweight person -unless u think your image of thin & healthy person who runs daily & its YOU- u cant achieve this.
The same is true about whether you deserve to make money as a trader. If you have a self-image that states it isn’t right to be able to make money so quickly, then you will be fighting a losing battle against your powerful self-image-SO CREATE A DREAM OF BIG MONEY -BIG HOUSE.Just like the person trying to lose weight, you will only become successful when you have the correct picture of yourself. The picture must be of a person who is deserving of making money in the trading environment.VISUALISE THIS PICTURE DAILY.
Self esteem is your opinion of yourself. High self esteem is a good opinion of yourself and low self esteem is a bad opinion of yourself. Self esteem is crucial and is a cornerstone of a positive attitude towards living.

It is very important because it affects how you think AND act . RICH BILLIONAIRES TRAIN THEIR SON TO CREATE AURA , CONFIDENCE BOOMING PICTURE TO RUN BUSINESS.
Low self esteem means poor confidence and that also causes negative thoughts which means that you are likely to give up easily rather than face challenges. In addition, it has a direct bearing on your happiness and wellbeing. SOME TIPS
1] Do what you love.
Everyone loves to do something, when you indulge yourself in what you love, you improve the way you feel about yourself. You improve your self image. Think about this in the context of your trading.
2] Acknowledge your strengths
There is no one who has no strengths. Everyone is good at something, know what your good at and give yourself a pat on the back. Do things that bring this quality out into the open. Excercise it, make it stronger. It will give you the confidence to do other things including trading much better.

3] Don’t put up with crap.
There is no reason you should tolerate other people being mean to you. Even if they say they are doing it with love. Make sure people know they should be nice to you and if they refuse, walk away from them. This is important in the context of people thinking that you will only lose money in trading. Only you know that if you trade smartly, you will be the winner!

4] Do your research
self help books are a waste of time in the sense that only person who can change you is you. CHANGING is really hard as it IS boring & INFIGHT IN MIND. SO read biographies of people you respect, people who do positvive things and attain huge success. Look for a mentor WHO can help you. Its worth the money and time spent.
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TRADE RULE TO LIVE BY; presently i use simple rule SET
s = stop ,e= entry, t= target .........this way it control by greed looking objective , as first i think STOP pt, so when price comes there i enter, automatically my buy low philosophy get satisfied and at target book 50% - so easily i manage trade.
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The only thing that you can exercise is self control through your trading rules and self discipline.Trading rules are the collection of the trading method and the rules that you apply on your trades using that method.
No matter what type of trading you’re doing (swing trading, day trading, long-term trading), you’ll need to come up with your own set of rules to keep your trading structured. The problem is most people don’t want to make up their own rules, because if they did they would have to take responsibility for their results. And, as we all know, most people don’t want to take responsibility for their action. But, as we all know, the only way to be successful in trading is to take 100% responsibility and act in our own best interest.
Here are some samples :

- Every trade is a pair. A trade order and a stop loss order (manage the risk)
- Stop trading after 3 losing trades and step back to analyse (never dig your own grave)
- I will exit each trade whenever it makes 30 points profit.
I will use the valid signal that my trading algorithm gives (or the method that I decide to use)
- Avoid or reduce the trades in high volatility days.
- Enjoy trading and take responsibility for each of the wins and losses in all your trades.
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Its important to separate the outcomes of the trades from the fact whether your execution was flawless or not. Many a time we mix the two up. Its important to keep the review process after trading hours and not mix that up with the outcomes during trading. Outcomes are the result of market movement and we dont control that.

So there is no point beating yourself up with the results of unsuccessful trades. Fix that only in reviews of your trading method after market hours and treat that as a different corrective step.
Well defined trading method rules and flawless execution are part of your daily operational success. The review of the outcomes is a post trading exercise meant to fix issues in your trading method. Keep the two separate always!
A trade learner always have problem with his emotions and doubts about his trading methods. He has to work himself to fix these. - use a trading compliance worksheet to track your trades.

 

[oilman5]

Emotions that you need to manage – Greed

Rules of EMOTION FREE TRADING says...............

When you enter a profitable trade, you need to have a clear exit rule. If you dont, you will have inconsistent results. The markets are always moving when they are open, and go against or with you in a trade without notice. Therefore, its important that you exit a profitable and an unprofitable trade with the rules that you have set up.
The three simple ideas of getting in, getting out, and not trading become even more difficult because there is variability. Only you can decide when to end it.

In a profitable trade, you need to decide when you’ve made enough. Many people get caught up in thinking that there is never enough, no matter how much they’ve made in the trade. If they’ve made a Rs 1000 profit, they get upset with themselves that they didn’t make Rs 2,000. If they’ve made Rs 2,000, they want Rs 5,000. A truly greedy person can never be satisfied. No matter how much they have in a trade, it will never be enough.

On the other hand, with a losing trade, a greedy person will not want a losing trade to exist because it represents failing. So this person may act as if it doesn’t exist by convincing themselves the market will come back and reward them with a winning trade. These are very dangerous characteristics for any trader to have. Without question, these traits will put you on the road to failure faster than you can imagine. A truly greedy person cannot succeed in the trading environment
The market simply does not care at all about you or if you win or lose money, the market does not know you exist, and it doesn’t get emotional about you. Yet, most traders get emotional about their trades and about the market, thus they are letting a non-living entity control their behavior instead of controlling it themselves. You will not make consistent money in the market until you learn to control your emotions and reactions to the market.


Once you learn to trade only what you see on the price chart instead of what you think, you will be well on your way to becoming a consistently profitable trader, because trading what you see and not just what you think means you are controlling yourself instead of being controlled by the market. The key is to consistently trade only what you see and not what you think or feel, this will help to keep you from giving into the emotions of revenge or greed after a losing or winning trade. Traders who consistently trade only what they see on the price chart and not what they think “might” happen, along with managing their risk effectively, are the traders who make money in the markets. When you learn to trade with high-probability price action setups while simultaneously controlling your emotion and risk, you will be in an even better position to make money.

Unfortunately, because traders may be trading with the thoughts of what they will do with the money that they win while they are trading, they can face severe emotional distress, because the market doesnt care or want to know about what happens to you or your trade!

The answer then lies in the fact that separate the thinking of what you do with your earnings(dream) or losses from the market from the actual act of trading. The two are completely unrelated .
solution comes BEING OBJECTIVE
PL READ Larry Levins "Secrets of Emotion Free trading"
Its good to be objective with your trading method, rules and the discipline that you are following.
BUT never try to be objective or predetermine the direction of the market based on your thinking,..............
The fact is that analysis IS based on events of the past and they predict an outcome IN YOUR THINKING. But the future has no connection to the past. It WILL BE result of events that happen in a time that has not yet "happened". Never say OR BELIEVE, that the market cannot move in the opposite direction or it cannot move 100 points in the direction of your trade.FACT IS It can and will happen when you least expect it.

What you need is having in place planned actions based on your rules when such events occur(WHAT IF SCENARIO). That’s it. This will allow you to have a sound nights sleep everyday!

If a trade behaves the way your trading method predicted, well and good. But if it does not, please get out of a position based on your trading rules.

Mark Douglas, author of The Disciplined Trader states there are seven characteristics of an objective person. Here they are so you can recognize it :

1) You feel no pressure to do anything.
2) You have no feeling of fear.
3) You feel no sense of rejection.
4) There is no right or wrong.
5) You recognize that this is what the market is telling me, this is what I do.
6) You can observe the market from the perspective as if you were not in a position,even where you are.
7) You are not focused on money, but on the structure of the market.
If you can see any of the above qualities in yourself, you’re on the right road. Again, you need to release yourself from the need to be right. To be a successful trader, you don’t always need to be right, but you always need to be objective.
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just to re-inforce, always follow the rules.

Unless you decide to change yourself, modify behavior , use strong self discipline to control emotional urge- you will never change your losing trader status . So avoid tips -emotions -blind expectations.
In my experience mentoring traders win,- I have seen traders make a lot, under controlled behavior guidance -again with freedom make some losses- and thats why many a prefer mechanical rule based trading.
If you dont follow your rules and your trade is a winner, thats luck. And a one off event. pl follow -thin cutting edge of safe trading-in iron clad discipline.
SOME NO RULE
Never trade when you are not in a calm state of mind. You must be always in a position where you follow and execute your trading system flawlessly. If you have had a fight at home or passed through a trade that caused you to lose, do not make a wild move and get into a wrong trade. Just switch of the computer and take a jog or a walk or play with your kids .If you dont trade, you never lost money because of that.


Greed and fear are part of the emotional baggage . They are the result of your internal ingrains, value system, emotional make up and need to be kept out of your trading thinking. They can cause you to take irrational decisions and go against the rules that you have.
Work on keeping these emotions away
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Your success is determined by only one person, and that is you! Own up and take responsibility for your actions and act to your benefit always.Dont wish that the market will suddenly come back to you after a losing streak. Always be just prepared for positive and negative outcomes through your trading rules

 

[oilman5]

There is another approach- read from best trader, particularly when they have given insightful thought.
So i am giving some view from a trader called Nicholas Darvas,-. who ignores tips, financial stories and brokers’ letters.His 1960 book, “How I Made $2,000,000 In The Stock Market” grabbed the attention of thousands of investors around the globe.
The dazzling upward momentum stock profits that made Darvas a millionaire were impossible within such ivory tower frameworks as the Capital Assets Pricing Model (CAPM) or random chaos theory model................. he had a financially well-trained mind.He majored in economics at the prestigious University of Budapest. He was a gifted student. He was a meticulous note taker. He applied his intellect to ferreting out the secret to success in the stock market.
“I decided I had been missing a good thing all my life. I made up my mind to go into the stock market. I have never gone back on this decision.” -Nicholas Darvas
A startling number of do-it-yourself (DIY) stock investors perish in market. They lose everything.They are wiped out.A big part of the reason that I am so inspired by the Nicholas Darvas story is that he faced these exact same problems all starting stock investors have endured. Consider the following barriers to your success…
PROBLEM 1: IGNORANCE.
The first problem that Nicholas Darvas faced was his own ignorance. He knew nothing about the stock market.
He made his first profit in the stock market by sheer luck. This set Nicholas up with a false sense of confidence at the very beginning.
This over-confidence would lead him to some of his most terrifying and truly dangerous losses.
Do you brag about your trading at social events? Deep down inside do you feel that you know less than you should about the markets?
Do you feel inadequate as a stock or stock option trader?
PROBLEM 2: MISGUIDANCE.
Nicholas decided to “ask around” to see if rich people he met knew the right stocks to buy. He ended up buying into companies with names he couldn’t pronounce with products in industries he was unaware of.
He quickly discovered that asking people “Do you know a good stock?” is a very bad idea.
He eventually learned that this approach to the stock market NEVER works!
Do you seek out gurus on the internet to find out what they are recommending? Do you have a tendency to buy the recommendations just because you feel that the guru is particularly gifted?
Maybe you watch Mad Money with Jim Cramer on CNN? He’s a hoot!
At the same time have you noticed that your account size stays the same or shrinks?
PROBLEM 3: INCOMPETENCE.
Mr. Darvas concluded that neither he nor people he met in his daily routine knew the secret to the stock market. He wondered if having the right broker was the key to success.
After all, such people dedicate their daily activities to stocks.
His first broker was a little man spouting important sounding statistics. The little broker forcefully explained why a gold mining stock he found on the treacherously infamous Toronto Stock Exchange (TSE) should double over a specific period of time because of the ore reserves it controls.
Nicholas buys on the broker’s recommendation. As the stock drops Nicholas becomes aware of the man’s incompetence.
Nicholas concludes that brokers do not know the secret to making a fortune in the stock market. How many times have you been led into a bad stock or stock option play because of a “trusted broker?”
.
PROBLEM 4: OVER-DIVERSIFICATION.
Nicholas Darvas began jumping in and out of the market very fast. He became content with small profits rather than seeking out large windfalls.
This created a new problem in that he routinely owned small amounts of too many (25 to 30) stocks.
This made the monitoring and control of his portfolio too difficult. It also made brokerage fees deplete his account just that much faster.
Are you a newsletter junky? Do buy everything the newsletter editor recommends?
Do you sometimes stop what you are doing in your regular day? Are you frozen by a cold surge of fear that you have way too many positions handle?
Over-trading is a major reason stock investors fail.
PROBLEM 5: EMOTIONS.
The next headache Nicholas faced was that he developed a liking for certain stocks. This meant that he was more reluctant to sell than he should have been when the market went against the stock.
Having pet stocks induced him to let losses grow out of control.
Do you have that certain stock that you love to chat about with strangers you meet while waiting in the bank teller line? You know the stock hasn’t performed particularly well but you love it anyway.
PROBLEM 6: GAMBLING.
His obsession with making a fast buck in the stock market compelled him to over-trade. He was soon losing $200 a day.
Do you dart in and out of the market chasing small profits?
PROBLEM 7: ADVICE.
The first solution Nicholas turned to was a series of Canadian stock investing advisory service newsletters. He soon learned that advisory services made their money by making speculation sound very easy.
Nicholas Darvas also found that urgency helped advisory services supply their subscriber’s need for action.
He would rush to order recommended stocks.
They would invariably fall in price.
Hence this solution created another problem.
Do you get a surge of excitement when you read the recommendations of a major investment newsletter to which you are subscribed?
How often do those stock plays really work out?
When you look carefully at all of the recommendations you received over the prior year do you find that you missed some of the better stocks? You finally admit to yourself that you ran out of money chasing every deal that came in front of your face!
PROBLEM 8: TIMING.
He realized that his real problem was that he did not know when to enter the market. After his first year his $11,000 grub stake was down to just $5,800.
Nicholas quickly learned that timing in the stock market is everything!
Are you confused about timing? Do you listen to one guru who says,
“Never time the market” only to be confused by another who says that the first guru, “is a top market timer?” Deep down inside do you sense that timing is everything but admit to yourself that you simply don’t know enough about the subject.
PROBLEM 9: TIPS.
Nicholas seeks out a broker who recommends “fundamentally safe” stocks. He soon realizes that there is no such thing as a fundamentally safe stock.
Yet he still doesn’t understand that the advice is never valid economic evidence. It is just another tip.
Do you have friends who call you to talk about stocks? Do the stocks they are tracking ever work out as a group?
Do they hold you back? Do you listen to them anyway?
Do you have a broker you trust? Does his or her tips give you a net profit?
Socrates showed that the student must find the solution from within to gain true wisdom. This “Socratic method” also applies to investing and trading of any market.
PROBLEM 10: IRRESPONSIBILITY.
Over time Nicholas falls into another trap. When he wins he pats himself on the back.When he loses he blames his broker.
I once knew a clever con artist.He robbed people of millions through a multi-level marketing scam — finally ran out of steam the peasants came at him with pitchforks and torches.He stood in front of them.
He outstretched his arm. He pointed his index finger at the angry mob.
I was astonished as I watched this convicted white collar thief boldly declare,
“When you point the blame at somebody there are three fingers pointing back…”
As much as I despised the actions of this brazen fraudster I realized that he was right.
People who are in denial of their mistakes can never learn — can never move forward!
I thought to myself,
“Who was it who happily handed over thousands of dollars to this charismatic and impressive con-man in the first place?”
We all had.
And I could tell that other families would never learn. They would pin the blame on the perpetrator of the fraud without realizing that they had not done their proper due-diligence......... I took away perhaps the most valuable lesson of my investing career. I began the practice of taking full responsibility for outcomes in my life.
This was the moment that my financial life began improving for the better.
PROBLEM 11: ILLITERACY.
Nicholas sets up an account with his first New York broker.
He can’t understand all the technical words the broker uses.
This makes it impossible for Nicholas to effectively evaluate the information he is hearing.
For fear of revealing your ignorance do you act as if you understand financial concepts when you really don’t?
Deep down do you often know that you don’t know enough finance to really understand the stock market?
PROBLEM 12: DISCERNMENT.
He decided that there must be higher priced stocks with as powerful returns as he had experienced in his first — a Canadian mining penny stock. His problem was to figure out how to discern which ones they were.
Do you go back through your charts and find stocks have skyrocketed that you ignored?
Aren’t those the stocks that you would have made a killing on?
How can you find those?
PROBLEM 13: CHURN.
Nicholas Darvas enters into phases where he jumps in and out of stocks quickly in three transactions in February of 1956. This leads to a loss of $461.21.
He realizes that if he would have stayed with the original stock in the first transaction that he would have had a profit of $1,748.75.
These were all high priced well-known stocks.
He comes through the end of the — then — greatest bull market in history at the end of 1957 with just $889 profit to show for his efforts.
Do you really follow the trend? Or do you get nervous the more profit accrues in a stock you — finally — make money on?
Do you sell out only to watch it double or triple from your exit point?
PROBLEM 14: INSIDERS.
Darvas starts reading the Security Exchange Commission Insider Transaction Reports. He reasons that a stock is a buy if insiders are also buying.
This tactic does not work.
He finds that insiders may know their company but they do not know the stock market. Like everybody else they often buy too late and sell too soon.
Have you ever bought an “insider” stock that the CEO is pumping millions of his or her hard earned cash into? How often have these stock plays made money for you?
PROBLEM 15: OVER-CONFIDENCE.
Nicholas turns to a regimented filter of fundamental factors he organizes into a table. He believes that this will make him an expert in finance.
As it turns out this intellectual crutch makes him an over-confident investor and a wreck waiting to happen!
He loses $9,000.
The shattering effects of this psychological blow are crushing.
He had not been a wild gambler.
He had labored long and hard to find a stock called JONES & LAUGHLIN he was sure would soar. It failed and so had he.
He had been as cold and scientific as possible.
Yet this approach was also flawed.
Worse, it led him into FALSE-HOPE
Have your attempts to document factors you believe to lead to the next hot stock been a failed mission?
PROBLEM 16: FEAR.
He notices a stock he has never seen before. It is consistently rising.
It is TEXAS GULF PRODUCING. He buys it.
But he expends vast amounts of energy monitoring it constantly like an overprotective parent. He is so fearful of loss that he spends an excessively unnecessary amount of time monitoring the stock.
This wasted energy holds him back.
Is this a scenario you have been through?
PROBLEM 17: JUDGEMENT.
Nicholas Darvas buys into the very top of the market for some stocks. This teaches him that he has a judgment problem.
He can’t judge when the stock is topping out.
It will be the end of the road if he doesn’t find a solution to stop the account bleed when a stock drops. Otherwise his stock fortune will turn to dust.
PROBLEM 18: SIDEWAYS.
Darvas notices that stocks spend a lot of time moving sideways. He knows that this is the key to both timing and risk management.
But he struggles at first to determine the appropriate range of the sideways movement.
In a sideways movement he doesn’t know if the stock will rise and give him a profit or fall and wipe him out. He realizes that sideways movement is as big a problem as the Sargasso Sea was to medieval sailors.
PROBLEM 19: RUNAWAYS.
Nicholas determines that it is best to buy stocks that are already on the rise. He orders his broker to call him when a watch-listed volume mover stock rises above the technical resistance level of its “box.”
He finds that the stock is well above his ideal buy level by the time the broker calls.
How many times have you spotted the right stock only to have it skyrocket while you couldn’t pay attention to the market?!
PROBLEM 20: ACCURACY.
Nicholas realizes through trial and error that his accuracy in finding a rising stock will be no better than a coin flip. He realizes that he must make more money on his profitable trades than he loses on his unprofitable trades.
Have you ever used really wide stop loss orders because an “expert” told you that the stock was extremely volatile?
Did they ever remember to tell you when the right time was to sell? Do you ever wonder why you get hammered?!
PROBLEM 21: OVERCROWDING.
The high “cost-per-character” nature of telegrams limits the amount data Darvas can receive.
He couldn’t follow his stock with just the daily closing price. He eventually finds that he needs to know the daily high and low share price for each of the 5 to 8 stocks he can follow. Finally he adds the close of the Dow Jones Industrial Average.
He fears that volume quotes will overcrowd his daily analysis.
Do you have a sinking suspicion in the back of your mind that you have too much information hitting you in this new communication age of the internet? Is this also conspiring to hold you back?
PROBLEM 22: ALL-IN.
Wall Street will teach you to paper-trade. Sneaky, sneaky, sneaky…
This is no different than free slot play for Las Vegas tourists.
It hooks them into the machines up and down the strip. It also hooks a vacuum hose to each gambler’s bank account.
Nicholas found that paper-trading was no different. The emotions he needed to learn to deal with would emerge only when he had “skin-in-the-game.”
Facing those emotions took a lot of courage.
Nicholas starts taking pilot positions so that he can “feel” the stock. But he goes all in at the beginning.
This nearly wipes him out.
PROBLEM 23: RANDOMNESS.
Sometimes some of the stocks Nicholas owned made inexplicable drops in price. This is the first time he realizes that he has to figure out solutions to his problems by himself.
Advisory services and brokers can no longer help him. He knows at least as much as the “experts.”
He musters up the courage to…
THINK INDEPENDENTLY.
He pours through the data and arrives at an amazing conclusion concerning erratic adverse stock price movements.
PROBLEM 24: EROSION.
Nicholas Darvas quickly realizes that buy-&-hold strategies don’t work. Returns are too deeply eroded on price downturns. He considers such investors gamblers,
“…with the eternal hope of the turn of the lucky card.” How much more confusing can the markets get?
investors. A buy and hold strategy today is financial suicide .

PROBLEM 25: FADS.
Nicholas notices that stocks fall in and out of fashion. In his day GENERAL MOTORS and CHRYSLER were relatively small firms.
But they represented the future!
Today these companies represent corporate hubris of overdeveloped industries with little growth opportunity.
What stocks, giving the same signals Nicholas saw in the 1950s, are out there waiting for you right now? How can you spot them?
PROBLEM 26: NEWBEE AGAIN
In a few days of trading, he threw overboard everything he had learned over the past six years. He did everything he had trained himself not to do.
He talked to brokers. He listened to rumors. He was never off the ticker.
It was as if the “GET-RICH-QUICK” demon had gotten hold of him.
The first thing that deserted him was his SIXTH SENSE.
He did not “feel” anything.
All he could see was a jungle of stocks running up and down devoid of rhyme or reason.
Then his INDEPENDENCE went.
He gradually abandoned his system and adopted the attitudes of others.
He was following the crowd.
His reason forsook him. Emotion completely engulfed his thinking.
And Nicholas Darvas incurred some of the biggest losses of his lifetime.
This is a very common real life nightmare story I hear from many students.
How can you correct this and insulate yourself as you invest over the coming years in the stock market?
PROBLEM 27: SUCCESS.
As the sum value of Nicholas Darvas’ stock trading accounts mushroomed into the millions he faced a serious problem. He had to face the fact that his
STOP-LOSS would no longer be practical. No trader or specialist would absorb such a large order quantity of stock in a matter of seconds.
His unique approach to the problem can be more effectively applied today through a core passive portfolio.
Do You Want To Avoid — Or Fix — All These Problems?

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Now we go to find solution as seen by him.

SOLUTION 1: EDUCATION.
Nicholas made a strong stride forward in his development as a stock investor when he began monitoring the financial columns in The New York Times, The New York Herald Tribune, The Wall Street Journal ....... later prove to be a major source of information that would make him a success in the stock markets.
This solves problems of ignorance, incompetence, and illiteracy.
SOLUTION 2: PRICE.
Nicholas Darvas eventually realizes that the movers are the stocks that save him. These are shares that simply seem to be rising in price consistently over time.
This solves problems — discernment, insiders, over-confidence, and overcrowding.
SOLUTION 4: VOLUME.
He notices that the best movers have dramatic increases in trading volume before and when they rise. This is especially so for dignified stocks that trade quietly for many years then suddenly go wild.
If a long inactive stock suddenly becomes active in terms of dramatic increases in volume he considers this unusual and begins to watch it.
If it increases in price he makes a pilot purchase using a buy stop order combined with a contingent stop order.
SOLUTION 5: DEDICATION.
Nicholas sits with his stock tables of price and volume every evening. He dedicates himself to finding volume movers that will rise.
This has the surprising effect of focusing his energy on identifying and tracking a few stocks. He upgraded from spraying the market with a shotgun to trading stocks with the precision accuracy of a sniper rifle.
This solves problems — over-diversification and irresponsibility.
SOLUTION 6: BOXES.
Darvas noticed that stock prices on the rise don’t go straight up a 45 degree slope. They move sideways.
Then they rise (or fall).Then they move sideways again.Then they rise (or fall) again.
He called these sideways periods “boxes.” These boxes allowed Nicholas Darvas to precisely time entry and exit as well as manage risk.
This solves problems — discernment, insiders, over-confidence, and overcrowding.
SOLUTION 7: CONTINGENCY.
Darvas solves his runaway stock problem with a special contingent order to buy his stock when the price rises above the technical resistance of the box.
Through his box theory he can finally see the exact point at which a stock is worth testing out. But if he waits until the end of the day he often finds that it is already too late.
He develops a standing buy stop order approach to solve this problem.
This solves problems — gambling, timing, insiders, over-confidence, runaways, accuracy, and over-crowding.
SOLUTION 8: INSURANCE.
Nicholas Darvas solves his problem of being wrong 50% of the time with an initial stop loss order. This is a special contingent order to sell his shares when the price falls below the technical support level of its box.
This solves problems — misguidance, gambling, judgment, accuracy, and erosion.
SOLUTION 9: PILOT-BUY.
Nicholas Darvas decided — at least for himself — that “paper-trading” stocks was worthless. On the other end of the spectrum he learns that going “all-in” at the beginning results in massive losses.
Because of this he starts making pilot-buys of VOLUME MOVER stocks that fit his system.
This solves problems — over-diversification and all-in.
SOLUTION 10: AVERAGES.
He eventually discovers that mysterious price drops coincide with collapses in the market averages. He begins to track whether or not the general market is STRONG or WEAK.
He discovers that such general market analysis defies erudite analysis. He resolves this problem by keeping his analysis intuitively “stupid-simple.”
This solves problem — randomness.
SOLUTION 11: EARNINGS.
Once Nicholas is completely out of the baby-bear slide of 1957 he notices that some stocks resist the decline. He carefully studies those stocks.
He notices that the earnings trends of these stocks point sharply upward.
This solves problems — discernment, insiders, and over-confidence.
SOLUTION 12: INFANTS.
Nicholas pays close attention to new infant industries.
He keeps it “simple-stupid” here too. He doesn’t pay any attention to company products.
He simply looks for rising share prices. This is preferably — but not necessarily — on rising earnings and expanding volume in those sectors.
This solves problems — discernment and fads.
SOLUTION 13: LEVERAGE.
When Darvas knows he is right he ramps up his returns with margin. This is a form of leverage.
Options did not exist then.
Today traders rarely trade stocks on margin. They don’t need to.
They use options.
This solves problem— runaways.
SOLUTION 14: FIREWALL.
Darvas reaches a point where he decides to never add to his market funds from his show-business income. This places a fire-wall between himself and complete ruin from the markets.
This solves problem — emotions and gambling.
SOLUTION 15: SOLITUDE.
Then one day, as he sat in the Plaza Hotel AFRAID to make a telephone call, he suddenly realized something.
When he was abroad he visited no boardrooms, talked to no one, received no telephone calls, watched no ticker.
He had operated on the basis of his telegram, which gave him his perspective.
It showed him the way that stocks were behaving.
There were no other influences, because he did not see or hear anything else.
In New York there were interruptions, rumors, panics, contradictory information, all floating into his ear.
As a result of this his emotions became involved with the stocks – and the cold, clinical approach had gone. He gave instructions to his brokers to never telephone him or give him information of any sort on any pretext whatsoever and his weekly edition of Barron’s.
The only communication he wanted from Wall Street was his usual daily telegram.
This solves problems — misguidance, incompetence, emotions, gambling, novice, tips, advisors, churn, and herding.
SOLUTION 16: DIVERSIFICATION.
His capital to trade was now “too” big. His own orders would hurt his profits by adversely moving the stock price against his position.
He engaged in a form of “reverse” diversification.
There was only one thing to do: he decided to divide his funds into two parts.
Once he had made up his mind to do this, selection was comparatively easy.
He had only to decide among four stocks:
• ZENITH RADIO
• LITTON INDUSTRIES
• FAIRCHILD CAMERA
• BECKMAN INSTRUMENTS
There was only one way to do this – let their strength in the market be the judge. He makes a pilot buy into all four of them on May 13, 1959.
This solves problem — success.
SOLUTION 17: LIQUIDITY.- DONT TRADE MICRO CAP
SOLUTION 18 : TRANQUILITY.
His system evolved to a point where even Nicholas’ mistakes were no problem. They did not make him upset anymore.
His mistakes could no longer make him unhappy.
If he was right, so much the better. If he was wrong, he was sold out.
This now happened automatically as something apart from him.
.
BE FOCUSSED & SKILL THE MASTERY ..........READ SIMILARLY JESSE LIVERMORE & PHANTOM OF PIT
.
Remember Nicholas stopped tracking numerous stocks.This forced him to focus on less than 10 stocks at a time.
....... focus on nothing but the price action of the stock.He could no longer be misled by rumors or tips.
Inside you will learn to isolate yourself mentally. You will learn to sterilize your analysis from the harmful opinions of others.
Independent thinking then emerges from courageous introspection and analysis within you i call MASTERY.
U can see that his development as a masterful stock trader evolved no differently than learning to drive a car. Student drivers can be taught how to use the accelerator, the steering wheel, and the brakes.The student has to break away at some point and independently develop a feel for driving.
By applying these core principles discovered by Nicholas Darvas — you will become more masterful in your stock trading..
Trust me when I tell you that you don’t want to go against the white collar ninja stock assassins I have trained for these markets. You need to pull your knowledge and skills up.Then you can operate on an even playing field.
Over time your training and persistence will allow you to tilt the field a
little in your favor. Then the money will flow to you rather than to the pros

 

[oilman5]

3RD PART : SYSTEM BUILD UP & APPLICATION

3 elements for analysis .
1] fundamental
2] TA
3] Psychology
are given .................and now i am moving towards comments on use them
.......................................................................................................
now u should have a system -for all condition of market..........like SAINT in time variation factor ,considering trend u trade & make money- get early out in wrong trade.
Or U may be great judgemental trader like ST, understanding imp pivot -price bias,how price is unfolding its futuristic behavior-so join accordingly(this i call formless trading -ultimate goal of a trader)
U must have a comfort level on stop/lot size-also greed/fear controlled personality.
U must have a list of stocks/instrument to follow- where by watching/playing day in/out market speaks to about imidiate intention.Also you know which HIGH is too high=so unsustainable & ready to short.
similarly no problem to judge nifty 5200 is unsustainable bottom ,so can cherry pick-u write trade diary to keep u fit as a trader- as u know complacency kills even the best.
Ofcourse u enjoy the life ,- as u got the fruit of trading -an independent pvt trader with total freedom.
Your system of trading may look different to others - but definitely it is money generating as market condition, approach to trade, condition to entry/exit as well as risk percept-all r syncronised with a single factor -U
u may have a plan to give it to dearer provided they can handle- or to earn more to live in luxary.
Be on guard ,market condition may change , u may have to shuffle to bring one old trade system -just like old wine in new bottle.
All of us only 4 condition exists-1] up /down trend condition
2] volatile condition -
3] low move -consolidation before directional move
4] Range play
IF U COULD DECIPHER PRICE FOR THESE CONDITIONS - with little judgement what comes next- this Earth is nicely living place- afterall thats why u r an expert trader.
MY COMMENTS:
I use extensively economics to understand broad condition.
Chart is my strength zone - i use it for short term trade.
I use price flow /orderflow to small scalp momentum trade- this thing comes with experience & trial & error. Many an indicator study, infact their failure by price(as price is supreme)- taught me understanding of price behavior.
By studying price at IMP support /resistance particularly if their is pivot- can tell future direction of market.
U make money by money management/ getting out early from wrong trade.
Confidence-discipline-first hand knowledge(experience) counts.Novice can never hold money from market.
Reversal is easier to trade provided it suits your personality.
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HINTS ON MY SYSTEM WILL BE GIVEN NOW


method checklist

intraday -momentum
swing -countertrend
position-both fundamental+ ta bias
OUT OF THIS WHICH HAS MORE SUITED ie. by which style actually u made money
............................................
WHERE U R MASTER?- SOME PARTICULAR STOCKs ,or some sector, some technical pattern
What is ur threshold for booking stop?How u define HIGH Probability in a trade ,before u enter- what mitigation plan if otherside low probability event actually happens.
..............................................
What is your plan of learning/behavior modification plan in everchanging Market condition (which may change some characteristics even within a week)
How do u capitalize sector rotation of fund flow?

Something as a multi variate trader , i should emphasis.
1] Gap - to understand greed/fear of partcipant
2] After gap fillup , rational reaction by traders, continuation in gap direction or just opposite (exhaustion GAP)
3] In support zone-bullish engulf helps to take a reversal trade, whatever may media/fund manager say.
4] In an imp Resistance zone Price is not falling (holding)- it has high probability to break out. Buy nearby that zone after 1st pullback.
5] IN bearish scenario, a stock is not falling- that is the candidate for long haul
6] Studying individual 50 stocks of Nifty fundamentally/sector wise- helps how money is rotated in range market.
7] It takes good amount of time to master mindbeast (greed-fear-hope)
8] Discipline is the best approach for stop & position size management.
9] Uncertainity is the governing principle of market, so u have to be flexible in choosing suitable strategy (from multiple strategy depending upon market condition)with highest level Discipline for stop & position size management.
10] beware-Pro get frustrated by booking profit early-live with it.