The Best Trading System

What do you like or dislike on this thread?

  • Like: Trading Theory, Psy Ops, Myth Busters

    Votes: 22 37.3%
  • Like: Trading Systems

    Votes: 20 33.9%
  • Like: Everything on this thread

    Votes: 32 54.2%
  • Dislike: Too much theory, not enough actionable items

    Votes: 4 6.8%
  • Dislike: Systems discussed are found as useless

    Votes: 1 1.7%
  • Dislike: Everything on this thread

    Votes: 2 3.4%

  • Total voters
    59
#31
Hi Tuna ,
Could you please suggest SL n Tgts for crude mini, also best time periods to watch for as MCX trading between 10 am and 11.30 pm.
 

Tuna

Listen and act, don't ask it, it doesn't oblige
#32
Well, I generally start trading on crude only after 5 pm. Levels and TGT will be based on your Setup & Entry . It is difficult to do that (Buy/Sell levels ) for Crude, so I go ahead with market dynamics on realtime basis, but you can try Pivot Confluence - shall discuss this on Concept # 4 next weekend.
 
#33
Well, I generally start trading on crude only after 5 pm. Levels and TGT will be based on your Setup & Entry . It is difficult to do that (Buy/Sell levels ) for Crude, so I go ahead with market dynamics on realtime basis, but you can try Pivot Confluence - shall discuss this on Concept # 4 next weekend.
Thank you Tuna.
Waiting for crude specific setups.
 

Tuna

Listen and act, don't ask it, it doesn't oblige
#34
My Trading Concept # 4


Confluence and development of trading system

(There are few links, visit those later after going through the end of doc, else you may miss out the full picture I am trying to paint here)


What I want to discuss today is the foundation stone of any successful trading strategy. Regardless, we buy or sell, there is always a seller for a buyer and vice-a-versa and both of them taking the action (buy or sell), with the assumption that they will make money – but only 1 of them will be correct (assuming both are trading on the same timeframe). Which side? The one who has the majority of the price-volume force. Visualize this as a Tug of War with un-even team-size. But the one with stronger price-volume force, will win.

So at the end of the trade, in this game of probability – where only one side can be correct (buyer or seller) – is the one who has The Force on his/her side.
The idea of confluence is to have a trade setup where the chance of your joining The Force is higher –
But how?

Every different group of traders has a different technique:
  1. Few follow Pivot points (Fibonacci, Classic, Woodie’s or Camarilla)
  2. Few follow only Day High/Low, Previous Day’s High/Low , Value area High/Low, Market Profile etc
  3. Pinbar trading showing candle having long wick + High volume to show rejection
  4. Gann Fan / Gann Number traders
  5. Harmonic Pattern Traders, EW Traders
  6. Channel Breakout/ Break-out failure traders
  7. Traders following technical setup – and there we can have few thousands of setups considering the combination of indicators they are using
  8. Discretionary traders – who has some rules for entry /exit but left best to the discretion or price action they believe as correct for buying or selling

And the list goes on…..

And
The God-Father of all: The Smart Money

Consider yourself any one of this group (except being the Smart money) – your trade can and will win only if your buying or selling decision falls in the confluence with majority of the other traders in different of those above groups joining your side – and that will only happen if you Entry signal and direction (buy/sell) is close vicinity of the signals being generated by others. You will be in the majority group (Buyer or seller), overwhelming the other group with so much buying and selling pressure that you win the trade.
And let’s consider that still you will not be always right, but if you can get this right 5/10 times (yes only 50% time) with Risk Reward of 1.5 or more, your account balance will increase – this is generally my equation (50% win rate + 1.5 RR). But I do get most of my trade with 2 or 3R as I scratch my trade on the slightest hint of failure. As a matter of fact – power of confluence typically gives you an effective win-rate of +70%.

Now to do this (trading system with Confluence) – there are multiple recipes.




How you do this it is up to you – but let me share my strategic setup on how I develop a new trading system or have developed the winning one for me till now.

1.First be at the side of smart money – how? Check the trend on daily/weekly chart. I also track if FII/DII are selling or buying on EoD (For Nifty) – there are many places to check that. You can check the below link or NSE site to get provisional data:

http://craytheon.com/charts/fii_dii_nse_bse_trading_chart_graph.php

http://www.traderscockpit.com/?pageView=fii-dii-in-india

For Crude I use my Cash-Flow system (shall discuss on next section) to determine the money flow in the virtual way (not tracking real transactional volume as such).

I have won many contra (mostly on day trades) – but the majority of my winning trades are the one which are with the trends, especially almost 80 odd % of my positional win on Nifty since last 3 years were with the one with the trends.

If you are not sure about the trend (sideway market) – step aside from your screen and enjoy life outside trading. In fact that’s why we earn money.

2.Find the Pivot points confluence (I don’t follow any particular type, I get the list of all). I have a paid membership at Traderscockpit.com (this was mostly to help me mostly with stock screening on cash section of trading). But they have many things apart from screening.

They have a beautiful presentation of pivot points. I mark the important one matching the other groups and also if there is anything on week pivot matching days level. (Below one for example purpose on past data, no intention of copy write infringement)




You also can do this based on excel. Below website can help you:

Pivot Trading

The point is, you can follow any Pivot calculation type. My way is to find the matching levels one among all of those (so that I can net max of the Pivot traders in my Buy and Sell call)

3.Find your timeframe – this is The Most Important Point.

The thumb-rule is, lower the timeframe, you need higher skill.

Think about this twice.

You definitely have members in your family and friends who does not know anything on technical analysis on trading. They will simply ring up the broker to buy some stocks when market crashes and hold it for 2-3 months or a year and then sell those with good profit. That is the magic of time.

Where all of us are in the trade to win money in fastest possible time, as if we are in some F1 race, but are we skilled enough for the lower TF?

If not, you will simply give away money. In Tom’s word you are just liquidity provider to others or a donner – who give away the hard earned money to other traders – losing both time and money.

We should develop skill first win with higher TF Trade, and then zeroing down to lower TF trades. In the day trade also you can explore with higher timeframe first (4 hours, 1 hours and then gradually narrowing down or 15 mins, 5 mins, 3 mins normal or Scalping trades.

4.Find your position size. This is linked to your timeframe and overall trading capital (keep aside your R/R and Win rate aside for a while – think you don’t have a setup yet, so no idea on win rate).

Higher the timeframe will require Deeper SL and Higher Margin (overnight carryover margin). Lower TF will require small SL, so you can increase your Size.

There is also a human factor - I will discuss more on this later

5.Find a technical setup - there are many on the net and as well I am discussing few of mine and will discuss remaining one as well. I will also discuss how to develop one of your own if you want something new. But purely on technical indicator – you need 2 things:
1.That generate entry/exit signal
2.The Filter – avoid the fake signals

Few indicators can be used differently for a different purpose on a different timeframe. For example – some of use RSI overbought to sell on the first sign of weakness of the trend, and few actually enters on Overbought on lower-time-frame to mark the beginning of a new strong trend.

I will save some energy here and let the vast repository of internet help you on indicators and how to combine those: but here is good starting point:


TradeCity


Putting everything together:

Now, when I start checking winning profitability of any of my setup (anything new I am developing even now), I typically do it with just 1 or 2 lots Nifty or 10 lots of Crude Mini – Cause I want to lose minimum capital and I hate paper trading. I generally check below:

  • The frequency – I simply cannot hit buy/sell on my wish. I need the signal generated from my technical indicators (point 5) along with some confluence
  • What is the average profit (pips) I earn from my winning trades
  • What is the pip size of SL (30 points,50 points,100 for overnight trade) to invalidate the Setup
  • Identify, if this work best on Bullish Market or Bearish Market (Trending) or Sideways (you may hate it, but you need system for sideways market – generally 70% of the time market is on sideways as per common opinion and statistics)

Typically after testing for 2-3 months (I generally get both up and downtrend captured), I see the result. If the win-rate is > 50% and RR is anything above 1.5, this is a qualified system for me.

I don’t do Programming Back testing anymore these days, because it cannot capture the point of confluence and neither we can trade like a machine.Technically I am more than fit for a programmed back-testing as I am a programmer for last 14 years- and precisely that’s why I know where the machines fails.

Once the system is qualified – next step is testing. I test my system for a decent trade size (little higher than the validation setup) and check if I am capable of handling this without impacting the result in a negative way.

Once this is done – I own this system.

If one has not done this – I can bet that chances are pretty high that he or she will be a net losing trader, regardless he/she has been in the market for 5 months or 5 years, or will become one in just matter of time.

It is tempting to ask “What is your trading system”? Don’t do that. Spend some time, learn the concept from scratch, and try your hand in trying something new. Fail Often, Fail Fast (with low position size, so that you don’t get bankrupt).

Yes, you can take idea of existing trading system from others on the internet, but tweak to see what is required to be altered to make it compatible with your Timeframe and Points of confluence.


My preferred one for confluence

For Nifty
1. Positional Setup (with Trend) : Trend+Weekly Pivots + Pullback till Dynamic R/S at 20 DEMA/50 DEMA/100 DEMA + Pinbar rejection day candle with high volume (optional) - this setup has given me back all my losses of my first 8 years of trading - I shall discuss this on Concept 5.

2. Positional Setup (Reversal System): Trend fatigue+ Weekly Pivots+ Pinbar Rejection with High Volume (Mandatory) - needs lots of guts to get in as sentiment will be outright bearish/bullish and you are going against the mass. Shall discuss on Concept 6 - I hardly could get in this on time, still practicing the right entry. But entered mostly on day 2 or 3 once little or more confirmation is in place.


Both of the above systems are for 9 to 6 guys - will discuss one of this tomorrow.

Nifty/Crude Intra Day Trade Setup

1. With trend : Cashflow System (will discuss) + Day Pivot confluence + Technical indicator showing Breakout failure on Contra - the one I use most of the time

2. Against Trend: Cashflow System (will discuss)+Divergence system (already discussed on last concept) + Daily Pivot points confluence.

Please note - on Intraday , I mostly trade breakout failures -

1. Bullish trend - I will try to enter long on failure of break of support on pullback

2. Bearish trend- I will try to enter short on the failure of a break-out of the resistance on upthrust.




Develop one successful trading strategy first – check profitability and practice it to own it. Scale up position size if you keep on hitting consistent win rate in the chosen market condition (bullish/bearish, trending). Then develop another (Overbought/Sol, expecting trade reversal) and then another (Sideways market) – that’s your square cut, Straight Drive and Pull Shots.

Finally – last picture will summarize everything for you. Trade with just 1-2 lot on higher TF till you graduate. Preserve capital and gain experience. Develop a System as a process and focus on process goal instead of hitting double century on debut. If you have freedom of time, check if that works on lower TF (as that will increase your trade frequency) – but only after your trade system is proven on higher TF.

Exception – There are few system only for lower TF (1 min, 3 min TF), don’t fall for those yet. Go for the universal one – which work across all TFs – those are easy one and gives you a feel of symmetry.


Ask yourself just one question – if you don’t have a system or process for making trading decision consistently to become a net winner with just 1 lot (Nifty or Crude Mini), what makes you believe that trading with bigger capital with multi-lot will let you make money in long term. 1 or 2 random win without a process will do more damage as you will do same again and blow it.





It has been a long post- but I have to sum up all my decade old learning - here it is.
 
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#35
You are simply Rocking BRO. I can only pray god for you to BLESS and pump more and more energy to create massive wealth for you and help others.:thumb::thumb:

Its not that easy share the real experience like you are doing. Its simply priceless Bro . Thanks a million for Taking such an AWESOME initiative to educate all in right manner instead of simply giving one system. It may work or mayn't work in future but this education should definately help in future to have one of our simple system based on own frequency:clap::clap:.

I am practicing one of my own with crude mini using your inputs and couple of from forum/open source. hopefully this time i will quit losing group and join at least small earning group from market. fed up being on losing group

I really admire your patience to type THE big posts. :clapping::clapping:
 
#36
My Trading Concept # 4


Confluence and development of trading system

(There are few links, visit those later after going through the end of doc, else you may miss out the full picture I am trying to paint here)


What I want to discuss today is the foundation stone of any successful trading strategy. Regardless, we buy or sell, there is always a seller for a buyer and vice-a-versa and both of them taking the action (buy or sell), with the assumption that they will make money – but only 1 of them will be correct (assuming both are trading on the same timeframe). Which side? The one who has the majority of the price-volume force. Visualize this as a Tug of War with un-even team-size. But the one with stronger price-volume force, will win.

So at the end of the trade, in this game of probability – where only one side can be correct (buyer or seller) – is the one who has The Force on his/her side.
The idea of confluence is to have a trade setup where the chance of your joining The Force is higher –
But how?

Every different group of traders has a different technique:
  1. Few follow Pivot points (Fibonacci, Classic, Woodie’s or Camarilla)
  2. Few follow only Day High/Low, Previous Day’s High/Low , Value area High/Low, Market Profile etc
  3. Pinbar trading showing candle having long wick + High volume to show rejection
  4. Gann Fan / Gann Number traders
  5. Harmonic Pattern Traders, EW Traders
  6. Channel Breakout/ Break-out failure traders
  7. Traders following technical setup – and there we can have few thousands of setups considering the combination of indicators they are using
  8. Discretionary traders – who has some rules for entry /exit but left best to the discretion or price action they believe as correct for buying or selling

And the list goes on…..

And
The God-Father of all: The Smart Money

Consider yourself any one of this group (except being the Smart money) – your trade can and will win only if your buying or selling decision falls in the confluence with majority of the other traders in different of those above groups joining your side – and that will only happen if you Entry signal and direction (buy/sell) is close vicinity of the signals being generated by others. You will be in the majority group (Buyer or seller), overwhelming the other group with so much buying and selling pressure that you win the trade.
And let’s consider that still you will not be always right, but if you can get this right 5/10 times (yes only 50% time) with Risk Reward of 1.5 or more, your account balance will increase – this is generally my equation (50% win rate + 1.5 RR). But I do get most of my trade with 2 or 3R as I scratch my trade on the slightest hint of failure. As a matter of fact – power of confluence typically gives you an effective win-rate of +70%.

Now to do this (trading system with Confluence) – there are multiple recipes.




How you do this it is up to you – but let me share my strategic setup on how I develop a new trading system or have developed the winning one for me till now.

1. First be at the side of smart money – how? Check the trend on daily/weekly chart. I also track if FII/DII are selling or buying on EoD (For Nifty) – there are many places to check that. You can check the below link or NSE site to get provisional data:

http://craytheon.com/charts/fii_dii_nse_bse_trading_chart_graph.php

http://www.traderscockpit.com/?pageView=fii-dii-in-india

For Crude I use my Cash-Flow system (shall discuss on next section) to determine the money flow in the virtual way (not tracking real transactional volume as such).

I have won many contra (mostly on day trades) – but the majority of my winning trades are the one which are with the trends, especially almost 80 odd % of my positional win on Nifty since last 3 years were with the one with the trends.

If you are not sure about the trend (sideway market) – step aside from your screen and enjoy life outside trading. In fact that’s why we earn money.

2. Find the Pivot points confluence (I don’t follow any particular type, I get the list of all). I have a paid membership at Traderscockpit.com (this was mostly to help me mostly with stock screening on cash section of trading). But they have many things apart from screening.

They have a beautiful presentation of pivot points. I mark the important one matching the other groups and also if there is anything on week pivot matching days level. (Below one for example purpose on past data, no intention of copy write infringement)




You also can do this based on excel. Below website can help you:

Pivot Trading

The point is, you can follow any Pivot calculation type. My way is to find the matching levels one among all of those (so that I can net max of the Pivot traders in my Buy and Sell call)

3. Find your timeframe – this is The Most Important Point.

The thumb-rule is, lower the timeframe, you need higher skill.

Think about this twice.

You definitely have members in your family and friends who does not know anything on technical analysis on trading. They will simply ring up the broker to buy some stocks when market crashes and hold it for 2-3 months or a year and then sell those with good profit. That is the magic of time.

Where all of us are in the trade to win money in fastest possible time, as if we are in some F1 race, but are we skilled enough for the lower TF?

If not, you will simply give away money. In Tom’s word you are just liquidity provider to others or a donner – who give away the hard earned money to other traders – losing both time and money.

We should develop skill first win with higher TF Trade, and then zeroing down to lower TF trades. In the day trade also you can explore with higher timeframe first (4 hours, 1 hours and then gradually narrowing down or 15 mins, 5 mins, 3 mins normal or Scalping trades.

4. Find your position size. This is linked to your timeframe and overall trading capital (keep aside your R/R and Win rate aside for a while – think you don’t have a setup yet, so no idea on win rate).

Higher the timeframe will require Deeper SL and Higher Margin (overnight carryover margin). Lower TF will require small SL, so you can increase your Size.

There is also a human factor - I will discuss more on this later

5. Find a technical setup - there are many on the net and as well I am discussing few of mine and will discuss remaining one as well. I will also discuss how to develop one of your own if you want something new. But purely on technical indicator – you need 2 things:
1. That generate entry/exit signal
2. The Filter – avoid the fake signals

Few indicators can be used differently for a different purpose on a different timeframe. For example – some of use RSI overbought to sell on the first sign of weakness of the trend, and few actually enters on Overbought on lower-time-frame to mark the beginning of a new strong trend.

I will save some energy here and let the vast repository of internet help you on indicators and how to combine those: but here is good starting point:


TradeCity


Putting everything together:

Now, when I start checking winning profitability of any of my setup (anything new I am developing even now), I typically do it with just 1 or 2 lots Nifty or 10 lots of Crude Mini – Cause I want to lose minimum capital and I hate paper trading. I generally check below:

  • The frequency – I simply cannot hit buy/sell on my wish. I need the signal generated from my technical indicators (point 5) along with some confluence
  • What is the average profit (pips) I earn from my winning trades
  • What is the pip size of SL (30 points,50 points,100 for overnight trade) to invalidate the Setup
  • Identify, if this work best on Bullish Market or Bearish Market (Trending) or Sideways (you may hate it, but you need system for sideways market – generally 70% of the time market is on sideways as per common opinion and statistics)

Typically after testing for 2-3 months (I generally get both up and downtrend captured), I see the result. If the win-rate is > 50% and RR is anything above 1.5, this is a qualified system for me.

I don’t do Programming Back testing anymore these days, because it cannot capture the point of confluence and neither we can trade like a machine.Technically I am more than fit for a programmed back-testing as I am a programmer for last 14 years- and precisely that’s why I know where the machines fails.

Once the system is qualified – next step is testing. I test my system for a decent trade size (little higher than the validation setup) and check if I am capable of handling this without impacting the result in a negative way.

Once this is done – I own this system.

If one has not done this – I can bet that chances are pretty high that he or she will be a net losing trader, regardless he/she has been in the market for 5 months years or 5 years, or will become one in just matter of time.

It is tempting to ask “What is your trading system”? Don’t do that. Spend some time, learn the concept from scratch, and try your hand in trying something new. Fail Often, Fail First (with low position size, so that you don’t get bankrupt).

Yes, you can take idea of existing trading system from others on the internet, but tweak to see what is required to be altered to make it compatible with your Timeframe and Points of confluence.


My preferred one for confluence

For Nifty
1. Positional Setup (with Trend) : Trend+Weekly Pivots + Pullback till Dynamic R/S at 20 DEMA/50 DEMA/100 DEMA + Pinbar rejection day candle with high volume (optional) - this setup has given me back all my losses of my first 8 years of trading - I shall discuss this on Concept 5.

2. Positional Setup (Reversal System): Trend fatigue+ Weekly Pivots+ Pinbar Rejection with High Volume (Mandatory) - needs lots of guts to get in as sentiment will be outright bearish/bullish and you are going against the mass. Shall discuss on Concept 6 - I hardly could get in this on time, still practicing the right entry. But entered mostly on day 2 or 3 once little or more confirmation is in place.


Both of the above systems are for 9 to 6 guys - will discuss one of this tomorrow.

Nifty/Crude Intra Day Trade Setup

1. With trend : Cashflow System (will discuss) + Day Pivot confluence + Technical indicator showing Breakout failure on Contra - the one I use most of the time

2. Against Trend: Cashflow System (will discuss)+Divergence system (already discussed on last concept) + Daily Pivot points confluence.

Please note - on Intraday , I mostly trade breakout failures -

1. Bullish trend - I will try to enter long on failure of break of support on pullback

2. Bearish trend- I will try to enter short on the failure of a break-out of the resistance on upthrust.




Develop one successful trading strategy first – check profitability and practice it to own it. Scale up position size if you keep on hitting consistent win rate in the chosen market condition (bullish/bearish, trending). Then develop another (Overbought/Sol, expecting trade reversal) and then another (Sideways market) – that’s your square cut, Straight Drive and Pull Shots.

Finally – last picture will summarize everything for you. Trade with just 1-2 lot on higher TF till you graduate. Preserve capital and gain experience. Develop a System as a process and focus on process goal instead of hitting double century on debut. If you have freedom of time, check if that works on lower TF (as that will increase your trade frequency) – but only after your trade system is proven on higher TF.

Exception – There are few system only for lower TF (1 min, 3 min TF), don’t fall for those yet. Go for the universal one – which work across all TFs – those are easy one and gives you a feel of symmetry.


Ask yourself just one question – if you don’t have a system or process for making trading decision consistently to become a net winner with just 1 lot (Nifty or Crude Mini), what makes you believe that trading with bigger capital with multi-lot will let you make money in long term. 1 or 2 random win without a process will do more damage as you will do same again and blow it.





It has been a long post- but I have to sum up all my decade old learning - here it is.
Wow Tuna! :clapping::clapping::clapping:
Great teachings along with sharing your researched methods.
You are simply "Teach a Man to Fish......" by taking time n pain.
By God's grace you will be more healthy n wealthy forever to help others like this.
 
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Tuna

Listen and act, don't ask it, it doesn't oblige
#37
My Trading Concept # 5

Nifty Positional System 1 : The Fool's System

I don’t know if anyone here uses this, but this is being used by me since last 3 years. I call it the Fool’s system as you don’t need to be a SmartA$$ trader to follow this as the rules are very simple. This is also for 9 to 6 guys who cannot follow chart whole day.

This system is my all-time favorite for positional trades on index (Nifty). The only issue is trade-frequency which is hardly once a month, but the RR & Win Rate is so good you really come out profitable 8/10 times and you can trade in big size.
I never tried it on Banknifty, but theoretically, it should work on any Index. You need to work on the SL though, but the concept remains same.

P.S- On Brexit day, I was a net buyer on Nifty (both Fut and Call options) because of this system and made a huge killing in next 4 days.

This is for Future Trading, but you can also buy options (OTM typically 200 points away from current BRN)

Bullish Setup (opposite is true for bearish Setup):

Precondition: 20 DEMA > 50 DEMA after a recent crossover (start of a new bullish trend) or opposite for bearish trend

Entry condition 1: You keep on waiting till price goes below 20 DEMA. You will keep on placing a stop buy order on 20 DEMA each day, generally, you will get the fill in next 2 days’ time.

Or,​

in case next day is a big gap up above 20 DEMA, you don’t get scared, immediately enter on market open.

Entry condition 2: Price goes below 50 DEMA and closes above 50 DMEA same day (otherwise don’t enter). Enter on closing price (around 3:20 pm)

SL: Typically, below Candle low if it is a big candle or on Weekly Pivot points (Support) which is in confluence with most of the pivots system (Discussed on last concept #4).

Exit strategy: Each day your TSL gets set on the mid-point of day_1 candle. Let it continue till market hits your TSL. (for option, you can keep an alert at that spot price level and exit once that is reached).

You can visually back-test this on any year and check the win-rate and R/R.

Position Size:

My take on this:

If Capital is 75k to 1 Lakh, you should buy only 1 Lot – don’t try extra leverage here please. Add 1 lot for each 75 k thereafter.

For option, don’t buy more than 30k worth of options for an entry for each 1 lakh capital.

You will get more than 50% on your capital over the year. – sounds funny? keep aside all your system and try this.

And if you played on options, well it could be anywhere between 100% or more.

The system may look very simple and stupid, that’s why I named it like that. But let me ask you a question – are you getting 50% annual return on your capital on the system you are using? If not, try this.

Important: If this is happening 3-4 days before expiry and you want to trade on option, please take next month option chains.

Frequency issue: Yes, you miss the adrenaline rush for sure. Needs lots of patience. But as I said before – there is a different system for a different condition. You need not to have only 1 system.

But let me share with you a fact, over time, this is the only system which saves my back like a loyal life partner where the other one has been hot and cold over time like a ditching $lut.

Sample charts (showing for the current year, you can check for any year but for trending conditions: bullish/bearish):





and the bearish one



You can estimate how many points you would have got in Nifty in 2016, the key was (Trend + Dynamic (R/S)+ Weekly Pivots+ Pinbar (optional))
Now estimate, how many points just 1 system would have given you in 1 year.

Did I nail all of those I marked – no I did not as I was a little smarta$$ this year trying too much on lower TF last 4-5 months due to slump in work at the office since last couple of quarters.

But I nailed the 2016 starting shorts, the bearish ones, the Bullish one in April & May and the Brexit one which was enough for me this year to treasure this system.

As I am again getting busy at office, I will rely more on this system this coming new year. Hope many of you will get some good profit out of this.
 
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Tuna

Listen and act, don't ask it, it doesn't oblige
#39
Trading Psy Ops # 4

Know your Z Factor and keep it realistic and consistent~ Unknown

Remember the common arithmetic problem during our early school days? A monkey is trying climb a slippery bamboo tree – on each attempt it climbs some X meter and on next it falls down Y meter – considering the height of the tree is Z – how much time will it take to finish the climb?

I found an uncanny similarity with trading and many will agree to it.

The only difference is – on the above problem that the monkey has a consistency (1 climb, 1 fall and it's climb rate is > fall rate). Unfortunately, it is difficult in trading unless a proper process is in place to ensure your winning pips > losing pips. But this part is known. What commonly missed out are:



  • You cannot predict the sequence of your win and loss unlike the monkey (X,Y,X,Y,X,Y). In your case it can be (X,Y,Y,Y,X,X,Y,Y,X,X,X,X,Y,X) – even a good trading system with high win-rate can generate consecutive failures causing frustration and raising doubt on the system and make you to hop systems.

  • The height of the tree, Z factor (or the profit target per month) is not fixed or even worse, not realistic for many (the losing sides)

This was a missing piece of puzzle for me for many years – before I could turn into a net profitable trader over months and year.

If you have an unrealistic target (say you have 5 lakhs and wants to make 50% / 75% every month) – there will be the rare occasions when you will meet or exceed your target, but trying to achieve the same on next months you will give away all your profit and blow your account.

The issue here is – market follows a rhythm and your setup will be on its best triggering situation only after some time-laps since the last good trigger it generated (regardless of your TF). And it applies to each of your systems – so multiple systems (2-3 are manageable at best) can give you triggers with a decent frequency but there is a wait time for each of those.

Yes, you need to have a little higher target if you are fulltime trader as this is your bread and butter.

But if you are a secondary trader with a different primary source of your income (which could be business or a 9 to 6 job) – you’re trading edge is your choice of timing the trade. You don’t have to overclock your trading system. After the first successful trigger setup – give market sufficient time to come back to comfort zone of your trading system to trigger the next.

Once your monthly target is achieved, stay cool and wait for the market to give you the best trigger again. At end of the year what matters – did your trading capital grow or you went bust.

2 years ago, my monthly target was only 15% of my capital (note, it was the monthly target). Once achieved, I use to take extremely low-risk trades for rest of the month. This year I went for 25% PM, overdid it by and large for last 4 of 8 months and rest 4 with 15%+, but hit a drawdown this month wiping out my major profit slab.

That has forced me to revisit my Psy system once more to find out what I did wrong. I guess was taking too many bad quality signals due to the unnecessary pressure I had built on myself with the monthly profit target (and my capital is littler higher than what it was 5 years ago, so the target was higher numerically as well creating some psychological pressure).

For beginners, 15% might sound real less – but compare it with FD or RD what bank gives you. And it is 15% per month on your trading capital.

Calculate, how much are you getting per year with this rate of 15% pm (don’t even bother to compound the profit in your trading capital in between the year – keep the trading capital fixed). You can scale up your trading capital on yearly basis, or divert that profit to cash segment of trading.

Let me assure you, if you can net only 15% PM - you are doing a great job, it is just matter of time before you start making big money with a bigger capital.

Constant profit does far better to your a/c than one Diwali bumper lottery.

So if you are trading with Nifty say with 3 lakh (I recomend only 3 lots for overnight carryover trades), you need about 45k only per month, that is about 200 point on Nifty per month with current lot size of 75.

Is it that very hard to get? One (or max 2 ) simple positional swing trade on Nifty can get you that.

Once you got that, stay relaxed and wait for ideal situation to arise where chance of winning probability is real good.

Respect and behold your Z Factor - that is your Z+ security of your trading capital.
 
Last edited:

suktam

Active Member
#40
Trading Psy Ops # 4

Know your Z Factor and keep it realistic and consistent~ Unknown

Remember the common arithmetic problem during our early school days? A monkey is trying climb a slippery bamboo tree – on each attempt it climbs some X meter and on next it falls down Y meter – considering the height of the tree is Z – how much time will it take to finish the climb?

I found an uncanny similarity with trading and many will agree to it.

The only difference is – on the above problem that the monkey has a consistency (1 climb, 1 fall and it's climb rate is > fall rate). Unfortunately, it is difficult in trading unless a proper process is in place to ensure your winning pips > losing pips. But this part is known. What commonly missed out are:



  • You cannot predict the sequence of your win and loss unlike the monkey (X,Y,X,Y,X,Y). In your case it can be (X,Y,Y,Y,X,X,Y,Y,X,X,X,X,Y,X) – even a good trading system with high win-rate can generate consecutive failures causing frustration and raising doubt on the system and make you to hop systems.

  • The height of the tree, Z factor (or the profit target per month) is not fixed or even worse, not realistic for many (the losing sides)

This was a missing piece of puzzle for me for many years – before I could turn into a net profitable trader over months and year.

If you have an unrealistic target (say you have 5 lakhs and wants to make 50% / 75% every month) – there will be the rare occasions when you will meet or exceed your target, but trying to achieve the same on next months you will give away all your profit and blow your account.

The issue here is – market follows a rhythm and your setup will be on its best triggering situation only after some time-laps since the last good trigger it generated (regardless of your TF). And it applies to each of your systems – so multiple systems (2-3 are manageable at best) can give you triggers with a decent frequency but there is a wait time for each of those.

Yes, you need to have a little higher target if you are fulltime trader as this is your bread and butter.

But if you are a secondary trader with a different primary source of your income (which could be business or a 9 to 6 job) – you’re trading edge is your choice of timing the trade. You don’t have to overclock your trading system. After the first successful trigger setup – give market sufficient time to come back to comfort zone of your trading system to trigger the next.

Once your monthly target is achieved, stay cool and wait for the market to give you the best trigger again. At end of the year what matters – did your trading capital grow or you went bust.

2 years ago, my monthly target was only 15% of my capital (note, it was the monthly target). Once achieved, I use to take extremely low-risk trades for rest of the month. This year I went for 25% PM, overdid it by and large for last 4 of 8 months and rest 4 with 15%+, but hit a drawdown this month wiping out my major profit slab.

That has forced me to revisit my Psy system once more to find out what I did wrong. I guess was taking too many bad quality signals due to the unnecessary pressure I had built on myself with the monthly profit target (and my capital is littler higher than what it was 5 years ago, so the target was higher numerically as well creating some psychological pressure).

For beginners, 15% might sound real less – but compare it with FD or RD what bank gives you. And it is 15% per month on your trading capital.

Calculate, how much are you getting per year with this rate of 15% pm (don’t even bother to compound the profit in your trading capital in between the year – keep the trading capital fixed). You can scale up your trading capital on yearly basis, or divert that profit to cash segment of trading.

Let me assure you, if you can net only 15% PM - you are doing a great job, it is just matter of time before you start making big money with a bigger capital.

Constant profit does far better to your a/c than one Diwali bumper lottery.

So if you are trading with Nifty say with 3 lakh (I recomend only 3 lots for overnight carryover trades), you need about 45k only per month, that is about 200 point on Nifty per month with current lot size of 75.

Is it that very hard to get? One (or max 2 ) simple positional swing trade on Nifty can get you that.

Once you got that, stay relaxed and wait for ideal situation to arise where chance of winning probability is real good.

Respect and behold your Z Factor - that is your Z+ security of your trading capital.


hi
very useful post..
but to earn 15% monthly basis consistently is difficult task...

Regards...
 

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