An Excellent Collection of ST's Posts.

[XRAY27]

There are 3 types of markets and the market moves as under :

1) We understand the market moves and we trade and make money.

2) We think that we understand the market moves but market goes opposite our view...so we make a small stoploss.

3) There are some periods where we have no clue ,we dont understand what the heck the market is doing....in this period dont force our views on the market....step aside and let market do its own things till it becomes clear to you.

Most traders have problems with type 3...they insist that they should understand what the market is doing all the times....this is not possible...even the best traders are clueless in some period of time.

Smart_trade

 

[lemondew]

Today 1:30 pm to 3:30 pm was point no 3 market for me

It was acting like crazy. Hopefully I dont become greedy and trade such markets

There are 3 types of markets and the market moves as under :

1) We understand the market moves and we trade and make money.

2) We think that we understand the market moves but market goes opposite our view...so we make a small stoploss.

3) There are some periods where we have no clue ,we dont understand what the heck the market is doing....in this period dont force our views on the market....step aside and let market do its own things till it becomes clear to you.

Most traders have problems with type 3...they insist that they should understand what the market is doing all the times....this is not possible...even the best traders are clueless in some period of time.

Smart_trade

 

[vijayanscbe]

I follow a different definition of pivots...also I trade on 3 min charts. So for me there were pivots today.

Use sideways consolidation and breakout to buy. The method is for our guidance. We should never be slaves of the system. If the market is going up or down then we must buy/sell...use sideways consolidations, 2 bars method, aggressive pivots....anything to buy.

The method includes most of the possibilities but it cannot include all 100 % of the possibilities which the market throws at us and that is why we need to use our judgment. In such cases I use my best judgement and take an entry at the best possible point and then keep a 15-20 points stop loss.

I find many saying they did not get an entry on their system though the market went up by 100 points. I dont trade that way. We should be in command of the system and not its slave. But every trader may have different views on following the system too rigidly and I don’t want to get into arguments on this issue...each to his own. So if there is no entry, then dont take a trade or use something else.

Smart_trade

 

[XRAY27]

Difference Between Unsuccessful and Successful Trader


1) Unsuccessful trader will be after systems, indicators, news....successful trader will concentrate on trade management, MM and learning new things to supplement his system.

2) Unsuccessful trader will blame market, operators, algos,brokers for his failure...suceessful trader will take the full blame on himself and look how to improve.

3) Unsuccessful traders wont look at the contracts after trading day is over...they are swept under the carpet......successful traders will carefully check the contracts and think what he could have done better.

4) Unsuccessful traders are not careful about their profitability and ledger balance...successful traders watch their ledger balance with eagles eye.

5) For unsuccessful trader making money from even wrong trade is more important....for successful trader, getting out of wrong trade no matter at what price is important....loss does not bother him...but being on wrong side of the market does.

6) Unsuccessful traders are angry, abusive,short tempered....successful traders are calm and happy lot.

Smart_trade

 

[XRAY27]

Fear of loosing trade


Once we have identified a competent trading method, we have to backtest it very rigorously for a long period. The backtest gives us an idea of the "nature" of the method, challenges it throws at you in real trading and prepares you for any situation in the market. Though backtest is not with real money so it cannot exactly simulate the trade environment but it definately is the second best to real trading to understand various issues you face in real trading.

Now comes another problem.....your method identifies a set up in real trading which now you are doing on it , the trade is about to trigger and now your mind starts playing games......." hmmmm the trade environment is still a bit hazy....bit unclear....let me wait for some more time....." It is my experience that all trades are a bit hazy initially....and the real money is made in between the point you start doubting about a trade and you and everyone else get confirmed about a trade......by this time the market has moved in favour of your trade and now all scramble to get in......the meat is over....also now the market is much away from your stops....so now the trade looses its Reward/risk ratio advantage.....and finally you miss the trade.
Many times this will be a big winner and you take a oath not to repeat these things in future but this pattern keep repeating one has to break out of this pattern........let us understand how professionals manage such dilemas.....

When a trade is about to trigger, even a good trader has the same issues which a new trader has......but he takes the trade knowing fully well that if it does not workout, he will get out of that trade with minimal damage.The reaction of successful and novice traders to the failed trade is totally different. The following is the reaction of a loosing trader :

1) Damn.....this trade again going in loss....how does market know I am in a trade so it goes against me..........game of operators.......a honest trader has no chance of succeeding........

2) I need a different tweak to this method.......

3) After such research I have taken a trade.....how the hell can it go wrong ??? I must take some more positions and average......

4) I should have waited for it to be more clear......

Now let us see how a professional reacts.....he has taken a trade on a breakout which is not working out.....he will say....hmmmm I thought this trade will be a great winner....but market does not want to go in the direction of the breakout.....ok....no issues.....if the market comes back in the range it broke....I need to get out of the trade and re enter again if the necessary.....I will not wait till my stops are hit.....the breakout which I traded is not valid....so I am getting out....I will always get many more opportunities in the market ....thank you market.....see you in the next trade...

Once we start accepting that loosing trades are unavoidable in this game we must minimise the damage they do to our account and we should have no fear of loosing trade when the trade is about to trigger and we take a major step forward in our journey of becoming profitable traders.

Smart_trade

 

[XRAY27]

Risk capital per trade

Trade 1% of your trading capital on each trade. Increase the % only after you reach 50 % profit on your trading capital....This should take about 3 months. Then at the end of 3 months devide the profits equally between trading capital and risk capital.....continue trading 1 % of your trading capital.....and trade 4-5 % of your risk capital......let this continue for 100 % profit....then repeat the same step.....

Let us take an example...say your Initial trading capital is Rs 5 Lacs......you make 2.5 L profits devide that 50:50 ...so trading capital now becomes 5+1.25 =6.25 L and your risk capital is 1.25 L now on each trade you take 1 % of 6.25 L plus 5% of 1.25 L = 6250 +6250 = 12,500 on each trade......continue this till your trading capital + Risk capital becomes 15 L ....then same steps.....

If you find 5 % too large, then go for 3-4 % of risk capital but this compounding will increase your trading capital exponentially without taking undue risk with your trading capital which goes on increasing continuously.

Smart_trade

 

[wisp]

An earlier thread http://www.traderji.com/members-discussion-forums/93453-important-posts-smart-trade_-part1.html

 

[XRAY27]

As a young trader who was struggling to come up in life I used to talk to many very successful traders. One of them was trading with a double digit Rs Crores capital ( this was about a decade ago ) once told me the following which had lasting impression on my mind. His advice was as under :

1) You try to make Rs 8-10 Lacs per annum on your capital of Rs 3 L which is very difficult...I make 10 times that amount but my capital probably is 200 times your capital so for me it is easy job.

2) One does not have to do extraordinary things to be wealthy....all one has to do is do ordinary things but with extraordinary efficiency.

3) Consistancy is the key to anything in life and so is in trading . You may make 20 % in a day on some days but making consistant returns on your capital is much more important than making few spectacular profit days and few equally horrible losing days.

Smart_trade

 

[XRAY27]

Now with rs 1 L trading capital you trade 50 Nifty. Suppose you make 200 points in the first month giving you a profit of Rs 10,000...for next month again same 50 qty...200 points profit....now your total capital is 1 Lac + 10K +10 K = 1.2 L ...so in 3rd month you trade 3 contracts or 75 Nifty....200 points in 3rd month will give you 15 K profit...so in 4th month you trade with 4 contracts...so on and so forth...but if anywhere there is a monthly loss of 10 or 15 K, reduce 1 contract....so add when you make money..reduce when you loose money.

You can follow whatever MM you are comfortable with...all MMs have a basic idea that increase the qty when making money, reduce faster when loosing money.You are taking additional risk with market's money ie out of profits earned.

This MM looks very simple but it is very tough practicing it with discipline ..but do it for 2-3 years and you will be trading really big quantity all from markets money. After 1 year the qty increases very fast and so does the profits. In case you have couple of loosing months, you will achieve the qty after 2-3 months

Smart_trade

 

[XRAY27]

PROFIT BOOKING

1) Profit taking is very important part of any trade managemet.It is the part which makes money for us.

2) Profit booking is both science and an art.

3) All good traders are good at booking profits.

Now we come to daytrading. Here we have to strike a very delicate balance between letting profits run and grabbing profits aggressively. Few points to consider while booking profits are as under :I will just mention the points , a few posts can be added on each of these points.

1) Market volatility and range: If the market ( NF) say is giving 120 points range every day, then booking profits in 20 points is booking too early....but if the range is 50-60 points then 20 points is a good move.

2) Trending /sideways day we have at hand : In a trend day we have to hold the positions and add to them and hold till the end....trend days normally end very near top/bottom of the days range.

But in sideways days we have to book profits more aggressively. Else the market will reverse and the profit will disappear.

3) Important Supports /Resistances: Important supports /resistances such as TDST levels,major pivot highs/lows, Sequential low risk sell/buy areas,VWAP and the VWAP bands etc

4) Rejection and failures : Rejection and failures at important pivot highs/lows and support/resistance areas will give a clue to book profits.

5) Market Activity : Observing market activity at important pivots can give a good clue for profit booking....if the market starts making small bars which intertwine with each other then it is a sign to book profits. On the contrary if the levels are broken effortlessly then hold on to your position.

6) Steep Rise/fall: After a sustained rise and fall, we get a steep rise or fall and big bar, that is a sign of a selling/buying climax. Grab the profits there.

7)Some important price patterns like hammers and inverted hammers, hanging man,engulfing bars coming at important levels after sustained rise/fall also gives great clues for profit booking.

8)Power of 9: After making 9 buy/sell set up bars the market will take a correction...so trail the profit taking at low/high of each successively higher/lower bars. Market also has a tendency to make short term top/bottom after every 5 bars in one direction...this observation is for any timeframe.

The above are just mentioned to give you a template to think and work on your profit taking. Many people follow booking 1/2 qty if trading NF in 20 or 30 points and trail the remaining half.

Smart_trade