F&O Trade Diary - Manny


Well-Known Member
One of the Key lessons that I learnt which changed the way I look at trading is do not try to copy someone else strategy, its never going to work for you, instead focus on trading concepts and build your own strategy & MM rules. I know I may sound arrogant but realizing this is the key for success in trading. If we study successful traders the key differentiator is that each have found their unique strategy which is in sync to their psychology and you will not find 2 traders following exactly the same strategy and are successful.

There are hundreds of strategies & trading concepts which are freely available on the net and to be frank each of them will make money provided it has been adapted to traders personality. For example, strategy based on Demand & Supply concept by itself has an edge but one need to adapt it to make it natural with our personality, like @XRAY27 is using market profile which gives him additional confidence in taking the trades, similarly I use flow pivots along with D&S as it is more in sync with my personality.

However strategy is just a small part, the other part is risk & money management, this too need to be in sync with our unique personality and this is where most of the traders fail while following others strategy. Returns are directly proportional to the risk we take, but how much risk to be taken for each trade should be part of our strategy rules which should be as per our risk appetite and cannot be copied from another trader.

If one need holy grail trading strategy, one need to follow these 3 steps which I always follow, I am not asking to follow my advice blindly, just give it a try and see for yourself if it makes any difference:

1. For the strategies that you come across, try to answer the key question for each strategy " Why do you think this strategy makes money?" Answer should not be like Mr. X is trading it successfully or a complex indicator has generated the signal so it should makes money ..:) instead see if you can come up with your intuitive reasoning on why it will make money. Among the strategies that you select, identify the one for which you were able to give the simplest reasoning, this is the strategy which meets your personality and will have the confidence to follow without much of internal conflicts. If you understand the strategy which is very important you will be able to easily know the strength and weakness of the strategy to taking actions.
2. Now for this selected strategy identify the set of entry, sl, exit & MM rules under various conditions that you feel comfortable, always approach risk first so that you will be able to measure your returns with respect to risk as it will help in scaling up.
3. Test your strategy by taking minimum 30 trades using the lowest possible risk %, record these in a journal and track results every 10 trades and make any adjustments if required to the strategy rules.

If one is able to do these 3 steps honestly by the end of 30 trades you will have your own personal strategy which is in sync with your personality. This will be your Holy Grail strategy and since you have developed this strategy you will have the confidence to follow it even during draw-down phase.
Thats Good, Yes @madank is a very good trader, he was the first person to inspire me that trading can be taken up as a serious career option. It was encouraging to know someone from a similar educational background as me is successful in trading.

Yes, All in is a good entry technique which helps simplify trade execution and management. As you are now exploring to increase your volume or scale, you may also consider position sizing and define a framework for optimal dynamic risk profile. The challenge of scaling up without defining the risk profile will make your portfolio very volatile and may have bigger draw-downs. Hence there should be rules defined as to under what conditions one need to trade aggressively and when to get conservative.

For example if you are using FRM with All-in approach you can define 3 risk profile like low (1%), medium(1.5%) & high (2.5%) and trade based on the risk profile rules (Market is favorable,recent trades are all wins etc) This way you will trade with higher risk when conditions are favorable and trade with lower risk when conditions are not favorable. This will help smooth your equity curve and help you to scale up seamlessly. There was a good article by Dr. Van Tharp explaining the concept of how much to risk per trade which I had read long time back but am not able to locate it now.

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