Learn How To Fish

VJAY

Well-Known Member
Madans twitter message posted by xray bro

How bias affects our trading-

A typical battle in a budding trader’s mind : Scenario 1 - My last 2 trades whipsawed, I'll not take the 3rd trade now - the mkt is out there to get me (and the 3rd trade will be a huge winner - we end up cursing someone or mkts) (1/7)

Scenario 2 - I dont have a good feeling about this trade- as soon as the trade triggered,mkts have stopped or gone slightly against me. Let me close this trade before it hits SL (and the mkts actually reverses & trade goes in deep profit) - we end up cursing someone or mkts (2/7)

Scenario 3 - Holy moly, my trade is finally in profit but it seems momentum is ending now. Let me book whatever profits is on the table and wait for the next trade (same as 2 above,we end up booking small profit and miss on the BIG trade) - we end up cursing someone or mkts (3/7)

Scenario 4 - Mkts always hit my SL and reverses..so, I will hold the position (remove SL

and exit at breakeven (voila... the mkts keep going against our position and instead of taking small loss, we take a BIG loss) - we end up cursing someone or mkts (4/7)

Scenario 5 - Last 3 trades were winners - easy peasy

Lemme increase my leverage and trade larger qty (crap.. the 4th trade whipsaws. We end up losing more money in this 1 trade than the entire profit made in last 3 trades) - we end up cursing someone or mkts (5/7)

Scenario 6 - I havent been making any money (cos of one or few of the scenarios) whereas some random guy online is making huge money in every trade. Am sure my strategy is not good. So, lemme find some new strategy/new online guru or the best selling trading book in Amazon (6/7)

or new hot system/holy grail and trade my way to financial freedom. Rinse and repeat 1 to 6. This is a vicious cycle and guess what, finally we become the biggest mouthpiece for why trading does not work !!:DD It is a 'revolving door' maze and work on it to get out.

From Madan Kumar Twitter

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VJAY

Well-Known Member
Good points by Xray bro....
Pareto Principle: 80 % of profit comes from 20 % of trades..,at the movement 8 straight losses in intra ,which will be part of any systematic trader (continue loss trades)..it this exact area which makes a trader starts seeing other side (system hopping,or large time frame trading),lets always remember that emotions can be managed ,but cannot be controlled, we need to view each trade as probability....can we do this in real terms answer is no ,which needs psy drill..i.e embodiment in brain to carry your action irrespective of noise around you (Print /social media,forum)..which can show super profits,colorful ideas, also we can see some scary predictions) if they are effecting you then ,sorry you cannot be system trader !!
 

VJAY

Well-Known Member
Some posts for how to handle DD pace..By sumosanammain &TracerBullet[

It all depends on the analysis of the streaks that you face on a regular basis. If for example, 3 losses in a row is frequent, then maybe reducing quantity after that threshold would be a good idea.
No doubt, only paper traders can trade themselves out of a steep drawdown succesfully, and real traders like you and me get shaken up mentally, with our accounts waiting to see new highs.
I face issues after my 3rd loss in a row, and sometimes end up finding ways to avoid the next trade, right from reasons like today is weekly expiry to the markets are in a range to the reason that volatility is too high or volatility is too low, and end up messing up my system efficiency.
Its tough out there for sure, and mental toughness is very important, and takes years and years of handling drawdowns to condition. Still working on it.
I can see no other way to suggest, other than one small point, that after 3 losses, maybe wait for the trade to trigger, wait for it to go against you by half your stop loss, and then enter the trade, for a much better risk reward ratio. The issue with this is that if the trade just zooms in favour, you are left looking at the screen with zero position.

For a mech system, only thing to do is to take all trades. Any change should go through testing phase first.
If risk is moderate and max dd is comfortable, then maybe one solution is to do full automation so that you wont have to face day to day pnl.
If you are trading with aggressive size in order to scale up, then probably no option but to follow MM plan and scale down just as you scaled up earlier. This is the trade off.

For my current system in stocks where i take a lot of trades and have some discretion in trade selection, my plan is to reduce activity (number of trades) in extended dd phases when market is trading adversely. I do this by becoming more selective in my entry criteria. This is not a binary on off thing though as within DD period we could have days with very good context and movement and i might relax conditions a bit.

I am now testing a plan in Nifty which works best with smaller stops and large RR. So win rate is very low and streaks of small losses are the norm. For this, I will have to take all trades, there is no option as any single trade can easily cover full/most of the DD.

The best edges for the mind probably have say 50-60+% win rate with say 1:1R - without too much clustering of wins and dependence on large wins, but i have yet to find such an edge in my testing so far in my market-tf, maybe due to high taxes. 1:1 is never optimal for my systems ..
 

VJAY

Well-Known Member
Post bay Xray bro...

some points of reality in trading...

1.No body earned from searching top and bottoms,all the theories have failed statistically...

2.Trend only can be maked from middle and moves can be locked my trailing stop loss...you will have low striking with DD...but RR is whole thing which we can bat on..reality is not accepted so people won't stop searching for high strike rate with higher RR

3.Making a trading system answers all issues ,but following that, countering noise from out side needs practice, which many fail
 

Schatz

Well-Known Member
Good points by Xray bro....
Pareto Principle: 80 % of profit comes from 20 % of trades..,at the movement 8 straight losses in intra ,which will be part of any systematic trader (continue loss trades)..it this exact area which makes a trader starts seeing other side (system hopping,or large time frame trading),lets always remember that emotions can be managed ,but cannot be controlled, we need to view each trade as probability....can we do this in real terms answer is no ,which needs psy drill..i.e embodiment in brain to carry your action irrespective of noise around you (Print /social media,forum)..which can show super profits,colorful ideas, also we can see some scary predictions) if they are effecting you then ,sorry you cannot be system trader !!
there r many ways to skin a cat... what you are discussing is trend trading where one has to rely on low hit ratio and much bigger R:R to stay in the game... traders who r starting out its really difficult to go through long periods of DD ... instead of blinding doing trend trading one has introspect and see does it really fit ur mindset... one can choose to select strategy based on respective mindset instead of fixing mindset to the said strategy ... ofcourse there r certain basic mindset framework is needed... but i suggest to find out a strategy which goes along with u as a person ...
 

VJAY

Well-Known Member
Shared by Xray bro....

Trend trader skills as summed up by Steve Burns

1. Ability to build a profitable trading system.

2. Ability to follow the system with discipline.

3. The self control to follow proper position sizing.

4. The perseverance to keep going after draw downs in capital.

Mostly fail at 3 and 4...net result... running after new systems and ideas.
.:DD
 

VJAY

Well-Known Member
For profitable trading no need master many setups/patterns....mastering one setup/pattern enough for successfull trading.....here even in this method you can trade any one setup enough


“I fear not the man who has practiced 10,000 kicks once, but I fear the man who has practiced one kick 10,000 times.”Bruce Lee
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VJAY

Well-Known Member
Money management,position sizing and Trade management are the key element in trading of any method ...it's simply like this...
money management-whats your capital?how much % from your capital you are going to risk totally for trading ?
from it how much % you risk for day?
How much % you risk per trade?
Position sizing- it's clearly % risk you decided per trade...you should know initial stop loss for every trade before entry as per your method....
Trade management.This one is one of the key thing you need to develop with your method .when price moving against your entry what are the actions you take?initially do some simple rules for it...then your experience will teach you how good you can do it...IMO Trade management is what control your drawn down periods...

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