topic I agree with CV 100% about testing. Before moving on to the 'next system' did you check why the first one failed? I don't think one can go on like that for ever! and then say 'nothing works!' That is self defeating
I'm no expert but I do wish to disclose my viewpoint.
There is a difference between the following:
1) Losing, and losing on a consistent basis
2) Building your own trading system and choosing other's systems
3) Using a trend follower and a zig zag indicator
I understand your dilemma but you have to understand the fact throughly that no one will put out stuff that actually works in public. That would be utter disrespect of ones work IMO. Books and courses are just a starting point , there is a whole lot of testing and real time feedback that is required to understand market dynamics.And you know what it takes time and lots of it for anyone to 'get it'. This is not a game where you can dabble and expect great results.So dont lose heart and be patient! It will click eventually.
Your feelings have an immediate impact on your account equity. You may have a brilliant trading system, but if you feel frightened, arrogant, or upset, your account is sure to suffer. When you recognize that a gamblers high or fears is clouding your mind, stop trading. Your success or failure as a trader depends on controlling your emotions.
When you trade, you compete against the sharpest minds in the world. The field on which you compete has been slanted to ensure your failure. If you allow your emotions to interfere with your trading, the battle is over.
You are responsible for every trade that you make. A trade begins when you decide to enter the market and ends only when you decide to take your self out. Having a good trading system is not enough. Most traders with good systems wash out of the markets because psychologically they are not prepared to
5 Trading Tips-
-Remember that there is always another trader on the other side of the trade doing the exact opposite that you are doing. Only one of you can be right.
- Waiting around for the perfect trade or the perfect opportunity will guarantee that you never trade stocks.
- Trading stocks is about probabilities, NEVER certainties. You are not smart enough to predict, with consistency, what will come next.
- Conventional wisdom is usually wrong. Trade against the crowd, not with them.
- Money, trade, and self management has always been and will always be the holy grail to trading stocks.
So,my friend,if you really wish to succeed at this(that's step no 1 actually,do you really have that burning desire to succeed and make the necessary sacrifices)........if you therefore wish to succeed,you have to take all the blame for it.Every time you lose because you didn't adhere to your rules,the blame is not the market's,not this forum's,not your wife's,not TA's or FA's.......yours and yours alone.Go back to your methods,your money management disciplines,your entry and exit criteria,your mind,your health......somewhere,there's a problem that you need to look into and rectify.
Been there,done that,my friend........ I can understand the frustration and agony.But don't allow your mind to settle for petty excuses.......take all the blame and look into what needs to be rectified.
And,as for people successfully making money out of TA.......There are many in this forum itself who are doing it.And as said before,if one person can do it,it can be done.
Whether you want to make the necessary sacrifices and undergo all the pain required is another question.
I hope
And another thing to remember about Freecell.....particularly....That Every Game Can Be Won....I am sure you will develop some observing skill....thereafter, one can practise in terms of paper trading sitting in front of a Brokers Terminal....believe me, you can reach a stage......whereby you can trade with 99.5% accuracy...without even having to look at any kind of trading software but have to keep tabs on what is happening around the world politically...economically...& blah blah.......(Key to this development is Patience & power of observing & rest shall come quite easily
There are external indicators that are as powerful (& on a given day more powerful) than the indicators on the charts.
Your fantastic success reinforces my belief that an analytical background is most suitable for a Technical trader - helps in the assembly of otherwise isolated components and also troubleshooting, fine-tuning of the assembly and/or one or more of its individual components
As a tecnical trader , i can say that each and every set up has its pre defined stop los levels and targets, and a tecnical trader is discipined to obey those levels.
Not a single set up can give you a 100 % winners but following tecnicals one can make nice trades with risk managments.
Remember the tecnicals are following the markets, and tell us the current situations of a prevailing market conditions, they tell us a new trend is about to start of a trend is still in continuations, but it is not always that the trend follows technicality.
There are so many different factors that work on financial markets movements.
With sound tecnical analysis and a proper trading plan with predefined stop loss , one can trade at ease and can come out a winner on a long run
Being Right and Making Money Are Not Equivalent by Dr Van Tharp
How important is it for you to be right? Let's say I could guarantee that you would make money by the end of the yearlots of moneybut you would probably lose money on 90% of your trades. Would you like that? Could you tolerate that? Would you accept that? Most people would probably answer "no" to all three questions. And if that is you, you probably are denying yourself the opportunity to make money simply because being right is more important than making money.
Some of you might be saying, "How could you be wrong 90% of the time and still make money?" The solution goes back to the golden rule of trading, "Cut your losses short and let your profits run." Let's say that 90% of your trades lose money and that your average loss is $100. On the year you make 100 trades so you end up losing 90 of them for a total loss of $9,000. However, let's also say that your average winning trade is a big R-multiple. It's an R-multiple of 100 or a $10,000 winner. You have ten of those in a year, so you end up making $100,000 on your winning trades. If you subtract your winnings from your losses, you'd end up with a profit of $91,000 at the end of the year. You make $91,000, yet 90% of your trades are losers.
My guess is that 99% of the trading population could not trade a system that would produce those kind of results. The reason is because they don't get to be right enough. They have too many losing streaks. They have losing streaks that are longer than five in a row. Most people cannot tolerate long losing streaks. When they occur, they totally abandon what they are doing. In such a system you could easily have 25 consecutive losses. At that point you become certain that your system is broken, and you try something else.
Let's look at the opposite end. Suppose you got to be right 90% of the time. Suppose your average win was $100 and that your average loss was $2,000. This means that you'd have a total of $9,000 in winnings and $20,000 in losses. You would lose $11,000. Would people trade that system? Yes, they would. They would probably trade it for a number of years until they went bankrupt. Why? Because they get to be right most of the time and that is very rewarding.
You might be saying, but how could people possibly tolerate losses of $11,000 after 100 trades? It is easy; they turn the losing trade into a long-term investment in their mind and say, "it's only a paper loss." For example, I've had workshop attendees who were probably way above average in terms of sophistication. However, I asked them to raise their hands if they had an investment in their portfolio that was only worth 50% or less of what they paid for it. Eleven people raised their handsover a fourth of the class. And my guess is that among the overall population of investors, most people are sitting on a number of big losers, hoping they will come back. Why? Because they cannot stand to be wrong on an investment and they are waiting to be right on those losing trades.
What is the cost of having losing investments in your portfolio? It's major. First, you are using valuable capital up with nonproductive investments. Second, you are missing many good opportunities.
Why Being Right Seems So Important
There are two primary reasons why we focus on being right. First, we are conditioned to be right by the school system. Second, everyone in the trading industry gives people what they wantways to be rightwhich tends to perpetuate the myth. Let's take a closer look at these two reasons.
First, we are conditioned by the school system to the importance of being right. In school you are taught that there are right answers and wrong answers. What is a right answer? If you learned how to survive in the system, you learned that a "right" answer is whatever the teacher wanted.
Your performance is measured periodically through tests in which you are asked to pick the right answer. If you cannot get more than 70% right on the test, you are labeled a failure and ostracized. Your humiliation might even be in public in front on all your friends. And if your humiliation isn't public, it certainly is semipublic. Your "poor" performance goes home in the form of a grade with a comment that "Johnny is a little slow or Johnny is bright, but he just doesn't try." Usually, at this point, the most important people in your young life get involvedyour parents.
Even if you understand the system and work hard to know the right answers, you still might be taught that your performance is not good enough. It usually takes 94% right to get an excellent grade. But how many children go home and show their 94% test to dad only to get the response, "Why didn't you get 100%?"
Thus, it is no wonder that traders want to be right all the time. And being right usually costs them dearly in terms of profits. Whether you've been through 20 years of schooling and have a graduate degree or less than 10 years of schooling, you still have the same conditioning about being right.
The second reason people want to be right is that service providers for traders and investors feed the bias to be right. First, software vendors tend to provide systems that can be highly optimized. Once you've optimized your trading, you can lay a line over the prices and see exactly where you should have bought and sold. It seems obvious. However, the same optimized system does very poorly when applied to the real world.
Be right 75% of the time AND
Let your winners run their course
The probabiity of both increases if you do not overtrade.
Also one has to be very careful about stop-losses. While they may be your saviour with losers they may also cut you short with your winners.
Be as fussy as you want to be with your picks and entries (Refine your system till it returns no more than 10-12 picks) but once you've made your pick have some faith in the +ve expectancy you have associated with it.
There are only two types of traders
Volatility Traders
Directional Traders
Directional trading is ofcourse hard but its harder when you are uni-directional. Do you get the hint?
Let me make it a bit more clear - In a multi-variate dynamic medium you cant rely on static horizontal levels without factoring in the 'dynamic' part. That was the last hint
Trading is a performance-oriented discipline. Stress and mental pressures can affect your ability to function and impact your bottom line. Much of what has been learned about achieving peak performance in both business and sports can be applied to trading. But before looking at some of these factors, let's first examine the ways that trading differs from other businesses.
Intellect has nothing to do with your ability as a trader. Success is not a function of how smart you are or how much you have applied yourself academically. This is hard to accept in a society that puts a premium on intellect.
There is no customer or client good will built up each day in your business. Customer relationships, traditionally important in American businesses, have little to do with a trader's profitability. Each day is a clean slate.
The traditionally 8-5 work ethic doesn't apply in this business! A trader could sit in front of a screen all day waiting for a recognizable pattern to occur and have nothing happen. There is a temptation to take marginal trades just so a trader can feel like he's doing something. There's also the dilemma of putting in constant hours of research, having nothing to show for it, and not getting paid for the work done. Yet if a trader works too hard, he risks burn- out. And what about those months where 19 out of 20 days are profitable, but the trader gives it all back in one or two bad days? How can a trader account for his productivity in these situations
you were to invest time, energy, and emotion into developing a business venture and backed out at the last minute, it would be considered a failure. However, you should be able to invest time and energy into researching a trading idea, and yet still be able to change your mind at the last minute. Market conditions change, and we cannot be expected to predict all the variables with foresight. Getting out of a bad trade with only a small loss should be considered a big success!
What IS the definition of a successful trader? He should feel good about himself and enjoy playing the game. You can make a few small trades a year as a hobby, generate some very modest profits, and be quite successful because you had fun. There are also aggressive traders who have had big years, but ultimately blow-out, ruin their health or lead miserable lives from all the stress they put themselves under.
Principles of Peak Performance
The first principle of peak performance is to put fun and passion first. Get the performance pressures out of your head. Forget about statistics, percentage returns, win/loss ratios, etc. Floor-traders scratch dozens of trades during the course of a day, but all that matters is whether they're up at the end of the month.
Don't think about TRYING to win the game - that goes for any sport or performance-oriented discipline. Stay involved in the process, the technique, the moment, the proverbial here and now.! A trader must concentrate on the present price action of the market. A good analogy is a professional tennis player who focuses only on the point at hand. He'll probably lose half the points he plays, but he doesn't allow himself to worry about whether or not he's down a set. He must have confidence that by concentrating on the techniques he's worked on in practice, the strengths in his game will prevail and he will be able to outlast his opponent
The second principle of peak performance is confidence. in yourself, your methodology, and your ability to succeed. Some people are naturally born confident. Other people are able to translate success from another area in their life. Perhaps they were good in sports, music, or academics growing up. There's also the old-fashioned "hard work" way of getting confidence. Begin by researching and developing different systems or methodologies. Put in the hours of backtesting. Tweak and modify the systems so as to make them your own. Study the charts until you've memorized every significant swing high or low. Self-confidence comes from developing a methodology that YOU believe in.
Concentrate on the technical conditions. Have a clear game plan. Don't listen to CNBC, your broker, or a friend. You must do your own analysis and have confidence in your game plan to be a successful trader.
Analyze the markets when they are closed. Your job during the day is to monitor markets, execute trades and manage positions. Traders should be like fighter pilots - make quick decisions and have quick reflexes. Their plan of attack is already predetermined, yet they must be ready to abort their mission at any stage of the game.
Just as you should put winning out of your mind, so should you put losing out of your mind - quickly. A bad trade doesn't mean you've blown your day. Get rid of the problem quickly and start making the money back. It's like cheating on a diet. You can't undo the damage that's been done. However, it doesn't mean you've blown your whole diet. Get back on track and you'll do fine.
For that matter, the better you are able to eliminate emotions from your day, the better off you will be. A certain amount of detachment adds a healthy dose of objectivity
Trading is a great business because the markets close at the end of the day (at least some of them). This gives you a zero point from which to begin the next day - a clean slate. Each day is a new day. Forget about how you did the week before. What counts is how you do today!
Sometimes what will happen during the day comes down to knowing yourself. Are you relaxed or distracted? Are you prepared or not? If you can't trade that day, don't! - and don't overanalyze the reasons why or why not. Is psychoanalyzing your childhood going to help your trading? Nonsense!
The third important ingredient for achieving peak performance is attitude. Attitude is how you deal with the inevitable adverse situations that occur in the markets. Attitude is also how you handle the daily grind, the constant 2 steps forward and 2 steps back. Every professional has gone through long flat times. Slumps are inevitable for it's impossible to stay on top of your game 100% of the time. Once you've dug yourself out of a hole, no matter how long it takes, you know that you can do it again. If you've done something once, it is a repeatable act. That knowledge is a powerful weapon and can make you a much stronger trader.
Good trades don't always work out. A good trade is one that has the probabilities in its favor, but that doesn't mean that it will always work out. People who have a background in game theory understand this well. The statistics are only meaningful when looking at a string of numbers. For example, in professional football, not every play is going to gain yardage. What percentage of games do you need to win in order to make the playoffs? It's a number much smaller than most of us are willing to accept in our own win/loss ratios!
Here is an interesting question: should you look at a trade logically or psychologically? In other words, should every trade stand on its own merits? Theoretically, yes, but in real life it doesn't always work that way. A trader is likely to manage a position differently depending on whether the previous trade was a winner or a loser.
How does one know when to take profits on a good trade? You must ask yourself first how greedy do you want to be, or, how much money do you want to make? And also, does your pattern have a "perceived profit" or objective level? Why is it that we hear successful winning traders complain far more about getting out of good trades too soon than not getting out of bad trades soon enough? There's an old expression: "Profits are like eels, they slip away."
Successful traders are very defensive of their capital. They are far more likely to exit a trade that doesn't work right away than to give it the benefit of the doubt. The best trades work right away!
OK. Realistically, every trader has made a stubborn, big losing trade. What do you do if you're really caught in a pickle? The first thing is to offer a "prayer to the Gods". This means, immediately get rid of half your position. Cut down the size. Right off the bat you are taking action instead of freezing up. You are reducing your risk, and you have shifted the psychological balance to a win-win situation. If the market turns around, you still have part of your position on. If it continues against you, your loss will be more manageable. Usually, you will find that you wished you exited the whole position on the first order, but not everyone is able to do this.
At an annual Market Technician's conference, a famous trader was speaking and someone in the audience asked him what he did when he had terrible losing trades. He replied that when his stomach began to hurt, he'd "puke them at the lows along with everyone else." The point is, everyone makes mistakes but sooner or later you're going to have to exit that nasty losing position.
"Feel good" trades help get one back in the game. It's nice to start the day with a winning scalp. It tends to give you more breathing room on the next trade. The day's psychology is shifted in your favor right away. This is also why it's so important to get rid of losing trades the day before. so you don't have to deal with them first thing in the morning. This is usually when the choice opportunity is and you want to be ready to take advantage of it.
A small profitable scalp is the easiest trade to make. The whole secret is to get in and get out of the market as quickly as possible. Enter in the direction of the market's last thrust or impulse. The shorter the period of time you are is the marketplace, the easier it is to make a winning trade. Of course, this strategy of making a small scalp is not substantial enough to make a living, but remember the object is to start the day out on the right foot.
If you are following a methodology consistently (key word), and making money, how do you make more money? You must build up the number of units traded without increasing the leverage. In other words, don't try going for the bigger trade, instead, trade more contracts. It just takes awhile to build up your account or the amount of capital under management. Proper leverage can be the key to your success and longevity in this business. Most traders who run into trouble have too big a trade on. Size influences your objectivity. Your main object should be to stay in the game.
Most people react differently when they're under pressure. They tend to be more emotional or reactive. They tense up and judgement is often impaired. Many talented athletes can't cut it because they choke when the pressure's on. You could be a brilliant analyst but a lousy trader. Consistency is far more important than brilliance. Just strive for consistency in what you do and let go of the performance expectations.
Master the Game
The last key to achieving mental mastery over the game is believing that you can actually do it. Everyone is capable of being a successful trader if they truly believe they can be. You must believe in the power of belief. If you're a recluse skeptic or self-doubter, begin by pretending to believe you can make it. Keep telling yourself that you'll make it even if it takes you five years. If a person's will is strong enough, they will always find a way.
If you admit to yourself that you truly don't have the will to win at this game, don't try to trade. It is too easy to lose too much money. Many people think that they'll enjoy trading when they really don't. It's boring at times, lonely during the day, mentally trying, with little structure or security. The markets are not a logical or fair playing ground. But there are numerous inefficiencies and patterns ready to be exploited, and there always will be.
I FEEL WE SHOULD HAVE A SEPARATE SPECIAL ARCHIVE FOR THESE POSTS LIKE WHAT IS ABOVE. ONLY LUCKY PEOPLE WILL GET SUCH GEMS IMMEDIATELY. POOR PEOPLE LIKE ME HAVE TO DO A LOT OF DIGGING.
After my out bursts on TA kind advice i received was as follows
- TA is a tool to pick LOW RISK trades
- TA by itself is not a saviour
- Position sizing, Stop losses, Exit method are important to stay in the game
than right entry
- Staying in the game will bring wealth in due course
- There is no readymade formula for making wealth. It is observance, gut
feeling, attitude which requires
- It is not technique that is required but strategy, that will win the game
TA is a tool to pick LOW RISK trades
Av - Technical analysis just points out to the possibility of price action in the future...you have to look for evidence, cross verify, go to the past and future...AND THEN DECIDE whether the probability of occurance AND the CHANCE of FAILURE fits within your RISK - REWARD ratio. Using different forms of money management with different account sizes, what my be suitable risk reward to you, may not be suitable to me. There are nothing like UNIVERSAL low risk trades...then everybody would have taken that and the trade would immediately move away from its base making it a higher risk one.
- TA by itself is not a saviour
AV- It is just a study of crowd behavior through price actions, that shows important pointers to POSSIBLE future behavior
- Position sizing, Stop losses, Exit method are important to stay in the game than right entry
AV - WRONG, WRONG and WRONG. From experience, Entry is the most important thing. A good entry means the trade immediately moves into your favor. Thats half the battle won already. Then comes your other parts. The way you have emphasized is because lot of experts/authors emphasize like that as most traders do not think about those things. They are very important and saves your account from a faster probability of ruin, but they are not more important than entry. IF THEY WERE, systems would have generated trades randomly with just position sizing and money management and exits and in the long run, they would have won.
Staying in the game will bring wealth in due course
Av - Nothing can be further from the truth...staying in the game and learning to play it correctly will improve you r probability of winning. NO GUARANTEE OF AUTOMATIC wealth if u just hang on.
- There is no readymade formula for making wealth. It is observance, gut feeling, attitude which requires
Av - Incomplete sentence? Anyways, it is method, mind and money management (however you interpret it), and nothing else.
- It is not technique that is required but strategy, that will win the game
Av - Did not understand this one. ANyway if u have the best strategy, but do not have the right execution, no one cansave u. BOTH are required
Everything starts with a Theory - an idea, a hypothesis and then progresses through an iteration of experiment, verification, refinement and finally produces a set of rules/laws
And i can bet u, every fundamentaly strong company also fall. So called Fundamental investors are badly stuck in Sugar stock. Where as technical ppl wud hav exit at say a 5-10% loss. Not 50% or more.
the problem is that they start with earnings FY06 and then gradually go to earnings FY08 and 09 to justify buys...otherwise how can they ever be there in a momentum driven market...
oxy, they have their lines ready..the'll say "we told u so...valuations were expensive...its the technical analysts who told you to buy on stupid logic".
actually on a personal note, its a combination of technicals and fundamentals that truly provide trading signals. look at marty zweig's work..he has shown that some of the bear markets have started after changes in CRR, PLR etc. now he has charted them and correlated them with market indices...does that also become "stupid" technical analysis whereas all these funda guys study macro factors and come up with utter crap...the best being after 15 days "i told u so" and "i was expecting this".
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BVP, the problem with half cooked fundamental analysts (as with some "half cooked" technical analysts,particularly "half cooked" pattern traders) is that these guys hear new terms such as "PE ratio" and "cost of capital" etc and try to show their subjective intelligence by relating these factors with historical market movements..."MANUALLY" (with literally no help from a computer). Putting it in simple words, they do this after the fact...a post mortem analysis. Their buy and hold profit in a bull market phase makes them more (rather, over) confident on their analysis, not realizing it is pure "luck".
As an author rightly put it, "Anything that cannot be programmed into a computer and backtested with reasonable historical data isn't wrong. It is worse than that...it is meaningless. There is no logic behind it and it goes purely by faith. This stands where prayer and witchcraft for curing diseases stood before medicine was introduced
Building the Perfect Master Plan
What are the components of a good trading plan? Here are 10 essentials that every plan should include.
Skill assessment - Are you ready to trade? Have you tested your system by paper trading it and do you have confidence that it works? Can you follow your signals without hesitation? If not, it's a good idea to read Mark Douglas's book, "Trading in the Zone", and do the trading exercises on pages 189201. This will teach you how to think in terms of probabilities. Trading in the markets is a battle of give and take. The real pros are prepared and they take their profits from the rest of the crowd who, lacking a plan, give their money away through costly mistakes.
Mental preparation How do you feel? Did you get a good night's sleep? Do you feel up to the challenge ahead? If you are not emotionally and psychologically ready to do battle in the markets, it is better to take the day off - otherwise, you risk losing your shirt. This is guaranteed to happen if you are angry, hungover, preoccupied or otherwise distracted from the task at hand. Many traders have a market mantra they repeat before the day begins to get them ready. Create one that puts you in the trading zone.
Set risk level How much of your portfolio should you risk on any one trade? It can range anywhere from around 1% to as much as 5% of your portfolio on a given trading day. That means if you lose that amount at any point in the day, you get out and stay out. This will depend on your trading style and risk tolerance. Better to keep powder dry to fight another day if things aren't going your way
Set goals Before you enter a trade, set realistic profit targets and risk/reward ratios. What is the minimum risk/reward you will accept? Many traders use will not take a trade unless the potential profit is at least three times greater than the risk. For example, if your stop loss is a dollar loss per share, your goal should be a $3 profit. Set weekly, monthly and annual profit goals in dollars or as a percentage of your portfolio, and re-assess them regularly.
Do your homework Before the market opens, what is going on around the world? Are overseas markets up or down? Are index futures such as the S&P 500 or Nasdaq 100 exchange-traded funds up or down in pre-market? Index futures are a good way of gauging market mood before the market opens. What economic or earnings data is due out and when? Post a list on the wall in front of you and decide whether you want to trade ahead of an important economic report. For most traders, it is better to wait until the report is released than take unnecessary risk. Pros trade based on probabilities. They don't gamble.
Trade preparation Before the trading day, reboot your computer(s) to clear the resident memory (RAM). Whatever trading system and program you use, label major and minor support and resistance levels, set alerts for entry and exit signals and make sure all signals can be easily seen or detected with a clear visual or auditory signal. Your trading area should not offer distractions. Remember, this is a business, and distractions can be costly
Set entry rules This comes after the tips for exit rules for a reason: exits are far more important than entries. A typical entry rule could be worded like this: "If signal A fires and there is a minimum target at least three times as great as my stop loss and we are at support, then buy X contracts or shares here." Your system should be complicated enough to be effective, but simple enough to facilitate snap decisions. If you have 20 conditions that must be met and many are subjective, you will find it difficult if not impossible to actually make trades. Computers often make better traders than people, which may explain why nearly 50% of all trades that now occur on the New York Stock Exchange are computer-program generated. Computers don't have to think or feel good to make a trade. If conditions are met, they enter. When the trade goes the wrong way or hits a profit target, they exit. They don't get angry at the market or feel invincible after making a few good trades. Each decision is based on probabilities.
Keep excellent records All good traders are also good record keepers. If they win a trade, they want to know exactly why and how. More importantly, they want to know the same when they lose, so they don't repeat unnecessary mistakes. Write down details such as targets, the entry and exit of each trade, the time, support and resistance levels, daily opening range, market open and close for the day, and record comments about why you made the trade and lessons learned. Also, you should save your trading records so that you can go back and analyze the profit/loss for a particular system, draw-downs (which are amounts lost per trade using a trading system), average time per trade (which is necessary to calculate trade efficiency), and other important factors, and also compare them to a buy-and-hold strategy. Remember, this is a business and you are the accountant
Perform a post-mortem After each trading day, adding up the profit or loss is secondary to knowing the why and how. Write down your conclusions in your trading journal so that you can reference them again later.
Parting Notes
"No one should be trading real money until they have at least 30 to 60 profitable paper trades under their belts in real time in real market conditions before risking real money," says Novak.
Successful paper trading does not guarantee that you will have success when you begin trading real money and emotions come into play. But successful paper trading does give the trader confidence that the system he or she is going to use actually works.
The exercises in "Trading in the Zone" walk the trader through trading a system based on a simple indicator, entering the market when the indicator gives a buy and exiting when it gives a sell. Deciding on a system is less important than gaining enough skill so that you are able to make trades without second guessing or doubting the decision.
There is no way to guarantee that a trade will make money. The trader's chances are based on his or her skill and system of winning and losing. There is no such thing as winning without losing. Professional traders know before they enter a trade that the odds are in their favor or they wouldn't be there. By letting his or her profits ride and cutting losses short, a trader may lose some battles, but he or she will win the war. Most traders and investors do the opposite, which is why they never make money
Traders who win consistently treat trading as a business. While it's not a guarantee that you will make money, having a plan is crucial if you want to become consistently successful and survive in the trading game
I would not describe it as confidence or overconfidence as you put it, I would prefer 'Judgement & Experience' instead.
THOSE WHO DONT BELIEVE IN TA........
it works as good or bad as weather forcast.
HI,THIS TA VIEWS R COLLECTION OF ESTEEMED MEMBER...
I EXPRESS MY GRATITUDE TO THEM
OILMAN5
price only...to trade....is the best form of trade...its formless trading
normally..few can follow ..with discipline...
price roc...crossing an price 10dayma ROC ..derivative is good...
however...aroon continuation..validity of strength helps
....................................
.............1)keep your bets small
2)cut your losses short
3)let your profits run
4)follow the above rules with out question.
The two things I focus on in terms of method is always limiting risk/managing risk and compounding yield. We may agree on some of the strategies of entering and exiting trades, but the ONLY objective data i review and analyze is price, specifically macro price trends.
I'm just now getting into commodities with paper trades and have been able to translate my techniques from my stock and options trading with considerable success. But it requires patience and perseverance...an unattached, unwavering, unyielding, immovable determination. I liken it to the Terminator who in eveything he did, centered around negotiating the chief objective without vague, ambiguous, and oten eronious debate and reasoning. He was cold and calculating, always calculating mathematical probabilties as events unfolded. This is what I do and ....Forecasting ,having an opinion is great---great to write newsletters,great to present seminars,great to seem intelligent,great to make people feel one is an authority on the markets.Take a look at their records,one truly doubts if they are successful.The market is right...always right.The market is right when we think it should go in a particular direction.The market is right when it goes the other way.The market is never wrong.We are wrong if we went the wrong direction.One's opinion does not matter.To go with the flow of the market is everything........
Forecasting prevents vision.It prevents one from acting in the present because one's mind is rooted in the future.Once one is able to live in the present,one then gives up all resistance to the flow of the market.One then automatically takes stops and not go into hope
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I often read the yahoo finance column (for USA) by Dave Landry. He is a great swing trader, and that is what I try to be too. He has a great strategy for exiting trades, and I like it a lot. He says that when you enter a trade, define the risk (i.e the distance between your entry and stop). If the trade is successful, lock in half your profit as soon as the trade moves in your favor by the amount equal to the risk level. After that move your stop to breakeven (I usually put it slightly above breakeven), and then use trailing stops. In this way, you can earn your daily bread and butter by ensuring some profits, and at the same time, in his words, "have the chance of all of your trades turning into a home run." However, one more advise from him that I follow. If the trade moves in your favor too fast, just take the profit and run. This is what I did when I entered Rel Cap some days ago at Rs. 172, and next day it touched 192. More than 10% profit in 1 day, so I locked it all.
Hope it
a definite profit is better than a possible larger profit.The strange thing about the mind is that when one takes regular small profits,the mind is lured into not accepting losses.....When that big fall comes,one then will refuse to accept it and goes into hope mode.To cut one's profits and let the losses run is destructive not only to one's account but
Really, the most complicated & tense decision for me to make when I have to exit a profitable trade. Tendency is to hang on in the hope of making that "some more", but for late-in-life traders like me (I am not 99
How to exit a successful trade!
Do you stay with your profitable trades as long as possible because the trend is likely to continue and make your profits even larger?
This is easy to understand but not so easy to do when real money is involved. The difficulty is that although your profit may become much larger if you stay with a trade, it may also decrease and even disappear. Human nature is such that it values a sure profit much more highly than the probability of a much higher profit. Thus, traders are inclined to take their profits too soon. This can be fatal to long-term success because big profits are necessary to overcome the inevitable collection of small losses.
There is a good way to let profits run while still guarding against the possibility that prices will turn around and take away much of your accumulated profits before the trend actually reverses. It is called a trailing stop. You include in your plan a method for moving an exit point along some distance behind your trade. As long as the trend keeps moving in your favor, you stay in the trade. If the market reverses direction by the amount of your trailing stop, you exit the trade at that point. You would also offset your trade and reverse position if the trend reversed.
One way to set a trailing stop is to protect a certain percentage of the accumulated profit. That will always insure that you keep some profit on a good trade
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The Two Realities of Trading
There are two realities every trader must understand and accept before she/he can actually start trading for a living!
1) It Is Impossible to Predict Market Turns
It has become very common in the financial markets for analysts or "experts" to offer their "outlook", or predictions for various markets. In fact, it has become so common that many traders just assume that if so many people claim to be able to predict the future action of the markets, then it must be possible. Nothing could be further from the truth.
There are two great emotions at work in the markets - fear and greed. However, contrary to conventional thinking, greed is not always manifested as a lustful longing or need to make money. Quite often it is manifested in the form of "hope". And what could give a trader more "hope" than the belief that he may be able to know in advance what a given market is going to do? But, think about it for a moment. Can you think of any other endeavor where people can actually predict the future?
In order to be a successful futures trader, you must learn not to rely on predictions and forecasts. It is possible to find a person or committee or indicator or wave count which will occasionally offer a prediction which actually comes true. However, the fact of the matter is that there is no person, committee, indicator, or wave count, etc. which can consistently and accurately predict tops and bottoms in any market. It is simply not possible to do so on a regular basis
Once you free yourself of this notion, you open up your mind to the more important task of determining the current trend in a given market. In the long run, such knowledge will be much more useful than a thousand forecasts.
2) Losing Trades are a Natural Part of Trading
Novice traders have a great deal of trouble accepting the notion that losing trades are a "natural" part of trading. Yet, if you are actively "cutting your losses" on trades that don't go in your favor, a losing trade can actually be thought of as a positive step, because it is the act of consistently limiting your losses to a manageable amount which allows you to keep coming back to trade another day. While losing money on a given trade is not in itself a good thing, the very act of keeping each individual loss to a minimum is a necessary step in trading profitably over the long run.
When starting out, traders often shoot for a high percentage of winning trades, even though that generally means taking profits quickly and missing some big winners. More experienced traders come to realize that the percentage of trades which are winners is often a meaningless statistic. In the end, the only thing that counts is if the amount earned on winning trades exceed the amount lost on losing trades. As long as that is the case, it matters little if 3 out of 10 trades are profitable or if 7 out of 10 trades are profitable. The key is to make alot when you win and to lose a little when you lose
We have to move according to the market. Then only we can survive. We have to take the winning and losing trades sportively and control our emotions while trading which affects the judgement. Nobody can predict the market correctly over a period of long time. In the short term many predictions may come true. But the market has its own judgement
The amateurs in most fields ask for forecasts,while professionals simply manage information and make decisions based on probabilities.Take medicine for example.Apatient is brought to an emergency room with a knife sticking out of his chest-and the anxious family members have only two questions:"Will he survive?" and "when can he go home?"They ask the doctor for a forecast.
But the doctor is not forecasting-he is taking care of the problems as they emerge.His first job is to prevent the patient from dying from shock,and so he gives him pain killersand starts an intravenous drip to replace lost blood.Then he removes the knife and sutures damaged organs.After that he has to watch against infection.He monitors the trend of a patient's health and takes measures to prevent complications.He is managing -not forecasting.When a family begs for a forecast,he may give it to them,but its practical value is low.
To make money trading,you do not need to forecast the future.You have to extract information from the market and find out whether bulls or bears are in control.You need to measure the strength of the dominant market group and decide how likey the current trend is to continue.You need to practice conservative money management aimed at long term survival and profit accumulation.You must observe how your mind works and avoid slipping into greed or fear.A trader who does all of this will succeed more than any forecaster.
have come to the conclusion that trading is not an exact science. You can't do X and get Y every time. It is as much an art as it is anything else. There is no magic formula. Trading is all about probability. It is the art of correctly applying a set of carefully thought out rules and allocating the probability of that event to result in success.
Each trade is an independent event. The market does not remember if you lost or made money the last time you traded.
The way you approach the market psychologically has as much to do with your success as any trading plan.
Risk management is crucial if you want to have any hope of becoming a successful trader.
Matching a method of trading with your personality is the only way you will ever feel comfortable in the markets.
An adequately funded account is necessary - not only to be able to take the trades you want, but also so you don't feel every trade is a live or die situation.
The journey to the road of successful trading will make you confront your deepest fears. Your armor on this journey will be confidence, knowledge and belief in yourself that you can achieve your dreams.
Never, equate your success or failure in the markets with who you are as a person!
How to Use Moving Averages
Here are just a few simple ideas for putting moving averages to work:
1) Only consider buying a stock if it is above your moving average. By definition, if prices are below the average they are trending down. One of the best pieces of advice I've read on this subject was from Trader Vic. He said
"When picking stocks, I never buy a stock when prices are below the moving average, and I never (short) sell a stock when price is above the moving average. Just pick up any chart book that uses a 35- or 40-week moving average and you'll see why -- the odds of being right are way against you.
Mind you, this is after Vic does all of his fundamental analysis on a stock. So even if the stock looks great fundamentally, he'll pass if it's below the moving average."
2) Use moving averages as an exit signal. Seriously consider selling a stock that closes below the moving average.
3) Consider buying stocks as they drop near an upward sloping moving average. You'll notice when looking at charts that stocks often find support (bounce off of) moving averages. Buying on a pullback to a MA will often give you a good risk/reward entry point. You can put a stop-loss order nearby in case you're wrong about the bounce
Nothing suceeds like success! I'm searching for a system which is not very much difficult to understand but can give returns in most of the occassions. It's all about money management. I was a customer,for three months only, of an expert who used to give calls on markets,and found that only his calls succeeded in almost 80% cases! What was the reason?
Well,he would give calls when he will feel that it's worth giving and not giving calls everyday,just for the sake of giving it! He may give one positional call in one week and may be more or no call at all. But the reason behind his success is that - he used to give calls when a stock is just a few rupee above its major support and the potential upsides left in the scrips are somewhere near to four times the difference to its stoploss level. So the risk reward ratio becomes 1:4 almost! If you take five calls in one month and lose one trade,the gain will make up handsomely the losses
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Reason #1: Lack of a clear cut Trading Plan
__________________________________________________ ________
Along with under-capitalization this probably ranks as the
#1 reason traders fail. Beginning (and some more
experienced) traders will frequently be swayed by intraday
news and price action.
They may have started the day with a clear plan for the
day, but when the bell rings and the market starts they
lose focus and become mesmerized by the next tick as the
price action unfolds, alternately looking to buy or sell
every couple of ticks/minutes and getting whipped all over
the place.
A trading plan should give one criteria to measure trend
against and determine a direction to trade. Once the
direction has been decided the picture is significantly
clearer as one side of the market has been taken out of
consideration and one is free to focus on locating low
risk opportunities to enter in the direction of the trend.
The plan should address such things as:
- Criteria for Trend determination
- Criteria for recognizing Entry opportunities
- Risk Management / Stop placement
- Trade Management (i.e. how to determine when a trade
isn't working
- Profit objectives
- Exit strategies
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Reason #2: Overtrading - Trading round the clock
__________________________________________________ ________
The aforementioned lack of a trading plan coupled with
today?s lightning fast executions available through
electronic trading as well as the extended opening hours
for electronic trading get a number of traders in trouble.
When they see all the price movement and translate it into
dollar terms it is very easy to become impatient waiting
for good trading opportunities.
One may get caught up in the minute to minute fluctuations
to the point where he loses sight of the overall picture
and starts buying and selling every couple of minutes
(seconds even) to grab a couple of ticks, just because the
trading software is so responsive and the fills so fast
that he thinks he can get away with it.
We are so used to getting paid for our time in the real
world (i.e by the hour) that it is difficult to sit in
front of the screen patiently waiting for a trading
opportunity (that may or may not present itself for
another hour or two).
Seeing all this fluctuation the trader is tempted to
"hurry up and make some money" and take a couple of quick
trades to get paid for his time while waiting for the next
trade that qualifies under his trading plan, however
illogical that may sound.
Clearly, if the trader knew this type of trading to be
profitable, based on his research, he would have
incorporated it into his trading plan.
The very fact that it is not part of the plan should
eliminate such trades from consideration, but it is easy
to get bored and impatient and hard to resist forcing
things when the next trade is but a mouseclick away.
_______________________________________________In this installment we will explore how certain limiting
beliefs can affect your trading results and development as
a trader.
__________________________________________________ ________
Limiting Belief #1: Belief in Mechanical Systems
(THE best system, best hardware,
best software, best data etc).
__________________________________________________ ________
It never ceases to amaze us how people believe the process
of trading can be automated and all they have to do is
find a system that works - then they can kick back on the
beach with a pina colada in hand, call their trades in on
the cellphone and sit back to collect the checks.
To these individuals life becomes a never-ending search
for the "holy grail" of trading. They burn the midnight
oil looking for the ultimate oscillator that will make
them rich, sweating over the cleanest source of data,
which type of data is better, continuous or back-adjusted,
looking for the best trading execution platform, the best
charting software etc
In our observation these people are so wrapped up in the
mechanics and intellectual exercise of trading that they
never learn how markets actually work, i.e. that markets
are driven by fear and greed and emotional crowd behavior
and that price behavior cannot be reduced to a
mathematical algorithm.
These individuals might have been around the markets for a
long time and claim several years experience, but in fact
they've only had the same 1 year of experience several
times over, because they never learned from their
experience and kept on making the same mistakes.
While there are a handful of commercially available
mechanical systems that have decent track records and show
profitability over time the reality is that those systems
are what we call ?psychologically untradable'.
What we mean by that is that they frequently have large
drawdowns and those drawdowns may last for months. Most
people are not prepared to stick with such a system
through the drawdown and will usually abandon it near the
bottom of the equity curve before the system "gets back in
sync" with the market and moves to new equity highs
The thing most people miss when evaluating these systems
is that they underestimate how hard it is to stick with a
system through a drawdown period.
It is easy when looking at a track record, one will
"experience" the drawdown in a matter of minutes -
intellectually acknowledging that there is a significant
drawdown, but then the system invariably pulls out of it
and winds up being profitable for the year.
There is a world of difference between accepting a
drawdown on an intellectual level and then experiencing
that drawdown daily over a period of several weeks or even
months on an emotional level, wondering every day whether
this time the system has finally had it and may never pull
out of the "nosedive".
__________________________________________________ ________
Limiting Belief #2: Belief that Losses can be Avoided .
__________________________________________________ _______
Refusal to accept the fact that losses are an integral
part of the game and a belief that they can be avoided
leads to strange behaviors. This belief leads to
?paralysis by analysis' and problems pulling the trigger.
Trading is a game of probabilities. At any point in time
there is an X % chance that a move will take place as
anticipated, this means that conversely there is a (100%-
X%) probability that it won't!
When implementing a trading strategy one should be
cognizant of this fact and plan accordingly, i.e. not risk
more than Y% of capital on any trading idea/opportunity,
as there is always a certain probability that one is
wrong.
Regardless of how good your method is, even if it can be
demonstrated to have 99% winners, you will still lose ALL
your capital IF you risk it all on every single trade.
Another fact to keep in mind is that wins and losses are
not evenly distributed and nicely packaged in a tidy
series (for the previously mentioned 99% winning system
that would mean a series of 99 wins, 1 loss, 99 wins, 1
loss etc.). Even a 99% winning system will occasionally
have several losses in a row.
This brings us back to the differences between
accepting/understanding things on an intellectual level
vs. an emotional level.
While traders may understand intellectually that losses
are a part of the game, they still want the particular
trade they are in at any given point in time to be a
winner and are prepared to add to their position, move
their stop as the market moves against them, or cancel it
altogether to help secure a positive outcome.
This behavior and belief leads to traders being forced to
eventually take losses that are significantly bigger than
allowed for in their trading plan.
__________________________________________________ ________
Limiting Belief #3: Belief that Every Move can be
Predicted / Belief in Missed
Opportunities
__________________________________________________ ________
Starting traders (and a number of experience ones
spend a lot of time fretting over missed opportunities.
They play the "would'a, could'a, should'a, wish I had'a"
game, kicking themselves over missing opportunities they
believe they could have taken advantage of.
Aside from being demoralizing and damaging to the psyche
this practice is an unproductive waste of time.
Frequently traders will also introduce as a reason for
taking a trade, information that wasn't known at the time
the move took place.
The fact of the matter is that trading is a game of
probabilities and at any given point in time a move may
happen out of nowhere that was totally unforeseeable.
Some people have estimated that there are 12-20 decent
swings in the S&P's in a week and that you are trading
like a pro if you catch 3-4 of them.
In this respect trading is similar to baseball, the guy
batting .300 is doing one heck of a job and gets rewarded
accordingly!
__________________________________________________ ________
Limiting Belief #4: Belief that more information is
better (leads to information
overload / 'paralysis by analysis')
__________________________________________________ ________
Traders are inundated with confusing information and
trading tips. It is everywhere, from the talking heads on
CNBC, to the news headlines flashing across the trading
screen to the online chatrooms, newsletters, hotlines etc.
How does one go about making sense of it all? The short
answer is: You don't need to make sense of it all to make
money from price fluctuations in the market! All that is
required is an understanding of crowd psychology and
probabilities.
A number of traders believe they need to gather ALL the
information AND understand it, because that's what we do
in the real world when faced with a decision. Once the
information is mastered the secret to successful trading
will somehow be magically revealed.
Nothing could be further from the truth! No matter how
much information you accumulate and sift through you will
NEVER have ALL the pieces to the puzzle - if you are
waiting for that you will never make a trade.
What is needed therefore is to develop skills for
decisionmaking under uncertainty, i.e. a keen
understanding of probabilities and the ability to assess
the risk involved and reward associated with different
trade outcomes.
A losing trade does not mean the decision to enter it was
wrong, it may have been, but it may also be a case of what
is referred to in statistics as: "Good decision, bad
outcome", i.e the odds favored a particular move, but the
move failed to materialize as expected.
The best advice for beginning traders is: Forget all the
conflicting information being disseminated out there. All
that is needed is a price chart.
Leave it to someone else to worry about all the news etc.
The market's collective assessment of that information is
reflected in the price action.
The fact of the matter is that everyone has the same set
of information to trade off of when it comes to prices and
the individual trader will never have the resources to
secure better information faster than the large brokerage
and proprietary trading houses.
All one needs to to is to learn to recognize their
"footprints" on the charts, as evidenced by chart
patterns.
_______________________________________________
Conclusion
_______________________________________________
This second installment demonstrates that to succeed as a
trader you must be willing to accept the following facts
and observations:
- You must learn to understand how markets work and what
drives them. Trusting your hard-earned capital to a
mechanical system is a recipe for disaster as most traders
do not possess the intestinal fortitude to stick with such
systems through inevitable drawdown periods.
- You are never going to have all the information and
will be forced to act on incomplete information
- Not every move can be predicted. There will be
situations where your best laid plans are adversely
affected by random unforeseeable events.
As a result losses are an unavoidable, integral part of
trading.
Getting stopped out of a trade with a loss, contrary to
popular belief, is a good thing (assuming you have a
winning approach and solid trading plan) - It tells you
that your trade is not working and conserves your capital
for later use when another (hopefully better) trading
opportunity presents itself.
Am I committing any of these errors in my trading?
- Could they be contributing to the recent dive
in profits I've experienced?"
__________________________________________________ ________
Misconception #1: Under-Capitalization and
Unrealistic Expectations
__________________________________________________ ________
Some of the most damaging misconceptions and limiting
beliefs are planted in would-be-traders heads to entice
them to enter the industry, before they ever execute their
first trade.
The biggest one, by far, is that trading is easy and that
people can make obscene amounts of money within days of
starting out on the tiniest amount of trading capital.
While it is certainly true that the markets offer
unlimited potential and everyone has heard stories of
traders borrowing a couple of grand on a credit card to
get started, who subsequently went on to parlay that
into a small fortune.
The reality is that trading requires time, preparation
and sufficient start-up capital.
Starting out with too little capital and unrealistic
expectations sets would-be-traders up for failure
and is damaging in a number of ways, for example:
a) People who start on a shoestring are forced to take
on too much risk, and have a significantly greater
risk of ruin than better capitalized traders.
Someone starting out with $3,000 in the E-mini S&P?s
will have to risk $150 to $600 pr. trade, or 5-20% of
their equity on each individual trade. As a result
they will be ?wiped out? if they have a handful of
losing trades in a row.
Contrast this with someone trading the same approach
on a $10,000 account. Each loss will represent a
significantly smaller percentage of equity and they
will be able to weather the inevitable drawdowns that
occur from time to time.
Regardless of the approach employed, one should have
sufficient capital to be able to withstand at least
10 losing trades in a row and still continue trading.
The smaller the percentage of equity risked pr. trade,
the smaller the risk of ruin will be.
Research has shown that ideally one should not risk
more than 1%-4% of equity pr. trade.
b) Unrealistic expectations cause traders to discount
the progress they are making and lead them to ?force?
things to bring about the desired result.
As an example:
If you believe you 'should' be making $1,000 pr. day
pr. contract in the S&P?s when daytrading and find
that you are ?only? up $300-$500 by Wednesday after
trading for 3 days you will be unhappy with your
results.
Instead of continuing to do what got you to that point
in the first place and winding up with perhaps
$800-$1,000 for the week you will start pressing,
pushing for trades, trying to make things happen,
taking questionable trades and giving back in the
process what you?d made to that point and wind up
maybe -$1,000 or more in the hole for the week!
In trading, as in any profession, it takes time to gain
sufficient proficiency and one must learn to crawl before
they can walk.
By being adequately capitalized and budgeting several
months to a year at a minimum to learn the basics of
this profession beginning traders give themselves the
best chance of succeeding.
__________________________________________________ ________
Misconception #2: Confusing Margin Requirements with
Capital Requirements
__________________________________________________ _______
One frequently hears starting traders talk about the
minimum margin requirements set by the futures exchanges
as sufficient capital needed to trade a particular
contract.
Beginning traders will also look to the margin
requirements as a way to determine which market to
trade, saying things such as "My account is so small I
can only ?afford? to trade Soybeans and Wheat, because
they are the only contracts with a small enough margin
requirement".
The fact is you can?t ?afford? to trade ANY market
unless you have a winning approach!
If you don?t, you might as well hand over your money to
the nearest charity and save yourself the aggravation,
because you will lose it anyway!
Margin requirements are set to protect the integrity of
the marketplace, they are intended to make sure that
traders have sufficient capital on hand to meet their
obligations should the market move against their position.
They are calculated based on a specific formula that
takes into account the volatility of the market in
question.
Generally speaking, as a rule of thumb, they are
approximately equivalent to the average 3-day true
range of that market.
Margin requirements should NEVER be used to determine
the market, or number of contracts, to trade. Doing so
leads one to risk too great a percentage of equity on
any given position.
_______________________________________________
Conclusion
_______________________________________________ A close cousin of un-realistic expectations is
unwarranted over-confidence, inspired by a series
of successes in trading.
This is something that frequently affects
experienced traders after they have had a
good run in the markets.
They start feeling 'invincible', think
they've got the 'market figured out' and
have a tendency to take greater risks than they
should as a result (given their account size).
The market will invariably humble the over-
confident trader and hand him devastating
losses, as he gets called on the excessive
risk he has assumed through greater trading
size or the use of bigger stops (or even
worse - the use of no stops).
...................................................................
tool...momentum
stock select...nse..scan by explorer...ready to move ..
pattern triangle ...continuation....i have bullish bias..
2nd one...at particular retrace...bullish engulf...
so this two condition...gives me candidate..ready to move up
..now @9-55...ready to enter.../max no 3 trade...
if any news +flash..enter aggressively...if published recommendation..
whether its a trap to book profit...[its normal]
trading amount 3 lakh..1each...
if after 15min price..1% up..enter...profit pt...3%....
always keep eye on nifty future...if sell order more...today is NOT UR DAY
.....this system has 70% success rate atleast for me..
i believe search of candidate..very imp...it takes me @2hr..after scan how it shall
behave next day...
various alternate scenario...entry / exit...
so now u all understand why it suit rm/dealer...they can unemotionally..
watch..ofcourse execute.. as confidently ...
if condition not suit to trade...they dont trade
.................................
on short term trade...
its basically retracement buy...on a paticular stock..whether present value justified ? i use fundamental input...if analyst has conflict..i consider candidate is good one...
ma value 20 i use..also how stock behaved last 6month....
what ma x ..3/10 suggesting...i enter...
here i use good money management...trade amount 5 lakh...half idle
max put 50000, in a trade stop 4%...unfortunately accuracy..35-30% only..
so in a winning trade...i put 2lakh...after 5-8% price up..play for another..
4-5% profit...
i get out..from loser at stop...unfortunately ...recent switch down ward..
cost me good loss..as a part timer...gap down put me in puzzle...
result BIGGER LOSS
since..accuracy mine is poor..;.. i think to discard this...
as i am not master in volatility...present market condition...
............................................................
fact is i am poor as short term trader...
why?...may be long days fundamental faith...
but worst one . holding loser..[use of hope]...
entry is definitely my strength...
but exit is poor...judgemental error comes from other commitment....
and its law of TRADE....ONLY WITH 100% COMMITMENT U HAVE CHANCE
TO TRADE RIGHT..
.................................................. ................................................
SO AGAIN I COMMENT ON DAY TRADE....
why i guess successfully...natural flair of 30yr of chess play..alternate situation to act, use of survival instinct.....
but its stressful, i am older now,...may be new guys r faster,
good candidate for next day is my strength....
metastock explorer i use...
also omnitrader..which suggest some candidates....
so i use pib, ...entry technique .. x of buy at break out on particular pivot...
if volume..is good...so i commit bigger...
i dont mind to lose, as loss r less in number..so it has +expectancy..
if market condition unpredictive simply i dont trade...
it helps to me...as noise trading i understand...so break of pivot , moving
to higher zone ...easier and suit me in past...
as i believe daytrade is gambling,..so luck of right or wrong is always there
so i am ready for wrong, it prevents me let loss run...
as screening is done..i know what i am expected to do..
filter..+ bias of nifty...
any news publish creates criticality of trade...sudden surge of greedy fool
can send stock price any where..., last 6month behavior thats why i study on hourly chart..on particular surgeday..
its readyness to act..basically given me lots of right trade consistently
...............
i give more hints..x of 7 ema with closing price..
trigger... 8day ..william%r std signal
5day rsi strength increasing...
i assure u it gives money...those who doubt can back test it..
atleast condition fulfilled , given +move within next 2days
psychologically i find it very useful, as i am ready to lose ..i am nothing to loss..[hey i bet on bangladesh,against india..pun intended..]
i can avoid my weakzone..volatility
so those who have asked...ENJOY
....................................
investment vs trading
...................................
this is a controversial topic...still i decide to touch..investing..is putting money
for long term..strategic thought process is imp...consider any md..plans for expansion of his company..money arrangement and plan to plough back
..implementation of dream into reality..
constant watch to maintain target as per plan...is key...
same thing , if u invest u have to check...
trading
.............
its a concept to buy low and sell high..
where the demand is EXPECTED TO build, buying candidate..
where further demand realisation is not possible ...SELL
SINCE expected materialisation is not possible[ on some cases]..
get out before other traders dump..
whichever path u look none is easy...
fortunately some torch bearer help in writing their journey in distinctive style
many a great name all of us can utter.., but its IMPOSSIBLE to follow them
why?..2 individual r not same...copying is not possible
can u be any of them?..no i assure u ..its an impossible event
CONDITION AND CONSTRAINT...CAN NOT BE REPEATED SAMEWAY..WITH
SIMILAR VIEW AND LOGIC...
so what is your path and alternate view?
amalgamate...
a basic std rate of return is possible...
money managers view is easy to implement...
investment view..PUT MONEY IN SUNRISE INDUSTRY. in india for indian company
trading view.....based on some value analysis buy at oversold zone..and hope mean reversion shall bring u quick profit[ holding period 3-6month]
many traders may disagree...i say to them ..;'u r right, u do the same thing
in smaller timeframe..based on your superiority..so is ur RETURN'
NOW LOOK AT ALL GREAT DAY TRADER...they r mostly engineer..strong math logic...understand linear relationship..
with own developed one/ intraday plan ..with good signal generated..cont..
they can make money...regular basis...discipline and strict stop loss is mantra
experienced one with fund available...can do PLAY LEVERAGE
next..i say those who work in this field...they simply copy cat a winner ,
depending upon experience ..do a little, lose a little'
now..COMES THE FOOL, DREAMER...THEY NEVER UNDERSTAND HOW TOUGH ITS REALLY..[van tharp never made money by trading..though he trains many
best of the best traders]
so first..check..do have the ELEMENT IN YOU..time to invest and learn
right attitude....TORTOISE WINS HERE..
TRADING ON PRICE HAS 3ELEMENT...NOISE...
TREND
SHOCK/EVENT
Noise..a price within +/- 3%[arbitary..as per my experience ]
its the time u should watch..
soon some big fund /syndicate starts buy or sell..with price change +/-change..defining an up or down trend accordingly...
its when more volume joins ..media writes..oppurtunity to make money for early entrants..when trend is no more moving up..[ put hope triangle pattern
shall show CONTINUATION]..ANOTHER RISKY ATTEMPT CAN BE MADE..
BUT WITH STRICT STOP...
hopelessly i dont know when profit book starts and price shall fall
many signal is used by many as per confidence level and experience..
but none can handle SHOCK/EVENT...
SINCE IT CHANGES INVESTORS SENTIMENT BY NEWCOMING OF BUY AND SELL ORDER...hence price study..aswell as order flow must be the tools in your trading arsenal
2nd aim is study what others trader shall do ..on an event...
CAN U CREATE MONEY MAKING OPPURTUNITY OUT OF IT?
3rd factor...global money flow to india...
if fii is selling, YOU HAVE TO..
nobody can withstand flood, ...sell and go to hill station...
some book reference
trading psychology
........................
1. van tharp
2. dr elder
3. ari kiev
4. phantom of pit
trading phiosophy
they are works of trader
....................................
1. gann
2. linda
3. larry williams
4. bill williams
5. levermore
6. niederhoffer victor
7. soros
8. j ross
some technical related writing/context
1. candlestick
2. elliot wave
3. momentum theory
4. profit magic of stock transaction timing
system design
....................
1. way to trade
2. tusher chande
3. p. kaufman
4. j katz
applied theme
.......................
1. contrarian thinking
2. fibonacci
3. a-b-c pattern
4. stop loss
5. daytraders bible
6. trading on probability
7. portfolio management
subjective trading
.........................
swing trading ...landry
bary rudd
encyclopedia of chart pattern
tony crabel works
4 biggest mistake
trading in the zone
topic.. INDIAN STOCK MARKET
.................................................
1. FUNDAMENTAL
..........................
GROUP A AND SOME B1 ONLY...
LITERATURE..INDIAN INDUSTRY GROWTH 2002..2012
COMPANY ANALYSIS .. TOP DOWN AND BOTTOM UP APPROACH
SECTOR ANALYSIS
CAPITAL MARKET 500 COMPODIUM
LATEST RESULT..COMPARE QUARTERLY GROWTH
COMPANY .GOOD MANAGEMENT..ORDER POSITION
..................SUNRISE INDUSTRY..
GOVT FAVORISM..STORY FOR LONG RUN
MONOPOLISTIC VIEW
TECHNICAL
................
METASTOCK STUDY
INDICATOR STUDY
RESISTANCE SUPPORT .. PATTERN STUDY
GAP AND VOLUME SPIKE
TRADING MARKETS ...TOOLS
WHEN REVERSAL IS IMMINENT.. SIT ON CASH
MOMENTUM PLAY
DELIVERY IDEA
.....................
3.PSYCHOLOGICAL APPROACH
SUBJECTIVE BIAS..WHY MARKET WILL GO UP? WHEN IT WILL FALL?
FII FACTOR..GLOBAL FACTOR..OTHER WORLD STOCK EXCHANGE FACTOR
RESULT FACTOR... FEEL GOOD AND MEDIA HYPE
WHAT IS ACTUALLY STATE OF MARKET..WHAT TO BE IN NEAR FUTURE
4. TRADING
......................
DAY TRADE STYLE...SWING STYLE.. INTERMEDIATE TRADE STYLE
TRADE RULE 1 2 3
WHAT NOT
TO DO 1 2 3
HOW TO
TAKE ENTRY 1 2 3
PROFIT BOOKING
& STOP LOSS GUIDANCE 1 2 3
HOW TO ADD POSITION 2 3
CHECKING
RISK/ REWARD 1 2 3
DIARY
............
1. WRITE ANALYSIS OF ALL PAST TRADE
2. WHY PLANNING TO ENTER 'NEW' STOCK ...WRITTEN RULE
3. BEFORE BUY X CHECK ...DONT ALLOW TO BIG LOSS
...................................
THROUGH MONEY CONTROL.COM U CAN GO TO RESEARCH .. TO CHECK QUATERLY RESULT COMPARATIVE...
SELL RULE IS IMP.
WHEN TO HOLD?.........when trend continuing.
WHEN MARKET SHALL TOP OUT..........simply get out.ULTIMATE TEST OF A subjective trader
.............
I'm no expert but I do wish to disclose my viewpoint.
There is a difference between the following:
1) Losing, and losing on a consistent basis
2) Building your own trading system and choosing other's systems
3) Using a trend follower and a zig zag indicator
I understand your dilemma but you have to understand the fact throughly that no one will put out stuff that actually works in public. That would be utter disrespect of ones work IMO. Books and courses are just a starting point , there is a whole lot of testing and real time feedback that is required to understand market dynamics.And you know what it takes time and lots of it for anyone to 'get it'. This is not a game where you can dabble and expect great results.So dont lose heart and be patient! It will click eventually.
Your feelings have an immediate impact on your account equity. You may have a brilliant trading system, but if you feel frightened, arrogant, or upset, your account is sure to suffer. When you recognize that a gamblers high or fears is clouding your mind, stop trading. Your success or failure as a trader depends on controlling your emotions.
When you trade, you compete against the sharpest minds in the world. The field on which you compete has been slanted to ensure your failure. If you allow your emotions to interfere with your trading, the battle is over.
You are responsible for every trade that you make. A trade begins when you decide to enter the market and ends only when you decide to take your self out. Having a good trading system is not enough. Most traders with good systems wash out of the markets because psychologically they are not prepared to
5 Trading Tips-
-Remember that there is always another trader on the other side of the trade doing the exact opposite that you are doing. Only one of you can be right.
- Waiting around for the perfect trade or the perfect opportunity will guarantee that you never trade stocks.
- Trading stocks is about probabilities, NEVER certainties. You are not smart enough to predict, with consistency, what will come next.
- Conventional wisdom is usually wrong. Trade against the crowd, not with them.
- Money, trade, and self management has always been and will always be the holy grail to trading stocks.
So,my friend,if you really wish to succeed at this(that's step no 1 actually,do you really have that burning desire to succeed and make the necessary sacrifices)........if you therefore wish to succeed,you have to take all the blame for it.Every time you lose because you didn't adhere to your rules,the blame is not the market's,not this forum's,not your wife's,not TA's or FA's.......yours and yours alone.Go back to your methods,your money management disciplines,your entry and exit criteria,your mind,your health......somewhere,there's a problem that you need to look into and rectify.
Been there,done that,my friend........ I can understand the frustration and agony.But don't allow your mind to settle for petty excuses.......take all the blame and look into what needs to be rectified.
And,as for people successfully making money out of TA.......There are many in this forum itself who are doing it.And as said before,if one person can do it,it can be done.
Whether you want to make the necessary sacrifices and undergo all the pain required is another question.
I hope
And another thing to remember about Freecell.....particularly....That Every Game Can Be Won....I am sure you will develop some observing skill....thereafter, one can practise in terms of paper trading sitting in front of a Brokers Terminal....believe me, you can reach a stage......whereby you can trade with 99.5% accuracy...without even having to look at any kind of trading software but have to keep tabs on what is happening around the world politically...economically...& blah blah.......(Key to this development is Patience & power of observing & rest shall come quite easily
There are external indicators that are as powerful (& on a given day more powerful) than the indicators on the charts.
Your fantastic success reinforces my belief that an analytical background is most suitable for a Technical trader - helps in the assembly of otherwise isolated components and also troubleshooting, fine-tuning of the assembly and/or one or more of its individual components
As a tecnical trader , i can say that each and every set up has its pre defined stop los levels and targets, and a tecnical trader is discipined to obey those levels.
Not a single set up can give you a 100 % winners but following tecnicals one can make nice trades with risk managments.
Remember the tecnicals are following the markets, and tell us the current situations of a prevailing market conditions, they tell us a new trend is about to start of a trend is still in continuations, but it is not always that the trend follows technicality.
There are so many different factors that work on financial markets movements.
With sound tecnical analysis and a proper trading plan with predefined stop loss , one can trade at ease and can come out a winner on a long run
Being Right and Making Money Are Not Equivalent by Dr Van Tharp
How important is it for you to be right? Let's say I could guarantee that you would make money by the end of the yearlots of moneybut you would probably lose money on 90% of your trades. Would you like that? Could you tolerate that? Would you accept that? Most people would probably answer "no" to all three questions. And if that is you, you probably are denying yourself the opportunity to make money simply because being right is more important than making money.
Some of you might be saying, "How could you be wrong 90% of the time and still make money?" The solution goes back to the golden rule of trading, "Cut your losses short and let your profits run." Let's say that 90% of your trades lose money and that your average loss is $100. On the year you make 100 trades so you end up losing 90 of them for a total loss of $9,000. However, let's also say that your average winning trade is a big R-multiple. It's an R-multiple of 100 or a $10,000 winner. You have ten of those in a year, so you end up making $100,000 on your winning trades. If you subtract your winnings from your losses, you'd end up with a profit of $91,000 at the end of the year. You make $91,000, yet 90% of your trades are losers.
My guess is that 99% of the trading population could not trade a system that would produce those kind of results. The reason is because they don't get to be right enough. They have too many losing streaks. They have losing streaks that are longer than five in a row. Most people cannot tolerate long losing streaks. When they occur, they totally abandon what they are doing. In such a system you could easily have 25 consecutive losses. At that point you become certain that your system is broken, and you try something else.
Let's look at the opposite end. Suppose you got to be right 90% of the time. Suppose your average win was $100 and that your average loss was $2,000. This means that you'd have a total of $9,000 in winnings and $20,000 in losses. You would lose $11,000. Would people trade that system? Yes, they would. They would probably trade it for a number of years until they went bankrupt. Why? Because they get to be right most of the time and that is very rewarding.
You might be saying, but how could people possibly tolerate losses of $11,000 after 100 trades? It is easy; they turn the losing trade into a long-term investment in their mind and say, "it's only a paper loss." For example, I've had workshop attendees who were probably way above average in terms of sophistication. However, I asked them to raise their hands if they had an investment in their portfolio that was only worth 50% or less of what they paid for it. Eleven people raised their handsover a fourth of the class. And my guess is that among the overall population of investors, most people are sitting on a number of big losers, hoping they will come back. Why? Because they cannot stand to be wrong on an investment and they are waiting to be right on those losing trades.
What is the cost of having losing investments in your portfolio? It's major. First, you are using valuable capital up with nonproductive investments. Second, you are missing many good opportunities.
Why Being Right Seems So Important
There are two primary reasons why we focus on being right. First, we are conditioned to be right by the school system. Second, everyone in the trading industry gives people what they wantways to be rightwhich tends to perpetuate the myth. Let's take a closer look at these two reasons.
First, we are conditioned by the school system to the importance of being right. In school you are taught that there are right answers and wrong answers. What is a right answer? If you learned how to survive in the system, you learned that a "right" answer is whatever the teacher wanted.
Your performance is measured periodically through tests in which you are asked to pick the right answer. If you cannot get more than 70% right on the test, you are labeled a failure and ostracized. Your humiliation might even be in public in front on all your friends. And if your humiliation isn't public, it certainly is semipublic. Your "poor" performance goes home in the form of a grade with a comment that "Johnny is a little slow or Johnny is bright, but he just doesn't try." Usually, at this point, the most important people in your young life get involvedyour parents.
Even if you understand the system and work hard to know the right answers, you still might be taught that your performance is not good enough. It usually takes 94% right to get an excellent grade. But how many children go home and show their 94% test to dad only to get the response, "Why didn't you get 100%?"
Thus, it is no wonder that traders want to be right all the time. And being right usually costs them dearly in terms of profits. Whether you've been through 20 years of schooling and have a graduate degree or less than 10 years of schooling, you still have the same conditioning about being right.
The second reason people want to be right is that service providers for traders and investors feed the bias to be right. First, software vendors tend to provide systems that can be highly optimized. Once you've optimized your trading, you can lay a line over the prices and see exactly where you should have bought and sold. It seems obvious. However, the same optimized system does very poorly when applied to the real world.
Be right 75% of the time AND
Let your winners run their course
The probabiity of both increases if you do not overtrade.
Also one has to be very careful about stop-losses. While they may be your saviour with losers they may also cut you short with your winners.
Be as fussy as you want to be with your picks and entries (Refine your system till it returns no more than 10-12 picks) but once you've made your pick have some faith in the +ve expectancy you have associated with it.
There are only two types of traders
Volatility Traders
Directional Traders
Directional trading is ofcourse hard but its harder when you are uni-directional. Do you get the hint?
Let me make it a bit more clear - In a multi-variate dynamic medium you cant rely on static horizontal levels without factoring in the 'dynamic' part. That was the last hint
Trading is a performance-oriented discipline. Stress and mental pressures can affect your ability to function and impact your bottom line. Much of what has been learned about achieving peak performance in both business and sports can be applied to trading. But before looking at some of these factors, let's first examine the ways that trading differs from other businesses.
Intellect has nothing to do with your ability as a trader. Success is not a function of how smart you are or how much you have applied yourself academically. This is hard to accept in a society that puts a premium on intellect.
There is no customer or client good will built up each day in your business. Customer relationships, traditionally important in American businesses, have little to do with a trader's profitability. Each day is a clean slate.
The traditionally 8-5 work ethic doesn't apply in this business! A trader could sit in front of a screen all day waiting for a recognizable pattern to occur and have nothing happen. There is a temptation to take marginal trades just so a trader can feel like he's doing something. There's also the dilemma of putting in constant hours of research, having nothing to show for it, and not getting paid for the work done. Yet if a trader works too hard, he risks burn- out. And what about those months where 19 out of 20 days are profitable, but the trader gives it all back in one or two bad days? How can a trader account for his productivity in these situations
you were to invest time, energy, and emotion into developing a business venture and backed out at the last minute, it would be considered a failure. However, you should be able to invest time and energy into researching a trading idea, and yet still be able to change your mind at the last minute. Market conditions change, and we cannot be expected to predict all the variables with foresight. Getting out of a bad trade with only a small loss should be considered a big success!
What IS the definition of a successful trader? He should feel good about himself and enjoy playing the game. You can make a few small trades a year as a hobby, generate some very modest profits, and be quite successful because you had fun. There are also aggressive traders who have had big years, but ultimately blow-out, ruin their health or lead miserable lives from all the stress they put themselves under.
Principles of Peak Performance
The first principle of peak performance is to put fun and passion first. Get the performance pressures out of your head. Forget about statistics, percentage returns, win/loss ratios, etc. Floor-traders scratch dozens of trades during the course of a day, but all that matters is whether they're up at the end of the month.
Don't think about TRYING to win the game - that goes for any sport or performance-oriented discipline. Stay involved in the process, the technique, the moment, the proverbial here and now.! A trader must concentrate on the present price action of the market. A good analogy is a professional tennis player who focuses only on the point at hand. He'll probably lose half the points he plays, but he doesn't allow himself to worry about whether or not he's down a set. He must have confidence that by concentrating on the techniques he's worked on in practice, the strengths in his game will prevail and he will be able to outlast his opponent
The second principle of peak performance is confidence. in yourself, your methodology, and your ability to succeed. Some people are naturally born confident. Other people are able to translate success from another area in their life. Perhaps they were good in sports, music, or academics growing up. There's also the old-fashioned "hard work" way of getting confidence. Begin by researching and developing different systems or methodologies. Put in the hours of backtesting. Tweak and modify the systems so as to make them your own. Study the charts until you've memorized every significant swing high or low. Self-confidence comes from developing a methodology that YOU believe in.
Concentrate on the technical conditions. Have a clear game plan. Don't listen to CNBC, your broker, or a friend. You must do your own analysis and have confidence in your game plan to be a successful trader.
Analyze the markets when they are closed. Your job during the day is to monitor markets, execute trades and manage positions. Traders should be like fighter pilots - make quick decisions and have quick reflexes. Their plan of attack is already predetermined, yet they must be ready to abort their mission at any stage of the game.
Just as you should put winning out of your mind, so should you put losing out of your mind - quickly. A bad trade doesn't mean you've blown your day. Get rid of the problem quickly and start making the money back. It's like cheating on a diet. You can't undo the damage that's been done. However, it doesn't mean you've blown your whole diet. Get back on track and you'll do fine.
For that matter, the better you are able to eliminate emotions from your day, the better off you will be. A certain amount of detachment adds a healthy dose of objectivity
Trading is a great business because the markets close at the end of the day (at least some of them). This gives you a zero point from which to begin the next day - a clean slate. Each day is a new day. Forget about how you did the week before. What counts is how you do today!
Sometimes what will happen during the day comes down to knowing yourself. Are you relaxed or distracted? Are you prepared or not? If you can't trade that day, don't! - and don't overanalyze the reasons why or why not. Is psychoanalyzing your childhood going to help your trading? Nonsense!
The third important ingredient for achieving peak performance is attitude. Attitude is how you deal with the inevitable adverse situations that occur in the markets. Attitude is also how you handle the daily grind, the constant 2 steps forward and 2 steps back. Every professional has gone through long flat times. Slumps are inevitable for it's impossible to stay on top of your game 100% of the time. Once you've dug yourself out of a hole, no matter how long it takes, you know that you can do it again. If you've done something once, it is a repeatable act. That knowledge is a powerful weapon and can make you a much stronger trader.
Good trades don't always work out. A good trade is one that has the probabilities in its favor, but that doesn't mean that it will always work out. People who have a background in game theory understand this well. The statistics are only meaningful when looking at a string of numbers. For example, in professional football, not every play is going to gain yardage. What percentage of games do you need to win in order to make the playoffs? It's a number much smaller than most of us are willing to accept in our own win/loss ratios!
Here is an interesting question: should you look at a trade logically or psychologically? In other words, should every trade stand on its own merits? Theoretically, yes, but in real life it doesn't always work that way. A trader is likely to manage a position differently depending on whether the previous trade was a winner or a loser.
How does one know when to take profits on a good trade? You must ask yourself first how greedy do you want to be, or, how much money do you want to make? And also, does your pattern have a "perceived profit" or objective level? Why is it that we hear successful winning traders complain far more about getting out of good trades too soon than not getting out of bad trades soon enough? There's an old expression: "Profits are like eels, they slip away."
Successful traders are very defensive of their capital. They are far more likely to exit a trade that doesn't work right away than to give it the benefit of the doubt. The best trades work right away!
OK. Realistically, every trader has made a stubborn, big losing trade. What do you do if you're really caught in a pickle? The first thing is to offer a "prayer to the Gods". This means, immediately get rid of half your position. Cut down the size. Right off the bat you are taking action instead of freezing up. You are reducing your risk, and you have shifted the psychological balance to a win-win situation. If the market turns around, you still have part of your position on. If it continues against you, your loss will be more manageable. Usually, you will find that you wished you exited the whole position on the first order, but not everyone is able to do this.
At an annual Market Technician's conference, a famous trader was speaking and someone in the audience asked him what he did when he had terrible losing trades. He replied that when his stomach began to hurt, he'd "puke them at the lows along with everyone else." The point is, everyone makes mistakes but sooner or later you're going to have to exit that nasty losing position.
"Feel good" trades help get one back in the game. It's nice to start the day with a winning scalp. It tends to give you more breathing room on the next trade. The day's psychology is shifted in your favor right away. This is also why it's so important to get rid of losing trades the day before. so you don't have to deal with them first thing in the morning. This is usually when the choice opportunity is and you want to be ready to take advantage of it.
A small profitable scalp is the easiest trade to make. The whole secret is to get in and get out of the market as quickly as possible. Enter in the direction of the market's last thrust or impulse. The shorter the period of time you are is the marketplace, the easier it is to make a winning trade. Of course, this strategy of making a small scalp is not substantial enough to make a living, but remember the object is to start the day out on the right foot.
If you are following a methodology consistently (key word), and making money, how do you make more money? You must build up the number of units traded without increasing the leverage. In other words, don't try going for the bigger trade, instead, trade more contracts. It just takes awhile to build up your account or the amount of capital under management. Proper leverage can be the key to your success and longevity in this business. Most traders who run into trouble have too big a trade on. Size influences your objectivity. Your main object should be to stay in the game.
Most people react differently when they're under pressure. They tend to be more emotional or reactive. They tense up and judgement is often impaired. Many talented athletes can't cut it because they choke when the pressure's on. You could be a brilliant analyst but a lousy trader. Consistency is far more important than brilliance. Just strive for consistency in what you do and let go of the performance expectations.
Master the Game
The last key to achieving mental mastery over the game is believing that you can actually do it. Everyone is capable of being a successful trader if they truly believe they can be. You must believe in the power of belief. If you're a recluse skeptic or self-doubter, begin by pretending to believe you can make it. Keep telling yourself that you'll make it even if it takes you five years. If a person's will is strong enough, they will always find a way.
If you admit to yourself that you truly don't have the will to win at this game, don't try to trade. It is too easy to lose too much money. Many people think that they'll enjoy trading when they really don't. It's boring at times, lonely during the day, mentally trying, with little structure or security. The markets are not a logical or fair playing ground. But there are numerous inefficiencies and patterns ready to be exploited, and there always will be.
I FEEL WE SHOULD HAVE A SEPARATE SPECIAL ARCHIVE FOR THESE POSTS LIKE WHAT IS ABOVE. ONLY LUCKY PEOPLE WILL GET SUCH GEMS IMMEDIATELY. POOR PEOPLE LIKE ME HAVE TO DO A LOT OF DIGGING.
After my out bursts on TA kind advice i received was as follows
- TA is a tool to pick LOW RISK trades
- TA by itself is not a saviour
- Position sizing, Stop losses, Exit method are important to stay in the game
than right entry
- Staying in the game will bring wealth in due course
- There is no readymade formula for making wealth. It is observance, gut
feeling, attitude which requires
- It is not technique that is required but strategy, that will win the game
TA is a tool to pick LOW RISK trades
Av - Technical analysis just points out to the possibility of price action in the future...you have to look for evidence, cross verify, go to the past and future...AND THEN DECIDE whether the probability of occurance AND the CHANCE of FAILURE fits within your RISK - REWARD ratio. Using different forms of money management with different account sizes, what my be suitable risk reward to you, may not be suitable to me. There are nothing like UNIVERSAL low risk trades...then everybody would have taken that and the trade would immediately move away from its base making it a higher risk one.
- TA by itself is not a saviour
AV- It is just a study of crowd behavior through price actions, that shows important pointers to POSSIBLE future behavior
- Position sizing, Stop losses, Exit method are important to stay in the game than right entry
AV - WRONG, WRONG and WRONG. From experience, Entry is the most important thing. A good entry means the trade immediately moves into your favor. Thats half the battle won already. Then comes your other parts. The way you have emphasized is because lot of experts/authors emphasize like that as most traders do not think about those things. They are very important and saves your account from a faster probability of ruin, but they are not more important than entry. IF THEY WERE, systems would have generated trades randomly with just position sizing and money management and exits and in the long run, they would have won.
Staying in the game will bring wealth in due course
Av - Nothing can be further from the truth...staying in the game and learning to play it correctly will improve you r probability of winning. NO GUARANTEE OF AUTOMATIC wealth if u just hang on.
- There is no readymade formula for making wealth. It is observance, gut feeling, attitude which requires
Av - Incomplete sentence? Anyways, it is method, mind and money management (however you interpret it), and nothing else.
- It is not technique that is required but strategy, that will win the game
Av - Did not understand this one. ANyway if u have the best strategy, but do not have the right execution, no one cansave u. BOTH are required
Everything starts with a Theory - an idea, a hypothesis and then progresses through an iteration of experiment, verification, refinement and finally produces a set of rules/laws
And i can bet u, every fundamentaly strong company also fall. So called Fundamental investors are badly stuck in Sugar stock. Where as technical ppl wud hav exit at say a 5-10% loss. Not 50% or more.
the problem is that they start with earnings FY06 and then gradually go to earnings FY08 and 09 to justify buys...otherwise how can they ever be there in a momentum driven market...
oxy, they have their lines ready..the'll say "we told u so...valuations were expensive...its the technical analysts who told you to buy on stupid logic".
actually on a personal note, its a combination of technicals and fundamentals that truly provide trading signals. look at marty zweig's work..he has shown that some of the bear markets have started after changes in CRR, PLR etc. now he has charted them and correlated them with market indices...does that also become "stupid" technical analysis whereas all these funda guys study macro factors and come up with utter crap...the best being after 15 days "i told u so" and "i was expecting this".
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BVP, the problem with half cooked fundamental analysts (as with some "half cooked" technical analysts,particularly "half cooked" pattern traders) is that these guys hear new terms such as "PE ratio" and "cost of capital" etc and try to show their subjective intelligence by relating these factors with historical market movements..."MANUALLY" (with literally no help from a computer). Putting it in simple words, they do this after the fact...a post mortem analysis. Their buy and hold profit in a bull market phase makes them more (rather, over) confident on their analysis, not realizing it is pure "luck".
As an author rightly put it, "Anything that cannot be programmed into a computer and backtested with reasonable historical data isn't wrong. It is worse than that...it is meaningless. There is no logic behind it and it goes purely by faith. This stands where prayer and witchcraft for curing diseases stood before medicine was introduced
Building the Perfect Master Plan
What are the components of a good trading plan? Here are 10 essentials that every plan should include.
Skill assessment - Are you ready to trade? Have you tested your system by paper trading it and do you have confidence that it works? Can you follow your signals without hesitation? If not, it's a good idea to read Mark Douglas's book, "Trading in the Zone", and do the trading exercises on pages 189201. This will teach you how to think in terms of probabilities. Trading in the markets is a battle of give and take. The real pros are prepared and they take their profits from the rest of the crowd who, lacking a plan, give their money away through costly mistakes.
Mental preparation How do you feel? Did you get a good night's sleep? Do you feel up to the challenge ahead? If you are not emotionally and psychologically ready to do battle in the markets, it is better to take the day off - otherwise, you risk losing your shirt. This is guaranteed to happen if you are angry, hungover, preoccupied or otherwise distracted from the task at hand. Many traders have a market mantra they repeat before the day begins to get them ready. Create one that puts you in the trading zone.
Set risk level How much of your portfolio should you risk on any one trade? It can range anywhere from around 1% to as much as 5% of your portfolio on a given trading day. That means if you lose that amount at any point in the day, you get out and stay out. This will depend on your trading style and risk tolerance. Better to keep powder dry to fight another day if things aren't going your way
Set goals Before you enter a trade, set realistic profit targets and risk/reward ratios. What is the minimum risk/reward you will accept? Many traders use will not take a trade unless the potential profit is at least three times greater than the risk. For example, if your stop loss is a dollar loss per share, your goal should be a $3 profit. Set weekly, monthly and annual profit goals in dollars or as a percentage of your portfolio, and re-assess them regularly.
Do your homework Before the market opens, what is going on around the world? Are overseas markets up or down? Are index futures such as the S&P 500 or Nasdaq 100 exchange-traded funds up or down in pre-market? Index futures are a good way of gauging market mood before the market opens. What economic or earnings data is due out and when? Post a list on the wall in front of you and decide whether you want to trade ahead of an important economic report. For most traders, it is better to wait until the report is released than take unnecessary risk. Pros trade based on probabilities. They don't gamble.
Trade preparation Before the trading day, reboot your computer(s) to clear the resident memory (RAM). Whatever trading system and program you use, label major and minor support and resistance levels, set alerts for entry and exit signals and make sure all signals can be easily seen or detected with a clear visual or auditory signal. Your trading area should not offer distractions. Remember, this is a business, and distractions can be costly
Set entry rules This comes after the tips for exit rules for a reason: exits are far more important than entries. A typical entry rule could be worded like this: "If signal A fires and there is a minimum target at least three times as great as my stop loss and we are at support, then buy X contracts or shares here." Your system should be complicated enough to be effective, but simple enough to facilitate snap decisions. If you have 20 conditions that must be met and many are subjective, you will find it difficult if not impossible to actually make trades. Computers often make better traders than people, which may explain why nearly 50% of all trades that now occur on the New York Stock Exchange are computer-program generated. Computers don't have to think or feel good to make a trade. If conditions are met, they enter. When the trade goes the wrong way or hits a profit target, they exit. They don't get angry at the market or feel invincible after making a few good trades. Each decision is based on probabilities.
Keep excellent records All good traders are also good record keepers. If they win a trade, they want to know exactly why and how. More importantly, they want to know the same when they lose, so they don't repeat unnecessary mistakes. Write down details such as targets, the entry and exit of each trade, the time, support and resistance levels, daily opening range, market open and close for the day, and record comments about why you made the trade and lessons learned. Also, you should save your trading records so that you can go back and analyze the profit/loss for a particular system, draw-downs (which are amounts lost per trade using a trading system), average time per trade (which is necessary to calculate trade efficiency), and other important factors, and also compare them to a buy-and-hold strategy. Remember, this is a business and you are the accountant
Perform a post-mortem After each trading day, adding up the profit or loss is secondary to knowing the why and how. Write down your conclusions in your trading journal so that you can reference them again later.
Parting Notes
"No one should be trading real money until they have at least 30 to 60 profitable paper trades under their belts in real time in real market conditions before risking real money," says Novak.
Successful paper trading does not guarantee that you will have success when you begin trading real money and emotions come into play. But successful paper trading does give the trader confidence that the system he or she is going to use actually works.
The exercises in "Trading in the Zone" walk the trader through trading a system based on a simple indicator, entering the market when the indicator gives a buy and exiting when it gives a sell. Deciding on a system is less important than gaining enough skill so that you are able to make trades without second guessing or doubting the decision.
There is no way to guarantee that a trade will make money. The trader's chances are based on his or her skill and system of winning and losing. There is no such thing as winning without losing. Professional traders know before they enter a trade that the odds are in their favor or they wouldn't be there. By letting his or her profits ride and cutting losses short, a trader may lose some battles, but he or she will win the war. Most traders and investors do the opposite, which is why they never make money
Traders who win consistently treat trading as a business. While it's not a guarantee that you will make money, having a plan is crucial if you want to become consistently successful and survive in the trading game
I would not describe it as confidence or overconfidence as you put it, I would prefer 'Judgement & Experience' instead.
THOSE WHO DONT BELIEVE IN TA........
it works as good or bad as weather forcast.
HI,THIS TA VIEWS R COLLECTION OF ESTEEMED MEMBER...
I EXPRESS MY GRATITUDE TO THEM
OILMAN5
price only...to trade....is the best form of trade...its formless trading
normally..few can follow ..with discipline...
price roc...crossing an price 10dayma ROC ..derivative is good...
however...aroon continuation..validity of strength helps
....................................
.............1)keep your bets small
2)cut your losses short
3)let your profits run
4)follow the above rules with out question.
The two things I focus on in terms of method is always limiting risk/managing risk and compounding yield. We may agree on some of the strategies of entering and exiting trades, but the ONLY objective data i review and analyze is price, specifically macro price trends.
I'm just now getting into commodities with paper trades and have been able to translate my techniques from my stock and options trading with considerable success. But it requires patience and perseverance...an unattached, unwavering, unyielding, immovable determination. I liken it to the Terminator who in eveything he did, centered around negotiating the chief objective without vague, ambiguous, and oten eronious debate and reasoning. He was cold and calculating, always calculating mathematical probabilties as events unfolded. This is what I do and ....Forecasting ,having an opinion is great---great to write newsletters,great to present seminars,great to seem intelligent,great to make people feel one is an authority on the markets.Take a look at their records,one truly doubts if they are successful.The market is right...always right.The market is right when we think it should go in a particular direction.The market is right when it goes the other way.The market is never wrong.We are wrong if we went the wrong direction.One's opinion does not matter.To go with the flow of the market is everything........
Forecasting prevents vision.It prevents one from acting in the present because one's mind is rooted in the future.Once one is able to live in the present,one then gives up all resistance to the flow of the market.One then automatically takes stops and not go into hope
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I often read the yahoo finance column (for USA) by Dave Landry. He is a great swing trader, and that is what I try to be too. He has a great strategy for exiting trades, and I like it a lot. He says that when you enter a trade, define the risk (i.e the distance between your entry and stop). If the trade is successful, lock in half your profit as soon as the trade moves in your favor by the amount equal to the risk level. After that move your stop to breakeven (I usually put it slightly above breakeven), and then use trailing stops. In this way, you can earn your daily bread and butter by ensuring some profits, and at the same time, in his words, "have the chance of all of your trades turning into a home run." However, one more advise from him that I follow. If the trade moves in your favor too fast, just take the profit and run. This is what I did when I entered Rel Cap some days ago at Rs. 172, and next day it touched 192. More than 10% profit in 1 day, so I locked it all.
Hope it
a definite profit is better than a possible larger profit.The strange thing about the mind is that when one takes regular small profits,the mind is lured into not accepting losses.....When that big fall comes,one then will refuse to accept it and goes into hope mode.To cut one's profits and let the losses run is destructive not only to one's account but
Really, the most complicated & tense decision for me to make when I have to exit a profitable trade. Tendency is to hang on in the hope of making that "some more", but for late-in-life traders like me (I am not 99
How to exit a successful trade!
Do you stay with your profitable trades as long as possible because the trend is likely to continue and make your profits even larger?
This is easy to understand but not so easy to do when real money is involved. The difficulty is that although your profit may become much larger if you stay with a trade, it may also decrease and even disappear. Human nature is such that it values a sure profit much more highly than the probability of a much higher profit. Thus, traders are inclined to take their profits too soon. This can be fatal to long-term success because big profits are necessary to overcome the inevitable collection of small losses.
There is a good way to let profits run while still guarding against the possibility that prices will turn around and take away much of your accumulated profits before the trend actually reverses. It is called a trailing stop. You include in your plan a method for moving an exit point along some distance behind your trade. As long as the trend keeps moving in your favor, you stay in the trade. If the market reverses direction by the amount of your trailing stop, you exit the trade at that point. You would also offset your trade and reverse position if the trend reversed.
One way to set a trailing stop is to protect a certain percentage of the accumulated profit. That will always insure that you keep some profit on a good trade
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The Two Realities of Trading
There are two realities every trader must understand and accept before she/he can actually start trading for a living!
1) It Is Impossible to Predict Market Turns
It has become very common in the financial markets for analysts or "experts" to offer their "outlook", or predictions for various markets. In fact, it has become so common that many traders just assume that if so many people claim to be able to predict the future action of the markets, then it must be possible. Nothing could be further from the truth.
There are two great emotions at work in the markets - fear and greed. However, contrary to conventional thinking, greed is not always manifested as a lustful longing or need to make money. Quite often it is manifested in the form of "hope". And what could give a trader more "hope" than the belief that he may be able to know in advance what a given market is going to do? But, think about it for a moment. Can you think of any other endeavor where people can actually predict the future?
In order to be a successful futures trader, you must learn not to rely on predictions and forecasts. It is possible to find a person or committee or indicator or wave count which will occasionally offer a prediction which actually comes true. However, the fact of the matter is that there is no person, committee, indicator, or wave count, etc. which can consistently and accurately predict tops and bottoms in any market. It is simply not possible to do so on a regular basis
Once you free yourself of this notion, you open up your mind to the more important task of determining the current trend in a given market. In the long run, such knowledge will be much more useful than a thousand forecasts.
2) Losing Trades are a Natural Part of Trading
Novice traders have a great deal of trouble accepting the notion that losing trades are a "natural" part of trading. Yet, if you are actively "cutting your losses" on trades that don't go in your favor, a losing trade can actually be thought of as a positive step, because it is the act of consistently limiting your losses to a manageable amount which allows you to keep coming back to trade another day. While losing money on a given trade is not in itself a good thing, the very act of keeping each individual loss to a minimum is a necessary step in trading profitably over the long run.
When starting out, traders often shoot for a high percentage of winning trades, even though that generally means taking profits quickly and missing some big winners. More experienced traders come to realize that the percentage of trades which are winners is often a meaningless statistic. In the end, the only thing that counts is if the amount earned on winning trades exceed the amount lost on losing trades. As long as that is the case, it matters little if 3 out of 10 trades are profitable or if 7 out of 10 trades are profitable. The key is to make alot when you win and to lose a little when you lose
We have to move according to the market. Then only we can survive. We have to take the winning and losing trades sportively and control our emotions while trading which affects the judgement. Nobody can predict the market correctly over a period of long time. In the short term many predictions may come true. But the market has its own judgement
The amateurs in most fields ask for forecasts,while professionals simply manage information and make decisions based on probabilities.Take medicine for example.Apatient is brought to an emergency room with a knife sticking out of his chest-and the anxious family members have only two questions:"Will he survive?" and "when can he go home?"They ask the doctor for a forecast.
But the doctor is not forecasting-he is taking care of the problems as they emerge.His first job is to prevent the patient from dying from shock,and so he gives him pain killersand starts an intravenous drip to replace lost blood.Then he removes the knife and sutures damaged organs.After that he has to watch against infection.He monitors the trend of a patient's health and takes measures to prevent complications.He is managing -not forecasting.When a family begs for a forecast,he may give it to them,but its practical value is low.
To make money trading,you do not need to forecast the future.You have to extract information from the market and find out whether bulls or bears are in control.You need to measure the strength of the dominant market group and decide how likey the current trend is to continue.You need to practice conservative money management aimed at long term survival and profit accumulation.You must observe how your mind works and avoid slipping into greed or fear.A trader who does all of this will succeed more than any forecaster.
have come to the conclusion that trading is not an exact science. You can't do X and get Y every time. It is as much an art as it is anything else. There is no magic formula. Trading is all about probability. It is the art of correctly applying a set of carefully thought out rules and allocating the probability of that event to result in success.
Each trade is an independent event. The market does not remember if you lost or made money the last time you traded.
The way you approach the market psychologically has as much to do with your success as any trading plan.
Risk management is crucial if you want to have any hope of becoming a successful trader.
Matching a method of trading with your personality is the only way you will ever feel comfortable in the markets.
An adequately funded account is necessary - not only to be able to take the trades you want, but also so you don't feel every trade is a live or die situation.
The journey to the road of successful trading will make you confront your deepest fears. Your armor on this journey will be confidence, knowledge and belief in yourself that you can achieve your dreams.
Never, equate your success or failure in the markets with who you are as a person!
How to Use Moving Averages
Here are just a few simple ideas for putting moving averages to work:
1) Only consider buying a stock if it is above your moving average. By definition, if prices are below the average they are trending down. One of the best pieces of advice I've read on this subject was from Trader Vic. He said
"When picking stocks, I never buy a stock when prices are below the moving average, and I never (short) sell a stock when price is above the moving average. Just pick up any chart book that uses a 35- or 40-week moving average and you'll see why -- the odds of being right are way against you.
Mind you, this is after Vic does all of his fundamental analysis on a stock. So even if the stock looks great fundamentally, he'll pass if it's below the moving average."
2) Use moving averages as an exit signal. Seriously consider selling a stock that closes below the moving average.
3) Consider buying stocks as they drop near an upward sloping moving average. You'll notice when looking at charts that stocks often find support (bounce off of) moving averages. Buying on a pullback to a MA will often give you a good risk/reward entry point. You can put a stop-loss order nearby in case you're wrong about the bounce
Nothing suceeds like success! I'm searching for a system which is not very much difficult to understand but can give returns in most of the occassions. It's all about money management. I was a customer,for three months only, of an expert who used to give calls on markets,and found that only his calls succeeded in almost 80% cases! What was the reason?
Well,he would give calls when he will feel that it's worth giving and not giving calls everyday,just for the sake of giving it! He may give one positional call in one week and may be more or no call at all. But the reason behind his success is that - he used to give calls when a stock is just a few rupee above its major support and the potential upsides left in the scrips are somewhere near to four times the difference to its stoploss level. So the risk reward ratio becomes 1:4 almost! If you take five calls in one month and lose one trade,the gain will make up handsomely the losses
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Reason #1: Lack of a clear cut Trading Plan
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Along with under-capitalization this probably ranks as the
#1 reason traders fail. Beginning (and some more
experienced) traders will frequently be swayed by intraday
news and price action.
They may have started the day with a clear plan for the
day, but when the bell rings and the market starts they
lose focus and become mesmerized by the next tick as the
price action unfolds, alternately looking to buy or sell
every couple of ticks/minutes and getting whipped all over
the place.
A trading plan should give one criteria to measure trend
against and determine a direction to trade. Once the
direction has been decided the picture is significantly
clearer as one side of the market has been taken out of
consideration and one is free to focus on locating low
risk opportunities to enter in the direction of the trend.
The plan should address such things as:
- Criteria for Trend determination
- Criteria for recognizing Entry opportunities
- Risk Management / Stop placement
- Trade Management (i.e. how to determine when a trade
isn't working
- Profit objectives
- Exit strategies
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Reason #2: Overtrading - Trading round the clock
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The aforementioned lack of a trading plan coupled with
today?s lightning fast executions available through
electronic trading as well as the extended opening hours
for electronic trading get a number of traders in trouble.
When they see all the price movement and translate it into
dollar terms it is very easy to become impatient waiting
for good trading opportunities.
One may get caught up in the minute to minute fluctuations
to the point where he loses sight of the overall picture
and starts buying and selling every couple of minutes
(seconds even) to grab a couple of ticks, just because the
trading software is so responsive and the fills so fast
that he thinks he can get away with it.
We are so used to getting paid for our time in the real
world (i.e by the hour) that it is difficult to sit in
front of the screen patiently waiting for a trading
opportunity (that may or may not present itself for
another hour or two).
Seeing all this fluctuation the trader is tempted to
"hurry up and make some money" and take a couple of quick
trades to get paid for his time while waiting for the next
trade that qualifies under his trading plan, however
illogical that may sound.
Clearly, if the trader knew this type of trading to be
profitable, based on his research, he would have
incorporated it into his trading plan.
The very fact that it is not part of the plan should
eliminate such trades from consideration, but it is easy
to get bored and impatient and hard to resist forcing
things when the next trade is but a mouseclick away.
_______________________________________________In this installment we will explore how certain limiting
beliefs can affect your trading results and development as
a trader.
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Limiting Belief #1: Belief in Mechanical Systems
(THE best system, best hardware,
best software, best data etc).
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It never ceases to amaze us how people believe the process
of trading can be automated and all they have to do is
find a system that works - then they can kick back on the
beach with a pina colada in hand, call their trades in on
the cellphone and sit back to collect the checks.
To these individuals life becomes a never-ending search
for the "holy grail" of trading. They burn the midnight
oil looking for the ultimate oscillator that will make
them rich, sweating over the cleanest source of data,
which type of data is better, continuous or back-adjusted,
looking for the best trading execution platform, the best
charting software etc
In our observation these people are so wrapped up in the
mechanics and intellectual exercise of trading that they
never learn how markets actually work, i.e. that markets
are driven by fear and greed and emotional crowd behavior
and that price behavior cannot be reduced to a
mathematical algorithm.
These individuals might have been around the markets for a
long time and claim several years experience, but in fact
they've only had the same 1 year of experience several
times over, because they never learned from their
experience and kept on making the same mistakes.
While there are a handful of commercially available
mechanical systems that have decent track records and show
profitability over time the reality is that those systems
are what we call ?psychologically untradable'.
What we mean by that is that they frequently have large
drawdowns and those drawdowns may last for months. Most
people are not prepared to stick with such a system
through the drawdown and will usually abandon it near the
bottom of the equity curve before the system "gets back in
sync" with the market and moves to new equity highs
The thing most people miss when evaluating these systems
is that they underestimate how hard it is to stick with a
system through a drawdown period.
It is easy when looking at a track record, one will
"experience" the drawdown in a matter of minutes -
intellectually acknowledging that there is a significant
drawdown, but then the system invariably pulls out of it
and winds up being profitable for the year.
There is a world of difference between accepting a
drawdown on an intellectual level and then experiencing
that drawdown daily over a period of several weeks or even
months on an emotional level, wondering every day whether
this time the system has finally had it and may never pull
out of the "nosedive".
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Limiting Belief #2: Belief that Losses can be Avoided .
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Refusal to accept the fact that losses are an integral
part of the game and a belief that they can be avoided
leads to strange behaviors. This belief leads to
?paralysis by analysis' and problems pulling the trigger.
Trading is a game of probabilities. At any point in time
there is an X % chance that a move will take place as
anticipated, this means that conversely there is a (100%-
X%) probability that it won't!
When implementing a trading strategy one should be
cognizant of this fact and plan accordingly, i.e. not risk
more than Y% of capital on any trading idea/opportunity,
as there is always a certain probability that one is
wrong.
Regardless of how good your method is, even if it can be
demonstrated to have 99% winners, you will still lose ALL
your capital IF you risk it all on every single trade.
Another fact to keep in mind is that wins and losses are
not evenly distributed and nicely packaged in a tidy
series (for the previously mentioned 99% winning system
that would mean a series of 99 wins, 1 loss, 99 wins, 1
loss etc.). Even a 99% winning system will occasionally
have several losses in a row.
This brings us back to the differences between
accepting/understanding things on an intellectual level
vs. an emotional level.
While traders may understand intellectually that losses
are a part of the game, they still want the particular
trade they are in at any given point in time to be a
winner and are prepared to add to their position, move
their stop as the market moves against them, or cancel it
altogether to help secure a positive outcome.
This behavior and belief leads to traders being forced to
eventually take losses that are significantly bigger than
allowed for in their trading plan.
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Limiting Belief #3: Belief that Every Move can be
Predicted / Belief in Missed
Opportunities
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Starting traders (and a number of experience ones
spend a lot of time fretting over missed opportunities.
They play the "would'a, could'a, should'a, wish I had'a"
game, kicking themselves over missing opportunities they
believe they could have taken advantage of.
Aside from being demoralizing and damaging to the psyche
this practice is an unproductive waste of time.
Frequently traders will also introduce as a reason for
taking a trade, information that wasn't known at the time
the move took place.
The fact of the matter is that trading is a game of
probabilities and at any given point in time a move may
happen out of nowhere that was totally unforeseeable.
Some people have estimated that there are 12-20 decent
swings in the S&P's in a week and that you are trading
like a pro if you catch 3-4 of them.
In this respect trading is similar to baseball, the guy
batting .300 is doing one heck of a job and gets rewarded
accordingly!
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Limiting Belief #4: Belief that more information is
better (leads to information
overload / 'paralysis by analysis')
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Traders are inundated with confusing information and
trading tips. It is everywhere, from the talking heads on
CNBC, to the news headlines flashing across the trading
screen to the online chatrooms, newsletters, hotlines etc.
How does one go about making sense of it all? The short
answer is: You don't need to make sense of it all to make
money from price fluctuations in the market! All that is
required is an understanding of crowd psychology and
probabilities.
A number of traders believe they need to gather ALL the
information AND understand it, because that's what we do
in the real world when faced with a decision. Once the
information is mastered the secret to successful trading
will somehow be magically revealed.
Nothing could be further from the truth! No matter how
much information you accumulate and sift through you will
NEVER have ALL the pieces to the puzzle - if you are
waiting for that you will never make a trade.
What is needed therefore is to develop skills for
decisionmaking under uncertainty, i.e. a keen
understanding of probabilities and the ability to assess
the risk involved and reward associated with different
trade outcomes.
A losing trade does not mean the decision to enter it was
wrong, it may have been, but it may also be a case of what
is referred to in statistics as: "Good decision, bad
outcome", i.e the odds favored a particular move, but the
move failed to materialize as expected.
The best advice for beginning traders is: Forget all the
conflicting information being disseminated out there. All
that is needed is a price chart.
Leave it to someone else to worry about all the news etc.
The market's collective assessment of that information is
reflected in the price action.
The fact of the matter is that everyone has the same set
of information to trade off of when it comes to prices and
the individual trader will never have the resources to
secure better information faster than the large brokerage
and proprietary trading houses.
All one needs to to is to learn to recognize their
"footprints" on the charts, as evidenced by chart
patterns.
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Conclusion
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This second installment demonstrates that to succeed as a
trader you must be willing to accept the following facts
and observations:
- You must learn to understand how markets work and what
drives them. Trusting your hard-earned capital to a
mechanical system is a recipe for disaster as most traders
do not possess the intestinal fortitude to stick with such
systems through inevitable drawdown periods.
- You are never going to have all the information and
will be forced to act on incomplete information
- Not every move can be predicted. There will be
situations where your best laid plans are adversely
affected by random unforeseeable events.
As a result losses are an unavoidable, integral part of
trading.
Getting stopped out of a trade with a loss, contrary to
popular belief, is a good thing (assuming you have a
winning approach and solid trading plan) - It tells you
that your trade is not working and conserves your capital
for later use when another (hopefully better) trading
opportunity presents itself.
Am I committing any of these errors in my trading?
- Could they be contributing to the recent dive
in profits I've experienced?"
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Misconception #1: Under-Capitalization and
Unrealistic Expectations
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Some of the most damaging misconceptions and limiting
beliefs are planted in would-be-traders heads to entice
them to enter the industry, before they ever execute their
first trade.
The biggest one, by far, is that trading is easy and that
people can make obscene amounts of money within days of
starting out on the tiniest amount of trading capital.
While it is certainly true that the markets offer
unlimited potential and everyone has heard stories of
traders borrowing a couple of grand on a credit card to
get started, who subsequently went on to parlay that
into a small fortune.
The reality is that trading requires time, preparation
and sufficient start-up capital.
Starting out with too little capital and unrealistic
expectations sets would-be-traders up for failure
and is damaging in a number of ways, for example:
a) People who start on a shoestring are forced to take
on too much risk, and have a significantly greater
risk of ruin than better capitalized traders.
Someone starting out with $3,000 in the E-mini S&P?s
will have to risk $150 to $600 pr. trade, or 5-20% of
their equity on each individual trade. As a result
they will be ?wiped out? if they have a handful of
losing trades in a row.
Contrast this with someone trading the same approach
on a $10,000 account. Each loss will represent a
significantly smaller percentage of equity and they
will be able to weather the inevitable drawdowns that
occur from time to time.
Regardless of the approach employed, one should have
sufficient capital to be able to withstand at least
10 losing trades in a row and still continue trading.
The smaller the percentage of equity risked pr. trade,
the smaller the risk of ruin will be.
Research has shown that ideally one should not risk
more than 1%-4% of equity pr. trade.
b) Unrealistic expectations cause traders to discount
the progress they are making and lead them to ?force?
things to bring about the desired result.
As an example:
If you believe you 'should' be making $1,000 pr. day
pr. contract in the S&P?s when daytrading and find
that you are ?only? up $300-$500 by Wednesday after
trading for 3 days you will be unhappy with your
results.
Instead of continuing to do what got you to that point
in the first place and winding up with perhaps
$800-$1,000 for the week you will start pressing,
pushing for trades, trying to make things happen,
taking questionable trades and giving back in the
process what you?d made to that point and wind up
maybe -$1,000 or more in the hole for the week!
In trading, as in any profession, it takes time to gain
sufficient proficiency and one must learn to crawl before
they can walk.
By being adequately capitalized and budgeting several
months to a year at a minimum to learn the basics of
this profession beginning traders give themselves the
best chance of succeeding.
__________________________________________________ ________
Misconception #2: Confusing Margin Requirements with
Capital Requirements
__________________________________________________ _______
One frequently hears starting traders talk about the
minimum margin requirements set by the futures exchanges
as sufficient capital needed to trade a particular
contract.
Beginning traders will also look to the margin
requirements as a way to determine which market to
trade, saying things such as "My account is so small I
can only ?afford? to trade Soybeans and Wheat, because
they are the only contracts with a small enough margin
requirement".
The fact is you can?t ?afford? to trade ANY market
unless you have a winning approach!
If you don?t, you might as well hand over your money to
the nearest charity and save yourself the aggravation,
because you will lose it anyway!
Margin requirements are set to protect the integrity of
the marketplace, they are intended to make sure that
traders have sufficient capital on hand to meet their
obligations should the market move against their position.
They are calculated based on a specific formula that
takes into account the volatility of the market in
question.
Generally speaking, as a rule of thumb, they are
approximately equivalent to the average 3-day true
range of that market.
Margin requirements should NEVER be used to determine
the market, or number of contracts, to trade. Doing so
leads one to risk too great a percentage of equity on
any given position.
_______________________________________________
Conclusion
_______________________________________________ A close cousin of un-realistic expectations is
unwarranted over-confidence, inspired by a series
of successes in trading.
This is something that frequently affects
experienced traders after they have had a
good run in the markets.
They start feeling 'invincible', think
they've got the 'market figured out' and
have a tendency to take greater risks than they
should as a result (given their account size).
The market will invariably humble the over-
confident trader and hand him devastating
losses, as he gets called on the excessive
risk he has assumed through greater trading
size or the use of bigger stops (or even
worse - the use of no stops).
...................................................................
tool...momentum
stock select...nse..scan by explorer...ready to move ..
pattern triangle ...continuation....i have bullish bias..
2nd one...at particular retrace...bullish engulf...
so this two condition...gives me candidate..ready to move up
..now @9-55...ready to enter.../max no 3 trade...
if any news +flash..enter aggressively...if published recommendation..
whether its a trap to book profit...[its normal]
trading amount 3 lakh..1each...
if after 15min price..1% up..enter...profit pt...3%....
always keep eye on nifty future...if sell order more...today is NOT UR DAY
.....this system has 70% success rate atleast for me..
i believe search of candidate..very imp...it takes me @2hr..after scan how it shall
behave next day...
various alternate scenario...entry / exit...
so now u all understand why it suit rm/dealer...they can unemotionally..
watch..ofcourse execute.. as confidently ...
if condition not suit to trade...they dont trade
.................................
on short term trade...
its basically retracement buy...on a paticular stock..whether present value justified ? i use fundamental input...if analyst has conflict..i consider candidate is good one...
ma value 20 i use..also how stock behaved last 6month....
what ma x ..3/10 suggesting...i enter...
here i use good money management...trade amount 5 lakh...half idle
max put 50000, in a trade stop 4%...unfortunately accuracy..35-30% only..
so in a winning trade...i put 2lakh...after 5-8% price up..play for another..
4-5% profit...
i get out..from loser at stop...unfortunately ...recent switch down ward..
cost me good loss..as a part timer...gap down put me in puzzle...
result BIGGER LOSS
since..accuracy mine is poor..;.. i think to discard this...
as i am not master in volatility...present market condition...
............................................................
fact is i am poor as short term trader...
why?...may be long days fundamental faith...
but worst one . holding loser..[use of hope]...
entry is definitely my strength...
but exit is poor...judgemental error comes from other commitment....
and its law of TRADE....ONLY WITH 100% COMMITMENT U HAVE CHANCE
TO TRADE RIGHT..
.................................................. ................................................
SO AGAIN I COMMENT ON DAY TRADE....
why i guess successfully...natural flair of 30yr of chess play..alternate situation to act, use of survival instinct.....
but its stressful, i am older now,...may be new guys r faster,
good candidate for next day is my strength....
metastock explorer i use...
also omnitrader..which suggest some candidates....
so i use pib, ...entry technique .. x of buy at break out on particular pivot...
if volume..is good...so i commit bigger...
i dont mind to lose, as loss r less in number..so it has +expectancy..
if market condition unpredictive simply i dont trade...
it helps to me...as noise trading i understand...so break of pivot , moving
to higher zone ...easier and suit me in past...
as i believe daytrade is gambling,..so luck of right or wrong is always there
so i am ready for wrong, it prevents me let loss run...
as screening is done..i know what i am expected to do..
filter..+ bias of nifty...
any news publish creates criticality of trade...sudden surge of greedy fool
can send stock price any where..., last 6month behavior thats why i study on hourly chart..on particular surgeday..
its readyness to act..basically given me lots of right trade consistently
...............
i give more hints..x of 7 ema with closing price..
trigger... 8day ..william%r std signal
5day rsi strength increasing...
i assure u it gives money...those who doubt can back test it..
atleast condition fulfilled , given +move within next 2days
psychologically i find it very useful, as i am ready to lose ..i am nothing to loss..[hey i bet on bangladesh,against india..pun intended..]
i can avoid my weakzone..volatility
so those who have asked...ENJOY
....................................
investment vs trading
...................................
this is a controversial topic...still i decide to touch..investing..is putting money
for long term..strategic thought process is imp...consider any md..plans for expansion of his company..money arrangement and plan to plough back
..implementation of dream into reality..
constant watch to maintain target as per plan...is key...
same thing , if u invest u have to check...
trading
.............
its a concept to buy low and sell high..
where the demand is EXPECTED TO build, buying candidate..
where further demand realisation is not possible ...SELL
SINCE expected materialisation is not possible[ on some cases]..
get out before other traders dump..
whichever path u look none is easy...
fortunately some torch bearer help in writing their journey in distinctive style
many a great name all of us can utter.., but its IMPOSSIBLE to follow them
why?..2 individual r not same...copying is not possible
can u be any of them?..no i assure u ..its an impossible event
CONDITION AND CONSTRAINT...CAN NOT BE REPEATED SAMEWAY..WITH
SIMILAR VIEW AND LOGIC...
so what is your path and alternate view?
amalgamate...
a basic std rate of return is possible...
money managers view is easy to implement...
investment view..PUT MONEY IN SUNRISE INDUSTRY. in india for indian company
trading view.....based on some value analysis buy at oversold zone..and hope mean reversion shall bring u quick profit[ holding period 3-6month]
many traders may disagree...i say to them ..;'u r right, u do the same thing
in smaller timeframe..based on your superiority..so is ur RETURN'
NOW LOOK AT ALL GREAT DAY TRADER...they r mostly engineer..strong math logic...understand linear relationship..
with own developed one/ intraday plan ..with good signal generated..cont..
they can make money...regular basis...discipline and strict stop loss is mantra
experienced one with fund available...can do PLAY LEVERAGE
next..i say those who work in this field...they simply copy cat a winner ,
depending upon experience ..do a little, lose a little'
now..COMES THE FOOL, DREAMER...THEY NEVER UNDERSTAND HOW TOUGH ITS REALLY..[van tharp never made money by trading..though he trains many
best of the best traders]
so first..check..do have the ELEMENT IN YOU..time to invest and learn
right attitude....TORTOISE WINS HERE..
TRADING ON PRICE HAS 3ELEMENT...NOISE...
TREND
SHOCK/EVENT
Noise..a price within +/- 3%[arbitary..as per my experience ]
its the time u should watch..
soon some big fund /syndicate starts buy or sell..with price change +/-change..defining an up or down trend accordingly...
its when more volume joins ..media writes..oppurtunity to make money for early entrants..when trend is no more moving up..[ put hope triangle pattern
shall show CONTINUATION]..ANOTHER RISKY ATTEMPT CAN BE MADE..
BUT WITH STRICT STOP...
hopelessly i dont know when profit book starts and price shall fall
many signal is used by many as per confidence level and experience..
but none can handle SHOCK/EVENT...
SINCE IT CHANGES INVESTORS SENTIMENT BY NEWCOMING OF BUY AND SELL ORDER...hence price study..aswell as order flow must be the tools in your trading arsenal
2nd aim is study what others trader shall do ..on an event...
CAN U CREATE MONEY MAKING OPPURTUNITY OUT OF IT?
3rd factor...global money flow to india...
if fii is selling, YOU HAVE TO..
nobody can withstand flood, ...sell and go to hill station...
some book reference
trading psychology
........................
1. van tharp
2. dr elder
3. ari kiev
4. phantom of pit
trading phiosophy
they are works of trader
....................................
1. gann
2. linda
3. larry williams
4. bill williams
5. levermore
6. niederhoffer victor
7. soros
8. j ross
some technical related writing/context
1. candlestick
2. elliot wave
3. momentum theory
4. profit magic of stock transaction timing
system design
....................
1. way to trade
2. tusher chande
3. p. kaufman
4. j katz
applied theme
.......................
1. contrarian thinking
2. fibonacci
3. a-b-c pattern
4. stop loss
5. daytraders bible
6. trading on probability
7. portfolio management
subjective trading
.........................
swing trading ...landry
bary rudd
encyclopedia of chart pattern
tony crabel works
4 biggest mistake
trading in the zone
topic.. INDIAN STOCK MARKET
.................................................
1. FUNDAMENTAL
..........................
GROUP A AND SOME B1 ONLY...
LITERATURE..INDIAN INDUSTRY GROWTH 2002..2012
COMPANY ANALYSIS .. TOP DOWN AND BOTTOM UP APPROACH
SECTOR ANALYSIS
CAPITAL MARKET 500 COMPODIUM
LATEST RESULT..COMPARE QUARTERLY GROWTH
COMPANY .GOOD MANAGEMENT..ORDER POSITION
..................SUNRISE INDUSTRY..
GOVT FAVORISM..STORY FOR LONG RUN
MONOPOLISTIC VIEW
TECHNICAL
................
METASTOCK STUDY
INDICATOR STUDY
RESISTANCE SUPPORT .. PATTERN STUDY
GAP AND VOLUME SPIKE
TRADING MARKETS ...TOOLS
WHEN REVERSAL IS IMMINENT.. SIT ON CASH
MOMENTUM PLAY
DELIVERY IDEA
.....................
3.PSYCHOLOGICAL APPROACH
SUBJECTIVE BIAS..WHY MARKET WILL GO UP? WHEN IT WILL FALL?
FII FACTOR..GLOBAL FACTOR..OTHER WORLD STOCK EXCHANGE FACTOR
RESULT FACTOR... FEEL GOOD AND MEDIA HYPE
WHAT IS ACTUALLY STATE OF MARKET..WHAT TO BE IN NEAR FUTURE
4. TRADING
......................
DAY TRADE STYLE...SWING STYLE.. INTERMEDIATE TRADE STYLE
TRADE RULE 1 2 3
WHAT NOT
TO DO 1 2 3
HOW TO
TAKE ENTRY 1 2 3
PROFIT BOOKING
& STOP LOSS GUIDANCE 1 2 3
HOW TO ADD POSITION 2 3
CHECKING
RISK/ REWARD 1 2 3
DIARY
............
1. WRITE ANALYSIS OF ALL PAST TRADE
2. WHY PLANNING TO ENTER 'NEW' STOCK ...WRITTEN RULE
3. BEFORE BUY X CHECK ...DONT ALLOW TO BIG LOSS
...................................
THROUGH MONEY CONTROL.COM U CAN GO TO RESEARCH .. TO CHECK QUATERLY RESULT COMPARATIVE...
SELL RULE IS IMP.
WHEN TO HOLD?.........when trend continuing.
WHEN MARKET SHALL TOP OUT..........simply get out.ULTIMATE TEST OF A subjective trader
.............