Thoughts on "The A to Z of trading career - musings of a professional trader !!"

[madank]

Dear all,

Lets have a discussion on the topics posted in this thread.

http://www.traderji.com/community/t...reer-musings-of-a-professional-trader.105523/

Looking forward to some valuable and fun-filled comments/discussions.

 

[LoneWolf]

Hello Madan,

First of all congrats on being a father and much appreciation for taking time to start this thread to cover A to Z of a trading career.

I want to write this post as a sort of self confession on what you have written as a basic tenets of trading. I must say I have given time and effort for writing down a trading plan on paper earlier, many times. But since every one's way of looking are different, all would surely be including different aspects in a trading plan. For example - I had never thought about writing a plan on what would be my action if SL is hit ? To me its always - Exit (done automatically as SL order is already placed), then keep looking for next setup. But what about the psychological damage done ?? How to deal with it ? Again had never thought about writing down a plans of actions on when trade goes against me ? As no two scenarios will be same when market is going against me, and so reading the markets and the following plans of actions might be different. But you mentioned such things under a trading plan. The thing is experienced traders like you are looking at the things at a deeper level which often a new trader like me is missing. So can we have some basic template kind of thing which are a must to include on a trading plan ?? I hope I am not asking too much.

Then comes the focus, well, this is road of self mastery, no one can guide me or force me, I need to find that urge with in myself. Then comes education, experience and then we require tools to trade. But after all this, IMO then comes one more vital aspects, that is execution of our plans of actions in live market. When I came in to trading I believed, there must be some holy grail system with profitable traders. Then I learned, MM is the holy grail, and then again I learned that its not the system but you. I am the holy grail, My psychology and mind set is the holy grail. Now today after 3 years of trading I am at this conclusion that the right execution is the holy grail to be profitable. So next it will be great to read your view on challenges and issues that a trader (new as well as experienced trader) face while executing the planned action.

Thanks.

 

[ncube]

Dear all,

Lets have a discussion on the topics posted in this thread.

http://www.traderji.com/community/t...reer-musings-of-a-professional-trader.105523/

Looking forward to some valuable and fun-filled comments/discussions.

Dear Madan,

Congratulations on being a Father..its a wonderful experience!!!

Thanks for starting this thread to share your experiences and knowledge with others. I am sure like me your writings will definitely influence many to improve their skills and knowledge. For last couple of years I had been thinking of sharing my learning on TJ and give back to this community which had been a great source of education for me all these years, but my personal commitments restricted any active contributions. However if I get some free time I will try to share my experiences on the weekly topics in this thread...hope it is fine with you.

The information you shared in the fourth point "Experience", played an important turning point in building my Trading skills. I started participating in stock market right after joining my first job after completion of my engineering. At that time it was more of hobby and another investment avenue. This went on for about a decade and during this time I saw many up's and down's but due to strict MM, my losses were always limited (I am very conservative.. and I was able to generate respectable returns but was never consistent. By this time I had understood that in trading its not just luck or super strategy that makes consistent money, rather there is some skill which differentiates a consistent successful trader from a normal trader and I started exploring in that direction.

My 'ah-ha' moment came during Dec 2013 when I read your Zerodha interview, where you highlighted the importance of mindset and psychology and this led me to start analyzing myself rather than the market or strategies that I use. Slowly I started working & developing the skills to improve my mindset. I also started observing the trading styles & understanding of other respected traders in Traderji such as Smart_Trade, XRAY27 (DS thread was active at that time) & later Subhadip (followed his Pivot & 2 ma thread) and found a common pattern in their skills & maturity. I realized that this skill can be learnt by anyone as there are no born successful consistent traders, however explaining this skill in writing is bit difficult as one needs to experience it by themselves and hence it is not easily found in any single book. I will make an attempt to share my experience learning these skills if possible today evening my time (I am on a business trip to mexico and its still Sunday afternoon here... Edit: Please ignore my last statement, I will share it when Madan talks about this in his weekly topic, I just realized its better not to change the flow of information!!!

Before I end this post I would like to share few statements of Swami Vivekananda and hope readers will be able to relate as it applies to Trading domain as well: (His teachings have always had good influence on my life and applicable even today):

All our knowledge is based upon experience. If there has been one experience in this world in any particular branch of knowledge, it absolutely follows that that experience has been possible millions of times before, and will be repeated eternally. Uniformity is the rigorous law of nature; what once happened can happen always.

In the first place, every science must have its own method of investigation. If you want to become an astronomer and sit down and cry "Astronomy! Astronomy!" it will never come to you. The same with chemistry. A certain method must be followed. You must go to a laboratory, take different substances, mix them up, compound them, experiment with them, and out of that will come a knowledge of chemistry. If you want to be an astronomer, you must go to an observatory, take a telescope, study the stars and planets, and then you will become an astronomer. Each science must have its own methods. I could preach you thousands of sermons, but they would not make you religious,until you practiced the method. These are the truths of the sages of all countries, of all ages, of men pure and unselfish, who had no motive but to do good to the world. They all declare that they have found some truth higher than what the senses can bring to us, and they invite verification. They ask us to take up the method and practice honestly, and then, if we do not find this higher truth, we will have the right to say there is no truth in the claim, but before we have done that, we are not rational in denying the truth of their assertions. So we must work faithfully, using the prescribed methods, and light will come.

 

[madank]

Hello Madan,

First of all congrats on being a father and much appreciation for taking time to start this thread to cover A to Z of a trading career.

I want to write this post as a sort of self confession on what you have written as a basic tenets of trading. I must say I have given time and effort for writing down a trading plan on paper earlier, many times. But since every one's way of looking are different, all would surely be including different aspects in a trading plan. For example - I had never thought about writing a plan on what would be my action if SL is hit ? To me its always - Exit (done automatically as SL order is already placed), then keep looking for next setup. But what about the psychological damage done ?? How to deal with it ? Again had never thought about writing down a plans of actions on when trade goes against me ? As no two scenarios will be same when market is going against me, and so reading the markets and the following plans of actions might be different. But you mentioned such things under a trading plan. The thing is experienced traders like you are looking at the things at a deeper level which often a new trader like me is missing. So can we have some basic template kind of thing which are a must to include on a trading plan ?? I hope I am not asking too much.

Then comes the focus, well, this is road of self mastery, no one can guide me or force me, I need to find that urge with in myself. Then comes education, experience and then we require tools to trade. But after all this, IMO then comes one more vital aspects, that is execution of our plans of actions in live market. When I came in to trading I believed, there must be some holy grail system with profitable traders. Then I learned, MM is the holy grail, and then again I learned that its not the system but you. I am the holy grail, My psychology and mind set is the holy grail. Now today after 3 years of trading I am at this conclusion that the right execution is the holy grail to be profitable. So next it will be great to read your view on challenges and issues that a trader (new as well as experienced trader) face while executing the planned action.

Thanks.

Thanks @LoneWolf for the wishes

Thanks for writing your thoughts and views.

When one gets stopped out of a trade, it is just 'exiting' the trade right? True but there are certain follw-up questions that can arise in a trader's mind.

1. What about re-entering the trade?
2. What would be our trade size(if its gonna change)?
3. What if its a day trade and one has to limit 2 losses per day?
4. Have we attained the max loss for the day? (if any)

There are lot of follow-up questions after a losing trade. Some folks close the terminal for 30 minutes and come back after a loss (to reduce the immediate psychological effect). Some folks actually cut their losses by exiting before the SL gets hit(when the trade is going against them).

Whatever works to rejuvenate the brain (digesting the loss) should be written down. Why we have to write it? if we dont write it, we will not read it everyday. If we dont read it everyday, it will not get internalized. If we dont internalize them, we will commit trading mistakes sooner rather than later(which will be seen hindsight). Get the drift here, Lonewolf? But if one's plan is already internalized, this point will be moot. Another interesting question is how would we internalize the plan if it keeps changing every 3 months(jumping systems, adding parameters based on the next 'super' indicator')?

The intention of this post is to give a framework for identifying what is stopping us from attaining that trading consistency. I have experienced this phenomenon lot of times in the early days wherein i make a trading mistake(out of plan or missed out a valid trade) because i have not familiarized myself with all the scenarios of my trading plan. As we all know, uncertainty is the only 'certainty' in trading and preparing/internalizing the scenarios will definitely propel us towards the path of consistency.

Regarding execution- I do believe in that and it is one of the topics for the later weeks(mentioned in the list of topics somewhere else - The real holy grail of trading "Execution'). Will cover more in that week

Hope it helps !!

 

[madank]

Dear Madan,

Congratulations on being a Father..its a wonderful experience!!!

Thanks for starting this thread to share your experiences and knowledge with others. I am sure like me your writings will definitely influence many to improve their skills and knowledge. For last couple of years I had been thinking of sharing my learning on TJ and give back to this community which had been a great source of education for me all these years, but my personal commitments restricted any active contributions. However if I get some free time I will try to share my experiences on the weekly topics in this thread...hope it is fine with you.

The information you shared in the fourth point "Experience", played an important turning point in building my Trading skills. I started participating in stock market right after joining my first job after completion of my engineering. At that time it was more of hobby and another investment avenue. This went on for about a decade and during this time I saw many up's and down's but due to strict MM, my losses were always limited (I am very conservative.. and I was able to generate respectable returns but was never consistent. By this time I had understood that in trading its not just luck or super strategy that makes consistent money, rather there is some skill which differentiates a consistent successful trader from a normal trader and I started exploring in that direction.

My 'ah-ha' moment came during Dec 2013 when I read your Zerodha interview, where you highlighted the importance of mindset and psychology and this led me to start analyzing myself rather than the market or strategies that I use. Slowly I started working & developing the skills to improve my mindset. I also started observing the trading styles & understanding of other respected traders in Traderji such as Smart_Trade, XRAY27 (DS thread was active at that time) & later Subhadip (followed his Pivot & 2 ma thread) and found a common pattern in their skills & maturity. I realized that this skill can be learnt by anyone as there are no born successful consistent traders, however explaining this skill in writing is bit difficult as one needs to experience it by themselves and hence it is not easily found in any single book. I will make an attempt to share my experience learning these skills if possible today evening my time (I am on a business trip to mexico and its still Sunday afternoon here... Edit: Please ignore my last statement, I will share it when Madan talks about this in his weekly topic, I just realized its better not to change the flow of information!!!

Before I end this post I would like to share few statements of Swami Vivekananda and hope readers will be able to relate as it applies to Trading domain as well: (His teachings have always had good influence on my life and applicable even today):

All our knowledge is based upon experience. If there has been one experience in this world in any particular branch of knowledge, it absolutely follows that that experience has been possible millions of times before, and will be repeated eternally. Uniformity is the rigorous law of nature; what once happened can happen always.

In the first place, every science must have its own method of investigation. If you want to become an astronomer and sit down and cry "Astronomy! Astronomy!" it will never come to you. The same with chemistry. A certain method must be followed. You must go to a laboratory, take different substances, mix them up, compound them, experiment with them, and out of that will come a knowledge of chemistry. If you want to be an astronomer, you must go to an observatory, take a telescope, study the stars and planets, and then you will become an astronomer. Each science must have its own methods. I could preach you thousands of sermons, but they would not make you religious,until you practiced the method. These are the truths of the sages of all countries, of all ages, of men pure and unselfish, who had no motive but to do good to the world. They all declare that they have found some truth higher than what the senses can bring to us, and they invite verification. They ask us to take up the method and practice honestly, and then, if we do not find this higher truth, we will have the right to say there is no truth in the claim, but before we have done that, we are not rational in denying the truth of their assertions. So we must work faithfully, using the prescribed methods, and light will come.

Thanks @ncube

Glad to know that you found your 'ah-ha' moment like what Mark Douglas says. Please go ahead and share your thoughts/views here. Am sure that is the whole idea of this thread. Good read about Swami Vivekananda. Nice write-up !!

Fun fact for the day (hope you dont mind writing it down in your reply post @ncube): Was fortunate enough to know few pit traders when i was in the states and these are told by them..all are legitimate and i feel every story has some take-away for us.

Here's a true story from Chicago Mercantile Exchange (CME) - One day, before a major US Dept of Agriculture Cattle report, a large trader in the cattle pit bought 100 contracts at steady money on the day to initiate new long position. Several small traders in the pit also bought, figuring this guy knew something and they could 'coattail' him. Then, the first wave of selling hit the pit. Market moved 50 pts lower for the day and instead of panicking, the large local bought more. Guess what - the coattailers followed him. Then, the 2nd wave of selling hit the pit - 100 points lower now...The big guy bought more. So, did the 'coattailers' - but at this point, their coattails were feeling a bit tight. Then the 3rd wave of selling hit the pit. The market went limit down or at that time approx 1.5 cents per pound lower than the previous day close. Scenario is this - if there had been more selling power than buying power(not necessarily more sellers), then the market could have ended the day lock limit down(meaning no more trades for the day) and traders would have locked into their long positions conceivably until the next day. Guess what again - big guy bought even more. This time, however, the coattailers rushed for exits; they just could not take it anymore. Just as they sold, the big guy said (one of my pit trader friend was a coattailer and he lost huge sum that day .. he heard the big guy say this ) "now we got them where we want them'. Only two coattailers had the guts to hang on and as it turned out, market ended up closing at high of the day (as 3rd wave of selling was the last wave of selling) and the big guy laughed all the way to the bank !!

So, this is where probably the following expression in trading comes from " i bought the first support; i bought the second support; I 'was' the third support"

Moral of the story : It is a futile attempt to know what the big guys are doing - they have deep pockets and we dont. Coattailing can be very costly !!

Am not responsible if someone draws analogy between this story and folks following daily FII/DII numbers at the end of the day to create trading/investing opportunities

 

[LoneWolf]

Moral of the story : It is a futile attempt to know what the big guys are doing - they have deep pockets and we dont. Coattailing can be very costly !!

Am not responsible if someone draws analogy between this story and folks following daily FII/DII numbers at the end of the day to create trading/investing opportunities

Okay, then does the story draws analogy with trading in teh shadow of smart money ?? Cause yesterday only I finished reading a book, and it was all about following where smart money is.. "Volume spread analysis". And I also felt my Aa..hh moment..

Though I have had countless Aa..hh moments in past, and then after someday they become Aa..ahh.. Ouch moemnts..

 

[ncube]

Okay, then does the story draws analogy with trading in teh shadow of smart money ?? Cause yesterday only I finished reading a book, and it was all about following where smart money is.. "Volume spread analysis". And I also felt my Aa..hh moment..

Though I have had countless Aa..hh moments in past, and then after someday they become Aa..ahh.. Ouch moemnts..

@LoneWolf, nice humor you have got made me laugh recalling my similar experiences...

BTW, I don't think Madan is saying one should not analyze smart money, I believe they are really important as they only have the deep pockets to move the prices and make our trades profitable. However one should not just take position becoz smart money is buying/selling as we never know the reason why they are buying/selling. Hence volume spread analysis should be used along with our core system as a means for confirmation and give us additional confidence. VSA should not be used as a primary criteria for taking any position. Madan, please correct if my understanding is wrong.

Regarding getting Aa-ha moments, even I had suffered from this phenomenon... whenever we read a new book, learn about new indicator or strategy we keep getting Aa-ha moments, but we should be careful in selecting the right Ah-ha moments for us. One may ask how to identify which is the right Ah-ha moment for me, to answer that one should first develop strong belief in one core system that you trade regularly even if the results are not up to your expectation but that is the best you have got. Now whenever you come across a new idea/indicator and get your Ah-ha moment, first try to see if it is consistent with your core system and blends seamlessly and improve its performance. If it improves then you are in the right path and you can start integrating the concepts into your core system. However if it conflicts with your core system then it's better to give it a pass or else you will end up system hopping and will never be able to build expertise on you core system..and there will be many Aa-ahh-Ouch moments..

 

[LoneWolf]

I said that on a lighter note Ncube.

Few months back I was reading some old threads on trader ji, and found a post written by SMart_trader, where he has written something like this, "we might never know exactly how smart money is trading, But they often walk with heavy boots, and leave their foot print.and those footprints can show their hand sometime." He was talking about volume. My personal inclination has always been towards simple candle study and price action with no fancy indicators. Just few days back, One member Xray introduced me to VPA study, and in the book itself the author has mentioned that use this VPA analysis to validate the price action that you are seeing on chart. For eg - A bullish candle closing on top with wider range is not always as bullish as it may seem, it should be accompanied with heavy volume participation as well, other waise there is anomaly in chart and this tells something. So reading the volume analysis has opened a whole new area for me, and it also changed the way I used to look at charts.

 

[XRAY27]

Yes !!! there are many MOOV advertisements in trading ,when we read a book ,or follow a method in forum or internet or running after mentor, colorful AFL's etc ,we will face the Aah movement ,but once every thing is fixed we move from Aah se Aha tak..

 

[XRAY27]

New traders taking their first steps towards learning the basics of stock trading should have access to multiple sources of quality education. Just like riding a bike, trial and error coupled with the ability to keep pressing forth will eventually lead to success.

One great advantage of stock trading lies in the fact that itself lasts a lifetime. Trader needs years to develop and hone their skills, it is not a click to button,hard work is need to get to that magical movement. Strategies used twenty years ago are still utilized today. The game is always in full force. Critics are there for indicators/price action, but there a many who are masters of that indicator/price action and they are trading for living !!!

Next comes mentor ,a mentor could be a family member, a friend, a past or current professor, co-worker, or any individual that has a fundamental understanding of the trading and having a successful story. A good mentor is willing to answer questions, provide help, recommend useful resources, and keep spirits up when the market gets tough. All successful traders of the past and present have had mentors during their early days.Forums can be another source for question and answer any person who can clear traders doubt is a mentor for me ,thanks to traderji for starting this wonderful platform which is helping traders. many are there in the forum who helped me ..off course still not able to move in swing trading as planned due to my own mistakes ,but working on it( psychological drill )and will move on with full qty from April 2018 once it is finished successfully