Very Important notes for newbies traders.

#1
1.Never jump first for option...trading....because all option masters belongs from university. Do you have that certificate....?if not then.....enter school.....(Cash market)......after...2-3 yrs.....enter college......(Future..Index...trading...not stocks...)...after 2 years in Index trading...then think about future stocks......after all these stages you will become pure Graduate.....then you can think to join in option trading (University)world....:D

2.Never run for holy grail....A system is work for me may not work for you....With same method one person will make fortune.....another person will....loss his fortune...:):)
 
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#2
3. Never give money for Tips / Formula or...AFL.......suppose you subscribed for [email protected] pm......in this case you have to start trading in minus....so you can't trade in positive mind....


"If stock market experts were so expert, they would be buying stock, not selling advice." - Norman Ralph Augustine
 
#3
4. Risk -Reward- Ratio is very Important in Trading........ Suppose "A" person accuracy is 40% and he may still be making more money than a person "B" .....having an accuracy of 90%......... Let us take a specific example. "A" has an accuracy of 90% and a risk-reward ratio of 1:1, i.e. Re.1/- stop loss for a target expectation of Re.1/-. He makes 100 trades in a month out of which he ends up in a profit in 90 trades and a loss in 10. He makes a profit of Rs.90/- (90 x 1) from the profitable trades and a loss of Rs.10/- (10 x 1) from the loss making trades, thus making a net profit of Rs.80/- for the month....... Another analyst, "B" has an accuracy of 40% and a risk-reward-ratio of 1:4, meaning that he expects a target of Rs.4/- for every rupee of risk that he is taking........... If he also makes 100 trades in a month, he will get 40 right and 60 of them would be unfavorable.......... In the 40 profitable trades, he will make a profit of Rs.160/- (40 x 4) and a loss of Rs.60/- (60 x 1) in the loss making trades, thus making a net profit of Rs.100/-..............Although ....."B" has 40% accuracy.....but.....he is earning.....20 rupee more than "A"'...........
 
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#4
Trading stress is primarily caused by two things:
either not knowing what to do or
knowing what to do and not doing it.

Many times in trading a new trader will discover that real money on the line is not the same as reading about trading or simulated trading. One of the top three things that will determine the success of a trader is the trader's psychology, the weakest part of any trading plan is the trader. Stress can knock a trader out of trading faster than anything else. You have to trade like it is a business. Realize that it is highly probable that half of your trades will be losers and your profits will come from the half of your trades that are bigger winners than the half that are losers. You can not control the market you can only control what you do, your entries, exits, position sizing, and method. Practicing discipline and self control at all times keeps you out of very stressful situations. The key to trading success is not fun and excitement and being right all the time, it is about making what you do as sterile and boring as possible and steadily make money with good trades that have the odds in your favor. This is a business not an amusement park ride, trade accordingly.

1.Only risk 1% of total trading capital per trade with stop losses and proper position sizing. Proper positions sizing makes the emotional impact of any one trade only one of the next one hundred a totally different mental perspective than an all in/have to be right Hail Mary trade.


2.Only trade a position size you are comfortable with.


3.Trade a method or system you believe in based on back testing of a positive expectancy.


4.Know where you will get out of a trade before you get in.


5.Only trade with a detailed trading plan.


6.Believe in your ability to follow your trading plan. YOu must have faith in yourself to lower your stress levels.


7.Know yourself as a trader and only take your kind of trades. Take trades that will leave no regrets because they were good trades regardless of out comes.


8.Do not listen to any unsolicited advice about the trade you are in, follow your own plan. Noise can really cause stress and mess up a trade, trade with emotional horse blinders on, keep out others voices and listen to your trading plan.


9.Sit out markets that you are uncomfortable trading due to volatility or other looming risks. Know when it is time to trade and time to 'go fishing'. This can save you a lot of emotional capital.


10.Do your homework before you trade. Be confident in your trade until it hits your stop. Get out when your stop is hit, you already lost money don't lose sleep as well.


11.Keep your ego out of your trading, run it like a business.the P& L is your focus not your ego and not trying to prove anything to anyone else.


12.Only trade when the odds are believed to be in your favor. It is much less stressful trading with the trend than against it.


13.Do not blame yourself for losses if you followed all your rules. The market giveth and the market taketh away, just keep taking your entries and exits.


14.If you do not know what to do, DO NOTHING.


15.To lower stress levels trade less and get away from watching every single price change. Day traders could trade only the open and closing hour, swing trader and trend traders could just take opening or closing signals. You could go from every tick to just checking in every hour or so if you have options or hard stops in. Most of the days trading is random noise, and randomness will stress you out focus on your time frame and only the quotes that really manner when they manner.

Courtesy: Tj member suri112000
 
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#5
STOPLOSS -BIG Mystery -and its three golden keys
----------------------


About stoploss







Mystery of Stoploss
One of the great mysteries of trading is the dreadful stop.

�what kind of stops should I use?�

The philosophy outlined here regarding stops is very different than most others. when you learn how to use stoploss wisely, you discover that stops don�t have to hurt.

Stoploss orders are the medicine of trading.

When your trade is sick, stops are there to heal it.
The big question is whether you like to take the medicine before you get sick
as a preventive measure or you wait till you really get sick,and then use the medicine. Natural choice seems to the part two.

There a few ways of using stops:

1. �No Stop� �specialist
What do you call a trader that doesn�t use stops?
An investor.
When a trader lets a trade go against him, he gets married to the stock, starts looking at fundamentals then becomes an investor.

I have seen people, especially six years ago, buy a stock at 100 and still hold it today, even though it�s a penny stock today.



2. �Random stop� or �Gambling stop� �

These happen when a trader knows how much money he wants to risk on a stock, his �bet� on the stock, and that is his stop.
Buy ABC stock with a 500 stop, because that is all they can allocate for this trade. These PEOPLE think trading as gambling, they put their money on the table and forget about it.

The problem with this method is that it is not a method, there is no reasoning behind the placement of the stop.

3. �Adding in stop� �

Some traders keep adding in money into their position as it goes against them. This is also called �Dollar Cost Averaging�.
When people begin trading they think that adding money to a position lowers your cost on it and, therefore, allows you to buy more shares at a lower price. Any Investor, who liked ABC at 60, surely will like it so much more at 50, right?

The reasoning behind this method is very dangerous.

You buy 1000 shares at 60, buy another 1000 at 59, buy another 1000 at 58. Now, your average cost is 59, not 60 as you originally wanted. The stock only has to jump up a single for you to break even, not two.
BIG PROBLEM
Problem comes when the stock keeps FALLING and you are now stuck with 3000 shares on the wrong side of a breakout.

People using this method wipe out their accounts. Traders will become investors. If not on the first 20 trades, then on the 21st that would wipe them out.
It only takes one large loss to devastate an account and devastate the trader.

Stops are like medicine for your trading.

The longer you take before you swallow the bitter pill, the worse your condition is going to be.
Preventive medicine works so much better, it prevents small weaknesses from becoming serious diseases.

Trade this way if you agree it is better

Follow this method of stops =it is very simple,

kNOW YOUR ENTRY REASON,
WRITE IT DOWN,
Always exit a trade
when the reason for your entry no longer exists.

Take Notice We said Exit, not stop.

We do not take stops, we exit.

At times it�s a negative exit, but it is still an exit, not a stop.

A �stop loss� stops your loss, we are not interested in the trade becoming a loss.

Explain�as follows

ENTRY

If you have done your analysis right, you should be able to pinpoint an entry.
=================
An entry is a trigger

that starts a trend,
starts a wave in a trend,
starts a bounce,
starts a fade or a break out.
=====================

BE accurate with your entry, AND your exit should be very simple.

If you entered a trend, you exit when you know that the reason for your entry no longer exists, when the stock refuses to start your trend.

If you entered a breakout, you know the reason for your entry no longer exists when the stock returns back into your consolidation.

So how much is that?
Your stop, or negative exit, (if you did your home work and pinpointed your entry,) is Noise + Spread.

Noise is the normal fluctuation of the stock and spread is the difference between bid and ask.

Basically, if you add them together, it is the amount that the stock can pull back before you know that your entry is wrong.

For example, in day trading, most of our negative exits are less than 1 RUPEE Most of the stocks that we trade have less than A COUPLE OF RUPEES spread and noise. In Swing trading, most of our negative exits are less than 10 TO 20 RUPEES(TEN TIMES plus THAT OF DAYTRADING) for the same reason.

Some people day trade with a RUPEE stop or even two or three rupees. If you do your home work and can pinpoint your entry, how many 1 rupee negative exits can you take before you equal one point or two points?
Imagine having 10-20 attempts for the price of one.
---------------------------------------
Three keys
There are three keys to success here:

1. Pinpoint your entry � You need to know exactly where to enter.
2. Know exactly where the reason for your entry no longer exists �Where on the chart does price have to go to invalidate your entry?
3. Re-entry � If the stock comes back and your setup is still valid, make sure that you re-enter.
Most of us pay less than 100 in commissions, which is a lot less than a devastating stop loss of multiple points.

If you have to pay 500 plus rupees for a trade that didn�t work, it is a business expense, not a stop loss. It protects you financially and psychologically. It allows you to re-enter the trade without any damages.

If you exit with an expense of 1000, it will do a lot less damage than several thousands or your whole account.
How would you feel if you spent a few hundred bucks on a trade vs. lost several thousands on a gamble?

Traders need to get educated how to pinpoint their entries and know exactly when the trade is working or not, in order to keep stops down to business expenses, instead of serious losses.

The secret to longevity and prosperity in trading is
knowing why you are entering,
pinpointing your entries and
preservation of your capital.

Preservation of capital is always more important than capital appreciation.

Hope this helps your trading in some way.

Dedicated to maximizing your profits,

rvlv



Courtesy:rvlv a senior.... traderji member.....he is not active...now...
 
#6
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#7
Why 95% lose?

1. I don't know if it 5% or 20%. But whatever may be the number the fact is, many traders will lose money and it cannot be avoided. The idea that everyone can make money is impossible. Everyone making money means there is no market, because who would be taking the other side of the trade?

2. There is a deeper reason as to why most traders will lose regardless of what methods they employ. It is not about money management, risk management, bad government policies, world events etc.. It is because they are part of the crowd (95%) and they do not have their own system.

3. Successful traders find something that works and stick to it, not letting others pull them away from their strategy. This is where most traders go wrong and why the crowd loses money.

4. Most of the trends is created by professional money managers who are managing trillions of dollars in assets. They normally start the Trend early and will be the first to get out. The point is the Trend was not started by the crowd but by the 5% who had enough money.

5. So the simple answer is, For you to win(be part of 5%) in the market, Do not follow the crowd (95%) and follow your system which works. And mostly you will have to take a Contrarian view. People will laugh at you, Will make fun of you. But you will have to learn to stick to your system, whatever happens. For that first of all you should also have a system which you believe will work.


Note: As Gandhi said, "Even if the whole world is against you, you should have the courage to stand alone for what you believe". Like Gandhi believed that Non-violence will work when everybody believed on Guns and nobody believed non-violence could work. I personally not a great fan of Gandhiji. So please do not start a war on Gandhiji and non-violence. It was just a point to illustrate that Gandhiji was firm on his decision and stuck to it, even when the whole world was against his ideology because during his times non-violence was not something which was proved to be working.
__________________
Best Regards,
Raj


Courtesy:healthraj TJ member......
 
#8
Risk Control by Max loss/ day or per week

Risk control is extremely important for we traders. I have received a pm from a trader and after taking his permission to post in my thread and my answer is posted below as many will be facing the same problems and will find it useful....names are deleted for confidentiality.

His pm :

Hi ST dada ,
i am day trader , cum jobber(scalper)since 2010 . i have good track record , i am full time trader , work with prop. desk . earn some money every month also .but problem is that no growth cause of my emotion. i cant stop when i am in loss .

for example :- i set my loss limit per day is 5k , max to max. whenever my loss limit cross , i want to stop my trading . but i cant .
this is my problem , i try many times and many ways to stop myself whenever my loss limit cross, but every time i fail .
now condition is that my earning is around 1 lakh per month in that company share is 40 % and remaining is mine it 60k .
my loss days are few in month its around 4-6 avrage per month , but these 4-6 days my loss is around 60-80k avrage ,many times it cross 1 lakh also .
it means my loss every month 60-80k which is big , i think , if i minimise it to 10-20k then my profit will be double every month ,but cant .
dada , i understand everything but cant implement it to practicle .please
dada , i try to improve myself but not improvement to minimise my loss , i know if i control my loss 5-10k per day then i am successful . but last 4 yr these struggle continue , cant stop myself .

dada , you are senior then please advice me , i hope you will guide me properly . please dada

thank you .

My Reply to his PM

Hello *******,

This is a usual problem when trade entry and riskcontrol both functions rests with a trader. In many hedgefunds abroad these functions are distinctly separate and a trader once has set the stoploss cannot alter it....the trade risk control is then taken over by a different department.

You must have strict stoploss and set predefined limits on daily/weekly and monthly losses else trading will always be three steps forward and three ( possibly four ) steps backwards and you will never make progress. So set the loss limit to 5 K ,10 K or 15 K whatever and once that is achieved, close all positions and shut your trading terminal off for rest of the day...it is absolutely essential for capital building that losses are controlled very strictly.After closing the terminal in many hedgefunds the traders are given lowly jobs of serving tea,coffee to other traders,picking up the empty cups/glasses, finishing pending admin work for rest of the day/week etc...so that all try not to get into that situation.Independent traders can shut the terminals and go out for outing /lunch with family, go for movie....but if that is not possible in a job...stop trading for that day.

So be ruthless with limits of max loss once set.

All the very best for your success...

Smart_trade



Courtesy:Smart_trade TJ MODERATOR
 
#9
We continue trading......hoping that next trade will cover some loss.....

View of ST bro......


Traders also have a trend. I dont know whether you have experienced or not but some days anything you do will fail....so we are out of sync with the market. Some days anything you do will be a winner....so we are in tune with the market...so on loosing days we are out of tune...so what is the guarantee that after 3 loosing trades, 4th will be a winning trade...more often than not it will also be a looser....
We have to decide quantum of loss and not continue trading beyond it in " hope to recover...or in revenge" it will most likely put us in deeper hole...and tomorrow we can think about the market afresh and trade again....market is not going to run away...opportunities will be plenty...but if we loose capital...then no trading...



Courtesy:Smart_trade, Moderator Traderji....
 
#10
Even if someone posts his method in details in Newspaper front page...still not even 5 will consistantly trade it because that method is for him and you are different than him....I have shared some extremely good things in TJ which work for me...but most people are systems " collectors" like they collect stamps...they trade for 1 week and 2-3 bad trades and they move to a different surefire system....one system collector told me he has a collection of 5000 AFLs but cannot make money in trading....

You have to find out a method that works for YOU...and that is a hard work...no thread/post or 1/2 a day seminar is going to make you a successful trader...so start working in that direction...dont waste precious time...after 5 years I am sure we will have debate on the same subject.

Smart_trade



Courtesy: Smart_trade..............Traderji Moderator....
 

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