61). We’re able to take many, many small losses, without flinching.
62). Only that sets us up for the big wins.
63). We don’t second guess our stops.
64). In fact, we want the stop to hit. As in, hit me, if you’ve got the *****.
65). When the trade moves in our direction, we let it. We’re doing other stuff.
66). When the trade moves against us, we let it. We’re doing other stuff.
67). That’s because we fully understand the function of our stop. It will take us out of the market, whether in loss or in profit. It’s dynamic, you see. It moves with the market as per the definition provided by us while punching in the trade.
68). We’re not afraid that our stop could be jumped. Can happen, in a panic. Hopefully, our technicals will have placed us in the right trade direction before huge and fast moves. It comes to mind that this kind of move occured at least twice in the last six years, once with the swiss franc, and once during Brexit. If we start worrying about such one-offs, we won’t trade at all.
69). We look at the technicals, and we listen to what they’re saying. The trend is our friend. We trade with the trend, either on fresh highs (fresh lows) or on pullbacks, depending upon the conditions.
70). This is trading, so I personally don’t look at fundamentals. However, cook your curry the way you like it.
71). We might zero into tradable underlyings with screens or searches, but…
72). …we eyeball into final trade selection.
73). Yes, the chart needs to look and feel just right. All but the one tradable entity are rejected by the look and feel of the chart. The one remaining is the one we trade. If none remains, we don’t trade.
74). Price is king. We’re into price action.
75). Indicators only indicate. Price does the talking.
76). What the price is saying will reflect in the indicator, but with a time-lag.
77). Do we want this time-lag? I don’t.
78). Thus, price action it is, for me. However, everyone is looking at the same price.
79). Therefore, we need to think slightly out of the box, to make money.
80). Edge + out of the box thinking + stamina nails it.
21). You started small, right?
22). Ultimately, you’re staying consistently in the green, correct?
23). Then it’s time to scale up. Slowly does it.
24). Why the whole spiel about starting small? You make your biggest mistakes in the first seven years.
25). Hopefully, you don’t repeat a mistake once it has happened, and once you’ve learnt from it.
26). However, mistakes are good, because they teach you. Nothing else can teach you with incorporation into DNA. Mistakes can.
27). No university can teach you. No books. No professor. Play the market, make the mistake, and learn.
28). A big break early in the markets is a recipe for disaster. More likely than not, you’ll blow up later, when it matters.
29). The best possible way to scale up is using position-sizing as delineated by Dr. Van Tharp.
30). The good thing about position-sizing is that it makes you scale down, when trading corpus goes below par.
31). Day trading takes up the day. You’re exhausted and are not able to do much else.
32). Short-term trading also keeps you riveted to the terminal, mostly.
33). However, position trading and longer time frames keep you in the line for whatever else you wish to achieve.
34). Market TV makes it a video game. Switch it off.
35). Trading with targets caps big-win potential.
36). When you trade, you trade. You don’t invest.
37). Successful trading means buying high and selling higher, or…
38). …selling low and buying back lower…
39). …as opposed to successful investing, which is buying low, not selling for the longest time, and then selling for a multiple.
40). Read points 16 to 19 again.
There’s expenditure and there’s expenditure.
Let’s say you start some work. It can be market-related, for all I care. What do you do first?
How do you prep?
Studying up. As long as I can manage.
Courses, workshops, the deal.
Naehhh. I try to keep it national though.
Haven’t required it till now for market work.
Ok. What happens next?
I hit the market concerned. Low-key at first.
That’s when you make the most mistakes. That’s why.
I see. Motive?
I want to learn from my mistakes and not repeat them.
Rather than from an instructor?
Of course. This is the market, remember. This is about you. Not about the instructor. This is about knowing your own shortcomings related to a particular market, and about adjusting and fine-tuning yourself to the market to trade it optimally. This is about fitting the market concerned in a tailor-made fashion into your own life without disrupting your own life.
Wow! Well, then, congratulations. You’re a prime candidate for doing it the plain vanilla way.
Is there any other way to do it?
Oh, there’s the fancy schmanzy one.
Kindly describe it.
Well, it mostly entails unnecessary expenditure along with necessary expenditure. There’s more unnecessary expenditure though.
One is normally too lazy to study up. Or, one doesn’t have the get-go in oneself to approach the subject on one’s own.
Sure, can happen.
One flips from instructor to instructor in search of the holy grail. Expensive software, international trips, five-star hotels, the whole shebang. In the end one has spent a bomb. To end up trading the instructor’s perspective. Finally realising that the markets are about oneself, and unless one is trading one’s own perspective, one is sure to lose. Or not realising this (!) and continuing to flip instructors and instructions. Finally burning out and giving up on the markets.
Sad though. All necessary software is available free of cost on the internet. One can do inexpensive internet courses to widen one’s horizon. These can involve one-on-one instruction too. Video-conferencing. File sharing. Threads. Assessments. The works. Live-market training. You name it. All travelling and extra expenses cut out. Few hundred dollars for the whole course.
I already acknowledged your plain vanilla acumen. I’m just trying to tell you that most others prefer the fancy schmanzy way.
I prefer to stay in the market and not burn out. I’m in the market to make a steady income.
Well, that you will, my dear friend. The plain vanilla way doesn’t promise any hype, but it does promise income.
Get it out of the way.
Bother takes a toll.
Focus goes away.
You don’t wish to see your trade.
That’s a pathetic condition to be in…
…as a trader.
When you’re in a trade…
…you need to monitor the trade.
How will you monitor a trade…
…if you don’t feel like looking at your screen?
What’s causing your indifference?
The spot of bother.
That’s why, get it out of the way.
Trade gone wrong?
Deal with it.
Bring your environment to an immediate logical conclusion…
…if you can.
You’ll trade like a king…
…or a queen…
… whatever title you prefer.
You’ll see clearly.
You’ll want to open your terminal.
Your ideology will be aligned with your trade.
You’ll be making money.
You need to acknowledge that you’re frozen.
Without that, the next step won’t come.
It’s normal to freeze sometimes. Just acknowledge it. Then learn.
For example, I acknowledge that I’m currently frozen wrt to the USDINR short trade. Missed entry. Next opportunity to enter never developed for me, and the underlying is currently in free fall. Don’t have the guts to short it at this level. Yeah, I’m frozen all right.
However, the fact that I’m acknowledging it opens up the learning window.
Why did I miss entry?
I know why I froze. Fear. What I need to understand is why I allowed a situation to develop that would lead to fear.
Was running super busy.
Neglected the underlying.
Kept postponing entry…
… till free-fall started.
It’s good to be busy.
Hmmm, so this can happen again.
How do I stop this from happening again?
If I ID a setup, I need to take it.
What about strategy?
Meaning, am I going with a short strategy for USDINR? Or am I keeping the window open for a long strategy?
See, that’s it.
Keeping short and long windows open makes me second-guess all the time.
So can I go in one-direction wrt USDINR all the time?
What speaks for it?
Underlying is falling from a height. Good.
Short only means no second-guessing. You just go short, period.
Stoploss will save ruin.
Not nipping profits in the bud will amass fortunes.
Can the underlying keep falling over the next few years?
Why not? Modi’s looking set for 2019.
Hmmm, so a short only strategy has a lot going for itself.
There’s more. Future month contracts are quoted at a premium. The premium evaporates over the current month. This move is in your favour if you’re short.
Yeah, there’s enough on the table to warrant a short only strategy for USDINR.
Why did it happen?
Because I acknowledged that I had frozen.
Now, my strategy is more fine-tuned and I’m probably less prone to second-guessing.
You need to pull off such stuff when you freeze.
Use the freeze to evolve.
Margin of Safety (MoS)…
… wasn’t that in investing?
Well – surprise – it’s in trading too.
You can enter a trade with MoS.
ID the trend.
Wait for a minor reversal.
Let the reversal continue towards a pivot, or a support or a what have you.
During this reversal, whenever you feel that you have considerable MoS, well – enter.
Why shouldn’t you wait for the pivot to get touched?
Things happen real fast at a pivot. Upon a pivot-touch, you can lose your comfort-zone even within minutes.
Two vital things can happen at a pivot.
Either there’s a quick bounce-back, or the pivot gets broken.
Bounce-back means your trade is now in the money, and that you can go about managing your trade as per your trade-management rules. Wonderful.
Pivot-break is not a worry for you.
Because you’ve placed your stop slightly below pivot, after the noise.
Upon pivot-break, you get stopped out. You take the small hit and move on to your next trade.
Eventually, things heat up.
There is movement.
Tops get taken out.
Fast money can be made.
How do you enter here? (Needless to say, for shorts, everything is to be understood reversed).
Momentum play (MP)…
… is the weapon of choice.
You set up a trigger entry after a top or a resistance or a what have you, and wait for price to pierce, and for your entry to get triggered. Then you place your stop, below top or resistance or what have you.
MP vs MoS is a matter of style.
If you’re not comfortable changing your trading style to adapt to times, that’s fine too. Stick to one style.
If you’re conservative, stick to MoS.
In a frenzy, however, MoS might almost never happen.
In a frenzy, entry will be triggered exclusively through MP.
Take your pick. Adapt. Do both. Or don’t. Do one.
You call the shots.
This is about you.