Professional Approach to Trading
Trading Advice and Journal. Real-money, experienced trader noting finer points to perfect the art of trading. Includes commentary on some of the leading markets like the US, CME, CBOT futures, India, India NSE futures and other leading indexes of the world such as Japan and China. Also, contains my effort to get to the markets that are conducive to day trading.
Wednesday, October 04, 2006
Tuesday, September 19, 2006
Spiritual Angle to Trading
Does a person’s spiritual approach affect performance in the stock markets ? It is a debatable point. We all know about Warren Buffet’s generous philanthropic gesture in donating most of his hard-earned fortune to the Bill and Melinda Gates foundation. Money is important but probably not as much as many make it appear. Several successful traders routinely give away a good percentage of their trading profits.
Other things to be noted is that Greed is punished remorselessly. It is alright to expect to earn huge sums of money. But overdoing it may attract punishment.
Unfortunately, there is no proof or measurement that so much greed attracts so much punishment, but such issues are interesting and need to be contemplated nevertheless !
Many profitable traders routinely give out a part of their earnings in charity. But for those who are just starting out, you do not have to face this issue yet !
Patience is a strong virtue in the securities markets. Nothing valuable can be earned in a tearing hurry. Everything has to be methodically earned. Even if you manage to earn a huge sum in a short while, it will be lost in no time since the ego makes sure you squander. Easy come, easy go, they say !
At the end of the day, one has to remember that desperation only leads to chaos.
The moral of the story is that one must treat the securities markets as a serious game and money can be earned with the right knowledge, right approach and at the right timing.
Wednesday, September 13, 2006
Things to do while Trading
Haste Makes Waste
You have a specialized, tested system. Wait for your conditions to be satisfied. Patience is an invaluable virtue for a trader.
Futures how big players take positions before amateurs. They consider their bets as only that. It is a chance. More often than not the efficient or the big player has the advantage of leverage, information, infrastructure and so on. He may also be trading in the proprietary account or at very low commissions (brokerage) making him very difficult to beat.
Follow trends, that should be your best chance. It requires patience to wait for trend changes. You will also have to time the point of entry very well since your margin for error is minimal, especially for a day trader.
Listening to the Markets
The market has a lot to say, just pay attention and you will find loads of useful information. For example, do the principle “Do not add to your positions unless the markets prove it. This is shockingly true in the Futures markets. The players in the futures markets are generally those with high risk appetite. Most of the time they are well equipped, skilled and well informed. It is not a surprise that they are correct most of the time.
Friday, September 08, 2006
Flaws in Technical Analysis
There is a popular way of looking at Technical Analysis. “What is your success percentage?” is asked. This is a very wrong way to look at analysis. The reason is that a profit may be $ 10 at one time but a loss maybe $ 100 at another. There is no comparison. You will be surprised to know that many successful traders get only around forty percent calls correct but they ride them to maximum profits. The wrong approach has earned the science and art of technical analysis being labelled as suspect. Do it is the individuals using it who make the tool good or bad.
While the science of Technical Analysis is criticized by some as having many defects, it is the user who has to be aware that it is just a tool to enhance your chances. Many new traders come to the market believing they have made the next big discovery of a money minting machine.
Only Technical analysis combined with prudent risk management, money management and trade optimization can help you make profits. Technical Analysis tools are just a beginning to becoming a professional analyst. There are higher challenges most of which involve an individual’s psychological make-up.
Remember that Technical Analysis is almost always the best tool if your time horizon is short, but only if used correctly.
It is very common to see retail traders flocking to a new analyst with a new technique. Remember, your growth as a good trader will accelerate only once you give up the search for the next magic formula. You grow to be a professional trader once you stop looking for the next amazing trading indicator or the next amazing Technical Analyst giving great technical calls. You must start concentrating on trade Optimization instead.
Thursday, September 07, 2006
No Risk No Return. This phrase is well known and it is not required for most of us. But for those who find taking the plunge difficult, it applies strongly. In addition to this, you will not learn unless you dive.
Despair generally arises when you are not applying your rules and are taking the wrong bets. The thinking process is retarded when despair arises. Take a break, take a deep look and you will generally find that you are doing something very wrong. That is, if you are following generally known good principles of trading.
You will notice that in your bad times, if you have very little capital left, you will start compromising on the very principles that will give you any hope of recovering from your losses.
When in doubt, don’t. Follow this simple rule and you will be better off in trading. There are many factors that influence the markets. At any point in time, even technical indicators, support levels, patterns may conflict each other. For example, there is a buy signal on the basis of 15 min charts but weakness in the 1 hour chart. If you cannot verify and come to a clear conclusion, just leave that opportunity alone. There will be many more coming your way.
Monday, September 04, 2006
Without confidence it is not possible to achieve much in other streams of life. In the equity markets, it is doubly true. If you lack in self-confidence, doubts may creep up in your mind. This may lead to indecision, which in turn lead to missed opportunities and losses. For day-trading and short interval trades, confidence is of utmost importance.
On the other hand, on down days be careful. In many instances, you may be tempted to book small profits just to make your day balance sheet look pretty. This is not the issue. When you are faced with loss-making trades sooner or later, that same daily balance sheet will not look pretty at all.
Never be far away from the correct principles of trading no matter what your mind is tempted to think. It is just too painful to reinvent the wheel.
In order to be a successful investor/trader, you must be very disciplined. Stick to the plan of action. This means that you will stick to trading policies, trading plans and so on. Know your objective and work accordingly.
Do not seek to implement new ideas that come all the time during markets. Remember, ideas are just ideas. If you feel there is value in them, they have to be thought about, refined, tested and then brought to the trading room. If you try to implement new ideas immediately to trading all you will do is to erode capital and confidence.
Do not allow hope to loiter anywhere close to your trading system. Hope has the potential to do maximum damage to your capital.