Thoughts on Day/Swing Trading

[Subhadip]

Based on my years of experience as a full time trader who trades for living and observing many upcoming traders fail ( and very few succeed ) bring out the following points.

1) Trading requires knowledge and education about how market functions, greed and fear of market participants, probabilities,risk/reward. This knowledge is different than the knowledge which our schools and universities impart.

2) The basic knowledge about trends, patterns etc can be learnt in 1-2 months....but to succeed one requires to blend this knowledge with mindset,money,flawless execution,entries,stops,adds,profit taking,taking a temporary retreat, re-entry.........all these require tremendous practice. One needs such practice in all performing arts such as dancing,singing.......can we imagine artists like Samnyukta Panigrahi or Pandit Jasraj become what they are and perform in the concerts by reading books on Oddissi or Indian classical music ?

This is where most traders fail.....they start with acquiring knowledge,read books,systems,AFLs,psychological stuff........but they never get to a point where all the above come togather in harmony and effortless blend. They never come to a point where they say ....ok this is a definite trade ( here by definate I mean the trade which he will definately take....and not a trade which definately will succeed.....) then second guessing,then the failure sets in, then starts systems hopping, then again frustrations and the same cycle repeats till he is able to break this orbit and go to the next orbit ,some can never do that and there we have one more failure .

3) The traders also need unshakable confidence in the system they trade. This confidence comes by selecting a system which suits our mindset, backtest the method,have proper MM . The confidence also comes when one tastes success on this method........it is very easy to say have confidence in the method when the method is not making money ....but we cannot have confidence on empty stomachs...can we ?

4) Most traders come to trading with very small capital. They think that one does not need capital in trading.....this belief is also nourished by fly by night tip vendors who claim that you just need 10,000 in your trading account to make Rs 2000 per day....nothing can be further from truth. If one has to live off trading one needs atleast Rs 3-5 Lacs capital......I have seen many who say Rs 25,000 is more than sufficient but it is not true......Many are short of capital because they come to trading after they loose their jobs,or fail in business or fail and loose huge amounts in speculation and finally all these people fail in trading too.....

5) The most important quality is ability to accept that one is wrong, get out of the trade at the earliest and go for the next trade which could be in re-entry of original trade direction or in the opposite direction if the market action so demands. Most people get attached because of ego or because they feel they cannot take that small loss ( but eventually they will take a much bigger loss....)

A trader needs to address all the above points in his journey of becoming a successful trader.

Smart_trade

nice
:clap::clapping::clap:

 

[EagleOne]

Wow, Raghav and ST! Brilliant posts! Not contradictory, but complimenting each other.

I once wrote somewhere on TJ: Comfortable, is the first thing one must look for while buying shoes. Fashions etc. are secondary. Same holds true for trading systems and methods etc - at least for me, it does.

And, ST, in many of your posts I read, you always tried to tell us all how hard it's to become a successful trader. It reminds me of the words of late French president, Francois Mitterrand: Everything requires effort. Because everything is difficult.
That is, on doesn't become a brain surgeon in a few weeks' time.

And hey, our r1989 is back. Weekend is complete!

Take care, guys

 

[ashwani chadha]

based on my years of experience as a full time trader who trades for living and observing many upcoming traders fail ( and very few succeed ) bring out the following points.

1) trading requires knowledge and education about how market functions, greed and fear of market participants, probabilities,risk/reward. This knowledge is different than the knowledge which our schools and universities impart.

2) the basic knowledge about trends, patterns etc can be learnt in 1-2 months....but to succeed one requires to blend this knowledge with mindset,money,flawless execution,entries,stops,adds,profit taking,taking a temporary retreat, re-entry.........all these require tremendous practice. One needs such practice in all performing arts such as dancing,singing.......can we imagine artists like samnyukta panigrahi or pandit jasraj become what they are and perform in the concerts by reading books on oddissi or indian classical music ?

This is where most traders fail.....they start with acquiring knowledge,read books,systems,afls,psychological stuff........but they never get to a point where all the above come togather in harmony and effortless blend. They never come to a point where they say ....ok this is a definite trade ( here by definate i mean the trade which he will definately take....and not a trade which definately will succeed.....) then second guessing,then the failure sets in, then starts systems hopping, then again frustrations and the same cycle repeats till he is able to break this orbit and go to the next orbit ,some can never do that and there we have one more failure .

3) the traders also need unshakable confidence in the system they trade. This confidence comes by selecting a system which suits our mindset, backtest the method,have proper mm . The confidence also comes when one tastes success on this method........it is very easy to say have confidence in the method when the method is not making money ....but we cannot have confidence on empty stomachs...can we ?

4) most traders come to trading with very small capital. They think that one does not need capital in trading.....this belief is also nourished by fly by night tip vendors who claim that you just need 10,000 in your trading account to make rs 2000 per day....nothing can be further from truth. If one has to live off trading one needs atleast rs 3-5 lacs capital......i have seen many who say rs 25,000 is more than sufficient but it is not true......many are short of capital because they come to trading after they loose their jobs,or fail in business or fail and loose huge amounts in speculation and finally all these people fail in trading too.....

5) the most important quality is ability to accept that one is wrong, get out of the trade at the earliest and go for the next trade which could be in re-entry of original trade direction or in the opposite direction if the market action so demands. Most people get attached because of ego or because they feel they cannot take that small loss ( but eventually they will take a much bigger loss....)

a trader needs to address all the above points in his journey of becoming a successful trader.

Smart_trade

i am very much thankfull for writting your experience as a successfull trader,every trader pass through all or few steps which you have written,sonner or later,every thing you written is 100 % practical,every trader is a part of it at some stage of his journey.
Now we may consider it his good luck or his bad luck or his lack of hard work or his in discipline as a trader which ultimately makes him successfull or a failure,once again thanks for your above post

 

[EagleOne]

As everyone has read, and admired, ST's and Raghav's recent posts. ST summed up all his experience in one single post. But still I would like many of my TJ friends to see a 2005 post by Traderji. Ironically, in all the 6 and half years gone by, it got acknowledged only by ST :

Fortunately, none of us serious trader types ever really gamble. We all take our trading very seriously, like a serious business person should.

Many people have asked me over the years what it takes to be a successful trader. The answer is not clear but here are a few thoughts to ponder and apply.

First, successful traders have a complete commitment to trading and do it full-time. If it is a hobby or a secondary pass-time, I know how the bottom line will be - a big minus. Trading must be addressed as a profession because if you do not treat it as such, let me assure you, those who do treat it this way will separate you from your money very quickly.

Secondly, successful traders fit their trading habits to their individual personality. If you are an impulsive individual, your style will reflect more trading than a calculating individual who waits for all the indicators to fall into place. The personality factor more than any other factor I know of, will determine success or failure. If you are an emotional person, admit that you are and structure your trading habits to make emotions a positive influence, not a negative one. If you are either greedy or fearful, that will affect your decision making on a position and without recognizing the governing emotion, your decisions will tend to be wrong. Whenever I am the most fearful of the market, that emotion helps make me decide to go long and buy. I know that my emotions tend to make me fearful most of the time. Whenever my fears become overwhelming, my discipline tells me to buy and discipline must win out or you are doomed to failure.

The work ethic can never be overstated. I watch the market all day long from the opening bell to the closing bell. I have kept diaries on every day in the market for the last seven years, sometimes having over 40 entries in my diary per day. If I do not do my work my profit suffers. There is no short cut in trading, the market will quickly find if you are lazy.

Planning is the objective part of trading. Start with the worst case scenario and work from there. You will never be more objective than before you execute a trade. Once you are in a trade, emotions take over so the plan must be in place before the activity takes place. Determine a plan that tells you when you are wrong and admit it. Get out, retreat, live to fight another day; these are cowardly approaches but it will keep you from the traders obituary. Remember each rehabilitation takes a long time, but death is final.

 

[Smart_trade]

We talked about TDST lines a few posts back. I am posting a 5 min Nifty Futures chart of 17 and 18 August 2011 with TDST lines marked on it .....look how precisely the blue TDST lines which are resistance lines are holding all the corrective rallies in a downtrending markets.

The opportunities to trade from the short side is given at 6 points ( red arrows marked) in those 2 days with a very high Reward/risk trades . These are the trades which alert and patient daytraders look for.......

Smart_trade

 

[augubhai]

Hi ST,

Today's NF 3 minute chart with TDST Sell Set-ups marked in red. The 2:42 PM bar was completed below the Sell setup, but price reversed immediately.

Was planning to add shorts below the close of this bar, but luckily price did not go down from the close of that bar. Was that the right thing to do?

 

[Smart_trade]

Hi ST,

Today's NF 3 minute chart with TDST Sell Set-ups marked in red. The 2:42 PM bar was completed below the Sell setup, but price reversed immediately.

Was planning to add shorts below the close of this bar, but luckily price did not go down from the close of that bar. Was that the right thing to do?

Hello Augubhai,

My 3 min NF chart looks a bit different. In my chart 1:00 bar closing is 0.25 less than close 4 bars ago hence the set up got discontinued there. So in my charts there is no TDST there. In my chart there was only TDST breakout above the blue line at 4892.5 which was a great trade.....

But if in your chart the prices have broken the red support TDST, you should have added to your short position. If the market closes above the TDST line, you could have taken off those add positions.But if the market would have sold off, you would have missed a chance to add to your position .

TDST can be traded in the following 2 ways.......

1) If the price closes below the red support TDST, go short.....and keep the stoploss of high of that breakdown bar.

2) Go short as per 1 above and keep a stoploss at the immediate pivot high which is above the TDST line.

We have to take the trade as the TDST is cracked......we will never know whether that breakdown will succeed or fail......if it fails we get out of adds quickly......if it succeeds we are on a great trade.

Smart_trade

 

[augubhai]

Hello Augubhai,

My 3 min NF chart looks a bit different. In my chart 1:00 bar closing is 0.25 less than close 4 bars ago hence the set up got discontinued there. So in my charts there is no TDST there. In my chart there was only TDST breakout above the blue line at 4892.5 which was a great trade.....

But if in your chart the prices have broken the red support TDST, you should have added to your short position. If the market closes above the TDST line, you could have taken off those add positions.But if the market would have sold off, you would have missed a chance to add to your position .

TDST can be traded in the following 2 ways.......

1) If the price closes below the red support TDST, go short.....and keep the stoploss of high of that breakdown bar.

2) Go short as per 1 above and keep a stoploss at the immediate pivot high which is above the TDST line.

We have to take the trade as the TDST is cracked......we will never know whether that breakdown will succeed or fail......if it fails we get out of adds quickly......if it succeeds we are on a great trade.

Smart_trade

Hi ST, thanks for your reply. Makes complete sense. Add early when the support is breached and get out quickly if price retraces. I am inclined to place quick adds, but have been trying to restrain myself from adding too quickly, since over the last I had many adds that reduced my profits rather than increasing them. Still need to work a lot on adds and exits...

One other thing was that the 14:42 reversal happened at 38.2% of the days upmove. (First time I checked a Fib level on any chart)

The charts were synced from PIB. I often notice gaps in the PIB charts. Many times, even ticks that show up in the Market Watch do not show up in the charts. So I realise the PIB charts may be less than reliable to count TDST bars.

 

[Satyen]

Hi ,
ST Da ..
Now We Know how to trade effectively , break out of lower TF TDST , Pivots , Pivots with Gap inbetween them ....

Some Time earlier you have posted market move in a cyclical way Trend to non Trend/Sideways Or vice versa

Requesting you to put some ideas on Non trend /Sideways Period in market Which is Riped enough break out from it thru
TDST /Pivot or Gap Pivots and gives birth to Trend may not be always but Generaly , which after entry and with Add will be nice trade....

Tried to find out solution using TD Sequential method , Like when it gives signal we have bias and entry with lower tie frame
60 min chart with TDST /Pivots / Gap Pivots .... but did not get enough oppertunity in Nifty ....

Now trying with ADX of 14 period ... Like when ADX(14) goes below level 20 we are ready for break out etc ,

Like recent Fall/Trend arised from Low ADX

Similarly Squezes can give good break out to trends etc

Need Your Valuable Thoughts / Ideas on above request

Regards
Satya

 

[nishant1011]

Hi ST da,

I have faced a problem in executing the order, for eg, I put a limit order at 100(currently at 101) in the anticipation of fall and it did fall but order didn't get executed. I saw in order list it says order Triggered. What should we do in this situation.

thanks
Nishant