Turning points in my stock trading career

I remember a beautiful quotation I had heard long long ago

"There is no real advancement without a crisis."

How true!

We hate crisis.

It is painful.

It almost knocks you out of the game.

But crisis is also symbolic of an approaching next level.

We buckle and we are left on this side of the crisis.

We survive the crisis and we enter the next level!

It isn't easy.

Its like new life.

Its like passing thru labour pains.

My journey in stock trading too has been from crisis to crisis.

Every crisis was like a slap, like a hit, like a scolding!

Being human, every crisis was hard on me.

But, as they say, there is always a day-after-tomorrow.

After one or two days, and sometimes just after a few hours, I always used to realise my mistake, my ignorance!

Thank God! I never stopped thinking.

As Marie Curie had said

"Nothing in this world is to be feared, but to be understood"

I tried to understand the things - right as well as wrong.

I always tried to challenge almost every idea and thought and method.

Gradually, the crises became fewer and smaller and higher!

Every now or then i stumbled across something which would change the way I traded.

From pure random trading, I started trading according to some rules....

I realised that I was not good at certain styles of trading,

I also realised that I couldn't be a master of everything,

I realised that many things didn't fit my emotional and financial setup,

I realised that sticking to certain rules made trading less painful and more profitable,

I realised that to trade effectively I needed to focus on select trading areas.

Stock trading is a sea.

Thousands of stocks.

Dozens of segments.

Delivery, Futures, Options.

Investing, Swinging, Day trading.

Shorting, Longing, Hedging.

Forex, Commodities, Stocks.

Hundreds of indicators.

Dozens of theories.

Hundreds of trading techniques and tactics.

Innumerable situations.

I realised that the more I wandered, the more I will be lost in the jungle.

I had to limit myself.

I had to focus on select things.

Things I was good at.

Things that were working for me.

This resulted in some crucial decisions, some crucial turning points

that made my progress in stock market irreversible,

that made my losses reduce dramatically,

that helped me finally get profits,

that helped me be 'in control' rather than 'being controlled'

Given below are those turning points, mile stones, crucial decisions.

Some were by choice, others were accidental and incidental.

1) Decision to trade only in nifty

Money doesn't know where it has been invested. Nifty and all indices are easier to predict. I have discussed this in detail in my post "Why I prefer to trade only in Nifty"

2) Decision to trade only with sufficient buffer to hold my positions in case of a disaster.

I started sleeping sound after this decision. Before this I used to get nightmares of "circuits".

I remember, a top stunt performer in Hollywood had once said in his interview "Performing stunts without foolproof safety is stupidity".

3) Decision not to short.

I was initially never comfortable with shorting. I still am not. Though I don't mind shorting in down-trends. Nevertheless, this decision helped me plug the major cause of my confidence leakage.

My losses reduced dramatically with this decision.

4) Decision to focus on my favourite indicators only

Trading without indicators is like walking on the mountains with eyes closed.

The day I stopped trading without indicators ensured that I will not go bankrupt.

After that surety was there came another dilemma - which indicators to focus on?

There were too many.

Initially I learnt a lot of them. Moving Averages, Trix, Mass Index, Bollinger Bands, RSI, Stocastics, Willaim%R, SAR, MACD and many many more...

But then I realised that like 'any road to God is ok', i should focus on one or a few indicators only.

RSI, Willaim%R and SAR are my top favourites. Though there are some other select super tools as well.

5) Discovery of Google Finance charts

Earlier I used to work with bseindia and y a h o o charts.

Then one day I came across google finance charts. (Earlier I had thought google was just into search engine. Today everyone knows that google is almost everywhere and still going).

And what a discovery it has been for me!

Google charts are almost live for nse, they are flexible and the least count of display is amazing.

What is not visible in other charts is magnified in google charts.

RSI and William%R look xerox of each other in other charts. But in google finance charts, both are dramatically different.

Every contour comes out so sharply and differently!

Though I feel that number of indicators in the options there should be more, yet Google finance discovery made one of the biggets changes in my trading career.

6) Decision not to invest or day trade, but swing trade.

I didn't have patience for investing.

Many traders like me are in too hurry to be investor.

I once read somewhere that till you are a millionaire, you should be a trader. Thereafter, you should be an investor.

Day trading, to me, is the game of the scared goats being chased by blood-hound operators.

Swing was my game - I realised. 2-5 days game gave me more control....and money.

7) Realisation of potential of BTST

People fear BTST, but I consider it the best, fastest and safest opportunity if we have done our homework.

Rishant Verma proved this with a hammer! He is the best!

8) Realising the importance of emotional stability and practice

Emotionally scared as well as excited emotional sheep walk right into the mouth of thankless emotionless lions!

9) Decision to trade only opportunities and not trade all the time

=80% of the profits come from 20% of the opportunities, and

Rest 80% of rest trading opportunities result in majority of the losses

10) Decision to never be worried about having missed the train.

A mentioned in my post "Cool advice of Uncle chips", I realised that whether nifty is at 500 or 50000, trading opportunities will always be there. Forget about the missed train. Next (metro train) is always coming around the bend. Never run after the missed one.

11) Resolve to take loss as the fees to "buy" a lesson!

and resolving to never repeat the same mistake.

12) Maintaing my notes

What is not recorded is lost after a few days.

My posts in mudraa as well as in my blog are my fossilized notes that will never be lost.

13) Trade only long in up-trends, only short in down-trends and long as well as short in ranging markets.

This has given jet thrust to my trading. And I am loving it!

14) A big turning point was my decision to use combination of rsi and william%r charts, decision to buy when both are at extremes simultaneously, decision to read both on 1 month chart and both with 14/30min reading did wonders for me.

All of a sudden, it propelled me into the next league of results!

15) I decided to reverse my 3rd and 9th decision mentioned above.

Perhaps this was an indicator of my growing confidence and technique.

16) When I came to know that CNX-IT and Bank nifty lot size have been halved, I was thrilled.

All this while I had to wait whenever the signal to buy or sell nifty was not there. I had always noted that timing of IT and Bank index funds was different from that of Nifty.

Thus these could have been traded had the lot size been lesser. (I was less comfortable in taking 5-6 lac position as compared to 2.5 lacs in Nifty).

The reduction of lot size of CNX-IT and Bank Nifty resulted in my having 3 options to choose.

This way I could trade more with obvious benefits.

17) I crossed a major hurdle in climbing the market everest when I decided to take bigger and longer positional calls. Earlier I used to book profit when it was too big to lose! Now, I changed the criteria to staying in the trade till there was an upside left.

18) The next turning point came when I decided that I will do a SAR (i.e. always staying in the market, be it long or short) using rsi (supported by William%R).

This became possible when I cracked the code of successfully anticipating the turning points.

I realised that turning points were different in rally and sell-offs/buy-ins! Whenever the rise or fall happened in steps, it was a rally. And whenever it rose or fell sharply (almost straight, with hardly any considerable hump) it was a sell-off or buy-in and NOT a rally.

I noticed that a rally always ended after after divergence between priceline and rsi. so found it safe to reverse position at the lower high (in case of the end of a bull run) or higher low (in case of the end of a bear run).

And in case of a sell-off/buy-in, I found that reversal happened at the time of rsi reaching the extreme. In such cases, no divergence takes place.

With this "always in the market" step, I was able to milk the market fluctuation to the max.