once there was a pigeon...

like many budding struggling traders, i used to be a pigeon who would flutter away at every and any small anti-trend clap.

all kind of brave talk used to fail miserably despite my best efforts.

over a period of time a series of chance system adjustments revealed how the bluff moves of price can be spotted/segregated.

till then i always used to book too soon out of fear of losing the illusive profit.

i can't explain how frustrated i was when i was unable to run long distance trends whenever there was one.

the fact that i, like majority struggling traders, was booking loss too late in the trades gone wrong, was adding salt to my wounds.

i can't express my satisfaction (wouldn't mind calling it happiness if it were not already not-a-big-thing-anymore) having crossed that choking waterfall of a challenge.

i'm on the other side now.

it was a small step of improvement but with giant consequences.

if u look at the corollary of this, u'll notice that this improvement in system also helped me dropping the wrong side fast enough and thus cutting losing trades sooner than later.

with passing time and practice, even the remaining fear will be gone (i am, like a typical "doodh ka jala", still looking for the ways my system will fail some day in a new way!!!).

but i'm reasonably sure that while the newer situations will keep arising, leading to sneezes and hiccups in my system, the hits will be smaller hopefully and i'll use even those instances to further improve my trading system.

taming the fear is at fairly advanced level.

the skin of my trading mind is quite thick by now.

=====

my next challenge was/is....scaling up.

i have said and written at various places in the last many years that i had decided not to trade REAL BIG size till i had developed the system fairly well...... till the system was fairly stabilized and had proved itself respectfully in various conditions and seasons.

my view always has been that jacking up the stakes and getting big returns never takes too much of time. but it doesn't happen till the "multiplication factor" system is in place.

otherwise, the buggy system is equally good in bleeding u real fast.

so, after having fairly stabilized the trading system, my next aim is to jack up the stakes. easier said than done.

it is like venturing into a new territory with many unknowns.

gradually working on this in steps these days. and at no point, without safety harness......

a system with a veto

amplified emotions are fractures in psychological strength of a trader....

don't be too sad - it will hurt ur ability to survive the difficult times, 

don't be too happy - it will have a bearing on ur ability to stay alert......

=============

have a target....no harm in that....but never be adamant. 

be flexible. go with the flow. 

i have a lot of opinions and targets and views. some are v strong. but i give veto power to the system. 

though my system and my views concur for good part, there are often divergence which are beyond my comprehension. 

in those times, i go my system way, often to be amazed!!!

=============

human trading is inseparable from emotions. 

emotions are subject to virus attacks. 

a pre-determined evolved trading system is too primitive to be effected by the emotions and hence fairly advanced in the market which doesn't know how to counter simplicity.....

the sheep lion

any trend in the world obeys this maxim....."trend ki jaan bahut mushqil se nikalti ha".....lemme share some examples...                      

: habits are nothing but trend....try changing a habit trend....it's v difficult                      

: relationships are trends.....try changing them....                      

: poverty, individual or that of a group, like country....                      

: a bad patch of a batsman...a dream run....                      

: winters.....summers......rains.....                      

: re-monetization after de-monetization is a trend.....                      

: corruption is a trend.....                      

: u can always safely bet along the trend......                      

: the decline of a crude oil prices will take as much time as was taken by it's rise!!!                      

: "bhed chaal" is good in trading but not "unanimity"                      

: hero honda (ouch....hero motocorp is riding on the splendor trend)....                      

: hillary clinton's "image""baggage" was a trend....                      

: modi wave was a trend.....a powerful one...all opposition leaders (shorters) are realizing it....

: obesity

: AAP was a trend which remained for a long time till it faded....                      

: ride waves and trends....be smart, a bit less brave......

======

anyone's trading results can dramatically change with just 2 steps......                      

: 1. reducing the trade size to the point of sound sleep despite adverse movement                      

: 2. go with the trend, almost like a dumb trader.....                      

======

little surprise that all intelligent guys and gals like engineers, doctors, CAs, bla bla are all shamed in stock market till they agree to be a sheep who has dropped all ambition to be a lion warrior. that sheep becomes the defacto lion, finally.

those who fear going with the trend should try gambling with v small amount pro the trend.....

4 stages/states of a trader

there are 4 stages/states of a trader

amateur amateur
the one in the market for fun, lottery, water testing

professional amateur
the one who finally decides to learn it properly

amateur professional
who is getting serious and better with time

professional professional
for whom trading is a profession now besides other things. he is a developed country in the trading world.

the road and the round about

a trend is a trend

it is a road and not a round about, well mostly.

but u can't know when (80% of the time) it is road and when (20% of the time, approx) it is a turn/round about.

this causes the number one and fundamental mistake traders world over succumb to and suffer from.

"distrust the trend; always fear the sudden end of it"

this is wrong...trend is a friend and not a foe looking for chances or devising ways to kill you.

it is all in your own head.

u take a trading position much bigger than ur peace of mind resulting in non-stop hallucinations that the trend is going to turn!

trend, whenever present, is blind and deaf.

it doesn't know ur position, only the position of the masses, which it is rarely against till atleast the pigs are fat enough to its liking.

trend can't see ur position nor can it hear ur pounding heartbeats.

it is not threatening u. u urself are full to the brim with fear.

u r ur no. 1 enemy.

congratulations, u urself are the pseudo-operator against the sheep "u"

u are so full of fear like a pigeon that even the mischievous shadow of the operator cat is enough to pack u flying...

a trader has to admit and understand that if he keeps applying a sensible simple system time after time after time, then he will correctly get the trend road 80% of the time and the round about for the rest.

the loss at the bends shouldn't scare you from recognizing, acknowledging and trusting the road.

ur first handicap is that u don't have some tool to identify a trend.

if u have one, u take too big a position.

if not, then even one loss is enough to freeze ur confidence for several days thereby making u fire in all directions in the dark while being blind-folded.

on the contrary, if u keep trusting the trend and keep taking the trade IN THE DIRECTION of the trend, then u will be stabbed in the back only 2 to 3 (or max 4) times (on an average) out of 10, approximately.

those who don't trust, go crazy...

they can't take the market from levels to levels without trends. trens have got to be there and will always be there albeit with every effort to be there sans u.

how to decide stop loss

i am always surprised to see the whole world decide trade on the basis of mango and stop loss on the basis of grapes.

stop loss should be in the same currency in which the trade was taken.

i.e. if a bullish trade was taken based on a signal from bullish divergence of rsi, then stop loss of that trade should be the point when that bullish divergence is threatened or no more valid.

similarly, if a trade is taken on the basis of a pattern, then stop loss is that level where that pattern no more holds good.

to take another example, a trade taken on the basis of nifty level should have a stop loss where that level is broken.

taking stop loss on the basis of nifty level while taking the trade on the basis of a technical indicator or level is wrong, imo.

also, tick size on the chart should be considered before deciding whether the stop loss is taken or still stands. e.g. if u r monitoring a chart with 5 min tick size, u shouldn't take the SL as hit till the chart marking after that 5min window is actually beyond that SL. that much of risk is to be taken, technically.

there is a good chance that if the stop loss is say 8180 spot on a 5 min chart, nifty may go down till 8168 (say) and jump back to above 8180 before that 5min window.

system, risk management and psychology in trading

[11/14, 9:10 PM] @ashokji:

If trading is
15% system
15% risk management
70% psychology
Why do most traders spend 99% of their time on developing systems?

[11/14, 9:29 PM] Js:

because psychology and risk management are steering and brakes which though critical won't move the car without the engine of system. while psychology can be tamed with enlightenment, and risk management with practice of rules, it is system which is the most tricky part. while risk management and psychology are defensive measures, system forms the basis of the offensive IMO. I'm not sure about the percentages you have quoted above, but the breakup applies more to the stage when you have broadly figured out the system. because it is then that the slippery oily psychology prevents the implementation of the system and hence consuming 70 percent of the effort. having said that, 99 percent is bit too high and indicates the state of mind of a trader who is trying to compensate lack of risk management and weak psychology with a non existent super system....

: I got my risk management sorted out first of all, and psychology thereafter. but despite risk and psychology in place, the search for the least inefficient, most adaptive, best fit, advanced yet simple practical system out of hundreds possible has taken real long. it's like painstakingly searching for the right key out of a bunch of hundreds.

: every system is notorious to flatter to deceive though only after prolonged testing. the Edison in every budding trader is generally cursed to try a hundred ways before succeeding in making his bulb.

: every system has some limitations which can be taken care of by the risk management and psychology...

: your question was stimulating. thanks

self talk

[11/7, 3:43 PM] : if a trader is sure of 70% accuracy of his or her system/method......i.e. his/her trade will be right approx. 7 out of 10 times (or wrong 3 out of 10 times), and, if he/she has the courage and money management to easily withstand in the rare even of all those 3 failures coming consecutively, then the trader can easily afford to be fearless.nobody can stop him or her from ultimate trading success....

[11/7, 5:27 PM] : the most difficult thing in trading is not analyzing the situation, but accepting what comes out in the analysis followed by actually pulling the trigger. profitable trades often start in total dark...

the other dirty game

when operators are bluffing and trapping retail trader masses they are also knowingly miss stepping themselves. they know they are wrong. just like in poker, a bluffer tactically goes the wrong way to trap and beat the right opponent in the end. but when a good trader feels that his well considered homework is seemingly going wrong, his fear and lack of confidence in his trading system and lack of backup strategy prevents him from even thinking about exploiting the bluff of the operator. almost all traders want 30 profit and 0 loss instead of 10 loss followed by 50 profit.

if you can spot and understand it, acknowledge the operator bluff, go with it with reduced trading size and be ready to exploit when the overstretched tide turns...

when GST was nowhere near passing, market used to rise a lot on every hope news and fall on every negative development, but when GST actually got passed nothing happened. it was dud

same thing happened when Rajan was to quit. markets were expected to slip gradually without him and his assurances. what happened. we saw the largest sudden up rallies of recent times

brexit brexit brexit they kept shouting for weeks and months. what happened after shock brexit? just small fall followed by an up rally. all hue and cry and nothing happened.

same thing going to happen IMO during and after US elections. markets may fall even if Hillary wins and markets may rally even if Trump wins. markets may rally before the results or may fall not rise after Hillary's win. it is all tactical mischievous stirring of muddy waters to catch trader fish. what would you do if you were Goldman Sachs or other shark chief manager?

we all forget all the discussions and logic after the event. we are sheep. they know that. we don't know. don't want to know.

I'm not saying become Don Quixote. all in saying is....we should run with the hare and hunt with the hounds. that's the best strategy to make money despite not being from the devil's camp.

whenever any event is approaching we should think oblique. listen to everything in media, understand the wind direction and guess the unthinkable. that's going to happen in all likelihood. politics isn't the only dirty game.

note down what everyone is saying about market and election results and compare that with what actually happens post results

markets aren't going to go through the roof of Hillary wins and all zillion dollar economies wonts commit suicide just because Trump wins. American president is not God. he is a puppet in the hands of money Gods. he is there care taker.

businessmen are smart guys. for them their business interests are supreme

EU isn't dead after brexit. neither will America post these election results.

anyone smart enough to win presidential elections is smart enough to run the world's biggest economy

if all operators are making our going to make ship loads of money courtesy Trump, Trump is their darling

no controversy, no opportunity to make huge money

weapons of mass destruction theory was very very business friendly. it resulted in gulf war resulting in tremendous boost to businesses and economies of super power and allies besides realignment of (their own) business friendly governments

if I were the operator I will have both Hillary and Trump on my payroll

they are poor chaps. bigger players are, like God, invisible

don't be befooled by all the drama going on. enjoy it. take it all worth a pinch of salt. don't get emotional. protect your money. get aligned to the dirty minds instead of getting ready to play victim again.

the thinkable happens less, unthinkable happens big in stock market...

by the way, this is exactly what happened during last lok sabha elections

we had a "Trump"everyone said don't elect don't elect don't elect

we had a Hillary also...

same thing happens in every election, in every country.... all the time

winning elections is a big big responsibility. after all, it is the contract of contracts.

traders shouldn't be emotional. they should be what they claim to be.

both Hillary and Trump are patriots. don't mess up your head. say no to be certified a fool.

all events are used by big pockets to milk the masses

stock markets are super daddy legal casinos and wealth generators of the ruling class

myths and misconceptions about Elliott waves theory

1. Elliott waves in modern trading environment is very different from the stock market realities just before or after the second world war, 8 decades ago. though the underlying logic is same, the rules and application have gone sea change. it now pertains less to retail trader's or investor's motive and psychology and more to the behavior induced by the stronger minority hands into the weak majority to get their way with the final aim of trapping and beating them. it is more of a dodging tactic today for profitable stealth accumulation distribution strategy.

2. contrary to the prevalent understanding, Elliott Wave is not always present. neither it should obviously be expected. be it retail traders' herd behavior or operator tactics, Elliott waves emerge when there is time for it. during tight ranges these are either not there or highly deformed to be identified or fairly called Elliott waves, at least from any practical utility pov. otherwise any lines looked through Smirnoff for sufficiently long time will start resembling like a perfect Elliott Wave.

3. Elliott waves don't exist in total isolation. they are best visible from a particular lens of particular time chart. eg. the wave visible in 5 day chart is part of the one in 1 month chart which further is part of 1 year chart and so on. to understand the destination of a particular wave, look at its father wave. therefore, if you don't see the wave in one time frame, adjust the time focus and look at a shorter or bigger time frame chart. when elliot wave is absent from the short term/swing/positional chart, it is still visible intermittently in intraday chart.

4. it is a myth that the 3rd wave has to be the longest.

5. it is a myth that wave 4 can't enter territory of wave 2.

6. it is a myth that wave 5 has to rise to the highest point.

7. Elliott Wave is less well defined in stocks than in indices as the latter are averages, besides other reasons.

ashokji: Js ji that means anything can become defunct anytime... whatever strategy we build can be defunct anytime... so keep changing .... It's not an easy job, we have not come up with even one perfect one ...so forget about another in my life time....

js: absolutely. every strategy and till is evolving beyond recognition. we have to change. keep evolving, keep adapting. it is painful if possible. but that's how it is. one reason everyone is still a victim after decades.

struggle for survival. survival of the fittest. operators hate fully trained. they just want literate.

amit: Js ji here does it means that Jo retailers ko dikhta hai according to Elliot me vo hota ni hai.I mean the one which looks obvious doesn't happen and the operators take this as a beating tool for trapping retailers.And what happens is quite unexpected but with in the logic of Elliot theory.am I right js ji.

js: it is a game of cat and mice. cats don't want mice to become cats. it's not Tom and Jerry where mice wins

: partially yes. they can't accumulate distribute without Elliott reality. but the dodging requirement results in a thousand forms of waves while we are still stuck with 8 decade old Elliott measuring tape around our tailor necks

: over the coming weeks I will try to practically show you

8. you can't trade every situation with Elliott Wave. only reasonable trending ones.

9. larger the trader base and more developing the economy better the Elliott Wave works. it used to with great in US in early 19th century. no more. look at their chart patterns and that of day UK.... markedly different than those of India.

10. if you don't find a full Elliott Wave despite your best efforts post training, stop looking. there isn't any in that situation.

11. you can't accurately mark Elliott Wave points without the help of other indicators

12. there are trades beyond Elliott waves

13. Elliott waves is a knife very effective to cut through small and medium trends. they are almost indispensable. but in trading feast you also need forks and spoons.