TradeWithMe |
MY STYLE - BLOG
This has a lot of practical and useful information.
0 Comments
While the mentoring and trading side of this site has been doing well, I decided to give back to the trading community by helping newbies and experts to look at new approaches to trading. In my search for better ways of trading, I have read the approaches of masters like Gann and others and tried to infuse my practical ideas for simplified trading. I also discovered that its nearly impossible for a newbie to get the ride guidance for starting his or her journey into Technical Analysis. Thats the birth of the Learning section, where I have consolidation information and knowledge from different sources into one basic structure, which will help learners to move forward.
The TA sections are also supported with videos and scripts which can be readily used by the visitors. My analysis platform is Amibroker, which is quite popular in the trading community. I have added a library section for significant and unique scripts which are available to everyone. Well, you may say, this is no rocket science, but implement this idea in real life and figure out those challenges!
With a specific instrument as an example lets work out the costs.With my system there are 15 possible trades in which 3-4 trades may hit stop losses in a week.. But these 4, saywill lose only Rs 800 in a week and max 800*4 = Rs 3200 in a month.. Now the winning trades will give 12*20*20*4=Rs 19200 in the same period.. Giving a net profit of Rs 16000 from just one lot of minifty! Of course you can knock off 60*5*20=Rs 6000 for costs, leaving Rs 13200 per lot. From 13th July, we are now trading a maximum of 3 trades per day.
We will always trade no more than 2-3 times a day, usually following a trend.
We always trade in one direction. Which means if the trend is positive and moving upwards, we will buy or be long, but never short. Some of you may think, we are missing opportunities, but thats one of the safe trading approached. Win, steadily....and avoid potential retracement whipsaws. When in a trend in one direction, we may exit and re-enter again a few points in the direction of the trend. This can happen more than once and increase the total number of trades in a day occasionally. When we whipsaw around a mean level, and two stop losses hit consecutively, we are out of the market for the day. Again, this is a safe trading approach. We will lose a max of two stop loss points which will never exceed 10 points per trade. My Trading Methodology
This method is suitable for traders who want to do day trading, but dont want to sit in front of the terminal the whole day. When the market is trending, you will normally only do1-2 trades per day. When the market is ranging, because of whipsaws between long and short directions, you will be forced to do multiple trades. In that situation, please follow the rule, that after 3 trades you will not trade any more for the day. In particular, if you hit 3 stop losses without any profit for any day, please stop trading that day. How does the system work? For those who do only one trade a day, follow steps 1 and 2 and if needed step 4. For those who can do more than one trade a day, please follow steps 1,3 and 4. Simple. 1.THE FOLLOWING STEP IS REPEATED FOR EVERY TRADE A trade call will be give on this site. You will execute this trade within 2-3 points of the call given. For example if short at 5512 is indicated, short in the range 5509-5512. Long at 5512 means go long at 5512-5515. Your stop loss, initially, will be 10 points away from your trade price, but as soon as your trade is profitable, you will make stop loss = trade price + brokerage or at least = golden level. We may change this logic slightly in the coming days, but remember, the stop loss will always be close to the golden level. 2.FOR THOSE INTERESTED IN DOING ONLY ONE TRADE A DAY. For those traders, who will not be in front of the terminal, you will wait till the trade is slightly profitable in about 20-30 minutes, set the stop loss and then do anything else. Check the status ocaasionally if you can or come back at 2:30 to 3 p.m. and if the order is still active, exit it. Thats it.. One trade a day. You can also see step 4, if it will work for you. 3.STEP FOR THOSE WHO WILL MONITOR THEIR TRADES FREQUENTLY Check if the trade has hit stop loss.If not, watch out for any exit calls for the trade or if it reaches a target that you are happy with - say 20,30, 40 or more points, you can decide to exit the trade. If the market is ranging, you can exit the trade after 10-12 points of profit and wait for the next call at step 1. 4. FOR THOSE TRADERS WHO CAN REMOTELY ACT ON ORDERS YOU CAN DO THE FOLLOWING: If you are able to telephonically talk to your broker, you can set the exit target 20-50 points away from your trade price as well. In this situation, you have 2 orders in place, one a stop loss and the other an exit order. Even if you are away from your terminal, you will have to monitor the nifty futures level, by calling your broker or using a mobile application or checking on a news channel on TV. If either the stop loss is hit or the target is achieved, you must exit the other order in the system. After that, you can await the next call at step 1. Nearly all of the traders who are following my guided trading threads have
one major issue... They have all lost lots of money. Why does this happen? Because traders jump into the ring, without any preparation or plans. What are your risking normally - its your hard earned capital. If you trade without any basic money management or risk management plan, you will surely lose all your capital. Here is a framework to set things in order, which can save you a lot of tension, emotional drainage and fear of the market. Fundamental - DO NOT TRADE IF YOU DONT HAVE FOLLOWING TWO POINTS MANAGED: 1. A trading system (even if these are tips) which doesnt generate better than 60% winning trades.(and you will see why shortly). 2. You dont have a written money management plan, which you use, everyday. Here is an example of the factors involved in money management. If you have a capital of 100000, decide how much you can risk to lose in a day,week and a month. Example, we say 0.5%-2% per day. This translates upto 40% per month, which is unacceptable, so you have a weekly and monthly cap as well. Say 5% for the week and 10% for the month. So to avoid our capital disappearing into smoke, the first rules for trading that evolve are: If any day our loss exceeds 2%, (Rs 2000) stop we trading for the rest of the day. Any week, our loss exceeds 5% (Rs 5000) cumulative, stop trading for the rest of the week. Any month, your loss exceeds 10%, (Rs 10000) stop trading further. At each of the stops, incase these are hit, we should review the trading methodology. Unless our trading system delivers 60-70% winning trades on a consistent basis, first on paper trades and then in the real trading environment, we dont trade again. Money that you dont trade is money saved. So on every day/week and month, use the win %age and the loss amounts as barriers for any further trades. And if you dont cross them, step back, review and fix the basic issues. If you do cross, the barriers, you are cruising to success. If the win trade ratio of your trading system is not >60% the absolute minimum, then your trading method is faulty and you are gambling. Review the method and fix it first, as suggested above. Now, a little deeper into the daily loss of 0.5-2%. If your risk is say 2 % of capital in a day. Say for Nifty futures margin is Rs 40000. The risk amount per day is 2% or Rs 800. So if you do 3 trades in Nifty in a day or lets say 4, then you cannot risk more than Rs. 200 loss per trade or 4 points. Your reward or profit per trade needs to be at least 2:1 times this risk or Rs 400 so that even if your success ratio is 50%, 2 winning and 2 losing trades you lose Rs 200 per trade = Rs 400 total, and gain Rs 400 per trade = Rs 800, with a net gain of Rs 400, you still are a winner. Target therefore for higher risk reward ratios of 3:1, if you can. See the linkage of the winning trade %age of greater than 60% instead of 50% above and a modest risk reward ratio of 2:1. If these are met consistently, you are winning consistently and making money. So here are your trading rules: Decide your daily,weekly and monthly loss risk %ages of your capital. Example Capital 100000, risk %age per day 2%= Rs 2000, Weekly 8% = Rs 8000 and Monthly 15% = Rs 15000. This means you cannot lose more than Rs 2000 in all transactions per day, Rs 8000 in all transactions for the week and Rs 15000 for all transactions for the month. Within each day, week and month, follow the following methodology. End of each day/week/month: Compute the trade win ratio = Your trades that were proftable after brokerage/(total trades that you did). So if you did 8 trades in a day and 5 were profitable, your trade win ratio = 5/8 = 61% approx. Analyse your winning trades. If your daily risk capital is Rs 2000 and if you allocated Rs 1600 to the risk for your trades, say at Rs 200 for each trade (it can vary for different scrips), did you win 2:1 = Rs 1600*2 = Rs 3200? The individual trades ratios are unimportant, so long as the focus is clear. If the profit number is not Rs 3200, review what went wrong, and confirm whether it was a major or minor issue with your system. Now at the end of the day/week/month, do the above nos tie up? Win ratio consistently > 60% Profit for day > allocated and utilised risk capital - if it was Rs 1600 for a particular day - your profit must be Rs 3200. Profit for week > allocated and utilised risk capital used that week. Say Rs 4000 - Your weeks profit must be Rs 8000 at least. Profit for month > Allocated and utilised risk capital say Rs 12000 - Your profits for the month must be Rs 24000 or more.. Stop, review and fix issues, whenever, these benchmarks are not achieved. Paper trade when you strart trading again, to ensure that you are on the right track. You NEVER lost money by not trading Day trading requires two elements to be successful. A trading method thats better than a coin toss, giving a 60% trade win ratio and the right risk management approach. Coupled with a trading psychology that ensures cool and tension free trading, you have the elements to start winning.
Connect with me at abnash1978@yahoo.co.in to get going or follow some of my tweets at @abnash1978. More to come here. |
AuthorAbnash Singh, Am a Trader helping small traders to realize their dreams. Archives
October 2017
Categories
All
|
Want more information ? Get in touch with us through the contact form : (click here)
|
|