What I have been doing for the past couple of years..a bit of soul searching..trying to improve my trading methods. More importantly trying to improve my money management techniques - this is by far the most important thing any retail investor/trader should do - But it is the one thats ignored by everyone..More on that later.
I have found that the best way to do things is to focus on the bigger picture..Keep leverage down to a bare minimum. Have a clear idea on the RR ratio..Most folks dont try to determine the risk but instead focus on the reward alone and in the end get bombed.
Another thing guys - Option trading is NOT investing. I saw someone say on a forum some time back that they had 'invested' in 5700 calls. What the hell!...Thats not investing..its speculation lol.
Anyhow coming to the chart. I have posted something similar some time back. This is the weekly nifty chart with KPL's 20 period swing on it. So its a 20week swing. I have found this is the best way to catch the longer term trend and swings with a fantastic accuracy rate. You can see the buy and sell arrows for yourself. This tool is great for a longer term investor and trader.
As I mentioned before, when 5650 broke, I think our market has entered into a longer term bear. This will be negated only on trading above 6181. Over time the swing will come down and we have to keep monitoring this to determine buy point.
I think we are looking at a possible bad year in 2011 and if we get a good low toward end of this year, then I will start looking for possible longs toward then. It might turn out to be the buys of a decade if it plays out the way I am thinking it will...Speculation at this point but lets see. I will say more about this later.
More comments on the chart. Count the points from arrow to arrow. Only price as I have found that that is the only thing can be trusted. Most folks will focus on thousand different indicators which only muddies up the picture. Focus on price alone.
I have been trading on the long side last year until the swing turned down as shown in the chart.
Bear markets are tough to trade for the retail investor. Its a game best left to professionals. Still I am trying to do something on the short side - atleast trying to capture some of the down swing. Lets watch and see how this plays out. Patience will be of great importance here.
More later.
7 comments:
wb, Lee. Very true about money mmt. I still don't know where to place the darned stop-loss after all these years.:)
Good to see you back with bang :)
Thanks for your comment @ JN blog. Now i am very clear in my views how to keep the "long term" in mind and trade the "short/medium trend".
Your longer term views are always good and still you are maintaining that in your trading?? if so how u r maintaining your SL?? as trading hrs timing is very diffcult for you na?
hope i have to say "good night" :)
Warm welcome from my heart and care more on trading , you were being a sailor for our trader community,
good -luck M.Karuppannan, salem
Lee,
Am a little curious and would appreciate your response. Given your long experience with the market, are you net profitable yet? if yes, what would that be in terms of %tage? If no, :(.
I am just curious and dont want to know the absolute numbers. Just a measure.
hay lee... my best wish to ur blog and best of luck for ur swing trading
@Ashish,
I've heard a statistic that those who trade in f&o exclusively are usually net negative.
True for everyone I know.
But I've often thought it is
1.because f&o traders trade less and less after a series of losses so it takes longer to recoup;
2. more importantly, from a lack of a trustworthy method rather than anything else. If you can't trust in your system, you will pull out when you're winning.
Stop losses are a real ART Yoda. I have kind of given up on them and instead am focusing on my signals.
Sujatha - tough question. For me this is where a bit of discretion comes in - mean to say more of feel kind of trading. Also simple supports and resistances.
I know the larger picture. Then I take a top down approach from there. For example 5650 broke, I was already building shorts from 5700 odd (gut feel) and when 5500 hit, I covered up, reshorted higher etc etc..I dont know - these kind of things just come my experience over time..And managing trades means I keep risk lower nowadays.
Leverage - I almost keep it at 100%..Mean to say if I have 5 lakhs - I will just short 2 lots = correct value more or less. To add 1 more lot, I need 2.5 more lakhs.
Trading hours big challenge - But I try to manage for a few hours. If I feel some important move will come, I will sit out the full trading day.
Thanks Bee..Read your mail also.
Thanks Prashant..
Ashish, you have asked a very difficult question. I will be completely honest here. Every trader will go bust several times in the stock market. No way out of it. I too have gone bust atleast 2 times. But I always made sure I dont lose more money than I can actually afford to lose.
I remember within first 2 yrs, I went bust once.
I studied lots and came back. Things went well for 3 years or so. Very extremely well for the next 1 year - got very overconfident and starting playing with huge amounts..started playing without SLs etc etc. Ofcourse I dont need to tell you what happened.
I have come to find that money management is the most important thing in trading. Understanding your risk and playing accordingly.
I would say right now, I play with less or NO leverage. Sure profits are smaller but need to keep greed under control. I am net on net okay now. Net profitable I mean. So yes it is possible and you can do it also. First thing needed is belief in yourself.
Lets continue this discussion.
Best.
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