Lesson #01
Till now you have seen my 7 or 8 Excel sheets
You will be wondering that how I can use at the same time an option sheet and a Breakout sheet
So here comes your experience
All the markets are not same
If market is very volatile then tens of supports and resistances are broken in a single day
Normally an option sheet gives an idea that where we can find a support and resistance, where a stock usually takes rest or swing
In current scenario nifty makes range of 500 to 800 points in a day
How can we expect that whatever support or resistances we are drawing. will play a vital role
So you must have watched that currently I am not posting any comments on options sheet
Because if volatility is high which we can see through India Vix, then breakouts work very well
as movement are very strong so whenever you feel a stock is rising and is near the resistance then in instead of selling, try to buy it over the resistance
One thing that I have noted through my experience is 1% ,the magical percent, if stocks move in a particular direction then there are chances that it will hit 1% in the same direction
So when I purchase above resistance then my First Target is always 1%
Is trading at 500 then the first target will be 505
If you don't have considerable cash or you are new to market try to avoid futures and options and always trade in cash
Advantage of trading in cash is that you can book your profit at various levels
suppose you buy something at 500 and the stock suddenly moves to 505 then instantly book half of your qty
as normally I never place my stop loss more than point 0.6%
That is 497 in my case
Booking half quantity at 505, even if you hit stop loss
still you will be in profit
This is just a part of money management or managing your trade
Lesson #02
Hi friend
Today I am going to discuss our Quest to find the Holy Grail system
And to break your heart I want to reveal that there is no such system exists that has 90% accuracy or 100% accuracy
I have seen many people searching the systems or amibroker afl that have 90% accuracy
And many times when they applied to current market they get wonderful results and when they try to use it for one or two months or longer…. then they see many whipsaws and then they drop that particular formula and then shift to the new one and this process goes on for even years
And this race for searching the ultimate system never ends
But I told you earlier that I am earning my livelihood from intraday trading and you will be surprise to know that my system have only accuracy of 50% to 60%
So the real key is not finding in ultimate system but to sustain in the market you need ultimate money management
Normally I place target at 1% and stop loss at 0.5%
So if I get into 100 trade and with 60% accuracy
I profit 60 rupees and lose 20 rupees
Net gain will be 40 rupees
And normally I am in 2-3 trades at max, at the particular time
So lets summarise
I need 300 rupees to enter three simultaneous trade
Then keep on rotating this amount for hundred trades in a month
which gives me 40 rupees profit
So net return will be 40 rupees on 300 rupees that is 13%
And mind it
I have not considered the intraday exposure that I get from my broker
But to become a winner I need one more thing
That is consistency
What I experienced, In my past years, is three consecutive losing trade are enough to break you
When I lost most
Is when I was constantly winning and when I was constantly losing
After winning constantly for five times I got very loose on my rules and I started Breaking the rules
I thought myself to be the king of market
I felt that I know the market in its deep roots
I doubled my investment
Double exposure
Them a single losing trade wiped out my profit of 4 trades
Another case
Losing constantly for five times I lost my mental balance
I was dying to get my money back from the market
My emotions overpowered me
again I forgot all the rules
Suppose I have 5 conditions to meet, I entered the trade even when three conditions meet
Which resulted in more loss
So then I realised that it is more important to be consistent then to be accurate
Then our emotions are under our control
We can analyse we can draw charts we can place targets we know what we are doing
We don't have to remember our god after entering a particular trade
When we lose after winning some trades
In our mind we just settle that oh… I will balance my profits with my this loss
So let settle the day with no profit no loss
In case of consecutive losses I have to transfer funds from my bank account to trading account
And then again I start feeling happy when I start profiting
I forgot at this point is that I am recovering only my losses
In the end of month the profit that I got is absolutely same amount that I transfer from Bank to trading account but still I thought that I am green
So my advice to all of you is don't run for accuracy but go for consistency
In next lesson of my experience I will share how I manage my money
Lesson #03
Before we move on to our next lesson in coming days, on position sizing, I want you all to read this story of wrestler Milo
It was about a Greek wrestler named Milo who lived many years back. He was one of the greatest wrestlers from Greece who had won six consecutive Olympic medals. Everyone wanted to know what his secret was and how he managed to be so strong and successful.
The story takes us to his village where Milo started his training by lifting a newborn calf while his competitors were trying to lift bulls in their practice sessions. Now anyone can lift a calf, even you and I can do that, there is nothing great in it. So how did Milo become great by doing that?
Milo used to carry his calf everywhere he went. Over time, the calf put on weight but Milo was still carrying him around. Milo's body and mind were getting used to lifting the calf even as it slowly grew. By the time the calf became a bull, Milo could lift it effortlessly, while his competitors were still struggling to lift the bull.
This story openes the concept of position sizing.
Lesson #04
I never forget to exit
Never over trade
Normally I keep 3-4% target for intraday during volatility
and when I meet that
I close my terminal otherwise i get tempted to trade more
which is disastrous
i am telling again n again
real money is cash not in ledger
so when i see enough cash profit in order book I stop
every monday I take payout of last week
Lesson #05
Hello friends
So as I have promised today we'll discuss position sizing
Now to start trading the first thing that we have to decide is the quantity to trade
Basically what the beginners do
They calculate their investment or capital
Then simply divide this capital with price of stock to get the quantity of rate
Suppose you have 100000rs and price of stock is 500
Then we enter 200 quantity
Which is absolutely wrong
so to Decide the correct quantity
We have to consider the loss
Like we have to enter the stock at 500 with target of 5 and stop loss of 3
We will check what is the maximum loss that I can bear
Like if I don't want to have loss greater than 500 on capital of 100000
My maximum loss is 500
And loss per share is 3
So quantity will be 166
This is called Position sizing
Secondly how to choose the capital to trade
We are very much attracted to what others are trading
Like on any channel if someone post that I got 10,000 profit on one lakh then we too think to invest 1 lakh immediately
Without considering the risks involved
Therefore I have shared the story of wrestler Milo in my lesson number 4
This is the same how I have increase my capital
I started with merely 5000 in 2007
What is the logic
Start with Capital of 5000, check your gains for losses in one week
If you are in profit increase the capital to 8000
If in loss remain at 5000
Again if you are in profit in second week then increase the capital to 12000
else be there
After increasing 3-4 thousand in initial stages
You can increase 6-7000 after reaching at the level of 50,000
But concept is simple be at same capital for the current week
if you have made loss in the previous week
In case of loss in two consecutive weeks
decrease capital to the previous level
Now comes the profit booking
You have to fix your ideology at Quick or slow
Like I myself is in category of quick
I am quick to book profit I am quick to book loss
What do you usually do
If we purchase Something for rupees hundred
Then we are quick to book profit at 102
But in case of loss we will wait at 97
Then when it comes to 97 we just hope for our entry point of 100
But it falls to 96
Then we repent and now start hoping for 98
But it falls to 94 now it's too costly to book here
So we convert and intraday to positional
As actually that stock was for intraday
Having no strength positionally it falls to 88
And we are trapped
If your slow in booking stop loss
Be slow in booking profit too
After buying at 100 wait for 110
I myself is always quick
Exit at 99.5
Book at 101
In the end I just want to say simple thing
Always keep strict stop loss
And try to book profit at every level
Suppose you buy something at 500
Target of 505 stop loss 497
Try to book Some quantity at 503
Then 504 then 505
If you book half quantity at 503 even you hit stop loss of 497
You are in profit
There is very tense environment while trading and while entering the trade
But your success depends very much on quantity u trade & price you book
Bye
Lesson #06
If you are retail option trader who mainly focus on naked option buying then follow this Simple rule.
Never buy a put option if price trades above previous day high.
Never buy a call option if price trades below previous day low.
This rule will save you a lot.
Lesson #07
7 great trend following indicators:
1) Moving averages
2) SuperTrend
3) Donchian Channel
4) Bollinger Bands
5) Keltner Channels
6) PSAR
7) ATR stop
if vix is high, lower the timeframe
if vix is low, higher the timeframe
Lesson #08
INDIAVIX
A simple layman explanation of VIX
it is a measure of expected volatility over the next 30 days
it is calculated using the nearest monthly expiry calls and puts
For eg, if VIX is at 50, it means that the expected annual change of Nifty over the next 30 days is at 50%
this means that Nifty is expected to be in the range of +50% to -50% from the current level for the next 1 year for the next 30 days.
In other words, from the current level of 9111, the range that is implied by VIX is 4555 to 13667
Expected range for the MONTH as implied by VIX is 50% / sqrt (365/30), which is 14.36%, ie 7802 to 10419
expected range for a DAY as implied by VIX is 50% / sqrt (365), which is around 2.62%, ie 8872 to 9349
Lesson #09
https://youtu.be/cxGHLHO5W6k
