Trading Lesson Learnt From my Trading Guru Part-II

Continuing with my previous week article Trading Lesson Learnt From my Trading Guru

I hope many traders who are trading or willing to start trading will be facing with the same dilemma and confusion so today am sharing few fundas i got from my trading guru. Use them and see the change in your trading.

 As a traders its not mandatory to be in market all the time.

The basic mindset of amateur trader is we are  supposed to have a position, in market all the time.

My GURU Answer: Emphatic NO.

This is one of the most difficult things to learn. Psychologically, it feels strange to have no position. It can feel like we aren’t working or that we don’t have a view on the markets.

My Guru said if you didn’t have a strong view on any market, then stay out of market. Money Saved is money earned. When there was nothing to do, he did nothing. He would say “It’s better to have no position than a dumb one”. By allowing himself to skip dumb that were driven by boredom frustration, he avoided trades that were likely to lose him money  Thus, he could wait comfortably until the really profitable trades appeared and get the most out of it.

While such an approach seemingly demands the patience of a saint, it is actually easier to sustain long-term. Once you have a methodology and are comfortable with it, Like our GANN strategy , Once we are in the trend we just sit on our positions and let the market reward for our patience.

Thus, the ability not to have a position is a reflection of you doing something else right—having a methodology and a rigorous, disciplined adherence to it.

 

If you want to make big money Sit of to your positions

I keep using the above term in my Facebook page .My Guru told me if you want to get long term success in Stock Market inculcate this habit

When you have a position on, watching the price movements can become quite emotional. The process of making money on a position can be exhilarating and exciting and  Losing money can be agony, even if it’s only in the midst of a correction to that trend.  

When you open a position, you have in certain reasons for getting in to the trade. If the position is making money and the reasons are still valid, then sit on it and let it make you money. In the midst of that, there can be some seemingly painful short-term periods. Keep your eye on the big picture. 

To Elaborate let me give an example: We discussed Century Textile Example on 19 July

Close above 666 Tgt 690

Call got activated on 20 July and Target got achieved on 22 July when Century made high of 710. On 20 July Century made High of 681 and on 21 July it made low of 666, As our SL is on closing basis and both days it closed above 666. Now many traders would have panicked seeing price of 666 and exited in panic, But reasons for trade were still valid we need to hold on to our positions. So never get dithered by short term correction and always keep an eye on larger picture.

Too often, we have a winning position on and if it begins to correct, we can feel like it’s the end of the world. Watching it go against us, just for a day, can leave us panicked. We feel like our profits are melting away. We get anxious and close it out just to stop the pain. OK, we stopped the pain. But was that a good trade? Did closing that position make sense? Under the panicked circumstances—doubtful.

My Guru was great at catching the whole move. He would calmly sit through corrections, even multi-week corrections, if he was confident that everything still made sense. He could always recount the reasons that he had gotten into a trade and was still in it. Tellingly, those reasons would never vary. When we reviewed historical charts and the huge trends that he had caught, he would highlight the small corrections against him, asking the question, “See, what was the big deal?”.

My Guru has a unique way of doing this.

Every day, he would ask himself why he was in a position. He would then ask pertinent questions like, “What could go wrong?” . If it still made sense and nothing had changed, then he would hold on to the position, even if there was short-term volatility.

Ultimately, as traders, we earn our profits by making good risk/reward decisions. A process like this one, where we are focusing only on why we get in and out of positions and can think through various scenarios, helps us to make better decisions. It also blunts the emotional impact of any adverse short-term price action, leaving us better prepared to tackle the markets.

When looking back on a winning trend, we can rest assured that not every single tick went our way all the time. While losing money for a couple of days may have felt excruciating at that very time, it was not actually that much pain. Missing out on the big trend that we had nailed early on? That’s far more painful.