During my interaction with traders during my trading course,I came to know most of traders who loose money will keep changing their trading system the day it give them a loss. Till its milking money traders stick to it, but if 2-3 trades goes wrong they will keep the trading system on back burner and start searching for new one.
This whole attitude of changing the trading system is one of the biggest mistake of traders.
Traders will search through trading forums to find the next best trading system which will help them in earning profit they seek. Trader will try the new system again for few weeks and again once the system give 1-2 loss making trades , the system will be dumped and search for “next best trading system or trading indicator” will begin and the same never ending cycle will keep going on and on.
To stop falling in trap of such vicious cycle, Trader need to let go of the thought there is a “Holy Grail” system or a fool proof trading method which will win 100% of time. “Holy Grail” system has never exited till date and it will never exit. Now when u try to explain this to trader, 50% still do not believe me.
I can sense them thinking “Just because Bramesh has not found the 100% fool proof system does not mean I will not find it, I am not a Quitter ” Have you ever been in such situation, I bet most of readers who are reading this must have gone through this process.
Many traders think this way is because they fail to understand the fundamental on What drive the stock prices up or down.Let me explain this
If I ask the following question to trader:
- Why United Spirits went up 40% in a day.
- Why Opto Circuit is is crashing every day.
- Why Nifty is not giving any move today.
Popular reasons traders will give for the stocks or markets moving are “The news” or “Some announcement from company” or “Markets are manipulated anything can happen “, but the truth is the markets or stock do not move because of any of these reasons. These things can be factors but they are not the reason the market moves.The market moves because of simple economic principal of Supply and Demand. When FII’s,DII’s,HNI and other big traders think stock or market is cheap they will bid higher making it move up and when they think its expensive they bid the price lower and market goes down.
News Announcement like Fed Policy, RBI Policy, New Government getting elected or Fundamentals of economy like GDP growth rate, IIP data do not make the price move up or down, but they do have the power to change the minds of the traders who do move the market.
Let me elaborate with an example, Consider Trader X is thinking of Buying Nifty Futures because he think RBI will cut rates and market participants on hearing the announcement will take prices further up. Now Suppose RBI came out with no rate cut announcement which is negative, this news has power to change Trader X mind and he think Nifty Future is expensive. So Instead of Buying more he goes out and Short Nifty futures. If enough number traders aggress with MR X , price of Nifty future will further go down.So The announcement did not send price down! The traders who trade the market did because they interpreted the announcement as negative and started selling.
It is this same reason why the system that is “Fool Proof”, “100%” every time does not exist and never will. For a trading system to be 100% correct and every trade be a winner, the system would have to know exactly what every other trader in the market was doing. The trading system would have to know exactly who was doing what, where exactly they were entering the market, how much they were trading and where they were exiting. Obviously this is impossible and is the reason why no matter how good a trader or system may be, there will always be times when losses are incurred.
The good news is that you can develop or learn a solid trading system that keeps the odds tilted in your favor . You can find trading systems out there that will yield some results, you just have to accept that nothing is perfect and temper down your expectation of 100% accuracy.
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SIR HOW IS OPENING RANGE BRECKOUT SYSTEM IN INTRADAY TRADING
Interested in your TA course. Can u pls send me the venue/fees/duration + other required details on my mail.
Sir, I have gone through many of your articles.. I have always seen you advising not to trade in options. Is it possible to develop a trading system for options trading. Why do option price surge or reduce by high percentage of 150 to 200% ( sometimes even more than that). Normally we see options defines the range of market. Trader buying in option contracts overall just keep on loosing money. Few trades are successful but ultimate result is always losses. How does a trading system defines the mentality of all traders?
Options premium are based on value of underlying,IV,Historical Volatility and Time vale from expiry. As we know its very difficult to time the market on consistent basis and for the same reason I was never interested in developing a system for trading in Options.Remaining this=ngs we will discuss in our trading classes.
please share your mechanical trading system for benefit of all.
Sir,for the last three months I am trading in option.I follow Candlesticks,Bollinger bands for day trading.Most of the trades are failed because I bought at resistance and sold at support.I draw candlesticks of option premiums.Most of the time I got profit by this method.Will you please advice for consistancy in profit. Thanks.
I belive on trading on mechanical systems, I trade/teach the same.
Truth is bitter, sometimes. To accept the truth as it is is also difficult for human brains.
While machines can work to a system, humans(95%) can not. This human element is what adds to the trading making it lively. Some quit after failures. But there are always newer ones joining the stream to give benefit to the 5%(should it be less, still?).
Survival of the fittest is inevitable, as much anti-social as it may sound.
Thanks for sharing your thought process. I second your view.
Jai ho Bramesh baba, that was nice, eye opener article
Thanks Narendraji 🙂