The day I started trading I hoped to make lot of money, and ultimate goal of every trader is to trade for a living. My Guru asked me how you are going to make “a lot of money”, I said some blah blah but Honestly speaking I did not had any concrete answer. Somewhere in the back of my mind I secretly hoped I will catch the one big move that will make me enough money to trade like Big boys. Unfortunately the odds of catching the “big one” are probably the same as those for winning the lottery.
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.
Have a realistic trading goal
First and foremost thing my Guru told me “I should have a trading goal“. The goal did not have to be a large one like being a millionaire in 1 year, Trading goal should be simple and realistic. Having a trading goal would help me focus better on the markets. I would come to see better opportunities (note this is not the same as “more opportunities”) as well as managing my money better. Since I did not have a very large trading account at that point of time ,My Guru suggested to start with a goal of netting 2500 per week out of the markets. So If I could do this consistently for four weeks, I should be able to net Rs1000 a month which is almost 10% return on capital.
I told my Guru “Sir its not possible for me to live of Rs 10000 a month !”. He laughed at my innocence and told ” Bramesh ” If you could consistently net 2500 a week, using single contracts, for the next 12 weeks, theoretically there would be no limit on the amount of money I could earn by trading.” Still confused I asked how this was possible.
He said that no trader, who trades for a living, does so trading just one contract at a time. The power of making money in the markets comes through the use of multiple contracts. If you can net just 2500 a week using single contracts out of your trades, then with four contracts you should, in theory, be able to net 10000 a week, or 40000 a month. However, trading multiple contracts like this without first being able to trade consistently would be financial suicide.
The Key here was able to get 2500 for a week using single contract, so after your commissions and losses you should be able to get 2500 at the end of the week.
Now here is the tricky part: while you should never enter a trade with the hopes of making up losses, the fact remains that if you are going to make consistent gains from your trading, your winning trades will need to surpass your losers (plus commissions).
So after giving lot of thought process finally came to realize this is possibly the best advice for cutting losing positions quickly that I had ever heard!Basically the consequences of keeping a losing position too long,Hoping it will reverse back to my cost would always break me in the long run.
My Guru further added Your focus was on a profit goal, it was important to maintain a proper risk/reward ratio. If there was too much money at risk, given the possible reward, then it would put too much pressure on the following trades to make up for losses that were incurred earlier. However, by keeping losses to a minimum, the following trades would have a better chance of adding to the weekly profit goal.
My Guru again emphasized , having a smaller trading goal, I would be more inclined to book profits when I had them; rather than hold on too long thinking I will make more in the move and finally watching the market eventually take the profits away.Thousands of traders have given up maximum profits because they thought the market would move just a little bit more.
My Guru clealry mentioned during starting of your trading career when your account size is small always use exit order to book profits, rather than using a trailing stop loss to exit the market. As my trading goal was on weekly basis so it made more sense to use exit order rather than TSL.
As your account grows and you can afford to trade with multiple contracts, you will simultaneously be able to book some of the profits from a portion of your open contracts, while still leaving a few contracts in place, with a trailing stop loss order, to take advantage of further market moves. Yet before you can begin trading like this, you first need to build your account and develop your consistency.
He reminded me that this was just a goal however and that you can not make the markets give you more than they are prepared to give. This means that you must be constantly prepared to take a profit; rather than sacrifice the profit you already have, in hopes of gaining more, even if you are shy of your goal. After all, if the market continues higher after you exit, you still have the option of re-entering the market again if the trade still looks viable.
To conclude To develop your trading consistency you first need to decide on a weekly goal. If you are like most small traders, a goal of netting 2500 per week using single contracts is a good place to start. While it might not seem like a very challenging goal on the surface, you might soon discover, through your trading, that it is not be as easy as you first believed. Remember, your goal is to gain 2500 per week with single contracts, net of commissions and any losses that were incurred earlier in the week. Once you have set a weekly goal for yourself, see for how many weeks you are able to attain it. If you can reach your goal for 12 to 16 consecutive weeks you will be doing very well. If you are doing any less than that, then you still need to practice.
Start each week fresh. There will be some weeks where you will not fair very well at all. You might find yourself with a string of losses and a cumulative loss for the week that seems insurmountable. If you are unable to attain your goal for that week, do your best to learn from your mistakes and make a new start the following week. Remember that you are performing the exercise to learn to trade consistently, so don’t be too hard on yourself.
While you might be comfortable trading one contract at a time, trading multiple contracts can put a lot of pressure on the psyche. If you can consistently earn profits with one contract then add another. If you continue to earn consistent profits with two contracts add two more contracts, and so on.
One final tip: Take care choosing the markets you wish to follow. Since your goal is consistency you might be best off to avoid the more volatile markets. Due to their volatility, these markets normally have higher margin requirements as well; however it is not usually a problem as there are plenty of less volatile, lower margin markets that offer plenty of potential for the small trader.
Take your time and remember that consistently earning profits is the real goal.
Amazing article, still intrigued by who the Guru is
Any ways you are one of those few rock solid mile stones in the dark with light shining in the direction to take or most importantly the direction not to take so that lesser experienced travelers like us may not feel the same pain as you did when you travelled the same road earlier wandering without a light a direction but only hope. Thank you so much. your inspiration goes a long long way and we feel safe when there is a beacon of light in the other wise pitch black moonless night called TRADING
Excellent Article Sir.
I have been following your blog for the last few months and religiously i wait for your evening post. i just filtered for trading psychology and found this article posted almost 2 years back. infact i wont call this an article… this is a gem. this 2 page gem has probably more practical advice in easy understandable language than u can find in an entire book. hats off to your guruji and to you. thanx a lot
One of the best posts read till date. Looks like you have the uncanny knack of reading our minds. You then go on tirelessly suggesting remedies for our problems day after day. One needs to religiously heed to your advice, although as they say … ” It’s easier said than done. ” When will we understand that lack of financial discipline will strip us to our last cloth !
My only regret– I did nt get introduced to Bramesh Sir early otherwise the size of my trading account would have been different, I am pretty sure . In the last six months of my association with him, my whole trading outlook has undergone a positive sea change. Hope this Fin year, I am going to trade like a serious player avoiding all those silly mistakes of early years…Jai Ho!!!!!
thank u for the very good advice sir
Bramesh Sir pranam to your guru who taught you or else we would have missed all of the valuable posts over the years….keep going sir our best wishes !
Nice Article …. 🙂 🙂 🙂
I liked the article very much. It stems from real experience and gives a very simple but powerful trading discipline. I use covered call strategy on monthly basis. Still, I feel difficult to maintain same performance each month.
Brameshji… Great right up. Definitely difficult to follow as this technique demands perfect discipline. Thanks for enlightening.
really excellent … a real GEM… Thanks a lot… Pl. suggest what should be done if target profit (Net) of say Rs. 2500 / lot is achieved at the starting day itself (on Monday)…should we stay out for next 5 days and start again on next Monday…I faced this problem as more I trade chances of losing profit is more… that’s why asking.
Yes one tgt done stay out !!! Do not be a compulsive trader
Such a nice article. words of wisdom indeed. Thnaks alot
I want to know about stocks name from less volatile market. i trade with RELINFRA and CIPLA. is it fine?? or do i need to change??
Excellenty advice. Self discipline to supplement sound principles is paramount.
Thanks Shashi !!
I really wish i had read this article earlier.or atleast today morning 🙁 I made the same mistakes that you have mentioned in this post. Anyway.. better late than never..i hope to correct my behavior pattern of making the same errors despite knowing that its a miss from my end..i know if there is someone who is in the way of becoming a successful trader.. it is only ME!
Thanks for your very very useful and informative articles.. One suggestion if you could record some trading videos demonstrating how to make trading decisions based on indicators and open a channel on you tube or anywhere.. it will surely help the hundreds who follow you.
Glad you are getting benefited out of the article..
Hats off to you Bramesh Sir, I have read many articles and heard many analysts speeches in my whole life; but this article is really inspiring; The message is very simple; be consistent and be smart to reap profits wherever possible so that even if you are not a millionaire; your Excel sheet should be green; superb ; really really inspiring articles; wanted to copy paste all your articles into a word document and send it to all my friends( But right click not working); no issues; will send the link and let them also read; JAI HIND
Thanks Ram Sir !!
i am unable to find the trend changer point on the web site of yours.where i ll find it.
also please send me the detail of course for professional traders.
TC level is updated everyday in FII FnO analysis published in evening..
i admire your service to the upcoming new traders.
i am following you for the past 4 years. your statiscal
assement is very good.keep going sir.
i am following you in the face book.
kindly accept me.
Thanks a lot for your words of appreciation.
I am following your blog since last one month or so. I have just started intra-day trading- still have no courage to enter Positional trading-. I have a fair knowledge of the technical analysis. My daily trading plan for the scrips are 70-80% accurate with support and resistance levels.
But my 2 main problems are ENTRY and Early Exits. I write the entry values in the order form but DON’t enter the trade and see figures going up and up.Whenever I enter trade and doing well, when at resistence/ support levels I tend to book the profits and loose out on higher profits.
Can you suggest me remedies to tackle these problems.
You need a proper trading system with well defined rules and a sound risk management to trade. As per your mail i have sent the course details.
Sir, keenly interested in ur course can you please send me the course details
My email is email@example.com
Sir, this is really a very best advise. I am a regular follower of your articles. I have enjoyed many of your writing and this is one of the best advise for me. Thanks Sir.
very good advice.
A valid point to shape up a good trading model.
Brameshjji, You are my Trading Guru! Thanks a million for your lessons.
Sir this is one of the best advice I heard from a long time and it is what I needed at most
Sir thank u very very much for such a beautiful post
You are doing a great work by helping novice traders like us
Thank u once again
Thanks All !!