Thursday, November 12, 2009

Trading is a Slow process of learning

This comment is interesting "Please guide me I love trading so much that now I am unable to work and I hate to do my job.I will be very happy if I am earning so much that it is enough to leave a middle class life provided I am trading.Please suggsest me what should I do.Should I look for a trading job???"

My Notes: It is a pleasure to view such passion for trading. I think the first requirement for a trader is a passion for the proces of trading (not for the money!). But, trading is a slow teacher. Therefore, it is wise to enjoy your exisiting work, do your best there, and work on charts in the part time. Follow only end of day charts, so that you are not distracted during work hours. Identify one or two patterns and focus on trading only those patterns. Once you acquire the discipline essential for trading, you can make a call on your future course of action.


Harsh asks me : could u describe a sucker rally


My Notes: Not really. I assume that Harsh is thinking of the current upmove as a 'suckers rally'.


Nirav says: have read the book named Swing Trading:A guide to profitable short-term investing by Marc Rivalland.  
"1. Is there any other book which will give more knowlege about Swing Trading?

2. Is there any book available in market which was written by W.D. Gann or related to W.D. Gann swing theory?"

My Notes: A lot of Indian reprints are offered by Vision Books. Go to their website and you may find more books of your interest. Instead of buying from Amazon, you should kep on searching the internet for Swing Trading and Gann. You are likely to get a lot of information for free. The Swing Traders bible is Streetsmarts by Raschke and Connors.

kk says "IN YOUR RECENT UPDATES YOU USED A WORD "LUCK".SIR I HAVE NEVER HEARD THIS WORD FROM ANY TECHNICAL ANALYST.PLEASE ELABORATE"

My Notes: You take a trade based on your analysis. Your analysis is conceptually correct, giving you a positive expectation. (meaning over a period of time, your profits will exceed your losses). Your trade by trade profit or loss depends on market conditions, but you will emerge as a winner over time.

Now, you take a trade that is conceptually incorrect. But, Luck favors you and the trade works well. Your rewards have come due to a sudden chance, not because of your analysis. If you persist in such trades, the risk of ruin is high. Most technical analysts will offer such incorrect trades. As a matter of luck some of them will work out, and they think they can get away with it, till the big one goes against them. Then of course, they are out of the market of many years. Sounds familiar?

In the same way, when you take properly analyzed trades, sometimes you get a  big winner. This is not due to some extraordinary skill in picking winners. It is a matter of luck that you had the winner first, and, probably the losers will follow. The wise trader knows this, and does not get carried away.

11 comments:

kk said...

RESPECTED SIR,
THE LAST TWO YEARS BELONGS TO ONE PATTERN I.E. "HEAD AND SHOULDERS". I HAVE SEEN MANY CHARTS MAKING THIS PATTERN EITHER WAYS, WHETHER UP OR DOWN.EVEN ON AN INTRADAY BASIS NIFTY MADE THIS PATTERN MANY TIMES. SO THAT'S AMAZING TO ME, AS I AM NEW IN MY TRADING CAREER SIR PLEASE TELL ME IF THERE IS CYCLE OF THESE PATTERNS OR THIS IS EXCEPTION.
WITH REGARDS.

Vimal K Rao said...

"Trend Following" by Michael Covel is an excellent book on Swing Trading

NITIN DAMLE said...

Sir,
I think nifty is forming inverted H&S pattern on eod charts. Break level is 5065 can we expect rally if it breaks 5065 with tgt.5500 odd level or break below 4538 will bring it up to 4000 odd levels.
As ADX shows that mkt. is in trading mode can we expect trending move above/below these levels? Pl. comment.
Nitin Damle

CHANDU said...

Wow sir after a long time i saw a brilliant post.

You did not give answers but You showed path.

Iam keep learning to be successful trader with your guidance.

Thanks for your posts and take care.

gourav said...

Hello Sir,
Gourav here.You adviced me to follow one or two pattern.Can you please give one example.Presently I am following one.By using DMI/ADX and 5EMA/13SMA/34EMA/89EMA decidig the trend and using CCI(3)to take entey and then using donchain channel as stop loss.But I as I am trading only the nifty so I am unable to take tarde most off the time.So shuld I scan stocks for this particulat pattern.
Also one more query is it advisible thr FOREX market ???

Regards
Gorav

tushki said...

sir pls suggest me chart pattern for unitech

Danish said...

I would like to add something for the guy who wants to leave his job for trading. NEVER DO THAT.

I have been in the markets for a very long time now and have met many many successful people (working in markets in one or the other way) here in New York. Most of them accept that they can't make money in markets. They all have full time jobs on which they are dependent for living.Even if they are in trading, most of their money is coming from advising and not trading own accounts.

Coming on the LUCK, my experience tells it is more of luck than analysis that makes money in trading markets. So called technical analysts and fundamental analysts won't agree because it is their way of living.

All the analysts keep changing their analysis as markets keep advancing.

I would recommend reading Fooled by randomness by Taleb and clarifying all doubts.

Note: I am not against technical analysis. Infact, I have written dozens of articles on techncial analysis for various US based financial magazines. Also, I have done enough research and in the end conclusion was "I DON'T KNOW".

men said...

Danish, it would help if you could give feed back about the US. If that markets goes up can v fall? I am reproducing a quote of Warren Buffet. "I'll meet some guy on the street today whose net worth will be growing faster than mine on a percentage basis, but if I start with a big enough number, it'll be a while before he catches me. It's a long way off for China's economy to be larger per capita than that of ths US."

men said...

Mr. Sudarshan, could you please give some suggestions on how best to use calendar spreads for trading. Also at what level should a positional person consider Longs/shorts for the above?

Danish said...

Hi Men,

I don't know if you are asking about stock markets or general conditions. Although, Dow is up 50% but general conditions are still very bad. Even US citizens are not able to find jobs. Rents are down a lot in Manhattan (20% down from 2007 and on top of that 2 months free on 14 months lease). So, system is trying to find new normal. I met few guys (popular faces) and they are all very bearish on US markets and expecting new lows in next few months.

suddu said...

sir,
I am a day trader and i trade as per 15 min chart..means i take 15 min high and low and then averge the same and then i took a decision whether i should buy or sell. for example:-yesterday dlf low in 1st 15 min 356 and high was 364.1 avg-360....i buy abv 360 after that stock went till 366.7.