Options - Best & Worst Trading InstrumentOptions (Index & stock) have been double edged sword. In the hands of experienced traders, it has resulted into multi fold growth of capital but at the same time for beginners or new traders, it has been capital killer.
Over the last 5 years, I have had opportunity to speak to hundreds of traders most of which have lost their hard earned money by trading options. Some of them have even gone to extent that they borrowed money from friends or banks to trade and only to lose it all by gambling in options.
Lets review some of important factors which has given helped experienced traders earn lakhs or even crore daily from options while most are just losing out their capital.
Factors resulting in losses for New Traders.
1. Lack of Technical Knowledge
Most of so called traders ignore the importance of Technical Analysis and directly jump into option trading. Most are either following news or tips from various platform with zero understanding of when to trade, when to book profit & most of all when to book loss. Its like jumping into water without knowing how to swim. Technical Analysis understanding is very important as it will give an edge to trader and help them analyze key factors related to entry, stop loss & target. Even though their is no 100% success formula in trading but having correct knowledge can increase your success chances from 50% to 70-80%.
2. Random Trading
Random or boredom trading is also another factor for failure of most option traders. Market gives us 1-2 good trading opportunity but many of us are part time traders who want to earn from market based on our availability and do not wish to wait for right opportunity given by market. Some will start the day with proper plan and only to get bored after couple of hours and then they will start trading randomly.
3. No Risk Management
The most key aspect for a good trader is risk management. But all new option traders will initiate trade first and then think about SL/Target. They have no knowledge about position sizing and will risk all the capital on a hero or zero trade on weekly expiry. Most of new traders will keep their losing trades with the hope of recovery while book small profits due to fear of losing.
4. Use of High Leverage
Unfortunately their are new trading platforms which float rules set by SEBI and provide High Leverage to attract new clients. People with small capital of 10-20K can buy 2-5 lots on an index option which can erode their capital in just 1-2 trades. Leverage trading can accelerate your losses 5-10 times which is another blunder for new traders.
5. Social Media Influence
Nowadays we regularly see people making lakhs or crores of profits on daily basis and all social media platforms are full of such screenshots. Many of them may be great traders who are actually making money and others may have just put a doctored screenshot but this influence/attract new traders to directly jump into Option trading with the hope that they will also replicate this success.
New Option traders completely ignore the hard work, analysis & planned work done by most successful traders and they only focus on money aspect which is main reason for their downfall.
6. Get Rich Quick Mentality
Every one of us want to earn money and have luxurious life. But most of us forget about hard work & practice which is required to reach their. Everyone is now directly jumping into Option trading with mindset to double or triple their capital in a short span without even putting a month of effort. When I have discussed expected monthly returns by most new Option traders, most common answer is 30-40% return on the capital in a month which translate into 350-500% return in a year. When we get 5-6% return in a year from fixed deposits, people are not happy with 5-7% return per month from trading.
Experienced Traders on other hand have following attributes which makes them winner.
1. Technical Expertise
All pro traders have a setup, strategy or proper knowledge of Technical Analysis which they have practiced over and over again for many years. It is not about having hundred strategies but have 2-3 strategies which you have practiced countless times in Live Market.
2. Trading Plan
All good traders have a plan w.r.t. maximum number of trades in a day/week/month. Maximum loss or profit their are willing to take before they close the system. They have understood that it is important to stick to a plan for long term success in trading.
3. Only Trade Right Opportunities
Patience is the key in trading and experienced traders knows this well. They wait for stock/index to come to their defined levels & form right setup before they initiate the trade. They are like sniper who patiently wait till all the factors are right to take the shot.
4. Focus on Risk Management
Risk management is by far most crucial aspect of trading. Importance of Risk Management is only understood by those who have been in market for some time. Although most think that it is the winning strategy of setup which will earn your money but only few focus on psychology building which include not taking revenge trade, do proper position sizing so that you are not under influence of fear or greed.
In the end, I only want to pass the message that Option trading is the last instrument which a new trader should jump into. Anyone starting trading should start with Equity as it has less volatility compared to Options and person can try their strategies for smaller risks.
Do you resonate with any of the factors above? Share your inputs on how you have grown to be a successful Option Trader.
Thanks
Piyush Gupta
Learn & Earn
Community ideas
Dow Top Has BrokenDow Top Has Broken. Will market continue rally? Nifty has changed its trend today.
Kennedy's channeling Technique Explained Hello everyone,
I have tried my hands to explain Kennedy's Channeling technique (KCT),
In this video what I have explained is:
ZigZags ( Internal pattern & concept of channel)
Flats (Internal pattern & concept of channel)
Impulsive waves (Internal pattern & concept of channel)
& a Example
Please do comment what you guys like about the video & scope of improvement.
Thanks for watching!
Ascending Channel Pattern 1. What is the Ascending channel pattern?
- Price trade within the range in an up trend, it forms a higher high and higher
low.
- The channel provides support and resistance
- Until prices continue to advance trade within the channel
- Volume Activity turns stagnant
2. How to trade it?
- If it breaks above the resistance line, extrapolate the channel range from point of the breakout point.
- If it breaks down the support line, extrapolate the channel range from point of breakdown point.
How Resistance Turns into A Support?Hi
You must have often heard that a resistance once taken out could act as a potential support level. Let us see through this chart how this happens.
Firstly there is a strong resistance zone on the left bottom of the chart, which is also 2019 high. Price took a knee jerk reaction from that level. Many traders would have bought near the highs in a bull market but now they are sitting in a loss. They would be thinking that as soon as the price comes back to their average price or cost, they would exit/sell.
1. Finally after the sharp bear phase, price rallies back to the 2019 highs. Now the above traders/investors would start selling at cost. Many new traders who think that price is at resistance would also start shorting (selling). Those who bought at lower prices would also try to book profits. So there is a flux of sell orders at that level. But wait! is that true?
2. Selling is there but buy orders are just overwhelming. Buyers are absorbing all the supply and managed to hold the reaction of selling. Or you can say that seller were not strong enough or buyers were stronger. If sellers are not strong and buyers are strong then what would happen? Tell me..... Yes you are right, the price would rally higher. And it did.
3. Now all those seller who acted at stage 1 would be shocked and want to book their loss at a better lower price. There are others who still think that this stock is weak and the BO is fake, so they start shorting. Price pulls back to the 2019 highs.
4. Now stage 1 sellers have a better opportunity to cover their loss, so they start buying. Left out buyers also start buying due to better bargain. Pullback buyers enter the market. This large flux of buying orders pushes the price higher and the rally resumes.
5. In this way, the prior resistance turns out to be a support for the stock.
This same psychology repeats at 6&7 where price holds previous resistance as a support.
Imho, Its always beneficial to see any market or chart from psychological point of view rather than merely patterns and signals. The same market psychology is true for how a support once broken, turns into a resistance.
Thanks for reading. I hope it would be useful.
Regards
How to add alerts on TradingView?Hey everyone! 👋
Alerts are a key trading tool that every trader should know how to use. Check out this quick guide for more information and some secret tips!
What are alerts?
TradingView alerts are immediate notifications you can set for yourself when the market meets the custom criteria you create. For example, "Alert me if Nifty crosses above 16000". All users can get visual popups, audio signals, email alerts, email-to-SMS alerts, and also PUSH notifications that are sent to their phones. Pro, Pro+, and Premium users can also receive webhook notifications when an alert is triggered.
You can also create alerts on prices, indicators, strategies, and/or drawing tools.
There are 2 ways to create alerts:
1. Using the Right-click
2. Using the vertical scale
Method 1:
This is a pretty straightforward way. Go to the price level at which you want to add the alert, then right-click and select "Add alert". Voila! You are done.
Method 2:
The second way to add alerts is by using the vertical scale (Price scale). If you hover over the vertical scale, you will see a “+” sign.
On clicking this sign, you will be greeted with the “Add alert” option. Just click on it and the alert will be set at the selected price level.
You can also customise your alerts by using alert settings.
Indicator Alerts
You can also set indicator-based alerts with predefined conditions like "crossing up/down", "greater/lesser than", and "entering/exiting channel". You can also create your custom trigger settings by using the alertcondition and alert functions.
Tip : The alerts can be accessed using the “Alerts” tab which is the second option from the top, on the right toolbar.
Thanks for reading! Hope this was helpful!
See you all next week. 🙂
– Team TradingView
Feel free to check us out on Twitter and Instagram for more awesome content! 💘
Identifying traps: Alarming signsThose 2 green bars were of 6 & 8% resp. With no follow through. Price is sideways with major pick in volume, shows strong supply is incoming n those 2 green bars were created to lure Public. There can be a pullback, but it wont sustain. Increasing of volatility is a sign of big move, since 5%+ moves have become normal since mid May 2022. Even a 6% move on 16 May lacks follow through.
Stock is nearing a structural breakdown, trading just above congestion zone created just before a big move. Interestingly there is high volume activity just above the congestion zone currently. This can be interpreted as market makers are offloading their stock. Any bounce here on wards will se a sell off.
On Lower Time frames
There was a failed breakout with high volumes, just above previous day. Again the longs were trapped.
To Conclude we may see a sharp decline in coming days, any bounce should be used as exit opportunity.
Magic of Mean Reversion (1:15 )Traditional technical analysis focuses on how to trade when a market breaks a significant high or low but never when what happens when it holds up. This is where I come into the picture. I have repeatedly posted these trades because they provide an extremely asymmetric risk reward ratio. During bearish phases, it is important to adapt to the market conditions. It is ideal in the current times to buy low and sell high. If a significant support breaks and then holds up, you can expect a burst of momentum in the coming few days. CEAT has given an exact trade to me once again. When I started writing about trading, I decided to not be charlatan and post anything that I did not believe in. One might see only winners on my page but that's not the truth. Like I have iterated before, I like control my risk reward and not accuracy. This system generates way more losers than you are used to, I would definitely like to add that but the risk reward so huge, with accuracy as less as 10%, it winds up being a profitable system. I personally chalk it up as a personal win. Follow me for more learning ideas.
Why It Is Hard To Hold A Winning Position. ?Why It is hard to Hold a winning position. ?
----------------------------------------
Suppose You took a trade ,bought 100 quantity at price 100 , with a SL : 80, and Potential target of 120,
Now what happens it goes up to 105 (you think your analysis is good let us wait)
Then it come back to 100 went further down till 90 (you thinks it is ok we have to give it room)
Then it went up above your buying level till 115 (now your target is 120 you are just 5 points away, what will come into your mind?)
Then suddenly sharp selling starts and you got your SL triggered.
More or less the PnL whipsaw, take you to the moon and within seconds, it drop you down. The PnL whipsaw creates dynamic changing emotions into your mind.
Am I correct or not till now, feel free to comment. ?
---------------------------------------------
Let us more about some pre-set emotions which comes out and affect our decision making with open position.
1) Fear of Losing the open position’s profit :
See everybody want to win nobody want to see himself of herself as a Loser in the mirror , when you take a trade you always think that it is going to give you profit (subconsciously), with such a biased mind the open position PnL affect your decision making. You get so much attached with the running profit that you start thinking like that it the profit you have already booked and feeling that it is your released profit, now you are “not willing to let it go” because you now attached to it emotionally (psychologically).
This type of fear arises from our belief system and past experience developed over previous trades. The social culture, family atmosphere also can be the reasons.
“If You think you are a risk taker than you must thanks God , because everybody do not have such brave heart.”
Advice: “Let it go”, the open position’s PnL, is not yours, it is the released one that counts. Believe in your system and let the target hit or trailing SL get triggered (SL according to your strategy).
2) Past Experience (Fear intensifies when have a very bad experience earlier)
Students approaching me for learning trading psychology ask me why you ask us about our past experience and track sheet, they do not want to recall, but their past experience and the track record tells their complete story , it tells everything what is the problem with their trading , what need to correct immediately what are the strong weak part of their psychology.
But why: Because past experience shapes our psychology. If you have witnessed a series of trade where your target is missed by few ticks and you have to book SL. Then you start thinking about your exit style, you think is there any improvement needed. At this point of time you again shift from this strategy to that strategy. If you are trading from a while then you can understand the gains we make are not smooth sometimes great sometimes they are worse. If you think there is a holy grail strategy you will spent whole life searching it, but still remain empty hand.
Advice: You have to realise that having continuous losses in a row can happen frequently as, you cannot avoid losing streak, even the professional traders have their losing streaks going for 2 , 3 weeks. You came here not to trade 1 week , 1 month or 1 year , you must have a long term view.
3) Lack Of Clarity :
If you are among those traders who always have a very sceptic view about trading, have knowledge and experience but , do not see it as a sustainable business, thinking that you cannot rely on trading income. You will develop a tendency to book early. Because holding a winning position requires a courage which comes from clarity.
I met a research analyst managing his client’s portfolio giving trading and investing recommendations to his clients on regular basis for more than 5 years. I asked him why you selling your valuable advice when you can profit from it. You know what he said to me, it is shocking for me he said , Nobody make money in trading. He do not believe in trading business even though having his bread and butter by selling his advice.
It is worst how you can sell your recommendations when you personally feel that nobody can make money. Is it not contradictory?
Advice: If you do not have clarity about your trading system, you cannot trade confidently and this one thing alone can derail you from your trading plan. So spent time reading, listening to various successful trader, know their story their style, the more you read listen the more you will get the knowledge and clarity.
4) Complacent with the Current profit :
I think this is the worst problem happening with you because if you are very complacent you will end up booking very small and losing big ultimately your equity curve will go down slowly. This happen to novice traders who want to make some extra income, they see that open position profit is enough for their one day or two day expenses they close their positions immediately.
Note: Have you seen people doing a mediocre job or their father’s small business even they have the potential for a bigger goals. Booking small profit frequently makes us convinced that what we are doing is great because we see a streak of winning trades.
Reason: Simple reason of it is than, we tend to apply our day to day life logics here, we are unable to see the potential and avoid systematic approach.
Advice: Your strategy is developed according to the profit potential, risk management not for your day today expenses or complacency level. Stay goal oriented make small, short duration goals and see a series of trade at a time not stuck your mind in single trade.
5) Lack of acceptance:
When you do not accept loss you will always try to avoid it this is the main reason why people sit tight will their losing position but cannot hold their wining positions.
Reason : Arrogance, Confusion, less belief.
Advice : You can make profit or loss on a particular trade depends on market situations. Recall this before creating every new position. Just follow you system.
Technical Indicators: Are they certain or probabilistic?There are three types of technical indicators that I have listed in this post- Trend, Momentum and Volatility . This is not an exhaustive but selective list of indicators. The selection is based upon the most useful and the most popular ones.
🔊 General Definitions
✔ Trend Indicators : They represent the overall direction of the market. These indicators lose their significance in a sideways market.
✔ Momentum Indicators : They represent the rate of change in price over a period of time. These indicators oscillate between a defined upper and lower limit and hence are also known as oscillators.
✔ Volatility Indicators : They represent the intensity of price swings around the mean price. These indicators are useful in identifying vital values such as stop loss and targets.
👉 Select carefully : Any indicator can be selected from a specific group but it should be avoided to select two indicators from same group. Reason being two indicators would fire signals for the same characteristic and hence one of the signals will become redundant.
For using multiple indicators, it is advised to take only one signal from each group.
👉 Certainty behind indicators : Trading is probabilistic and indicators are a subset of trading, hence they cannot be certain. In simple words, indicators are derivatives of the price action so most of them are delayed. That is the reason, many a times, signals are fired too late. On the other hand indicators are good at devising strategies.
🚩It is advised to trade one strategy consistently. One advantage of indicator based strategies is that they make the trading process more mechanical and hence help in infusing discipline. In this way it may suppress the haunting psychological weaknesses in traders over a period of time.
🚩There are some traders who have used indicators and made money while most of the others have given up on indicators and made money by trading price action only. In my opinion one should always give it a try before giving up. It will surely add to one’s knowledge. I am not too much in favor of indicators but one should always try to discover new things for creativity.
I hope it helped. Thanks for reading 👋
Which type you belong.?The best way to find the type of trader you are is to see the capital curve,(or equity curve) over time into your trading account. Over time it may increase or decrease depending upon your performance but the way it is increasing and decreasing will give you an idea of where you are going, towards a professional trading or still in the 95% of crowd, who overall lose money.
------------------------------------------------
Type - 1
Big Loss
Small Profit
You will not believe me I observed ledgers of many traders where I found that this category has the majority. Some lose there entire capital in just 20 to 30 trades their losing trades are so capital disruptive that they soon get out of the game.
The reason are many but one common reason I found in such traders that , they do not accept that they are on a path of failure. They always get crazy about their accuracy ,(as if you book small profit and big loss than your accuracy will be excellent) . One more problem is their search for a HOLY GRAIL.
My advice: May be this game is not for you. Try something else than trading, (Bitter advice but what can I do the reality is that this game is very hard)
-----------------------------------------------
Type - 2
Big Loss
Big Profit
Now this category is of those traders who enjoys this game, their main reward is not monetary reward the innate thrill of this game, gives them so much pleasure that they can resist themselves.
Reasons why they tend to behave like that are many but I think, they play the main role for prices to rally fast they make market uncertain and high volatile.
Ultimately they lose money but they are not concerned.
My advice: May be you , do not need any advice , You need Introspection
-----------------------------------------------
Type – 3
Small Loss
Small Profit
This type is of that trader who had a bad experience in the market and now they want to improve their trading they read books follow gurus . They always are in a search for holy grail . Though they ultimately lose money but I like this type of trader because they at least accept loses. They at least cut down the main hurdle. They survive long.
Advice: You accept small losses but why exiting early manage your emotions follow plane believe in plane, that’s it. Just allow trade to run in profit.
----------------------------------------------
Type – 4
Small Loss
Big Profit
This type of traders are the pro ones their entry is difficult but exit is marvelous , rest of the traders shuffle a lot while exiting from a trade but this trader they are genius in it. They make plane, execute them, flexible with plane, accept mistakes … etc
Advice: Sometime you may feel boring as the trader life is not a social life , after seeing all whipsaws in your trading journey you may feel tired but always remember there is yet many milestone to achieve, this is just a beginning.
----------------------------------------
The trading is a negative sum game , here one's profit is a loss of other. This is like battle where traders fight with their conflicting opinions at the same time simultaneously.
So keep your fighting spirit up .
Type: 2 Fear - Fear of Losing (Most Common)Type :2 Fear of losing
If you’re going to be a trader, you’re going to lose money at some point, and in case you are still in the phase of trying to avoid all losing trades and searching for a “Holy-grail” trading system with a 75% strike rate, you should forget about all that right now. As cliche as it may sound, losing really is part of winning as a trader; the two are inseparable. If you don’t learn how to lose properly you will never make consistent money as a trader.
Reality check…
-------------------------
ALL pro traders lose money, and they understand that it’s just part of the “game”. Sadly, for many traders, every trade is accompanied by a tremendous FEAR of losing money and sometimes intense emotional attachment.
Some of the key reasons why traders become fearful about losing their money include the following:
1. They don’t understand that mathematically, over a series of trades, a trader can lose a majority of their trades and still be widely profitable, simple math proves this.
2. They are simply fearful of losing money in general.
3. They are trading positions that are too big (risking more than they really should be), causing fear, sleepless nights and huge emotional swings.
This is some pretty powerful stuff so make sure you actually read the whole article and re-read it if you have to. What you learn here should give you the power to eliminate your fear of losing money in the markets and will help you develop into a confident and emotionally collected trader.
Fear of losing money can be a good, natural emotion, but we need to transform its focus.
Fear of losing money is a good emotion to have in many areas of life, if we did not have it there would be evens more chaos in the world and in the markets. Humans are protective of their acquired wealth and property, and rightly so; they worked hard for it.
However, in trading, this natural energy to be defensive and emotional with money needs to be transformed and refocused into a different mental state…
Instead of being fearful of losing your money when trading, embrace the control you have on each trade; a trader has complete control over the risk management of every trade via stop losses and position sizing, . These risk management tools are your way of being in control of your money/funds, and instead of being “fearful” about losing money, you should feel empowered and confident because you can predetermine how much you are comfortable with potentially losing BEFORE you enter a trade by using these tools.
However, just using these tools to control your risk per trade is not quite enough to totally remove the fear of losing.
-------------------------
Ask yourself some serious questions
If you feel fear or any emotion at all when you place a trade, you need to “slap” yourself in the face and ask yourself 3 big questions (and answer honestly):
1. Do I really have the knowledge and confidence to be trading with real money in the first place?
If you’re trading your hard-earned money in the markets but you don’t know what your trading edge is and you don’t have 100% confidence in your ability to analyse and trade the markets…you probably should not be trading. One of the biggest reasons traders become afraid to lose their money is because they aren’t confident in their own ability to trade! It seems silly I know, but it’s very true; many traders simply don’t have a trading strategy mastered, they don’t have a trading plan, trading journal, etc…they simply aren’t prepared to risk real money in the markets yet…thus they feel fear when they trade.
2. Am I trading a position size that’s too large for my personal risk profile / per-trade risk tolerance?
If you don’t know what your per-trade risk tolerance is, then you need to figure that out first. It’s basically just the dollar amount that you feel like you are 100% comfortable with potentially losing on any trade; because you CAN lose on any trade…remember that. You have to take into account your overall financial situation and then determine how much money you should realistically and honestly have at risk in the market on any one trade…be honest with yourself here. You’ve got to think of yourself as a risk manager and as someone who is managing funds, rather than just a small-time guy trying to get lucky; your trading mindset will directly influence your trading results.
3. Do I truly understand the maths behind trading?
-------------------------
When I say the “maths behind trading” I am mainly referring to risk reward and how it relates to your overall winning percentage. For example, on a series of 20 trades, you are likely to lose at least 35 to 45% of the trades, and most traders who are successful lose anywhere from 40 to 50% of the time, some even up to 60% of the time. But, through the power of risk reward you can lose more than you win and still come out very profitable. We will expand on this below.
Embrace the belief that losing is OK
Losing is good if you’re cutting your losses quickly and understand that by doing so you’re simply preserving capital and that your winning trades will pay for your losing trades with profit left over. This is the power of your average risk reward ratio over a series of trades coming into play; we will see this in action below…
Even very profitable traders typically lose more than they win, to prove this point let’s take a look at a case study showing 14 trades with a just a 43% win rate. To be clear, that means you are losing 57% of the time and winning just 43% of the time. It can be hard to associate “losing” the majority of your trades with making money, but as I discussed in one of my recent articles, you don’t have to be right to make money trading. You can make money with poor accuracy and decent reward to risk ratio.
What after a heavy Loss ?Different types of emotions, questions, doubts arises in our mind when we see our capital depleting overall , we see a big portion of our capital is gone now ,we left with very less compare to initial capital.
_________________________________
Different concussions made by different traders
_________________________________
1) They loss because of manipulator , operator , promoter , fraudsters etc ...
This type of thinking is obvious because there are manipulators , operators , insiders who are always at advantageous position than you ... It is just like that your army trying to fight with a king where his army is equipped with better weapons.
Your chances of winning is less , obviously . Am I right or wrong.?
See why I took this example because in trading profession one's loss is another's profit. It is not very different with ancient war where one king use to fight with other risking the life of his soldiers for looting wealth of opponent.
There are professionals, Institutions, prop desks, Fiis ,Diis , mutual funds , different portfolio managers serving their clients. Many players playing at the same time.
Now main point is do we not take trades as our chances are less ?
See yes big players make money but you can too make money you need to understand your strength.
Now at this point you will surprise what is retailer's strength , in front of big players . Let me list it out.
1) Less capital . You do not need very much liquidity to trade efficiently. Big player cannot trade scrip which do not have very much liquid.
2) Smooth Entry and Exit : If I say you have to enter or exit 10Lac shares of Reliance today can you execute it at a small price range no , but with a small capital it is possible.
3) We can stay away from market for long time if we do not see a clear trend. But what about big players he have to trade every market condition and they trade and bear the existence cost their.
4) You can change your trading style much to get better results but they can't do much changes .
This is just like small armies comparing with big armies , small armies have better less conflict within ,Management have less difficulties in handling , Less Budget. etc...
See you can blame big players for your loss but introspect within is this the only reason. ?
_____________________________________
2) They lost because they do not have big capital :
I remember a quote .
"A trader is never under capitalised his mind is underdeveloped "
First learn to grow small account. There is no guarantee that if you have a big account you will perform good.
____________________________________
3) There is problem with their strategy . (search for holy grail)
See if you think a strategy formed with mathematical calculations can alone make you rich . I do not think this business is for you ... it is harsh but true.
"" It is just like the search of god outside but it is siting inside ""
Work with your trading mindset will give more results than working with strategies.
___________________________________
4) Fear for losing money again
This fear is there in every trader whether you lost money made money or just starting , but what happens when you had a big loss experience this fear starts growing bigger and bigger , your decision making get affected with this fear. You get very fearful with open position when it shown some profit you just try to book ass soon as possible. You start booking small and lose big, with this derailed trading style no progress is expected.
___________________________________
5) You think you should join expert traders.
Now at this point you are thinking constructively ,but this gives opportunity for fake trainers , tip providers , brokers running their own agenda. For them to convince you for their services is very easy. They clearly know how to convince. I do not say there are only fraudsters their are genuine guys too but their percentage and willingness to help you is very very less.
"It is just like in search of peace , satisfaction, god people end up in the trap of fake babas , gurus so called god messengers."
I will further explore more about the possible psychological situations after a big loss and about Loss recovery strategies in my next post.
Stay tinned .....
Situations which shakes you emotionally ,Why & How ? There are Four worst possible situations may happen even in a series of trades which can shake you Psychologically.
==================================================
1) After hitting your SL market straight goes in your favour --->>
You know prices are not random always, the patterns, support, resistances, trend line concepts works well but for whom. ? and how ?
Suppose you found a crucial support level and taken a buy position with stop loss just below the crucial support.
You have placed your SL at correct place no doubt about that, but do you know such levels where most of the people may place their SL or may panic and exit their positions can be predictable.
Second , If you are playing trends and created a long position , can you exactly guess the prices do not correct till your SL level .no …
Third , This may conflict with first one but believe me most of the time prices are random, market do not know you exist. The logic you inculcate for the upcoming move may not valid even if the movement happen exactly the way you predicted.
Now you will surely ask, is booking SL is a good Idea or not. ?
Answer : Yes It is a good Idea to book SL , even if market goes in your favour after taking SL.
Reason : See you cannot analyze all factors which are affecting price now. No system strategy is 100% accurate. You may see a series of trades where after booking SL prices going in your favour. You may think there is some problem with my strategy (even if you have properly back-tested it) or is there any need to change something.
Believe me this is normal ,such situation you cannot be eliminated completely. Even an experienced trader goes through it.
"In life we regret of quieting things early, we think if I had carried those things a little bit further instead of quieting , results may be drastically different"
Key Takeaway : Accept such things do not give up seeing multiple sl in a row. Because shit happens….
==================================================
2) You See Your Target Missed Just By One Tick ==>>
It is normal do not panic have you not seen in cricket team winning and losing just by 1 run .
""There are many couples where we see that one is healthier than other. When the unhealthier one become sick everybody thinks what will happen to the healthier one if he or she dies , but unhealthier survives and healthier dies first. It is just like you thinking that prices moving in your favour and your target is very close and suddenly something happens and SL triggers."
Note : Accept that such things may happen and you can't do much about it. It is Okay
==================================================
3) After You exited the price went further in your favour without taking SL ===>>
This happen with me all the time and deeply frustrate me I can take SL and relax but I cannot relax in this situation where I exited just seeing profit and prices went straight without hitting my SL level.
See any advice for such situation depend on your risk and reward ratio. If you have booked a decent risk reward then prices goes up or down , not a point to worry.
If you booked very normal risk reward and then , you have to work on your psychology. See holding a open profit position takes more courage than holding a loss making position.
If you are doing this mistake again and again It shows one clear thing about your psychology "your have less courage."
Harsh but true........
Note: Work on your mindset .
==================================================
4) You get Frustrated with flat market Exited Early ===>>
See most of the time market remains flat it is a fact. If you getting frustrated with this nature of market. You should learn to be patient with your open position.
Note : You just place SL and Target that's it.
==================================================
Acceptance is the key , if you getting good results changing your predefined well back-tested ,proper risk reward giving system ,it does not mean you doing right thing. Many times you make profit by just taking random trade setups. It does not mean random trading works. Even a layman can predict market movement correctly in a series of days.
If you getting Bad results it also does not mean you doing wrong things.
==================================================
How and when should apply which Option's strategyHey everyone! 👋
This post is just for sharing knowledge about Future and Options strategies,
First of all, one should build view (bias) on market direction, it may be bullish, bearish, sideways, or there may be some events too, like budget day or quarterly results seasons or may be something else, once view is built then what are the ways to apply futures and options strategies are shown in this post.
Options trading may sound risky or complex for beginner investors, and so they often stay away.
Some basic strategies using options, can help a novice investor protect their downside and hedge market risk.
Options trading is meant to provide a process that defines the selling and buying of options by a trader.
The options trading strategies are what make up the options trading. There are various ways that a trader can use the options trading strategies to their advantage.
Options trading is a great way to increase your returns as an investor. You will be able to generate profits when the market goes up or when it goes down. However, with so many options trading strategies on offer, you may find it difficult to know which one to choose. This post is showing ideas of the different options strategies and help you choose the right one based on your views.
What Are Options Strategies?
Options are one of the most flexible and powerful way for investing in the stock markets.
Investors can utilize stocks in many ways, including buying and holding onto them to long-term appreciation in value or short-term trading to make a quick buck. However, the stock market is huge, and investors can utilize many sophisticated strategies.
The first complex strategy is called a call option. Call options are contracts that enable the holder to purchase a stock or other asset at a specific price within a specific time frame. If the price goes above the strike price, the owner can buy the stock at a lower price and then sell it at a higher price. This can result in a great return, but a loss is possible if the stock doesn't move or move in opposite direction.
Types of Options Strategies
There are four ways to trade options strategies : call, put, spread, and straddle. First, let's start with the call and put. A call is a contract that gives the owner the right to buy a stock at a specific price on or before the option's expiration date. On the other hand, a put is a contract that gives the owner the right to sell a stock at a specific price on or before the option's expiration date.
Spreads and straddles are both strategies used to manage risk. A spread is created by buying the same type of option with the same expiration date but with a different strike price. The strike price is the underlying stock price when the option is exercised. A straddle is created by buying an option with a lower strike price and an option with a higher strike price with the same expiration date.
Pros and Cons of Options Strategies
Just like selecting a stock to trade or invest in, selecting an options strategy can be a difficult task with risks and potential payouts. The pros and cons of options strategies help you decide which is best for your investing style.
Pros:
- Lower investment costs
- Stock options can be used as a way to hedge your investment or portfolio risk
Cons:
- High risks and losses can occur if you don't research your options strategy
- Options can only be exercised at the expiration date
Conclusion
Traders can use Options strategies to take advantage of both rising and falling prices of stocks. We hope you have gained a deep understanding of what options strategies are this post.
See you all next week. 🙂
RK_Charts
Most investors treat trading as a hobby because they have a full-time job doing something else.
However, If you treat trading like a business, it will pay you like a business.
If you treat like a hobby, hobbies don't pay, they cost you...!
Disclaimer.
I am not sebi registered analyst.
My studies are for educational purpose only.
Please Consult your financial advisor before trading or investing.
All harmonic bullish patterns in one ( Point C < A)in.tradingview.com
An attempt to put all harmonic bullish pattern rules in one diagram.
How to add images to your charts?Hey everyone! 👋
Do you know that you can add images to your TradingView charts? That’s right!
We have prepared this visual guide to help our awesome users customize their charts by adding images!
Sounds good? Let’s get started. 🚀
There are 2 ways to add images to your charts:
1. The good old copy-paste method
2. Using the “Image” upload option
Method 1:
1. Open the image that you want to add to your chart.
2. Copy it and open the chart window where you want to add this image.
3. When you are at the chart window, right-click and you will see the “paste” option. You can also use the keyboard shortcuts as per your operating system. (Ctrl + V for Windows OR Cmd + V for Mac)
4. Once you are done pasting, the image will appear on your chart.
Method 2:
1. Go to the toolbar on the left side of the screen and select the 5th option from the top.
2. Once you click on it, you will see plenty of options. Just select the “image” option.
3. This option will provide you with an upload window. All you have to do is just click on “choose image”, select the file, and click open.
.
4. You can change the opacity of the image using the “transparency” option.
If you still need help, try watching this short video tutorial that we made out for you.
Thanks for reading! Hope this was helpful!
See you all next week. 🙂
– Team TradingView
Feel free to check us out on Twitter and Instagram for more awesome content! 💘
Why Most Traders Fail? Practical ReasonsAs per my personal experience the following are the most primary reasons for failure in trading - applicable to all types of new traders and all the markets. Well! this is not an exhaustive list but the most reasonable one.
🚩 No Plan of Action
Trust me on this one, most traders fail to build a plan of action and fail. It is not only true for new traders but also to those who have been in this market for several years. Even if the latter have ever formulated such a plan, they would have never executed it with dedication. A couple of failures and all planning just vanishes in thin air.
The trader needs answer to the following questions:
What to trade?
How much to trade?
When to trade?
Why to trade?
Is it for intraday or swing trade?
How much is the risk?
Is risk tolerable?
Is risk reward ratio favorable in this trade?
Is the trade in the direction of primary trend or against it?
If he answers all these questions in advance, he will not have to regret after entering the trade. This would also bring confidence 🦾 in him.
🧐 Tip Seekers
New entrants would always look for tips from friends, business channels, broker or paid service providers. I don’t want to get into how this tip system works but I have never seen any tip seeker to be a successful trader. Rather I have seen many traders who lost their entire capital, even before their paid subscription was over. The harsh truth is that there is no shortcut to success in trading. Even seasoned traders have to work hard for making money. So, learning 👨🎓 is the first step for novice traders to approach what they seek.
🤑 Get Rich Quick Policy
Everyone wants to be rich overnight so that he doesn’t have to work for the rest of his life. This attracts traders to buy penny stocks. What is more attractive than anything, with these stocks, is the quantity that can be bought. A larger number of shares with the available capital. The other thing is profit potential. Buy at 2 and sell at 4, money doubled overnight. Unfortunately, that doesn’t happen very often. Traders buy such stocks for day trade or swing trade but then they keep it for years for one simple reason that these stocks never attracted large portfolios, for some valid reason. For such traders, investment in a sound company would have been a better option 😆
Another very popular instrument which lures traders and has the potential to destroy a trader’s capital at much faster pace is 'Options', especially weekly index options. I have seen people at broker’s floor loosing millions in just few minutes. New traders should stay away from Options and always start small, may be in cash segment.
🥵 Overtrading
Overtrading works like a currency shredder machine. Whatever goes in, never comes out in one piece. Its a very common practice among tape readers or those who trade on one-minute chart or less. Remember that you can either take one trade in a day or you can take 50 trades in a day. If you lose the former at tolerable risk, it would not harm your capital much. But if you make small profit after 50 trades, consider it a loss due to costs involved.
If you are unable to control this habit, then just start shifting to a higher timeframe after taking the trade. It will help.
🚦 Inconsistency
Say you have a plan but you are not executing it on every single trade. Your plan was to take a 1:2 risk-reward trade but sometimes you are taking 1:1 while the other times 2:1. A consistent trader would have a back-tested plan that he executes daily on every trade that he takes, no matter if that’s for a small profit every time. The trader needs to show some consistency in making small money every day/week. If he is consistent in it, then he can increase his position size for more profits and so on.
All the above reasons combine together to develop indiscipline. But if you will take care of the above habits, one at a time, as discussed then rest assured that you are on the right track.
Thanks for reading. I hope this was helpful 😉
Keep liking and comment for more such posts in future.
Bearish Flag PatternWhat is a bear flag pattern :
A bear flag pattern is a continuation pattern that resembles an upturned flag with a pole. It shows a continued bearish downtrend broken midway by a pullback – the upward channel or triangle representing the flag.
Criteria:
1. The pattern can be misleading if the retracement or the flag is larger than 50% of the pole.
2. RSI will help you gauge the strength of the pattern and the momentum after it.
How to trade it :
1. If the Flag section gets broken upside, It may invalid the pattern.
2. If the Flag section gets broken downside, consider the Pole section price range as the target from the break down point.
Check relative strength before entering the trade, It will help you to gauge the strength
How to play potential level breakout (From my latest trade)Steps
1) Identify potential breakout zones , crucial supports , resistances ,trend line , Patters like (triangle , rectangle , consolidation )
TATA POWER
other examples
UJJIVAN
ADANIENT
BTCUSD
BANKNIFTY
2) Wait for breakout "do not enter just seeing the breakout " ,watch carefully the volumes , then wait for a price to retest the level.
Many times when the prices make a crucial level , big players tend to exhaust this opportunity and fools us by fake breakout you can see my UJJIVAN idea in the links below.
3) when in price retest and start moving up then enter above just high of recent up swing and keep sl at the low of latest down swing.
This three steps are most effective approach for playing out the breakouts.
How to draw a good Trend Line .?(SCANNING TRENDING SCRIPS)
1) First, find a trending stock where , price moving up or down in a swinging fashion, like higher swing highs higher swing lows for up trend and lower swing lows and lower swing highs for down trend.
-------------------------------------------------------
(FILTERING OUT THE IMPERFECT TREND LINE)
2) At least three touches ,I mean touches without crossover. If you making a trend line by connecting swing lows then price should not be traded both the side price should be at left side of the trend line only that is the core concept of trend line.
-------------------------------------------------------
3) Check the distance between touches the distance between consecutive touches should not very too much.
-------------------------------------------------------
4) (SLOPE)
The slope of trend line should not be very steep. Flat trend line is okay but very steep trend line is not a good trend line.
Note: the trend lines are not very different from Support and resistances , The concepts apply to them is exact same just with one difference is that they are "TILTED". Trend lines also called tilted support and resistance.
==========================
The more you practice the more you get the grip.There are some trend lines ideas I shared where you can observe how price behave at trend lines.
Examples:
Why Stock Has Higher Book Value Than CMP ?What is Book Value ?
Book value per share (BVPS) is the ratio of equity available to common shareholders divided by the number of outstanding shares. This figure represents the minimum value of a company's equity and measures the book value of a firm on a per-share basis.
---------------------------
Here I am explaining you one of the reason why Book value per share exceed the CMP, the reason is related to , company's portfolio current valuation.
It is been very common that one company buys shares of other company , the dividend income is reported as other income, and the current valuation of these stocks is added to company's Book value.
----------------------------
For example Let us study this share name : Maharashtra Scooter
A well known brand of Geared scooter in early days. I think every body has a childhood memory attached to it's scooter . Now from a well known established scooter manufacturer to a holding company the journey is very different from usual.
Some interesting fact about Maharashtra scooter , that I found reading it's fundamental
Market Cap : 4,204 Cr ( opp .. That is not so great finding ✏️✏️✏️)
Book Value of Company : 22702 Cr (That is interesting)
Story is not over yet , wait
👇🏻👇🏻
Maharashtra scooter is holding 🫴🏻🫴🏻🫴🏻
💵💸💸💵💸💸💵💸
1) Bajaj Finance Ltd
Number of shares : 18974660
Holding Percentage : 3.13 %
CMP : 5519
Current Value : 10472.11 Cr .
🅱️🅱️🅱️🅱️🅱️🅱️🅱️🅱️
2) Bajaj Holding & Investment Ltd.
Number of shares : 3387036
Holding Percentage : 3.04%
CMP : 4640
Current Value :1571.58
🛵🛵🛵🛵🛵🛵🛵🛵
3) Bajaj Auto Ltd .
Number of shares : 6964277
Holding Percentage : 2.41%
CMP : 3607
Current Value :2512.01Cr
These three stocks announced dividends recently where ex date was 30 June , Dividend of 20 , 25 , 140 per share Respectively.
If I multiply and calculate the dividend earning of Maharashtra scooter that it stands at 143.92 Cr .
When I checked it's shareholding than I found more interesting things
1) All these companies are Bajaj Group Companies where Chairman is Mr. Sanjeev Bajaj .
2) Bajaj Holding has 51% stake in Maharashtra scooter and Maharashtra scooter has 3.04% stake in Bajaj Holding.
3) Company's ( FY 21-22)
Sales : 17Cr while
Expense : -20 Cr
But,
EBITA : +174CR (because of the dividend income got the point ? Comment Below )
If I add current portfolio value of these three stocks only (According to CMP) it it around 9605 Cr.
That is Why the book value of this stock is exceeding its cmp.
Head & Shoulders PatternBearish Head and Shoulders pattern
Type: Bearish Reversal
Prior Trend: Bullish
Look: Like human body head & shoulders
Right shoulder: Right shoulder is formed when prices correct after a sustained up trend
Head: once the correction is over prices resume their uptrend and make a new high that is prices start a rally to new highs than the prior high which was cloaked after a sustained up trend.
Left shoulder: Prices reverse and retreat almost to the point from where they started their rally and resume their uptrend however this time prices this time not only fail to make a new high and also unable to reach the prior high. In most cases, the rally is limited to the height of the left shoulder around it gives and takes 2 to 3 percent.
Neckline: A-line joining the low point of the left shoulder to the low point of the right shoulder.
Pattern confirmation point: Break of neckline
Pattern Target: Height of the head calculated from neckline deducted from the breakdown point of neckline
Confirmation needed: Must
Pattern failure point: when prices come back 50% of the Right shoulder length to the neckline point that is 50% retracement of the neckline point to the right shoulder
Example: CBOT Corn is currently forming a bearish head and shoulders pattern with a neckline placed at USc720. The left shoulder height is from 723 to 823 while the head length is from 723 to 824 so around 100 points is the head length from the left shoulder and the right shoulder height is from 723 to 798. The neckline breakdown point is 723 and deducting 100 from 723 gives around 623 targets on the downside. The conservative target is 50% which comes to around 673.
Traders Tip: Try to correlate with three different moving averages to improve pattern efficacy.
