Tracking the Day's Trend

As a day trader in NIFTY, I have to learn to find whether today is going to be a trending day or a rangebound day. Trading is similar to probability. Every trade has an edge of some percent and by finding it whether the day is trending one or a rangebound one, we can take our positions accordingly with a much greater probability of success. More about these are discussed in these posts - one and two

How should we do so for Indian markets? One great indicator is the Advance-Decline Ratio. By taking positions along with the analysis of this ratio may help one to take a trending vs rangebound call on the day.

Is Trading not my cup of tea?

As far as the articles I have read, nobody has spoken about the pains of trading as Dr.Brett did, in his blog. After reading that blog, I need to ask myself this question lot of times...

Is trading not my cup of tea and it is something else??

A comment in that post reads - the prob with all the newcomers is, that they are "overmotivated and undercapitalised". This can't be further from truth but people like me are finding it difficult to accept the harsh reality. I guess only when we accept the reality and do the following one can say trading is my cup of tea

I need to imbibe in myself the following beliefs about trading

* Treat Trading just like other business and become the sole entrepreneur.
* Accept Losses and treat it like losses in business
* Set proper targets not just stops
* Do trading with utmost discipline and money management and even after that you are not winning, accept the fact that trading is not your skill.

I am trading. But am i doing with all the above qualities? The harsh answer is no at this point.

Another link from blogosphere which talks about ineffective trading habits. Please scroll down the page in this link to find 7 habits of ineffective traders. After reading this i could list my mistakes.

* Not following stop loss all the time
* Keeping the positions open until expiry
* Not setting the targets according to day trader - 20-30 points or depending on the market

The thing is that i am keep on doing the same mistakes and as a result facing failures. Every time i fail i am pushing some more funds into trading a/c. I have to take a decision of not to push more funds into trading account until i see some meaningful improvements in my winning trades.

By rectifying the above mistakes and practizing trading for the rest of the year, i hope i can say a confident yes/ no for this question

Is trading not my cup of tea?

Lets wait till End of December 2009 to find it out!

Discipline

It is the foremost thing in trading if you need profit from the markets. Even though i learnt a lot about it from the book - ' Trading in a zone', I hardly used it in the past. I was irregular and didn't set the stoploss trigger trade at any point of time. The result is that at some point one will lost whatever earned. I was not disciplined and i lost all the money i earned in the last 5 trades!

I did a short in Nifty at 4464 and did the following mistakes

* Didn't follow the stop set at 4482 for intraday - NIFTY Closed at ~4525
* Inspite of my decision to do day trading, i carried the positions
* Made a new decision to wait until the expiry of july series (around 7-8 days to expiry)

After this Nifty went to as high as ~4615 in the next 3-4 days. But one day before the expiry NIFTY did a nose dive and came to as low as ~4420. I was watching the trading screen as NIFTY was trading at 4430-4440. I didn't square off. At that time i became greedy and was expecting 4390 in the NIFTY. So i didn't square off the position and left it as such and in the next day NIFTY expired at 4571.45.

So a loss, because of not following the discipline. Even though the markets showed signs of strength in the last 2 days, i didn't square off and was waiting that NF will fall inspite of all signals showing strength. I avoided the signals for most of the time, as i hoped that it will FALL!!!

As said in the book - Trading in a Zone, we will always look for signals which are augmenting our position and not for signals which we always look when we enter into trade or what we call as our edge!! All those were opposing and i didn't look and i took a loss of a magnitude that erased my profit that i got in last 5 disciplined trades

I have to understand that in a stock market everybody gets loss. Even the best will face loss. But greatness is determined by how long you stay wrong. I have to learn this lesson and move forward. This quality along with other distinguishing quality of great traders is discussed in Dr.Bret's blog post.

Confidence Vs Hesitation

I am not able to find out why i am not able to do more trades in Mini-Nifty over the past 2 weeks. I have put only 2 trades!

Am i blaming that i don't have time to study the market and put a trade?
Am i not watching the market and see what it is doing?
Am i not interested to put a trade?

Perphaps, the answers are otherwise to the above questions. After thinking a while i could see that i am more focussed on cutting losses, than on profits! Also i am thinking that i am not in a clear state of mind to put a trade. So I am hesitating to put a trade fearing that i could lose some money. I should be ashamed of myself only if i am not following the stop loss. So go ahead and do day trade in Mini Nifty with a maximum of 2 lots, with a proper stoploss. I have to figure out the target based on the trading range of NIFTY on that day.

So, I should confidently and with a clear state of mind put a trade and analyze the performance of that in the coming weeks..

Joined the bandwagon of amateur web traders

I had joined the list of people working in some other field pursing trading as their passion. I had my share of failed attempts in trading, trying to win the market! Though I had the dream of starting and writing something about my trading and my view, it didn't materialize till I came across a web page - E-Mini Trader's Introduction. That page left a deep impact on me, as the story of him resembled me in some way.....started trading way back in cash market, had some losses, left the account as such for 6 months with 20k cash, came back and started trade in futures without any proper trading system and discipline. It resulted in losses but the good thing is that i did only small number of lots in MINIFTY which is giving me a chance to learn the futures trading.

After reading that blog, I thought of starting my own blog. At first I thought i will do it in a week. But after asking some questions to myself, i decided to do it right away. Thus this is born :-)

My view is that starting something is not important, keeping consistency is more important. So i am going to try my best to update it. If this blog is not updated regularly then either i had stopped trading (the thing i am not willing to do.) I hope i will sustain in trading, If i learnt the following things

• Discipline in putting a trade and exiting one with a proper stop loss
• Cut losses rather than try to hold and wait for things to happen
• Commitment to take my trading to next level

My near-term goal is not profits but learn how to protect my capital. Over the past few days, thinking of it, i am hesitating to put any trades! Later on seeing the screen i am commenting on the missed opportunities. I have to learn to move away from it and just keep my head focused on the next trading opportunity as said by Bret in his article

I will post more about my trades and my experiences going forward