Nifty Future and Option Trading

ATTITUDE SURVEY

2013-09-22T06:53:00.000-07:00

This survey have been taken from the “Trading in the Zone” by Mark Douglas.

Answer to below questions are my personal opinion.

I have tried to answer the attitude survey questions and those are my personal view.Just want to say this questions are so critical that they can make or mar your trading career.I have been trading for almost four year now. I have seen some success with lot of failure,until I................

1. To make money as a trader you have to know what the market is going to do next.

No. I just need to know my edge. My edge will define my profit and Loss. Edge means tried and tested trading plan. Because I know following my plan over long period of time will automatically bring money to me.There is no way to find out what market is going to do next .

2. Sometimes I find myself thinking that there must be a way to trade without having to take a loss.
No. There is always a Loss. Every time my edge tell me to take position in the market .Sometime it work and some time it doesn't. An edge is nothing more than an indication of a higher probability of one thing happening over another. Remember ,probability is not guaranty. Every trade has a potential to go against you .

3. Making money as a trader is primarily a function of analysis.
No. Just follow your trading plan and ignore everything.Making money as a trader is primarily a function of following your trading plan.You only need to know your trading Plan.

4. Losses are an unavoidable component of trading.
Yes. Every time I make entry to market, there is every chance of stop loss getting hit. However, we should have a believe over longer period I will make money by following my trading plan.

5. My risk is always defined before I enter a trade.

Yes. We should define our risk before we enter a trade .If we are uncomfortable with the risk we should simply ignore the trade and move on.

6. In my mind there is always a cost associated with finding out what the market may do next.

Yes. An edge is nothing more than an indication of a higher probability of one thing Happening over another. But at the end it is just a probability and not guaranty.

7. I wouldn't even bother putting on the next trade if I wasn't sure that it was going to be a winner.

We will never know what next trade will be winner or a loser. I need to take all the trade to make consistent money. There is a random distribution between wins and losses for any given set of Variables that define an edge.

8. The more a trader learns about the markets and how they behave, the easier it will be for him to execute his trades.
just need to define my edge and follow it religiously .I don’t care about anything else. Ignorance is bliss.

9. My methodology tells me exactly under what market conditions to either enter or exit a trade.
True .Trading plan define your entry ,exit and Risk management.

10. Even when I have a clear signal to reverse my position, I find it extremely difficult to do.
No. We should improve it by following our trading plan seriously.

11. I have sustained periods of consistent success usually followed by some fairly drastic draw-downs in my equity.

True.There is a random distribution between wins and losses for any given set of Variables that define an edge.

12. When I first started trading I would describe my trading methodology as haphazard, meaning some success in between a lot of pain.
True.but later I have improved by learning and continuous improvement.

13. I often find myself feeling that the markets are against me personally.
No -Market is not that intelligent. I just need to know my edge. My edge will define my profit and Loss.Initially I felt like market is doing exact opposite to my position.

14. As much as I might try to "let go," I find it very difficult to put past emotional wounds behind me.
True. Continuous improvement and following your trading plan will make it slowly fade it away

15. I have a money management philosophy that is founded in the principle of always taking some money out of the market when the market makes it available.
True. Just define the role of exit management (take some money out and let rest follow).

16. A trader's job is to identify patterns in the markets' behavior that represent an opportunity and then to determine the risk of finding out if these patterns will play themselves out as they have in the past.
True ..............Very ,very true.

17. Sometimes I just can't help feeling that I am a victim of the market.
No. We can really be victim of not following our trading plan and not defining our edge properly.

18. When I trade I usually try to stay focused in one time frame.
Dual time frame guaranty better success. Always we need to have bigger picture in mind.

19. Trading successfully requires a degree of mental flexibility far beyond the scope of most people.

False .just follows your tested plan and ignores everything. Ignorance is bliss.

You don’t need to be intelligent to make money in market .You need to follow Tested plan over long period of time and success will automatically follow.

20. There are times when I can definitely feel the flow of the market; however, I often have difficulty acting on these feelings.
True. I need to improve and follow our plan regularly.

21. There are many times when I am in a profitable trade and I know the move is basically over, but I still won't take my profits.
Just define the role of exit management (take some money out and let rest follow).

22. No matter how much money I make in a trade, I am rarely ever satisfied and feel that I could have made more.
I never know what will happen next .My trading plan should define entry and exit. I will just follow my plan. Just define the role of exit management (take some money out and let rest follow).

23. When I put on a trade, I feel I have a positive attitude. I anticipate all of the money I could make from the trade in a positive way.
Feel positive by following your trading plan.

24. The most important component in a trader's ability to accumulate money over time is having a belief in his own consistency.
True

25. If you were granted a wish to be able to instantaneously acquire one trading skill, what skill would you choose?
Follow my trading plan and trade in the moment.

26. I often spend sleepless nights worrying about the market.
No.I would rather prefer sleepless nights for improving my plan.

27. Do you ever feel compelled to make a trade because you are afraid that you might miss out?
I have got away from this by following my plan .

28. Although it doesn't happen very often, I really like my trades to be perfect. When I make a perfect call it feels so good that it makes up for all of the times that I don't.
I would like to make trade entry of my plan rather concentrating on it being perfect or imperfect.

29. Do you ever find yourself planning trades you never execute, and executing trades you never planned?
I have got away from this by following my trading plan .

30. In a few sentences explain why most traders either don't make money or aren't able to keep what they make.
Proper money management is needed to retain the money you have or what you have earned.

Consistently follow your trading plan ……………………Success will follow.

Source: “Trading in the zone”

Trading in the Zone with these 12 steps

2013-09-22T02:12:00.000-07:00

The following principles are taken from the “Trading in the Zone” by Mark Douglas.

Here they are in numerical order:

The 5 Fundamental Truths of Trading:

1. Anything can happen. You have an edge and you may have probability on your side. But at the end it is just a probability and not guaranty. Lot of things which are not quantifiable can take place in market.

2. You don’t need to know what is going to happen next to make money. Ignorance is bliss . Just execute your edge and place the probability on your side.No Body knows what is going to happen next.

3. There is a random distribution between wins and losses for any given set of variables that define an edge.In other words, based on the past performance of your edge, you may know that out of the next 20 trades, 12 will be winners and 8 will be losers. What you don’t know is the sequence of wins and losses or how much money the market is going to make available on the winning trades. This truth makes trading a probability or numbers game. When you really believe that trading is simply a probability game, concepts like ‘right’ and ‘wrong’ or ‘win’ and ‘lose’ no longer have the same significance. As a result, your expectations will be in harmony with the possibilities.

4. An edge is nothing more than an indication of a higher probability of one thing happening over another. An edge is just a likely hood of one things over other .Probability => Quantifiable likelihood (chance) of the occurrence of an event expressed as odds.

5. Every moment in the market is unique. It is important to remember that every moment in the market is unique. Just because the market did one thing one day does not mean that it will do the same thing the next day. The participants in the market change from day to day and even hour to hour which makes every single experience in the market completely unique.

The 7 Principles of Consistency:

1. I objectively identify my edges. You already know what you are looking for. You should know your entry , risk parameter , profit objectives. Edge can be combination of any sets of pre determined variable , which have been back tested and found to give 50-55% winning trade.

2. I predefine the risk of every trade. We know that every trade has a potential to be a loser , so we should be pre decided about the dollar amount we are going to risk on the trade to find out whether the trade is working or not .Best time to put a stop is before you put the trade on.

3. I completely accept the risk or I am willing to let go of the trade. Sometime we can be uncomfortable with the dollar amount we have to risk to put the trade on . if you are not completely comfortable , then either you cancel the trade or scale back on your position to make yourself comfortable with dollar amount .

4. I act on my edges without reservation or hesitation. Once the edge present itself just put the trade ON.We have learned, usually quite painfully, that we don’t know in advance which edges are going to work and which ones aren’t. so, I have stopped trying to predict outcomes. I have found that by taking every edge, they correspondingly increase their sample size of trades, which in turn gives whatever edge they use ample opportunity to play itself out in their favor, just like the casinos.

5. I pay myself as the market makes money available to me. I take money out from my system after execution of 30 trades and and if I am in profit . You can have your rule .

6. I continually monitor my susceptibility for making errors. Common Errors are

Refusing to define a loss.
Not getting rid of a losing trade when it is obviously a loser.
Getting locked into a bullheaded opinion about market direction.
Focusing on monetary value of trade instead of market structure.
Revenge trading to recoup a loss.
Not reversing a position when the market is clearly changing direction.
Not following the rules of your strategy.
Planning for a trade and then not taking it.
Not acting on your intuition.
Giving back recent gains due to over trading or inconsistency.

7. I understand the absolute necessity of these principles of consistent success
and, therefore, I never violate them. Read it every day before market Opens and follow it.

Source: “Trading in the zone”

10 Market Insights from Mark Douglas

2013-09-22T01:39:00.001-07:00

1. The four trading fears

95% of the trading errors you are likely to make will stem from your attitudes about being wrong, losing money, missing out, and leaving money on the table – the four trading fears

2. The proverbial empathy gap

You may already have some awareness of much of what you need to know to be a consistently successful trader. But being aware of something doesn't automatically make it a functional part of who you are. Awareness is not necessarily a belief. You can’t assume that learning about something new and agreeing with it is the same as believing it at a level where you can act on it.

3. The market doesn't generate happy or painful information

From the markets perspective, it’s all simply information. It may seem as if the market is causing you to feel the way you do at any given moment, but that’s not the case. It’s your own mental framework that determines how you perceive the information, how you feel, and, as a result, whether or not you are in the most conducive state of mind to spontaneously enter the flow and take advantage of whatever the market is offering.

4. The flaws of fundamental analysis

Fundamental analysis creates what I call a “reality gap” between “what should be” and “what is.” The reality gap makes it extremely difficult to make anything but very long-term predictions that can be difficult to exploit, even if they are correct.

5. A good trader is a confident trader

I’ve worked with countless traders who would spend hours doing market analysis and planning trades for the next day Then, instead of putting on the trades they planned, they did something else. The trades they did put on were usually ideas from friends or tips from brokers. I probably don’t have to tell you that the trades they originally planned, but didn’t act on, were usually the big winners of the day. This is a classic example of how we become susceptible to unstructured, random trading—because we want to avoid responsibility.

6. Anything could happen

The best traders have evolved to the point where they believe, without a shred of doubt or internal conflict, that ”anything can happen.” They don’t just suspect that anything can happen or give lip service to the idea. Their belief in uncertainty is so powerful that it actually prevents their minds from associating the “now moment” situation and circumstance with the outcomes of their most recent trades.

They have learned, usually quite painfully, that they don’t know in advance which edges are going to work and which ones aren’t. They have stopped trying to predict outcomes. They have found that by taking every edge, they correspondingly increase their sample size of trades, which in turn gives whatever edge they use ample opportunity to play itself out in their favor, just like the casinos.

7. Most people are obsessed with being right

Why do you think unsuccessful traders are obsessed with market analysis.They crave the sense of certainty that analysis appears to give them. Although few would admit it, the truth is that the typical trader wants to be right on every single trade. He is desperately trying to create certainty where it just doesn’t exist.

The typical trader won’t predefine the risk of getting into a trade because he doesn’t believe it’s necessary. The only way he could believe “it isn’t necessary” is if he believes he knows what’s going to happen next. The reason he believes he knows what’s going to happen next is because he won’t get into a trade until he is convinced that he’s right. At the point where he’s convinced the trade will be a winner, it’s no longer necessary to define the risk (because if he’s right, there is no risk). Typical traders go through the exercise of convincing themselves that they’re right before they get into a trade, because the alternative (being wrong) is simply unacceptable.

If he exposed himself to conflicting information, it would surely create some degree of doubt about the viability of the trade. If he allows himself to experience doubt, it’s very unlikely he will participate. If he doesn’t put the trade on and it turns out to be a winner, he will be in extreme agony. For some people, nothing hurts more than an opportunity recognized but missed because of self-doubt. For the typical trader, the only way out of this psychological dilemma is to ignore the risk and remain convinced that the trade is right.

8. Trading has nothing to do with being right or wrong on any individual trade

For the traders who have learned to think in probabilities, there is no dilemma. Predefining the risk doesn’t pose a problem for these traders because they don’t trade from a right or wrong perspective. They have learned that trading doesn’t have anything to do with being right or wrong on any individual trade. As a result, they don’t perceive the risks of trading in the same way the typical trader does.

9. We have to be rigid in our rules and flexible in our expectations

We need to be rigid in our rules so that we gain a sense of self-trust that can, and will always, protect us in an environment that has few, if any, boundaries. We need to be flexible in our expectations so we can perceive, with the greatest degree of clarity and objectivity, what the market is communicating to us from its perspective.

10. Market losses are simply the cost of doing business

When I put on a trade, all I expect is that something will happen. Regardless of how good I think my edge is, I expect nothing more than for the market to move or to express itself in some way. However, there are some things that I do know for sure. I know that based on the markets past behavior, the odds of it moving in the direction of my trade are good or acceptable, at least in relationship to how much I am willing to spend to find out if it does. I also know before getting into a trade how much I am willing to let the market move against my position. There is always a point at which the odds of success are greatly diminished in relation to the profit potential. At that point, it’s not worth spending any more money to find out if the trade is going to work. If the market reaches that point, I know without any doubt, hesitation, or internal conflict that I will exit the trade.

The loss doesn’t create any emotional damage, because I don’t interpret the experience negatively. To me, losses are simply the cost of doing business or the amount of money I need to spend to make myself available for the winning trades. If, on the other hand, the trade turns out to be a winner, in most cases I know for sure at what point I am going to take my profits. (If I don’t know for sure, I certainly have a very good idea.) The best traders are in the “now moment” because there’s no stress. There’s no stress because there’s nothing at risk other than the amount of money they are willing to spend on a trade. They are not trying to be right or trying to avoid being wrong; neither are they trying to prove anything. If and when the market tells them that their edges aren’t working or that it’s time to take profits, their minds do nothing to block this information. They completely accept what the market is offering them, and they wait for the next edge.

Nifty Analysis & Daily Chart for 19 Sep,2013

2013-09-18T10:14:00.002-07:00

Daily Trend is up above 5745(SAR)

Weekly remain bullish above 5632

Trailing Stop loss for SAR 5726

Bearish Engulfing Pattern @5932

Raising window support 5460,5688

Weekly Indicator is bullish and Daily Indicator has given bearish signal in OB .

Support are 5210-5315-5350-5410-5448-5487-5515-5550-5606-5606-5630-5675-5720-5748-5840

Resistances are 5920-5970-5985-6080-6113-6150- 6187-6230-6284

Low of the Hammer are still protected 5254 and 5118 on weekly basis.

78.6% of the last major fall 5882 need to crossed for trend to turn completely bullish.

Divergence on 9 day RSI Chart

"What does it mean to think in probabilities?
It means to believe at the very core of our identity that:

anything can happen
every moment is unique
there is a random distribution between wins and losses on any given set of variables that define an edge

Each one of these beliefs will keep your expectations in line with what is possible from the markets

perspective. To the extent your expectations correspond with what is possible from the markets perspective, you eliminate the potential to define and interpret market information as painful.

Ultimately

~ you can get to the point where you can trade from a "carefree" and "objective" state of mind where you are making yourself available to perceive and act upon whatever the market is offering you in any given "now" moment from its perspective."

Nifty Analysis & Daily Chart for 17 Sep,2013

2013-09-16T16:12:00.000-07:00

Daily Trend is up above 5700(SAR)

Weekly remain bullish above 5632

Trailing Stop loss for SAR 5652

Bearish Engulfing Pattern @5932

Raising window support 5460,5688

Weekly Indicator is bullish and Daily Indicator has given bearish signal in OB .

Support are 5210-5315-5350-5410-5448-5487-5515-5550-5606-5606-5630-5675-5720-5748-5840

Resistances are 5920-5970-5985-6080-6113-6150- 6187-6230-6284

Low of the Hammer are still protected 5254 and 5118 on weekly basis.

78.6% of the last major fall 5882 need to crossed for trend to turn completely bullish.

TO ACHIEVE CONSISTENCY , I SHOULD
1.Be able to identify an edge (trading method)
2.Have a trading plan on how to utilize the edge
Risk Parameter , Money Management (Position Size), Profit Objectives
3.Able to execute the edge without making trading Error
4.Think in probabilities
5.Making a mental shift from trade to trade perspective to series of trade perspective
6.Believing that you don't have to know what is going to happen next on trade by trade to win or make money.
7.Develop the ability to recognize you have crossed the threshold from normal self confidence to the state of euphoria.

Nifty Analysis & Daily Chart for 16 Sep,2013

2013-09-15T09:32:00.001-07:00

Daily Trend is up above 5674(SAR)

Weekly remain bullish above 5632

Trailing Stop loss for SAR 5607

Bearish Engulfing Pattern @5932

Raising window support 5460,5688

Weekly Indicator is bullish and Daily Indicator is bullish OB.

Support are 5210-5315-5350-5410-5448-5487-5515-5550-5606-5606-5630-5675-5720-5748-5840

Resistances are 5920-5970-5985-6080-6113-6150- 6187-6230-6284

Low of the Hammer are still protected 5254 and 5118 on weekly basis.

78.6% of the last major fall 5882 need to crossed for trend to turn completely bullish.

Nifty Analysis & Weekly Chart for period 09 – 13 Sep,2013

2013-09-14T23:35:00.000-07:00

Weekly Stochastic/RSI Chart still support bullish view.

Low of the Hammer are still protected 5254 and 5118 on weekly basis.

Weekly remain bullish above 5632

78.6% of the last major fall 5882 need to crossed for trend to turn bullish.

5688 is the immediate support , 6093 is the immediate support on weekly chart

Monthly chart show 5950 ,6093 as resistance

MACD - no signal yet

Nifty Daily Chart Update -13th Sep 2013

2013-09-12T20:40:00.000-07:00

Daily Trend is up above 5629(SAR)

Bearish Engulfing Pattern @5932

Raising window support 5460,5688

Weekly Indicator is bullish and Daily Indicator is bullish OB.

Support are 5210-5315-5350-5410-5448-5487-5515-5550-5606-5606-5630-5675

Resistances are 5720-5748-5840-5920-5970-5985-6080-6113-6150- 6187-6230-6284

Low of the Hammer are still protected 5254 and 5118 on weekly basis.

Weekly remain bullish above 5632

78.6% of the last major fall 5882 need to crossed for trend to turn completely bullish.

Nifty Daily Chart Update -10th Sep 2013

2013-09-09T18:52:00.000-07:00

Daily Trend is up above 5450(SAR)

Weekly Indicator and Daily Indicator is bullish .

Support are 5210-5315-5350-5410-5448-5487-5515-5550-5606-5606-5630-5675

Resistances are 5720-5748-5840-5920-5970-5985-6080-6113-6150- 6187-6230-6284

Low of the Hammer are still protected 5254 and 5118 on weekly basis.

Weekly remain bullish above 5632

78.6% of the last major fall 5882 need to crossed for trend to turn completely bullish.

Thought Process Before You Put The Trade ON

2013-09-08T19:39:00.001-07:00

Risk Management

2013-09-08T09:29:00.000-07:00

Why do we need Risk control and Money Management ?
Some losing trade are normal part of the trading. My responsibility as trader is to Keep my losing trade small and let the winner run . Every trader has a potential to be loser ,if it is loser then i need to protect my self from loss.

Money Management

Allow me to be wrong

Help me control risk

Take into account every trade can be potential loss

Separate the pros from the novice

Money Management is the state of the mind .

WARNING SIGNAL :- If your draw down on last 10 trades exceeds 12% ,then your are exposing your self to obscene risk . (Based on Risk of Ruin Table)

GOAL:- Let your winning trades run and cut your losing trade short !!!

Healthy Money Management Psychology begins when you believe that and acknowledge that each trade outcome is unknown at the time you enter the trader!.

Trade Risk Versus Market Risk
"Trade size" control the Trade risk .Can be controlled through protective and trailing stops.
"Account Size" control the Market Risk .Cannot be controlled ex. huge Gap up/down .
If you control your Trade Risk then there is high probability of recovering the Market Risk.

Risk of Ruin
The probability of an individual losing sufficient trading money to the point at which continuing on is no longer considered an option to recover losses. Make Risk of ruin work for you .

Win-Ratio Formula
Win Ratio =# of wins divided # of trades
Ex := 60%= 60 divided by 100

Pay off Ratio Formula
Pay off Ratio =Average winning trade divided Average Losing trade
Ex := 3= 300 Re divided 100 Re or (3:1)

Relations between Win-Ratio and Pay Off Ratio
Screen shot below show even if we get the 2:1 risk : reward and 50 % winning : Risk of ruin is reduced to 0.8%.Make Sure you make risk of ruin work for you than against it.

Two Percent Risk Formula
Account size × 2% = Risk amount
Ex:= 1,00,000 *2% =2000 -(These is the dollar amount you can afford to lose if you get stopped out.)

Trade size formula

[Risk amount − Commission]÷ Difference between entry and exit = Trade size
Ex:= [2000-500] ÷ (15*50)=2 (Maximum contract you can purchase)

Please find the link of some more articles on Risk Management
1.Nifty Future Risk Management Plan
2.Risk Management Checklist
3.Fine Tuning Your Money Management System

Nifty Weekly Chart Update -9th Sep 2013

2013-09-07T23:46:00.000-07:00

Weekly Stochastic Chart Show bullish view .

Low of the Hammer are still protected 5254 and 5118 on weekly basis.

Weekly remain bullish above 5632

78.6% of the last major fall 5882 need to crossed for trend to turn bullish.

Habits of Wealthy Traders

2013-09-02T09:13:00.002-07:00

1.Wealthy trader are patient with winning trades and enormously impatient with losing trades.
2.Wealthy trader realize that making money is more important than being right .
3.Wealthy trader look at technical analysis as a picture of where traders are lining up for BUY and SELL.
4.Before they enter the trade they know exactly where they exit for either a GAIN or LOSS.
5.They approach trade number 5 with the exact same mindset they did on the 4 losing trades.
6.Clean chart - They use naked charts and focus on Zone.
7.They realized a long time ago being uncomfortable in Trading is OK.
8.The market they trade fit their personality.They are participant -not an on lookers.
9.They stopped trying to figure out Tops and bottoms long ago and stopped losing money doing so.
10.They stopped thinking market being cheap and expensive.
11.They are willing to change sides ,short to long vice versa when market tell them to do so.
12.They trade aggressively when trading well and modesty when they are not .
13.They realize the market will open up again tomorrow.
14.They never add to a losing trade.........EVER.
15.Cash is the target ,but they set goals for their trading that are anything but MONEY. (MAKE PROCESS THE GOAL)
16.They read trading books but they read more "CROWD" books.Example
The wisdom of CROWD.
Markets Mobs and Mayhem
The art of strategy
17. They provide liquidity to the markets while watching price and volume.
18.They have a way to gauge fear,greed and speed of the transactions .
19.They practice reading the right side of the chart -not the left side.
20.Every wealthy traders have an edge .
21 Their position size is calculated on the Risk Tolerance .
22. Profits Targets are based on ATR.
23. One or two trades a month , make their month.
24.Confident decision makers in case of in complete information.
25. A losing trade is not a reflection on themselves as a trader.
26.Their business isn't trading ,it is finding the right trades.
27.They right down or record every trade price thought or moods.
28.Their conviction of an active trade remain unless something major changes.
29.A winning trade doesn't taking extra risk on the next trade.
30.They trade the reaction and not the news.

Nifty Daily Chart Update -26th Aug 2013

2013-08-25T08:24:00.001-07:00

Daily Trend is down below 5525(SAR)

Weekly Indicator is Bearish OS, Daily Indicator is bullish .

Support are 5210-5315-5350-5410-5448-5487

Resistances are 5515-5550-5606-5606-5630-5675-5720-5748-5840-5920-5970-5985-6080-6113-6150- 6187-6230-6284

Trading in the Zone with these 12 steps

2013-08-18T08:37:00.001-07:00

Trading in the Zone. Huh? What zone? I thought I was trading in my office….there’s a zone?

The following principles are taken from the “Trading in the Zone” by Mark Douglas. I refer to it’s teachings constantly in our video series, “Basic Training for Traders”. If Trading was a faith, and it had a bible, I believe it would be Mark’s book.

Here they are in numerical order:

The 5 Fundamental Truths of Trading:

1. Anything can happen.

2. You don’t need to know what is going to happen next to make money.

3. There is a random distribution between wins and losses for any given set of
variables that define an edge.

4. An edge is nothing more than an indication of a higher probability of one thing
happening over another.

5. Every moment in the market is unique.

The 7 Principles of Consistency:

1. I objectively identify my edges.

2. I predefine the risk of every trade.

3. I completely accept the risk or I am willing to let go of the trade.

4. I act on my edges without reservation or hesitation.

5. I pay myself as the market makes money available to me.

6. I continually monitor my susceptibility for making errors.

7. I understand the absolute necessity of these principles of consistent success
and, therefore, I never violate them.

In “The Disciplined Trader” for example, Mark Douglas points out that typical traders often avoid creating principles and rules, because they simply do not want to take responsibility for the results of their trading. They like the mystery and intrigue of the markets – of thinking that they have some input on what the markets are doing when they trade. They enjoy the working out of it all, taking their best guesses and going against the big boys head to head. They have something to talk about in the golf cart on Saturday – something to share at the dinner table after the movie. They love sharing their opinions in chat rooms, and being asked their opinions by others – the camaraderie of it all.

None of this has anything to do with actual trading.

So print these rules out – and get serious about your profession.

Fine Tuning Your Money Management System

2012-10-06T19:59:00.001-07:00

1.Risk is chance of loss, chance of losing something.
2.Risk Management is managing outcome , which is different than expected .
3.Risk Management -Managing and measuring the area where loss can occur .
4.Healthy Money Management psychology begins when you believe and acknowledge that each
trade outcome is unknown at the time you enter the trade.
5. Every trade has a random outcome, we need to manage our loss on losing trade.
6.Some losing trade are normal part of trading
7.Let your winning trades run & Cut your losing trades short.
8.Avoid being in market that do not provide Winning % [ Report and Holiday market in Christmas]
9. Trade Risk versus Market Risk:-

"Trade Size" controls your Trade risk ,some control like stop loss settings
"Account Size" controls your Market risk, out of control of trader like GAPS,News Event etc.Fund your trading account for Risk Control.
Market risk can be recovered if we manage Trade Risk correctly.
10.Win Ratio : No of winning trade / no of Total trades
11 .Payoff Ratio : Average Winning Trade /Average Losing Trade
12. Percent of capital at Risk : what is the optimal percent of capital at risk on each trade?

13.Risk Of ruin - Screen shot below show even if we get the 2:1 risk : reward and 50 % winning : Risk of ruin is reduced to 0.8%.Make Sure you make risk of ruin work for you than against it.
WARNING SIGNAL- if draw down on last 10 trades exceeds 12% , avoid exposing your self to obscene risk.

Risk Management Checklist

2012-10-06T18:35:00.000-07:00

1.Always use stops
2.Use a proven and tested methodology for calculating stops rather than an arbitrary figure.(http://perfectniftytrader.blogspot.in/2012/01/nifty-future-risk-management-plan.html)
3.Protective Stops, Time Stops and Trailing stops should be followed religiosly
5.Never exceed a 2% risk (of your trading account size) on any given trade.
6.Always trade with risk capital (money you can afford to lose).
7.If you are not comfortable with risk ,completely ignore the trade.
8.Always be adequately funded to take next 30 trades.( Sample Size Trading)
9.Maximum  losing trade in a week allowed to take in Day /Week
10.Maximum  losing trade allowed to take in Day /Week
11.Maximum  losing amount allowed to take in Day /Week
12.Always trade with maximum 2 lots only.
13.Maximum Trade to take in Day/Week/Month
14.Use scaling out of positions to boost your percentages.
15.Make Sure you make risk of ruin work for you than against it.

Nifty Daily Chart Update -26th Sep 2012

2012-09-25T20:11:00.001-07:00

Daily Trend is up above 5515 (SAR)

Weekly Indicator is Bullish OB, Daily Indicator is Bearish (Stochastic)

Rising Window Support 5263 ,5447

Low of the Window 5450 -immediate major support

Bullish Engulfing pattern 5227-5350-5435-5545

Support are 5498-5440-(5330-(5377-5385)-5343)-(5280-5290)-5240-5160-5088-5040-5000

Resistances are 5498-5630-5700-5937-6169-6328

Profit Target are (5280-5290)-5350-5375-5443-5500-5630-5700-5937-6169-6328

Nifty Daily Chart Update -17th Sep 2012

2012-09-15T07:17:00.000-07:00

Daily Trend is up above 5350 (SAR)

Weekly Indicator is Bullish, Daily Indicator is bullish Over bought zone.

Rising Window Support 5263 ,5447

Low of the Window 5450 -immediate major support

Bullish Engulfing pattern 5227-5350-5435-5545

Support are 5498-5440-(5330-(5377-5385)-5343)-(5280-5290)-5240-5160-5088-5040-5000

Resistances are 5498-5630-5700-5937-6169-6328

Profit Target are (5280-5290)-5350-5375-5443-5500-5630-5700-5937-6169-6328

Nifty Daily Chart Update -10th Sep 2012

2012-09-08T21:26:00.000-07:00

Daily Trend is up above 5315 (SAR)

Weekly Indicator is Bearish, Daily Indicator is oversold zone with bullish reversal

High of Shooting Star 5450 can be critical resistance ,Window Top 5410 can be resistance

Piercing Pattern at 5164 , Window Low 5220 ,Bullish engulfing pattern 5240

Support are 5240-5160-5088-5040-5000-4950-4800

Resistances are (5280-5290)-(5330-5343)-(5377-5385)-5440-5498-5630

Profit Target are (5280-5290)-5350-5375-5443-5500-5630

Nifty Daily Chart Update -4th Sep 2012

2012-09-03T12:03:00.000-07:00

Daily Trend is down below 5348 (SAR)
Weekly Indicator is Bearish below 5325, Daily Indicator is Bearish OS zone with bullish reversal
High of Shooting Star 5450 can be critical resistance ,Window Top 5410 can be resistance
Piercing Pattern at 5164 , Window Low 5220 ,Bullish engulfing pattern 5240
Support are 5240-5160-5088-5040-5000-4950-4800
Resistances are (5280-5290)-(5330-5343)-(5377-5385)-5440-5498-5630
Profit Target are (5280-5290)-5350-5375-5343-5500-5630

Nifty Daily Chart Update -3rd Sep 2012

2012-09-02T18:53:00.005-07:00

Daily Trend is down below 5356 (SAR)

Weekly Indicator is Bearish below 5325, Daily Indicator is Bearish OS zone with bullish reversal

High of Shooting Star 5450 can be critical resistance ,Window Top 5410 can be resistance

Piercing Pattern at 5164 , Window Low 5220 ,Bullish engulfing pattern 5240

Support are 5240-5160-5088-5040-5000-4950-4800

Resistances are (5280-5290)-(5330-5343)-(5377-5385)-5440-5498-5630

Profit Target are (5280-5290)-5350-5375-5343-5500-5630

Nifty Weekly Chart Update -3rd Sep 2012

2012-09-02T06:55:00.002-07:00

Below 5325,weekly and daily Stochastic Chart is bearish

High of Shooting Star 5450 can be critical resistance

Bulls are safe only if nifty closes above 5378 and 5358

78.6% of the last major fall was held

Trading Affirmations

2012-09-02T00:22:00.002-07:00

Mark Douglas, a person I consider one of the pioneers of trading psychology talks about trading affirmations in his book Trading In The Zone (A book ever trader should own). I think it’s really important to understand all of these truths and principles and believe them if you want to be consistent in your trading.

I acknowledge there may be aspects,components,principles of Successful trading that I may not be aware of.As my awareness grow of what it meant to be great trader , I will not take for guaranteed or assume there new awareness have integrated into my mental system in a way where they are completely functional or non conflict, from any thing else which i have already learnt.I willingly and wholeheartedly give the power to change the structure of my mind.Accepts the enhancement and change enthusiastically ,lovingly go way any reservations or resistance. I empower this word to become my internal and external reality.

My methodology identify pattern and market behavior and give me signal to do something .It is normal for my mind to think this signal are telling me what is going to happen next . To be consistent successful trader ,I realise I have to trained my mind ,which don't think normal until new way of thinking become functional part of my mental environment.

During this process of integration , I may find rational part of my mind , in one way or the other arguing ,for knowing what is going to happen next.I resolve when I find myself from the process of thinking,assuming or believing that i know , I will generally re focus my thought on new understanding and nature of the market and trading.

What I know now is every trader contribute to overall behavioral pattern of the market and there every one who trade is a market variable ,that has potential to confirm or invalidate any pattern or any signal.Believing these make it easy to understand that signals are just an edge where there are just higher probability of one thing happening over another. As a result , I no longer pay any particular significance on edge that present itself.Each day it become easier for me to put the trade on when edge present itself because i know believe from very core of my identity I don't need to know what is going to happen next to make money. I just need to keep my mind focus on the probability.

There fore I am always asking myself, what's probable and what 's possible and what probable it is and how much it is going to cost to find out meaning what does the market have to sound like and look like to tell me that this trade isn't working in the time frame i traded .

What I know now ,every market moment is truly unique regardless of how similar it may look or feel of something i have already experienced. Therefore ,Every time i find myself connecting the 'NOW' moment of market to something that is already in my mind , I will actively disconnect the two , actively focus on present moment and refocus on 'ANY THING CAN HAPPEN' .
All I need to know is
a.Is market confirming my defination of edge
b.what is the risk of finding out whether the trade is going to work
c.Can I accept the risk ?

If answer to a and c is 'YES', and if i had a plan to take profit ,Then I resolve to enter the trade without reservation or hesitation.

Now I know ,I am not responsible for what market does or doesn't do, nor i am responsible for predicting what market will or won't do ,what I am responsible for making sure , I am in most conducive state of mind to perceive what is possible from market objectives and my objectives of consistently making money.Therefore ,I need to check quality of my mind by asking question that "am I in best state of mind to trade objectively and without susceptibility of making trading error" ,if not I resolve not to trade or scale back in a manner that corresponds to my diminish capacity.

Each day , i am getting better and better on making these assessment about myself and I know that mistake exists in my life that points a way to success.I was not born with the definition of what it mean to make the mistake.Children do not know concept what it mean to make a mistake until taught.These concept are learned more often in painful way.There it is natural for me to avoid pain and it is natural for not taking responsibility for anything that i define as a mistake.

However there is problem here, Every mistake points towards success ,fulfillment and satisfaction . Inside each mistake there is secrets hidden to be unlocked to push us forward on the path of success ,fulfillment and satisfaction .By Taking trading exercise, it is natural for trader to go through cycle of emotional pain and dissatisfaction.I resolve to reverse any cycle of emotional pain and dissatisfaction by accepting my result as true reflection of my level of development . My goal is to become consistently successful trader , the process of doing so have several steps but more importantly it has a first step and that first step has to be consistent with my true level of development .Where I am right now , not where i would like to be or assume I am based on what i would face myself.for important first step , i should be willing to stop beating myself and accept i don't need to be perfect but at the same time acknowledge that every outcome is true reflection of my level of development.

I resolve to give my self permission that I dont need to prove anything from my trading to any body. I just need to give my self permission to learn , I whole heartly give that permission now. knowing be defination that any thing i need to learn doesnt exist inside me.

Consitent successful trader, I cam imagine myself is future projection of my self, I am going to go inside future projection step by step ,accepting my results along the way not as a mistake but as thing to learn to acheive future projection of my self .

Trading Psychology Journal Part 4

2012-09-01T19:14:00.000-07:00

Winning requires absolutely no skill at all.It required no skills to be winner.‘you don’t need to know ANYTHING about trading or the markets to put on a winning trade.You can make money either Buying and Selling ,so by default 50% of winning possibility is associated with every order.

Mental errors traders fall for are a result of the belief that the technical methods are telling the trader what is going to happen next on a trade by trade basis. That is not what technical methods were designed to do.

Technical methods, and technical analysis methods were not designed to tell the trader what is going to happen next on a trade by trade basis. This is the standard trading thinking of putting the probabilities in your favor, cutting your losses and letting your profits run.

But I would take it a step further and say the technical methods, aka technical analysis methods were not designed to do that because they cannot generate order flow and move the market. Order flow based methods actually can tell you what can happen next on a trade by trade basis, for they deal with and analyze the very foundations of every marker – transaction flow and liquidity. That doesn’t mean that they can escape statistical measurement – they can’t. What order flow can do is offer drastically better and more accurate explains for why price has moved in the past and why it will move in the future. It can actually tell you what is going to happen next on a trade by trade basis, instead of just hoping that a trading edge develops over the long run.

We have to accept the randomness principle, which is to accept the fact that any trade event can be a random unique outcome, but that can produce a consistent result over the long run. Traders who fail to acknowledge this principle will find that trading can be very frustrating.

Technical methods define and identify patterns and collective human behavior. The patterns definitely exist, they repeat themselves over and over again. The problem is that the outcomes do not always correspond with the patterns on a trade by trade basis.

If the last trade was a winner, this trade, even if the charts are the same, even if the same exact signal, the same looking chart, there is no guarantee this trade, that this trade will be the exact same as the past one.

There is a “random distribution between wins and losses over any sequence of trades that you might look at.”.Thinking in terms of probabilities.

Pattern - whem this set of criteria there is higher proabilities one thing over another.

When pattern present itself => there is no points analyzing the pattern.

There is no correlation ship between pattern and risk.

There is no correlation ship between pattern and profit.

Now we have to get into the nuts and bolts of how the markets work. One of the reasons why people have such a difficult time with this is because their initial exposure to the markets themselves is through electronics. Through electronics there is a real disconnect between what your are actually participating in and what is causing you to want to participate in it in the first place. Markets started as exchanges. All prices are people generated events. Everything happens because of what people believe.

What actually has to happen for prices to move is this: If the last price of something is $10, for the market to actually move to $12, all the offers at $11 have to be taken out. In other words, people who are trying to sell at $11 they have to get their orders filled before they can get to $12. For someone to actually bid it to eleven, or bid it to twelve they are doing the exact opposite in that moment of what it takes to be successful. They are not buying low, they are buying high. They are buying high relative to the last price, or buying higher relative to the last price.

Patterns represent collective human behavior. And when a set of criteria is present in the market, there is a higher probability of one thing happening over another.

That people, that other people will come into the market to bid it higher, or offer it lower form here.

We are obliged to other traders to come in to buy something at a worse price than what we thought was low to make us winners. (for a long trade).Most of us out there are dependent on someone else to move the market for us.

The trading errors come from believing that when the pattern is present that it is going to give me a winning trade on this one. This trade is going to be a winner.

The typical trader thinks I am not going to put this trade unless I think it is going to be a winner.

We don’t want to get into trading with the possibility of being disappointed, dissatisfied, or betrayed. A lot of traders feel that way. The problem is, when that potential exists it has the affect of affecting the way that we see market information in detrimental ways.

The human mind was made to create patterns. It will see patterns in random data. A turn-of-the-century statistics book put it this way: ’Too fine an eye for pattern will find it anywhere.’ In other words, you’re going to see more on the chart than is truly there. Also, we don’t look at data neutrally – that is, when the human eye scans a chart, it doesn’t give all data points equal weight. Instead, it will tend to focus on certain outstanding cases, and we tend to form our opinions on the basis of these special cases. It’s human nature to pick out the stunning successes of a method and to overlook the day-in, day-out losses that grind you down to the bone.

Regardless of the reason for getting into a trade, if other traders don’t buy into that reason, or if other traders don’t have another reason to want to buy at a price that is worse than yours. You bought the stock at $10, someone is going to want to buy it at $11, buy it at $12, at $13, and not only be able to buy it at 11, 12, 13 and 14, there are going to have to take out all the offers, all the traders who think it is high at 11, 12 and 13. And so, if these people aren’t coming into the market to do that, then whatever reason you thought you had might not be so good. That is why it is critical to pre define your risk before you get into a trade. Professional traders do not think of it any other way because they know it takes other people. My reason might be great, but if someone else isn’t buying into it what different does it make? It doesn’t matter because it is not a winning trade.

The pattern shows up first. Then what we have to do is put up our money. Meaning, how much am I willing to risk to find out if it will work. Most traders because they evaluate, because they judge and because they analyze and build a case for the pattern being right, they actually talk themselves out of believing that the risk even exists.

Just simply a higher probability of one thing happening over another. Higher probability over a series of trades.

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