Journey of a Computer science Engineer who goes scar to star trader
The Journey Begins
My trading journey was not much different from the other aspiring traders when I started. I learned the technical terms related to the stock markets in the initial training at the firm where I worked. I had some great conversations with the traders over the call while working and got to know the nuances of the share market from their experiences. Though I didn't like that job, I got a basic understanding of the market and its jargon.
It was Oct’2017 when I left the job and decided to try my hands into real trading. Initially I traded just to make money daily and with a capital of 5k. I made some profitable trade but I also made some great losing trades too. Frankly, I ended up blowing the entire account.
I took a break just to forget that loss and to gather the courage to enter the market again. I started with a capital of 10k. I made it to 12.5k in two days but the next two days had eaten my whole profit and also left with a capital of 8.5k. Again, I stopped trading not to see my account blowing up like the last one.
Now here comes the time to have some strategy. I came up with a simple strategy that I will decide the take profit before entering a trade(I didn't know the stop-loss at that time). And I also decided to take the benefit of fluctuations in a range-bound market. Honestly, I didn't know the charts, candlesticks, patterns and why the stock price moves. I only cared that at least it moves.
I forgot to tell you I traded only in nifty and bank nifty options. Now starts the game again with a so-called strategy keeping in mind. I made a profit on every trade and I took only 1 or 2 trades per day. I was in fear that if I take more trade it could eat my handsome profit. I converted my capital into 24k in a matter of 10 trading sessions. I was on cloud nine with a thought that I am an amazing trader who just tripled his account in just a matter of 10 days.
But I wasn’t aware of the second side of the market. I was doing good in the name of profit but not in market terms. The next day I was shocked when I entered a trade and it went against me. I decided to wait until the market moves in my favour. I was in a loss of 3.5k at the end of the day and I ended up holding that position in the hope that it will move in my favour.
But I didn’t know that I cannot control the market. My position was in the loss of 5k now because of contract expiry. The value of the premium was decreasing with every minute passing. So somehow I managed to gather courage and squared off the position at a net loss of 5.2k.
The Revenge Trades
I was going crazy and was out of my mind that what had happened. I just made my mind to recover the loss. I forgot what strategy I had made and entered in the market with a conviction of recovering the loss. I traded the next 5 sessions and I want to tell that I didn’t even make a single rupee in it and my account health was severe. It was at 11k.
The Game of Greed and Fear
I thought that the strategy was not good to give me profit regularly. So I planned to come up with a new strategy and moved to short term holding of premium from intraday. Here I followed the market trend which is also the part of my strategy(I thought).
I was able to find the market trend but I didn’t know how the market changes trend. With a conviction of correct market trend, I executed the trade at a premium of 120 (bank nifty). It closed at 145 at the end of the day. I was quite happy with it. The next day the market opened with a gap in my favour. I was sure that it will go in the same direction too. And at that time I was right and my profit was 4.4k. But in the next moment, I became worried about the profit that I might lose. So I came out of the position at a net profit of 4k at a premium of 220. Believe me, it was trading at 350 at the end of the day.
That was a celebration time for me I gave Pat on my back for this great achievement.
The next day I have 15k in my account now but I am not happy because I have 2k more to recover. That was the day and I ended up blowing my entire account.
This was the second time I just let the market to eat my entire capital. I can tell you that my mind was not agreed to accept that tragedy.
I switched from bank nifty to stocks option with a thought that it doesn’t work in my favour anymore.
I lost my money but it was greed to earn money which I lost. So I started with 12k (my hardly saved money and that was the last amount I had to trade).
I just picked up Reliance industries to trade options and that also with short term holding because I was able to see that reliance was moving in a range of 860–1000. I took the trade when it was at around 1000 in a sense that it will come down, at the starting of the contract with my whole account which is 12k with a thought in mind that it will recover my loss when it will come down to 900. And yes it came to 960 and I was in a handsome profit of 6k but there was going something else in my mind so I decided to be in the position.
And the interesting part is that it never came to 900 again. I didn’t book the profit on time and I had only 4.5k left in my account. And reliance made its all-time high which is above 1380.
After that, I stopped the trading completely and forgot about the losses. I made up my mind to study the market.
The Power of Learning Every day
From that day continuously I am reading whatever I find about the share market, videos on YouTube, articles, charts, indicators. I got to know about Varsity by Zerodha which is a great tool available free of cost to build the foundation over the basics of the candlesticks and patterns, Options and Options strategies, Futures, etc. I utilized countless sources for information to read about the financial markets to gather the raw knowledge, so I can fine-tune it over a while. I found strategies, executed every strategy with a single share in the cash market to see whether it works or not.
Meanwhile reading on Quora(I read/write/share actively here) I came across an article about the trade results of a trader which amazed me and I landed to a Trading Community name TTL(The Trade Learners). And the article was written by none other than Dr Kranthiraj itself. It was more interesting to know that he is an ENT Surgeon, a Trader, a Farmer, a Trainer, a Coach and founder of TTL at the same time.
I found a great open platform where I can ask questions and everybody is ready to guide you. I learned a lot about trading from experienced peoples in the field. I came across many traders who use strategies with plenty of indicators but I was faded up of indicator and none of them worked for me. The thing I wanted to learn is, how price works? how it changes the trend? how it forms different types of patterns? Later I came to know the term Price Action. I found a great source to learn price action “The Trading Consortium” which is beautifully curated in plain English by Mr Abhinav Singh who is one of the members from TTL and open for any questions if one had while reading from the Library. I have met many great souls and better traders in the TTL family.
From that day I never looked back and invested a good amount of time reading the price action. I have read 10 posts from the channel and practised it for a month and repeated this and still doing the same. There is a hell lot of rich content about support & resistance, breakouts & pullbacks, Value areas to enter a trade, areas where to book profit, trendlines, different types of patterns and how they get formed, how to plan a trade around them, knowing the odds in favour & against before taking a trade, think in terms of probability(I hated probability my entire life but here I love it), Risk management, Risk to Reward ratio, Position sizing. They were backed by real trades with a detailed analysis. I got good command over the price with every passing day and executed every study with lesser quantity.
Learning Continues with Back Testing
After learning the price action it was easy to learn about the indicators and their functionality. As per my experience, Moving averages, RSI, Volume are great yet simple tools and I used them over a course of time. It's not that other tools are bad, there are better tools available in the market but how many of them you can learn it's up to you. If using something is earning you money then stick to it if not enhance it else change it.
Till the present day, I have taken more than 2000 trades with 1 quantity of any share. Because I believe that it’s better to check something in a live market than simply reading. The decision of trading with less quantity saved me a fortune of money.
Now the time came to get hands dirty in the real game and apply what I learned. I could not devote much time to active trading due to office schedules and work. But anyhow I wanted to be in the market and trade so I decided to start with Option writing in Indexes Nifty and Bank nifty where I can make my decision based on price action.
I used to draw my levels beforehand to enter a trade and stared at the screen to see the behaviour of price. Small fluctuation didn't affect my trades so I was having a good time thinking and act. I was trading only on expiry but dedicated the day(9:00AM–3:00PM) to it and remaining days I worked normally in the office. So it was a win-win situation for me that I managed both office and trading.
After 1 or 2 months I was attracted to options buying again and made some winning trades but lost good in the trade of Yes bank options. That was the trade I took an oath to refrain from it and I never touched option buying till date. I am not saying buying is bad but it requires good timing in both analysis and execution. You need immense patience to wait for momentum trade else decay will eat your capital.
I made some rules to trade and to trade only an instrument Bank nifty which has good liquid contracts. I opened an account with a discount broker for better leverage because of option writing requires a good margin to trade. I apply the OI study, the Price action to make my trade decision. It's been 10 months of following the same process with discipline as a challenge with a small account. I am happy that I was able to recover all the learning costs caused over the 2 years.
I made some rules to trade and to trade only an instrument Bank nifty which has good liquid contracts. I opened an account with a discount broker for better leverage because of option writing requires a good margin to trade. I apply the OI study, the Price action to make my trade decision. It's been 10 months of following the same process with discipline as a challenge with a small account. I am happy that I was able to recover all the learning costs caused over the 2 years.
My learning from the above challenge is “Try avoiding bigger losses, you can make bigger trade any fine day but a bigger loss puts you away far behind and that makes you pissed off. That hits the psychology to the core that was built over time of practice. This makes us play big by putting all the rules behind and there are never-ending revenge trades. Practising consistency makes us a better trader and builds our psychology and enhance trade execution.
Never underestimate the power of going back to basics after a certain time, you will learn more. The toughest task is timely execution if you miss it, you will chase the price. Why execution doesn’t happen on time? Lack of belief in the trading system. Why chasing the price? FOMO. This is the fact that if you don't believe in your system then no one can make you money and that stops you to become a good trader. There is something to work upon yourself not the system. Confidence is the key and that comes with practice and great execution.”
Never underestimate the power of going back to basics after a certain time, you will learn more. The toughest task is timely execution if you miss it, you will chase the price. Why execution doesn’t happen on time? Lack of belief in the trading system. Why chasing the price? FOMO. This is the fact that if you don't believe in your system then no one can make you money and that stops you to become a good trader. There is something to work upon yourself not the system. Confidence is the key and that comes with practice and great execution.”
The Emotion Management
Emotions are hyped into trading nowadays instead of following a process. If you follow a trading plan, take the calculated risk, and predefined entry and exit. then you just need to sit tight with a cup of coffee. Emotions take a back seat when you have a conviction on what you are doing and why you are doing.
Why emotions Engulf your rational thinking? Because you take trade bigger than your capacity, didn't decide when to take profit or book loss before entering a trade, no reasoning behind taking a trade. I have come across a situation many times that when we are in the right direction we tend to book profits early but wait for stop loss to hit. Why this nonsense?
Always have a reason to enter, a reason to exit(stop or target). Yes, we can have a set of rules to trail the stop-loss or part booking but always back all the acts by proper rationale.
Why emotions Engulf your rational thinking? Because you take trade bigger than your capacity, didn't decide when to take profit or book loss before entering a trade, no reasoning behind taking a trade. I have come across a situation many times that when we are in the right direction we tend to book profits early but wait for stop loss to hit. Why this nonsense?
Always have a reason to enter, a reason to exit(stop or target). Yes, we can have a set of rules to trail the stop-loss or part booking but always back all the acts by proper rationale.
If you can apply these things then bingo you have learned how to manage emotions while in the trade.
My Findings
After a time of 2 years into trading, I came to know many important aspects that helped me to make a better decision:
1. Having peace of mind and clarity helps to remain calm while in the trade and make a better decision when wrong. Vice verse not only costs money but also your mental health so physical health. It destroys you internally without giving you a sense of it.
2. If we have a plan and entered a trade, don't look for outside suggestions about whether to exit or when to exit. Do it by yourself, it makes us independent and saves our undergoing plan to make it better next time.
3. Avoiding distractions like scrolling social media and business T.V channels, seeking advice and views about the stocks while in the trade, improves our trading decisions. Why? Because if we are into a trade and following our system, but when we heard any view on the same stock it prints in our subconscious mind and affects the trading decisions. It makes the situation even worse over some time.
4. Everybody has an opinion and can be different from person to person. Having a plan is way better than any opinion irrespective of results. I lost my track many times by getting influenced by other views. Yes we can discuss post-market hours but any conversation is a must avoid during the market hours.
5. As a trader, my mindset allows me to follow 1 or 2 stocks at a time. because “When we spend a lot of time say 5–6 months with someone, you can tell about their mood just by looking at them. Similarly when you spend a lot of time on charts of a single script say Nifty/Reliance, your brain automatically learns to recognize patterns and the mood of the market.”
6. I take a calculated risk in each trade that helps to stay in the game because “If you don't bet, you can't win. If you lose all your chips, you can't bet. — Larry Hite”
7. I don't make any bias towards either trend or fixed daily targets. Why? Having a trend bias either hits stop-loss and makes me miss wonderful trades on the other side. Having a fixed daily target costs you better trades and if you don't achieve, the psychology doesn't remain the same in the next trade(90%). I would say better trade all the opportunities whether it comes 10 times a day or none.
8. I measure my performance based on how many points I made instead of how much profit I made. That helps to keep me in check.
The Message for the fellow traders
What do you think, how much time it takes to make a new habit? I read somewhere it takes 21 days but let's assume 1 month or 2. Now “Make a habit of not losing big and not breaking the trading rules not even a single time within this duration, whatever it takes. You would not be struggling at trading after it.”
By breaking a rule you don't just avoid the rule but also ruin the brain pattern which has been built over the time. Our mind works on the patterns, as humans, we are emotional creatures. Every act is processed information and repetition of the same act creates patterns that are saved with an emotion.
Following a challenge whatever it may be, after completion of the challenge may not give monetary benefit but gives a feeling of accomplishment. Once you get that feeling you become unstoppable.
By breaking a rule you don't just avoid the rule but also ruin the brain pattern which has been built over the time. Our mind works on the patterns, as humans, we are emotional creatures. Every act is processed information and repetition of the same act creates patterns that are saved with an emotion.
Following a challenge whatever it may be, after completion of the challenge may not give monetary benefit but gives a feeling of accomplishment. Once you get that feeling you become unstoppable.
I heard peoples saying about maintaining trade journals. I didn't know its meaning initially, I learned the importance. Because if you write your plans and results you give it existence in real-time. And you can only change, modify or enhance something that exists.
Isolate yourself from peoples who predicts the markets, follows the news, only gives opinions. Because everything is raw information and save your brain from creating chaos inside you. Save your energy to act when it’s needed else you will be helpless.
If you like this article, don’t forget to bless it with your tweets or shares on your favourite social media. Further, you might like to read Following Trading Journeys:
Chartered Accountant turned full-time Trader - An inspiring Trading Journey
An MBA Specialized in International Business Turned Full-Time Trader cum Investor
Any questions hovering in your mind? The comment box is for you. Post your questions or suggestions there, we will reach to you sure.
Share your Trading Journey with Us: Are you interested to share your trading journey with us? Contact us here or drop us a message at our Telegram Group.
No comments: