Jab Dil Dhak Dhak Kare

Trading
1

When people tremble on the trading desk often the reason is one or more of these

  1. Capital inadequacy - Just not having enough money to trade with a strategy. So, when loosing streaks and drawdowns hit BP levels goes high. Always quantify capital requirement for a strategy and for certain position size before the strategy is traded.

  2. Debt funding - Trading with money kept aside for some other pressing need or even day to day existence or money from pledged gold or investments or money from other secured or unsecured source can put lot of mental stress, if trading goes wrong. There are no fixed income schemes in the market. There could also be a trade around however improbable that could twist your trade and equity curve drastically. Always strive to trade with money one has and don’t mind loosing.

  3. Learning pitfalls - Learning doesn’t necessarily lead to earning from trading. Harvard MBAs struggle to keep up with S&P500. Well educated Mutual fund, hedge fund managers struggle hard to beat good old Nifty. Theory is sometimes not very comprehensive and can mislead. Learning too much can also confuse the mind especially when you are starting with all those complicated financial jargons and strategies. So never dive into market just on the number of certificates one has. Market will show your place quickly. Always remember we only need to know that much to engage profitably with market. Also, if one has a strategy in mind better to test it out - backtesting, forward testing, paper trading before deploying live.

  4. All in the pot and all out - The lord be kind if one bets everything on one trade. Always know that anything can happen anytime in the market against your expectation. Therefore, never go all in one trade as you risk going all out in that one trade. While hope may be the best of things, it tends to work out in our favour when we are in a position to hope over a fair number of trades.

  5. Consistently inconsistent - Any investment needs time to grow unless of course one hits a lottery. But even people who won lotteries kept on buying lotterries with a small amount over a fair period of time. There is no point consistently devoting insignificant time with a strategy and then switching over to another strategy loosing faith on the short term performance of the former strategy. All one is doing is accumuating losses in several different ways. It is always better to start after taking time to understand what a strategy philosophy is and the time investment needed to get a return using it along with all its inherent performance characteristics over time. Then stick with it as if your life depends on it. There is no quick salvation path to market success, but there exist several paths to quick self annihilation and we are likely to find all those if we are not persistent on well researched paths.

  6. Ok to win, Not ok to loose - There exist no holy grail strategies over a fair number of trades. Therefore it is not possible to always win in every trade. Its foolhardy to try and win every time by averaging loosing positions, holding on to loosing trades more than needed etc (This if unsupported by well tested well rounded strategy). Let the ego slide and accept battle losses. Afterall we are here to win the war.

Agree, disagree or have you observed a different stroke to get out ?

9 Likes
2

extremely well written post. Kudos

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All are fine points, but what is the reason for posting this now? :grinning:

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To create awareness. You were asking me in DM why so much capital is needed. That is the moment something like this got crystallised in mind and now translated in to post… :rofl:

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Of course I did, because every financial instrument is different, and I know nothing about derivatives.

I asked why 300 when it is Coffee, you said it it 300, because it is Cappuccino :coffee:

It is what you don’t know that gets you into trouble, it is what you know for sure, which is not so :grin:

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This reminds of NSE ad where two people are standing in queue at billing in supermarket and one of them keeps switching the queues seeing the other one moving.

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Don’t day traders do that? Going long or short depending on that particular time :grin:

1 Like
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And as soon as they exit the position, it starts moving in their direction

9

It happens, part of the game and for someone trading small batches, the loss will be less and if they are doing in small intervals, they will get many chances to make that whole session break even or even profitable.

What you said about the ad reminded me of this. So what was the point of that ad?

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That was for investors. To have patience and stick to a good stock. Don’t just keep switching seeing the other one moving and yours not moving

2 Likes
11

Right, got it.

For traders and chasers, it does not apply, we go where there is activity, where there is movement, so changing lines is necessary, dump this, grab that, leave this, hold that :grin:

12

Well said ! Well said indeed! Very much agreeable. :ok_hand: :clap: :clap:

13

I do not understand “JabDil Dhak Dhak kare”. Its ok. It is partially true and partially incorrect. It very much depends on the type of invester. I have only one point to make. A investor/trader should make it a point not to lose any money “on the whole”. It should be in the green. That is the basic starting point. The rest are next. I have been intermittanly in the market from 2003-2008 and then 2014-2016 and from 2021 till now. I have been successful since I did not expect to become rich overnight or in a year. Further I am not a long term investor.

14

I think every trader should go through to this post before stepping into the stock market. You have listed all important points to be kept in mind. Thank you so much for this!

15

good post… well articulated

16

kya baat hai, very good