Problem facing becoming a profitable trader

General
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"I am Parikshit and 22 years old. I started my stock market journey 3 years ago, and my progress chart is more consolidating than any other chart in the world. I am an options buyer and have utilised all the creative ideas I can think of. I started by learning indicators and soon realised within 1-2 months that they do not work. Then I learned about setups and understood that simply following setups made by someone else would not take me anywhere. I have developed more than 10 setups using different ideologies and understanding how other traders are trading, but I’m still not able to become a profitable trader.

I am a kind of breakeven trader, with nominal losses ranging from 10-15k in charges. I started with 1 lot and am now trading with 3 lots. When I started trading after forming a setup, I learned about option behaviour, which reduces the edge of setups in the market. I realised that to break even, I have to make at least a 10 percent profit. When I have 30 trades in a month with 50 percent accuracy and a 1:2 risk-reward ratio, the problem I face in executing setups is that sometimes the stop-loss (SL) is hit in options but not in the index (1-2 times a month at least), causing a 3-6% loss. If I do not take option SL, it damages more trades, and to maintain discipline, I believe it is important. Sometimes, I don’t get proper risk-reward due to momentum decay (at least 2-3 percent a month). There are also 2 percent charges. Sometimes, both option and index SLs are not hit, but due to going close to the SL (0.20-0.30 before SL is hit), Zerodha exits the position due to whatever reason (1 time in 2 months), causing a 1 percent loss. In any case, if we make a mistake in a month by putting the SL in the wrong place or executing the trade late or early, becoming profitable becomes a myth.

I have also learned in this journey of backtesting and executing setups that performed in 2021 will not perform the same in 2023 or 2024 because of volatility and momentum changes.I have tried multiple setups and found that the accuracy of many setups has reduced over time. They might perform when the same kind of volatility comes back. Backtests of 2-3 years are not relatable, I guess. One more thing I noticed is that setups perform on average from November to April, but I don’t know why none of the setups I formed perform from May to October.

I have never made money in the market, and after the phase has gone, I have learned how this moves, and I thought I was not at the right place at the right time, and this has consistently happened for the past 3 years. The only thing consistent in my journey is this.

So, my doubt is I don’t know where I am lagging. Do I have a problem in mindset, or maybe I don’t know how the market works? Now, I feel like leaving trading is the only option, but the time spent in the market never feels like a waste, and I guess I will never regret these 3 years. If anybody has a solution for me, then please help.I am also developing setups for swing trading in stocks. I am so demotivated that I’m not able to think of anything and just running away from the chart due to fear of failing again."

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yeah, this has happened. markets can be cyclical. 2020 was very volatile and 2020-21 or so was very easy period for trading momentum. So against that now we have had much tougher period since then although i think it might be getting back to normal now ( pre 2020 ? )

Only thing we can do is 1) try to improve system to survive such phases as much as possible 2) Try to add systems that are working well today. Both 1 and 2 must be tested over large sample, couple of years is not enough i think.
3) Also having another source of income helps a lot.
4) You can also look at other markets, underlying / stocks / shift to higher time frame etc.

But yes, there is no guarantee that anyone will obtain success or that success wont be fleeting. That is how it is. It took me 5+ years to understand how to make it work, but uncertainty will always be there.

If you have opportunities elsewhere, nothing wrong with taking them. And one can trade higher timeframes with longer holding periods too, perhaps looking at things EOD only and that way you can do both if you feel like it. Could even trade once a week on weekly timeframe.

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You do not have anything lagging. In fact, after reading your story, it seems like you have understood the markets pretty well.

Just one more thing, stock markets cannot be cracked in just 3 years. It may take a bit longer so hang in there. If you can narrow down your focus to just 1 stock or index, your confidence will be back soon.

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I Can understand your mindset very well, not only me everyone who read your post would. But don’t think you are alone, every retail trader who is successful in stock market have gone through this phase.

Long things short.

Options especially Index options does not behave the same way as cash market. Its totally different. You first have to master the option greeks and understand how it is related to the option pricing. These so called setups, or any text book strategies, including price action will not work. These things might work here and there but not consistent.

hence you have to create a setup or a strategy based on the options and its relationship with the greeks and have to find an edge there. As you have said back test will only give you an idea but its not a guarantee for future trades. once you setup a strategy after fully understand the concept of options, either can test with 1 lot or virtual trade. Once satisfied you can jump into the real trades else you will loose more.
This is from my experience and perspective , might not be the case of others.

+1

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I can relate with your journey, you guys have any suggestions for him?
@ronin_sha
@Jason_Castelino
@VijayNair
@AlgoEye
@t7support

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Take some office going job or complete your degree. See the world, world is outside our screen. This also improves trading. Also, when your feeling lost go out and take a vacation. India is very cheap to travel with lots of cheap option.

Very good going , i must say but reduce those strategies to 4-5. You can do correlation analysis so so two strategy are highly correlated than eliminate them. Lest the setup better it is

No worries , we all face these issue on day to day basis, learn coding and make your risk management automated .

For option buyer no trade is also a trade, conc on price action. So if your reversal trader than look for breakout strategy( sometime opp. perspective works)

Read about self motivation, meditation( i know your young but it might help you). All answers are within us only. Have patience and give time, you have full life ahead of you.

Leaving market for sometime also works, leave options and work in cash market. Its true profitatbiliy is ultimate motivation so make your overall yearly target small.

Good Psychological Video for option buyers : https://www.youtube.com/watch?v=JKI1EYEsQXI

Cheers! All the very best.

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@Parikshit_Choudhary every new trader come’s to this path, so don’t loos your guts. try first in stock with fixed SL on every Trade. i suffered the same thing, but i realized the option trading is not suitable form me and i working only in stock swing trading. and only one strategy i am following no need multiple strategy on multiple time frame.

Below is my profitable trading rules.

  • Follow one strategy Rule.
  • Fixed SL on every single Trade. increase the Capital on very half yearly once get confidence.
  • don’t watch others posted analysis.
  • stick your strategy.
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Quit trading.

I refrained from engaging in the discussion earlier as it might have been perceived negatively by some individuals. However, I’m responding now simply because I was tagged.

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Harsh.
It took most successful traders way more than 3 years to make good profits in the markets.
However, he can take a break from active participation in the markets and master a profession creating a reliable source of income for his family. He can then focus on trading as a side hustle or a part time activity.
Option buying is more difficult compared to other forms of trading.
It takes money to make money in capital markets.
Perhaps he could try to buy options that have lot of time left for expiry if capital is a constraint to master the art of trading.

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While i do options buying i look at a lot of things it’s not that simple like just follow price action. I know some traders here who know how to do it but are they going to tell you just like that? Even if i or other trader tells you for free what they will get in return? I am not being mean but telling you the truth.
You may say these are the same things what i saw on youtube but a real trader uses same things but his approach and mindset is the key which makes him profitable which you can’t learn on youtube and no one is going to tell you for free for sure! And even if you do any course by paying money it’s not a guaranty that it will be useful to you.

So simple answer is do option selling!

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Sometimes it’s better to say it out loud than just encourage him to keep trying. Intentions matter more than the words. Whatever I said was after reading his post and that’s the best I felt he should do. I am sure he will achieve higher heights in other fields. May be I could put the same in better words.
I have personally told 100s of students to quit CA because it was affecting them mentally. They are better off doing other things. In my opinion this guy is better off doing other thing. I hope he comes back 3 years down the line taking all the suggestions and proves me wrong. :pray:

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Take a break!

After break learn about long term investing via mutual funds or stocks it helps considering your age.

Remember you missed super rally in last few years and swear you will not miss rally in next 20 years by buying etf/ index / managed funds.

If you want to try trading spare 10% of surplus cash and slowly increase when your xirr improves.

Inflation beating real returns are important.

Trading should make us happy that market opens at 9:15 not anxious that they open.

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I think you should evaluate your basic trading stats such as your average risk-reward ratio and accuracy.

You can talk about many things but they don’t lie. If you don’t know where you are lacking, they will tell you the truth. Start evaluating your orderbook at end of day, write your stats for atleast 3 months and then analyse it.

Roughly speaking, imo if you want to become successful, you should not focus on accuracy, rather focus on size of SL and risk-reward. Keep your SL small but aim high. Your SL may hit for few more times but that’s not the matter untill you are making good risk-reward.

After comprehensively analysing your trading stats, the numbers will clear the weak point either you are placing big SL or not capturing big targets most probably. On the basis of that, you can work on your technical and chart reading skills and form a apropriate strategy for the same.

As you have said you have already passed 3 years with trying to solve this puzzle, i would rather also suggest you to re-think about your interest about trading, if you want to extract just money out of it as it is very lucrative, and have no interest towards process, then better you should quite trading and start focusing on things which you want to do.

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Thank you, your tips are genuinely appreciated. Could you please help me figure out what exactly it is that I’m not getting right? I would be eternally great full for any suggestions at all! Anything from your experience that you’d like to share would help me a lot as well.

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everyone I know in the field focuses on creating an edge in the Index market and determining an average strike price according to our setup, you’re bringing a new perspective of creating an edge in indices as well as options if i’m not wrong? Is it also worth it in your opinion to invest the time required for creating an edge in options as it would take at least thrice the time required to create an edge in indices since I am not acquainted with option greeks? Would you rather advice moving onto stocks rather than options? Stock swing trading also has an issue of picking the wrong stock which reduces the edge. Which path would you suggest?

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Thanks for your comment, needed to hear this. I have been focusing and trading in the Nifty index for the past year but the results have been inconsistent. I didn’t try to master options, but chose an average strike price and operated on that basis. I’ll definitely hang in there but could you help me figure out whether I should stick to options or stock swing trading. Any comments on what you think i’m getting wrong and what people at the stage I’m get wrong in general would also be greatly appreciated.

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Thanks for the positivity. I didn’t start option buying with The goal of making a quick buck with low capital, neither do I lack capital. I have always kept my risk within 1% of my capital. A distant expiry trade doesn’t sit well with my current setup, otherwise i would’ve been open to it. Any tips and advices from you would be genuinely appreciated.

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could you please clarify whether you found something wrong with the way I’m working or is it just that you think that trading is effecting me mentally, or that I don’t have what it takes to make it in the capital market? Any comments and guidance would be appreciated as I will be continuing with trading for sure with a sincere attitude. My words might seem as if they were coming from an emotionally drained soul but I solemnly have been and will be pursuing trading as my first priority, as it is the only thing I’ve found worth doing in my life.

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Yes There is something called Quantitative Trading I guess this is being done by Institutions and other big guys, That’s what am talking about, This is totally different from Traditional trading. But this doesn’t mean that retail cannot achieve that, You need to put in all the hard work for that, Yes it takes a lot of time but worth it.

I am not good at maths and hence it took almost 9 months. may be If you are good at maths you can crack it sooner. Yet it takes time, But its upto you to try or not. Again This is totally from discretionary, Trend, momentum , and all other traditional trading styles.

I did move away from stocks to options because of

  1. so many stocks, you cannot monitor everything , each stock has different movement based on News, results, sudden increase/decrease in volume, Insider trading and so on. Hence setup/strategy which works on one doesn’t work on others, so you cannot have a fixed setup. I was a believer in price action but again it doesn’t work consistently because of the above mentioned things.

  2. You can do swing trading in stocks , I will not suggest against. But You need a much bigger capital and a Full time Job, I hope and believe you cant make bigger returns consistently unless you have bigger capital , especially most of the times market will be sideways and its tough to identify which stock will take off. If you get stuck it may be weeks or months to be breakeven at some times.

  3. Hence I believe its better to focus on one Thing that is Index and spend time on how it works , for that you need to Master greeks. But If still you are not able to crack options you can better stick to stocks as options are not everyone’s cup of tea.

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Thanks for your comment, I get your point.