Trading- Mind Vs Heart

09 June 2021

The day began at 6.30 in morning.

Heart: A cursory glance at metrics says I am up more than 6% in month of June 2021, not even 10 days. This comes at back drop multiple months of double digit return. The juggernaut will roll on. Stay strong.

Mind: This is all good historical data, I am uneasy about the compressed event. The order flow of Nifty, leading stocks is quite odd. Distribution is carried out even with strong results. This is a clear indication long term forecasting is not factoring next quarter for now! Don’t you remember I have been telling my trader friends…Nifty is imminent for a pull back.

Heart: Yes yes, you are writing these cocktail stories for days. The market is booming and will rise further. There is no stopping, god is giving you money. Grab with both hands.

Mind: No no, I will play safe. I won’t take new positions and watch the existing positions closely.

Heart: As you wish but I am telling you. Boss you are doing a mistake.

9.30 AM

Heart: what happened big thinker? Market opens positive…you must shreds all your fear and go long again.

Mind: no, I will wait till post lunch .In fact at first sign of weakness if any I will trim my positions. Anyway I am 90% invested,

Heart: you forgot what Peter Lynch said. You lose more money by waiting for corrections than in actual correction.

Mind: that’s true. Who is waiting with cash? I am 90% invested.

Heart: you should be 100% invested within next 10 minutes and if possible use leverage.

Mind: no I will stay sidelines and protect profit.

Heart: as you say so! But you are going to pay a price.

1 PM- at lunch, market lost positive momentum; becomes flat.

Heart: don’t bother about this minor loss of momentum. Hang on stay strong.

Mind: stay strong for what? I have booked out all positions where there was a good profit cushion. Also exited the ones which were on minor loss. Holding only the ones where I believe order flow looks still to be on accumulation side. But back in 80% cash!

Heart: 80%?? You are mad, you are ruining the profitable opportunities. Remember Big Patrick word (Reminiscences of a stock operator)? It’s a bull market!

Mind: it may be a bull market. What is stopping me to re-enter? With exit today my average loss margin for the month will come down further while retaining the winning margin.

Heart: trading is intuition, you have to take uncomfortable decisions to make money.

Mind: thats fine, but who is taking comfortable decisions either? In speculation you have to a directional call which results in profitable amount over all. My metrics was good till date this year, so I am out. You better get lost now.

2.20 PM

Heart: you shorted?

Mind: yes

Heart: Did you forget this would be your 9th attempt this year in shorting, last 8 of them are failure?

Mind: I know, but combined losses from 8 attempts is not even 4% of portfolio. I have been reducing sizes.

Heart: 9 attempts back to back is suicidial. You are abandoning your better skillsets of long !!

Mind: no I am not, I am trying to go with the flow. I will not stack up full position size; rather wait tomorrow to see further.

Heart: what makes you think market will go down?

Mind: the same process which identified market will go up. No change in process.

Heart: process? Are you crazy? Bull market boss, reducing covid cases. Burgeoning profits, this is the beginning.

Mind: when did I say this is starting a bear market? No knows, no one will either. This is directional call, wrong or right doesn’t matter. What matters is how effectively I carry out this trade with risk and money management both.

Heart: you will lose, why using jargons?

Mind: Jargons? money management is fundamental pillar.

Heart: what ever!!

9.00 PM

Heart: did you saw SGX nifty is up?

Mind: I don’t care about something which I can’t control. I know where to get out tomorrow.

Heart: we shall see tomorrow…

Mind: yes, we will. Good night!


10 June 2021

6.20 AM. Morning time.

Mind- the damage to portfolio yesterday stands at 0.55%. This is the amount of profit that was given away.

Heart- its not about 0.55% or 2%, bigger point is panic sell off.

Mind- I disagree, it was selling into weakness. I have been selling into strength for long time, of course broader market has been good for a number of stocks.

Heart- are you going to re-enter 100% today?

Mind- can’t say now but final short list is ready for 100% unless liquidity becomes an issue for all stocks.

SGX Nifty opens…mildly positive. I think my shorts will survive.

9.15 AM, Market opens

Mind- yahoo, shorts survived. I am still holding on to bit of profits from yesterday. But I think as the day go on market will plunge further. It appears to be a open drive (opening near high and then fall).

Heart- market looks strong, yesterday was a stop over for bull market.

Mind- fine, I believe broader market is much more stronger than index stocks.

9.55 AM, Nifty re-claim opening price of day and surge

Mind- profits vanished, back to cost in short. I should still hang around.

Heart- no comments, market won’t correct now.

11.30 AM, first sign of shorts getting into red as markets surge further.

Mind- I am covering half of Nifty contracts at 20 points loss.

Heart- I suggest you cover fully.

Mind- Bank nifty still looks good.

12.00 PM, market shows no sign of weakness. Bank Nifty surges now, profit vanished.

Mind- I am covering all contracts. Booking 30 points avge loss on Nifty and 100 points on Bank nifty.

Heart- no surprise for me. Have you gone long now?

Mind- no no, though list is ready too busy in monitoring shorts.

12.30 PM, bank nifty shows weakness.

Mind- I am going to plunge again, short one more time. Not going to listen to heart.

1.00 PM, fresh contracts of Bank nifty showing 100 point loss again.

Mind- let me close all shorts of bank nifty. A bizarre day; I don’t deserve this after a good run of so many weeks.

Heart- never short pullback on a strong market.

Mind- but it did worked last time.

1.05 PM- 9th attempt to short post April 2021 resulted in minor loss or no profit.

Mind- 9 failures, don’t feel like trading today.

Heart- you are a fool, entire broader market is green. People are merry making, you are the only one who is in slumber.

Mind- fine, thank you.

2.00 PM, back in market

Mind- ledger is rich with margin and cash, list is ready. I am a trader and entries are popping up. No matter what has happened in morning I should start buying.

Heart- that’s the spirit boy. But you shouldn’t trade as per your process.

Mind- what do you mean?

Heart- forgot? You only wrote the rules. If shorts resulted loss for the day, take off for rest of day even required next day.

Mind- true, let me go slow. I will deploy 33%.

Heart- breaking process?

Mind- there are rare occasions where process meant to be broken.

Heart- is this a rare occasion?

Mind- indeed, 10% plus return in April and May. June even with yesterday selling 5.65% still. This is an exception.

2.15 PM- gone long with 33% allocation of ledger.

3.45 PM- long worked well, final loss for the day ended at 0.07%.

Mind- what an escape and a day I messed it up.

Heart- you should never imprint bad days to subconscious.

Mind- you are right.

5.30 PM, day is gone. Fresh list for tomorrow is ready. Time to read self help books.

Mind- it would be a disaster to keep these bad memories of 10 June 2021. Still I have to write down the lessons learnt.

Heart- Wizardom?

Mind- Yes, here they are:

Whats gone well- all rules except Rule no 8, Rule no 16, Rule No 25, Rule no-33, Rule no-36, Rule no- 37 Rule no -38

Heart- fantastic, why don’t you remind me all the rules again.

Mind- all right, here we go. By the way time to read some good motivational books. Bye till tomorrow.

First be sure, you really want to trade. It is common for people who think they want to trade to discover that they really don’t.

2. Examine your motives

Think about why you really want to trade. If you want to trade for the excitement, you might be better off riding a roller coaster or taking up hang gliding. Examine your motives for conflict between love and hate. Plan out how you are going to resolve conflicts?

3. A method that suits the personality

The approach must be right for you, it must feel comfortable.

4. It’s absolute necessary to have an edge

A positive expectancy!

5. Derive a method

Limitless permutations and combinations of methods.

6. Developing a method is hard work

Knee starts swelling, nights go by like twilight. Expect multiple failures.

7. Skill Vs Hard work

Both are required.

8. Good trading should be effortless

Hard work doesn’t include execution!

9. Money management and risk control

Stock Name- 10%, Money Management- 70%, Risk Management-20%

10. A trading plan

Blueprint…entry rules, exit rules, money management and a personal trading method!

11. Discipline

What feels good is often the wrong thing to do.

12. Understand that you are responsible

Do not blame others.

13. The need for independence

Own thinking, own trading decisions.

14. Confidence

Ability to continue.

15. Losing is a part of the game

Loss is a function of gain.

16. Time outs

There is a time to trade, there is a time to sit out.

17. The urge to seek advice

Don’t be under temptation- perils of social networking!

18. The virtue of patience

Wait for money to come to you.

19. The importance of sitting

Staying with trades which are winning.

20. Developing low risk idea

It’s a deadly combination of patience and risk control.

21. The importance of varying bet size

Edge fluctuates from trade to trade.

22. Scaling in and out of trades

It’s not everything vs nothing; it’s always something.

23. Being right is more important than being a genius

I am happy to be called as stupid while making money than being called genius while losing money.

24. Don’t worry about looking stupid.

Long by breakfast, short by lunch!

25. Sometimes action is more importance than prudence

Go with flow.

26. Catching part of the move is just fine.

Only two people can catch market top and bottom- GOD and LIAR.

27. Maximise gains, not the number of wins

Expectancy multiplied by opportunities

28. Learn to be disloyal

Abandon your position with the blink of an eye.

29. Pull out partial profits

Lock profits and develop control.

30. Hope- just a word

And a dirty word

31. Don’t do the comfortable thing

Comfortable decisions are nothing more than flipping coins.

32. You can’t win if you have to win

Winning is not one trade but the result of a time period.

33. Think twice when market lets you off the hook easily

Feeling great, too great…time to ponder.

34. A mind is a terrible thing to close.

Today breakout, tomorrow mean reversion.

35. The markets are an expensive place for excitement and entertainment

Hobby costs you money and the market has a notorious habit of killing hobbyists.

36. The calm state of a trader

Watch yourself doing the trade.

37. Identify stress and eliminate

Process rectification

38. Pay attention to intuition

Hand pain to shoulder pain!

39. Life is a mission and love it

Markets and madness- never give up.

40. Markets can be beaten