The last 2 months have been very hectic on the office front. So I couldn't find enough time to update the blog.
To put it in short, in this period I had a few good trades, followed by a few horrible ones, followed by a few good ones again.
In a few of the trades, I tried to predict the market, with disastrous results. I didn't trade along with the trend, but tried to preempt a trend reversal. So when the markets didn't reverse, I panicked and closed my trades taking in big losses. But at that point, the actual trend reversal occurred. The outcome: in some cases, the stocks which I had traded moved 20% in the direction that I thought they would. But I was so scared after taking those losses, that I just watched as a lame spectator.
After all this, I sat back and analysed some top mistakes that I was committing.
1. In most of the cases I was just taking up a trade as if it was a routine task. Not much time was spent in analyzing the charts or the market condition itself.
2. Lack of confidence or overconfidence to enter a trade.
Instead of letting good trades presenting themselves, I was trying to force an entry. Though my analysis used to be right in most cases, my entry point would be wrong - either too late or too early. Market timing strategy was all wrong.
3. In some cases, I ended up giving up some of the gains that I had made as I was not content with the profits that I had in that trade. I thought of waiting a while to see if I can make more profits in that trade. But in that time, the markets used to quickly recover, thus making a profitable trade into a no loss/no gain trade or a small loss trade. In most cases, I waited for my SLO to be hit, instead of proactively exiting the trade with whatever profits I had. I'm not sure whether to attribute it to greed, or my insistence to stick to my initial plan.
4. Trading too much.
I thought in the last year, I overtraded a bit too much. In that process, I also ended up losing bigtime if all my trades lost money at the same time.
But in the last month, I have made a conscious attempt to reduce the number of trades, and increase the profitability in each trade. The first step in this was to take out all my previous profits and start off newly with a small capital. This would be a deterrent for me from trading like a gambler.
Initially it was boring, as some of the trades were no loss/ no gain trades. But now, I am happy with this approach, as just one good trade will make the portfolio look good.
This has also brought in more emphasis on a better chart analysis and analysis of overall market conditions. Exercising self restraint is of utmost importance.
There is, however one aspect that is part of the market and over which I have absolutely no control of.
Since last year, there is an initial period between 9:00 AM - 9:07 AM in which the opening prices of index stocks are determined. This, is making a mockery of my plans, my stop loss orders and also makes a lot of charts look very very choppy.
For example, when I was trading ICICIBank, it hit a 52 week low of 761 and then closed at 779, still down more than 2% for the day. I looked up the charts and saw that it had hit a major support level. So I planned to exit the trade in case a strong reversal occurred. I placed an after market SLO at 800, more than 2.5 percent from the previous closing price. But the next day, during pre-open bidding, the indicative opening showed near 820 rupees, a full 5% up from the previous close.
Fortunately, I modified my SLO and forcefully exited the trade with decent profits.
Since our markets are correlated with global markets, any global news results in abnormal gap up or gap down openings. One, it makes a lot of charts look filled with narrow range candlesticks, even though the actual percentage movement has been in the range of 3-5%. And two, it takes out a lot of trades out of contention, as the stock has already moved away a lot, thereby giving me less confidence to take an entry.
I guess this is a part of market evolution, and over time some solution will be found.
I shall complete 1 year of trading this month end. Hope to post in a lot of my experiences in the next post. But, I am already happy that I have just survived this year, as somewhere I read that more than half the traders don't!
One more interesting update. Now its possible to speculate on DJIA and S&P500 in futures segment. I shall post more about this, after I try out trading them. Soon, FTSE might be added to the list.
For now, happy trading!
To put it in short, in this period I had a few good trades, followed by a few horrible ones, followed by a few good ones again.
In a few of the trades, I tried to predict the market, with disastrous results. I didn't trade along with the trend, but tried to preempt a trend reversal. So when the markets didn't reverse, I panicked and closed my trades taking in big losses. But at that point, the actual trend reversal occurred. The outcome: in some cases, the stocks which I had traded moved 20% in the direction that I thought they would. But I was so scared after taking those losses, that I just watched as a lame spectator.
After all this, I sat back and analysed some top mistakes that I was committing.
1. In most of the cases I was just taking up a trade as if it was a routine task. Not much time was spent in analyzing the charts or the market condition itself.
2. Lack of confidence or overconfidence to enter a trade.
Instead of letting good trades presenting themselves, I was trying to force an entry. Though my analysis used to be right in most cases, my entry point would be wrong - either too late or too early. Market timing strategy was all wrong.
3. In some cases, I ended up giving up some of the gains that I had made as I was not content with the profits that I had in that trade. I thought of waiting a while to see if I can make more profits in that trade. But in that time, the markets used to quickly recover, thus making a profitable trade into a no loss/no gain trade or a small loss trade. In most cases, I waited for my SLO to be hit, instead of proactively exiting the trade with whatever profits I had. I'm not sure whether to attribute it to greed, or my insistence to stick to my initial plan.
4. Trading too much.
I thought in the last year, I overtraded a bit too much. In that process, I also ended up losing bigtime if all my trades lost money at the same time.
But in the last month, I have made a conscious attempt to reduce the number of trades, and increase the profitability in each trade. The first step in this was to take out all my previous profits and start off newly with a small capital. This would be a deterrent for me from trading like a gambler.
Initially it was boring, as some of the trades were no loss/ no gain trades. But now, I am happy with this approach, as just one good trade will make the portfolio look good.
This has also brought in more emphasis on a better chart analysis and analysis of overall market conditions. Exercising self restraint is of utmost importance.
There is, however one aspect that is part of the market and over which I have absolutely no control of.
Since last year, there is an initial period between 9:00 AM - 9:07 AM in which the opening prices of index stocks are determined. This, is making a mockery of my plans, my stop loss orders and also makes a lot of charts look very very choppy.
For example, when I was trading ICICIBank, it hit a 52 week low of 761 and then closed at 779, still down more than 2% for the day. I looked up the charts and saw that it had hit a major support level. So I planned to exit the trade in case a strong reversal occurred. I placed an after market SLO at 800, more than 2.5 percent from the previous closing price. But the next day, during pre-open bidding, the indicative opening showed near 820 rupees, a full 5% up from the previous close.
Fortunately, I modified my SLO and forcefully exited the trade with decent profits.
Since our markets are correlated with global markets, any global news results in abnormal gap up or gap down openings. One, it makes a lot of charts look filled with narrow range candlesticks, even though the actual percentage movement has been in the range of 3-5%. And two, it takes out a lot of trades out of contention, as the stock has already moved away a lot, thereby giving me less confidence to take an entry.
I guess this is a part of market evolution, and over time some solution will be found.
I shall complete 1 year of trading this month end. Hope to post in a lot of my experiences in the next post. But, I am already happy that I have just survived this year, as somewhere I read that more than half the traders don't!
One more interesting update. Now its possible to speculate on DJIA and S&P500 in futures segment. I shall post more about this, after I try out trading them. Soon, FTSE might be added to the list.
For now, happy trading!
