million dollar traders

pl find below links to the 3 part bbc series "million dollar traders"

i recently came across these and watched them. these are 1 hour each 3 parts of an "experiment" wherein 8 shorlisted novice traders are given 1 million dollars to trade (after ofcourse basic training and under watchful expert eyes)

what a series this is! what an experiment it turned out to be!

every novice, ambitious (& even others) must watch these. all tensions and emotions and dilemmas and triumphs etc are beautifully (and at times in raw ugly manner) exposed!

watching these and other videos will add to any trader's learning curve.

enjoy.

http://www.youtube.com/watch?v=v6ciY8u04Kk

http://www.youtube.com/watch?v=ML4ObTeYLhg

http://www.youtube.com/watch?v=pWkzAvE5aQQ

my own laws and rules of day-trading

my first introduction to stock market was in november 2003. but i got serious only in jan 2009. though i had become literate about trading by that time, my real education and training started only after that. and what a journey it has been in these 46 months. full of sweat, tears, blood, death and re-birth....

majority portion of this journey is archived in the form of my 1000+ articles and posts in mudraa.com as well as my blog.

while the learning is still on and will and should always be, i have no hesitation in admitting that i have passed out of the univ and started my pro journey.

in the past 2-3 months i have been seriously devoting time to fine-tune and test and retest and improve my trading method. during this period, i have written and shared quite less due to the time constraint.

today, was in quite a relaxed mood and took the liberty of teasing myself with one of my favourite self-questions - "what are the laws of day-trading as per you as of today as per your method and understanding?"

this is one question that i have been asking myself very very regularly so that i always keep the larger picture right before my eyes and mind.

here is the latest list of my laws and rules for day-trading.

- trade pro-trend and even your blunders will be pardoned. (i have devised my methods to identify the three phases - up trend, no-trend, down-trend)

- technical indicators are the time tables of operators. operators and bandits never stick to time table. don't fool yourself with technical indicators but be aware of them anyway. look for the clue of the operator movement. retail traders play at the technical level and lose at the tactical level. retail traders will lose lesser simply by playing the trade rather than trading the trade.

- market does opposite to the majority opinion.

- use options, not stoploss.

- do your homework and enjoy the "game" of operators. choose right, sit tight.

- never spend your profit. plough it back after taking out contribution to the buffer fund. start with small principal, don't infuse any more capital. resolve to be a millionaire from one coin with the clever method.

- when you realize your mistake or see that the situation has changed since your homework, admit it and save whatever coins are left. stand up and win back lost coins and more.

- play points and not money. gradually, you will develop strong stomach muscles for bigger bets without butterflies.

- take advantage of the temporary adversity rather than succumbing to it.

- divide your capital in parts and start only with one. don't rush to become an operator overnight. learn to stand before you walk, learn to walk before you run before you fly....multiplication will take care of any amount of time you take to wait and learn addition and subtraction.

- experts know nothing. whatever they say won't happen. atleast that way, that day. not because they don't know, but because operators make it a point to go the other way, the other route. operators' modus operandi will never get exposed openly. because when it gets exposed openly, the operators would have abandoned it much earlier.

- all days are not tradable, all trades are not of same duration and juice. all trades are different in tactically.

- more study takes you away from the truth. finally, you would have to unlearn all to bring the real thing back in focus. the world of conventional trading training is fake. it is creating an army of goats for the predators.

self talk

yes,

trading is never easy.

even if you make a killer profit in a trade

the next trade will always be as difficult as the previous one.

even after n number of successes your chance of going wrong are always there.

market never gives any weightage to past or recent or latest performance.

it never cares for reputation and sincerity and image and other personal equations.

every trade is a new trade.

market is a great leveller.....no special respect or hatred for anyone.

same is true from the reverse angle as well.

market is as easy after a negative trade as it was before that.

no risk, no reward.

every trade will be "difficult" and wrapped in fear.

there is nothing called "zero fear" and "sure shot" set-up for trade.

as anatoly karpov famously said "the surest way to lose is play for a draw"

those fearing drowing keep sitting and remain sitting on the shore.

nothing ventured, nothing gained.

trading is a verb, not adjective or noun.

self talk

take a trade only after good amount of homework.

good homework ensures a win-win situation

1. either the trade will go the anticipated way and you profit.

2. or, if the trade doesn't go the anticipated way despite all that good homework, it leaves you with a learning which was apparently not included in the template you used for homework. in other words, your knowledge base increases for the next homework.

never, self doubt. never doubt the accurace of the homework or that of your decision. if homework was good and things don't go accordingly, take it as an opportunity to discover something new including the revealing of a mischief.

but never kick yourself.

a trader with low self-esteem can never be confident.

kicking ourselves only weakens us psychologically and makes us vulnerable to the mind games of the operators.

cross acround the trader's neck

lessons so far from 10 experimental trades :

1. the criteria is ok / promising and needs tightening/refining. 

2. intraday alone is not enough...can never be enough.......what about rallies where movements mostly happen in gaps?

so, btst/stbt (overnight trades) is a must alongwith intraday trades to make decent money. otherwise, despite risk and stress, profits are likely to be proportionately less.

intend to start overnight trades also alongwith intraday ones w.e.f next week.

3. buy at or "somewhat" in the money options when less sure or when taking a trade against the trend (ofcourse at the signal of the method). and when reasonably sure or when taking pro-trend position, take deep in the money option.

4. deploy ur money in 2 stages....one after 10am (whenever signal comes as per the method), second around noon when the real "game" is played......will incorporate this in trades w.e.f next week hopefully.

5. use mutliple indicators / logic to identify market bluffs and traps.

6. use method and fixed-time fences to eliminate (or atleast minimise) the effect of dodging and mind games played by operators and market deep-pocket-forces. use 'law of averages' to your effect. expect wrong trades as per the method (they will always be there and are expected and ok) but never quit trading after the negative trade. i call these negative trades and not bad trades......no trade as per a method is a bad trade......a good method properly executed can still result in loss....it should be called a negative trade and not a bad trade........a negative trade is a probabilistic entity but not a routine one. the trouble is that we stop trading after a loss yielding trade taking it as a bad trade instead of a negative trade.........pick any method.....decide its parameters.......so ruthlessly that even a computer or robot can trade as per it.....and then stick to it......don't stop trading when you make profit......don't stop trading when you make loss........never abandon the method.......method is like a cross in the trader's neck.......lose it and the devil will get you.

where is the sky?

one of my trader friends has asked me the following

" dear js, yesterday the market was 80 points down and today the market is 80 points up.
in this case, how can a retail trader like us can judge the trend?
yesterday when the market was down 80 points, we were feeling that the trend is down!
suddenly, today, when the market is 80 points up we feel that the trend is up!!
how the trend is changing overnight?!!!"

--

i am sure this must be the dilemma of many others.

i have a few things to say regarding this

1. the very first thing that came to my mind when i read this sms on my cell was
"this thing will keep on happening with the retail trader till he or she learns to understand the operator"

2. when we say trend, what is the period of the trend we have in mind?

do we mean trend of the day or trend of the week or trend of the month or trend of the semester or year?

all these trends can be different!
there are trend inside trends inside bigger trends......
if a "trend" seems to change in 12 hours should we take it is as the change of the monthly trend?
i leave the answer to you.

3. volatility and fluctutations are as important in teh market as are the revolutions for a wheel.
no fluctuation, no market. period.

as part of our mental seasoning and toughness and training, a trader has to go thru and get used to these things.

this is just like the somersalts and turns a figther pilot goes thruwhile flying at mach speeds. during these somersaults, sometimes the sky is above the pilot's head, sometimes below, sometimes to left, sometimes to right........

but a trained pilot always knows the reality.

whatever be the volatility or flucutation, a trader should have some holding point, some method, some indicators etc. to understand where is the sky!

the trouble is that many traders get into trading without mastering a method and other essentials.

trading is the easiest business in the world - both to lose money as well as to gain money....depending upon

whether you are flying the aircraft or the aircraft is flying you!

good batsmen can be good traders

yes,
a good batsman can be a good trader.
lets see how....


a good batsman tries to read the bowler's hand while he releases the ball
= a good trader needs to read the hands of the operators


a good batsman knows the field setting
= a good trade knows the chart setting


a good batsman doesn't fiddle with a ball too much out of stump and leaving him
= a good trader doesn't fiddle with an "inviting opportunity" too much "out of stump and leaving him"


a good batsman doesn't hesitate to use his feet once he has seen the ball well
= a good trader doesn't hesitate to take the trade once he has seen it well


a good batsman respects every good ball by the bowler
= a good trader respects every good trick by the operator


a good batsman knows that every ball can't be hit for a six
= a good trader knows that every price movement can't be traded for a "six"


a good batsman knows that a ball can't be hit as demanded by the spectators
= a good trader doesn't get carried away by the hooting of the "spectators of fear,greed and excitement" inside his head


a good batsman knows that he needs to settle down, read the pitch and read the wicket before giving a charge
= a good trader knows that he must understand the market situation, trend and stage of the trend before entering the trade


a good batsman knows the importance of singles and running between the wickets
= a good trader knows the importance of booking every profit that may vanish. he knows the importance of scalping.


a good batsman knows the importance of partnerships, staying at the wicket.
= a good trader knows the importance of holding the nerve and staying in a winning trade


a good batsman knows that he must face the pace to score
= a good trader knows that he must face the fury of volatility


a good batsman knows that more the pace of the ball easier it is to score by just sweet timing.
= a good trader knows that more the volatility and tricks used by the operators, easier it is to make money by just sweet timing.


a good batsman knows that at times he needs to see off the new ball, see off a fierce spell....
= a good trader knows that at times he needs to just pass-off and see-off the fierce spell of uncertainty, volatility et al.


a good batsman knows that getting out at duck is part of the game
= a good trader knows that loss, hard luck and wrong decisions are part of the trade.


a good batsman knows that every new innings is new and different
= a good trader knows that every new trade is new and different


---


be "the wall", "mr.dependable", "the colonel", "the hurricane".............

diagram of a trader's journey

john fisher's classic diagram of
the process of transition
that wonderfully explains the journey to success or failure of every trading apprentice
http://www.businessballs.com/processofchange.pdf

games operators play - II

table tennis

= when the operators know that the market can neither go up nor down for some time, they play table tennis from left to right to left between a boundary.

-----

sumo wrestling

= while still in a range, when the operators foresee the market shifting in a particular direction, they turn sumo wrestlers and drag the trade out of the range using mental tricks and sheer money power.

-----

rugby

= when the operators see a gap in the positions taken by mass traders, they pick "the trade" and run!

-----

equestrian

= when the operators see an opportunity in a particular direction, but notice a hurdle, they turn jockeys and play equestrian.

-----

chess

= when nothing is happening, they play chess and offer their rooks or even the queen as bait to checkmate.

dil chahta hai

three friends
in same job
learnt trading together
started trading together
made their first lac together.
they all decided to celebrate their achievement
together
by going for a long drive
like amir, akshay and saif
in 'dil chahta hai'.
for this they decided to pool in
half of what they had earned in the market in their first rendezvous.
-
and they did.
and what a vacation it turned out to be.
on the last day of their vacation
their car met with an accident.
all three got escaped unhurt.
but car was badly damaged.
after insurance
they had to shell out the balance
(half a lac each).
-
the vacation and stock market triumph
was thoroughly over.
they returned by sunday.
monday dawned.
the first friend thought
"i made money, so god punished me with this mishap."
the second friend thought
"thank god i made extra money from the market, otherwise how could i meet such expenses."
the third friend thought
"i should improve and focus more. i must earn more and more in the market so that such hiccups don't bother me in future!"
-
five years down the line
the first friend had quit trading and settled in the job, happily.
the second friend is in mutual funds, happily.
the third friend has quit the job and a professional trader, happily.
and all of them lived happily thereafter.
unexpected mishaps still happen in all of their lives
but they have no excuses.

trading with three laws of robotics

i was reading 

Isaac Asimov's "Three Laws of Robotics"

it has occured to me that if a trading system is like a robot

it must obey these 3 laws meant for robotics.

here are the adaptations of the three laws of robotics

to the trading system

law one of robotics : a robot may not injure a human being or, through inaction, allow a human being to come to harm.

adaptation of the law to trading system : a trading system may not cause substantial loss to a trader or, through inaction, allow a trader to come to loss.

law two of robotics : a robot must obey any orders given to it by human beings, except where such orders would conflict with the first law.

adaptation of the law to trading system : a trading system must NOT obey any orders given to it by the trader in the heat of the trading - it should trade strictly as per its defined rules, except where such disobedience would conflict with the first law.

law three of robotics : a robot must protect its own existence as long as such protection does not conflict with the first or second law.

adaptation of the law to trading system : a trading system must protect its own existence as long as such protection does not conflict with the first or second law.

thinking like a trader

"trading
distilled down to its simplest form
is a pattern recognition numbers game.

we use analysis to identify patterns,
define risk
and determine profit targets.

the trade works or it doesn’t.

in either case we go on to the next trade.

this is simple to conceive difficult to do.

trading is hard
because you must operate in a state of
not having to know,
even though your analysis may at times
prove you to be correct. "

- trading in the zone
mark douglas

needless dog fight

you are walking thru the street
you see a dog
as the distance decreases
you feel threatened
you pick up a stone
on seeing the stone in your hand
the dog too feels threatened
he can't pick stone
he doesn't prefer running away
he doesn't need to
because he has got teeth
and you've got the fear.

you get nervous
and release the stone
the stone misses the dog
but the dog doesn't miss you.

same thing happens
between you
and the market.

what is never a threat
just a routine fluctuation
turns into a face-off
courtesy your inherent fears

with obvious result.

in the words of mark douglas

"any exceptions that exist in your mind
will be a source of conflict
and may cause you
to perceive market information as threatening.
....free-flowing carefree state of mind is ideal for trading"

no gain with pain

"top traders do not perceive anything about the markets as painful;
therefore no threat exists for them.

no threat means nothing to defend against.

nothing to defend against means
there is no reason for your conscious and subconscious defense mechanism
to be activated.

to obtain this mind set you have to redefine your relationship to market information
so that there is little or no potential to perceive anything as threatening.

this new mind set will allow you
to remain focused on the opportunities available
instead of tapping into emotional pain. "



- trading in the zone
mark douglas

the last bug in the trading software

(excerpts from Trading in the Zone)


"a state of mind, or perspective is like software code.

you may have several thousands of lines of perfectly written code
with only one flawed line or character.

this one flaw
in relation to the rest of the code
could ruin or alter the performance of an otherwise perfectly written system.

the solution appears simple:
fix the misplaced character and everything runs smoothly.

however, finding the error
or even knowing it exists
can take considerable time and expertise.

when it comes to the ideal trading mentality
everyone is a certain psychological distance away.

virtually everybody starts out with flawed software.

as your perspective shifts
and/or you integrate new beliefs regarding responsibility and risk,
this shift would be the equivalent of finding
the flawed line or character in your mental software
and replacing it with something that works.

this internal shift is often described as the “ah ha” experience......

typically you might think

“it was right in front of me the whole time, i just didn’t see it”,

or

“it was so simply why couldn’t i see it?”

you are trapped !

"most traders believe
that the best way to avoid losses and emotional pain
is to learn more about the markets.

this bit of logic is a trap and presents another paradox.

the more you learn about the markets
the more you realize there are too many variables,
often conflicting.

in addition, there are no limits to the market’s behavior.
it can do anything at any moment.

this means that no matter how much you learn about the market’s behavior,
no matter how brilliant an analyst you become,
you will never anticipate every possible way
the market can make you wrong
or cause you to lose money.

if you are afraid of being wrong or losing money
you will never learn enough
to compensate for the negative effects
these fears will have on your ability to trade objectively and without hesitation.

the hard cold fact of trading is that every trade has an uncertain outcome.

unless you learn to completely accept the possibility of an uncertain outcome
you will try consciously or unconsciously
to avoid any possibility you define as painful."


- mark douglas
(trading in the zone)

fears of height, fear of drowning

these observations may need further study
but
i have noticed
that those traders who have "fear of height"
in their lives
book bull-side profit early
and take pre-mature short positions.
they find it extremely difficult
to enter at higher "altitudes" of markets
and chicken out
even at the slightest correction.

similarly,
those trades
who don't know swimming
and have fear of drowning
or
those who have fear of being left alone behind
or
those who fear darkness
in their lives,
book bear-side profit early
and take pre-mature short positions.
they find it extremely difficult
to enter short positions
at lower depths
and chicken out
even at the slightest bounce-backs!

confront your fears
and trade normal.

shut it, forget it

if
after entering a trade
you feel nervous
or scared
or unsure
or tense
pl come out.

on the contrary,
if
after entering the trade
you truly feel like
"shut it, forget it"
irrespective of what the market immediately does
you have
what it takes
to be a pro!

show some attitude

what is 'attitude'?


it is an individual's degree of like or dislike for something.


attitude is an individual's emotional response to a thing or situation.


attitude shows up in behaviour.


--


when a trader has taken a considered long position


and the market starts slipping


his attitude shows


what real stuff he is


and how successful a trader he is!


--


attitude of fear, suspicion or self-doubt is a sure sign of trouble


attitude of knowledgeable smiling indifference is magical !


more than technicals or fundamentals


successful trading is  primarily a psychological struggle.


--


when the market shows "attitude"


show some of it back!!!

who is scared?

"papa, why is the market behaving like this?

"to catch our attention, kid!"

"why does the market want our attention, papa?"

"because it can't scare us till we pay attention?"

"why does it want to scare us?"

"because it is itself scared?"

"why is it scared?"

"because it knows we are right!"