1. Expect the Unexpected
24 Aug 2015 just 1 year before, Nifty saw the highest fall closing down by 491 point and well below 8000. And Now we are trading close to 52 week high and around 6% down from Life high of 9119 . This August 2015 we have not even moved 1% from last 21 trading sessions. 24 June we made low of 7927 and now we are trading near 8600. Expect it No matter how much effort you put in your analysis, you still won’t have a hundred percent accurate idea of where the market is headed. There’s always the chance market will surprise you. Thats the reason as trader we should have a strong risk and money management, to pass through such unforeseen events.
My Guru used to tell me Your risk management should be so strong than even market hits a circuit against you, You should be able to trade and should not be out of market. Thats where handling leverage comes in picture.
2. Trading is all about probabilities
Trading is a game of probabilities.So as a trader 2 things should be in my favor while placing the trade.
(1) Risk to Reward should be in my favor
(2) If I get stop out I should not get mad after taking loss and take impulsive trade
Let me exlplain with a small example We gave a positional trade on Engineer India
Close above 238 Tgt 246/254
Today Engineer India Opened gap open 238, but my trade portability was highest to enter near 238 with sl at 236, stock did visit the low and made high of 254 meeting the final target.
Whether you win or lose at this point matters very little now, since you have already acknowledged before you even took the trade that you are trading based on probabilities. You may lose, which is okay, because you have already expected it as part of trading plan. In the same manner, you may also win, which you already are expecting too. Nothing can be more heartbreaking than unfulfilled expectations.
By keeping these truths in mind, you ease the pressure on yourself to always be right about what the market will do next or having to take a loss. In doing so, you overcome the fear of losing money, which is inevitable to every trader. So trade probabilities not your EGO.
Bitter Truth -Trading is the hardest easy money you will ever make.