In Continuation with the previous 2 articles
Trading Lesson Learnt From my Trading Guru
Valuable Trading Lesson Learnt From my Trading Guru Part-II
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“Have the courage to trade in big quantity ”
He meant the willingness to carry a very, very large position when you have a high degree of conviction and the risk/reward makes sense.
This is actually the flip side of My Guru’s last pearl of wisdom- when there’s nothing to do, do nothing. But when there’s something worth doing, then do it in size.
Geroge Soros frequently talks about this, because it’s a common trait of all great traders. In order to be a big winner, you have to be very, very large in the positions that have the best risk/reward. Considering that most traders make their year on two or three big trades, then you have to pile in when you see an opportunity.
The key question is: how do you judge when to trade big quantity ?
The answer: you have to rank your positions in terms of overall attractiveness/conviction and then size them accordingly. Once a trade meets all of the minimum criteria for you to put it on, then you go further and rank it on a scale of 1-5 of overall attractiveness.
To simplify, I have the following criteria:
– Strong chart—breaking out of a base of at least six weeks’ duration on 2x average daily volume
– An overall stock market that’s trending higher
– Buy coming as per Price Action Strategy after 2-3 Whipsaw
– Chopad levels signalling a Buy/Sell
– Higher Time Frame and Smaller Time Frame in Sync
– Buy as per Stock Positional System
If stock/Nifty could just barely meet your criteria, In this case, you would rate it a 1 out of 5 (the lowest). On the other hand,if stock/Nifty This would merit a 5 out of 5.
How would your position size vary depending on the rankings? For a “5”, you would want a position size that’s several times larger than for a “1”. That means you could put a “1” at 1-2% of your trading capital, which you would feel comfortable putting on a “5” at 6-10%. After all, you would feel most comfortable betting more on a position where things couldn’t be better, rather than in something that’s barely meeting your entry criteria.
That’s how my trading guru did it. Whenever he found a trade where all of the stars were aligned and he felt that the risk/reward was skewed in his favor, he would put on a gigantic position. And while it wouldn’t always work, the gains on his winners would far, far outweigh his losers, leaving him a substantial winner.
Conclusion:
As discussed in all 3 article methodology was quite simple. He would only trust his trading strategy , looking for trades that fit his methodology. When he had no ideas, he would do nothing; when he had a smattering of decent ideas, he would take some risk; and when he had a fabulous idea, he would put on a large position.
It sounds simple enough, but executing it is properly is another matter. As a matter of fact, despite his fabulous example and education,Many traders will be net loser. Why?
When push came to shove, I didn’t have a well-defined methodology for how to approach trades. Ultimately, no amount of advice will help you when you don’t really have a clear game plan.
As Brett Steenbarger says, the biggest barrier to trading success is usually a methodology problem. Hopefully, my example will show you importance of getting the very basics right.
After that, I hope that the My trading guru advice will help you to transform your trading to the level of the greats.
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i read all your blog daily …keep it up
thanks..
From T.Srinivas: Teaching someone to think big, requires a big heart.Thank -you to you and your guru for installing the confidence.
thanks a lot sir.. Hope u and mam are doing good..
Bramesh Ji thanks a million – this piece of applied wisdom strengthened my vague internal idea of playing volume without fear with the favorable risk reward ratio conditions / your defined parameters.This fear factor always dominated more (yet saved many times too).
Pls kindly do let me know if you are providing intraday follow up/ updates during market hours w.r.t.your morning recommendations. will be willing to join paid advisory if any,
Warm Regards
Gulshan Mehta
Thanks Gulshanji..
I do not have any advisory service.
Really it is nice article 1 to 3. You have been writing wonderful articles and also giving market/stock levels. Really you are great person to teach or help many people’s. No words to say about your help. Thank you very much for your help.
thanks a lot..
Reading your article for a very long time appreciate in sharing those to us
East Or West Barmesh Bhai is the best….my trading guruji
Excellent Ramesh .. Appreciate your work .
ye to vahi chothi chothi magar kuch moti sikhe hian same jaise chothi chothi baten aur gandhiji the
“When you have nothing to do ; do nothing”. Immensely important point! Thanks a lot sir to share the insights given by your Guru
I like your sincere advice through the fantastic articles than technical analysis.please continue your thought provoking articles
Sir..you have been of great GURU for all us…your approach to trading mainly focusing on Trading Psychology have shown us the right way of trading…thankful to you always..
Disciplined trader will have high probability of winning. Your words and thoughts are simply super. It has been very useful for me.
Respected Sir
I have been reading your articles for the last 4 years single oneof them I login to check almost to 3 to 4 times everyday waiting to check what is the latest you have written I have liked learned and enjoyed every single one of them and ur articles have contributed immensely in my development as a person and as a trader
THANK YOU
thanks a lot ..so happy am able to help you 🙂
A gigantic lot size is the real test of ones conviction.Its not greed if the approach is sound and robust with a risk management in place.a very useful perspective.