What is the biggest challenge that traders face?

It's not the market. It's not the competition. The biggest challenge traders face is themselves.

That's why we've put together this list of five short lessons that will help you overcome your next trading obstacle:

1. You need to be disciplined enough to wait for the perfect opportunity.

Successful Traders:

❌ They don't force trades or take unnecessary risks.

✅ They wait patiently for the market to provide them with a high-probability setup before entering a trade.

2. You need to only take calculated risks.

Successful Traders:

❌ They don't take irrational risks or blindly follow the herd.

✅ They make calculated decisions based on their analysis and plan.

3. You must be able to accept losses.

Successful Traders:

❌ They don't try to avoid losses at all costs.

✅ They know that losses are a part of trading and accept them as part of the process.

4. You need to have a defined edge.

Successful Traders:

❌ They don't trade based on hope.

✅ They have a defined edge that they execute repeatedly.

Much awaited session at Kolkata by Utpal Seth, Rare Enterprises, on "Dimensions of Mistakes in Investing", to be moderated by Varun Goenka.
#MAW

Utpal Sheth starts with a tribute to Rakesh Jhunjhunwala

Utpal Sheth lays out the context for today's session - Mistakes are rarely discussed!

Outcomes don't define mistakes. They are known through a process of deep introspection & multiple iterations. The opportunity cost of not embracing mistakes is very high.

When speaking of mistakes in investing, we often speak of 'Type 2 errors', and at times of type 1 errors. Utpal speaks of Type 1.5 error - not buying / selling with conviction!

Utpal discusses their process with mistakes - and quotes Rakesh Jhunjhunwala - making mistakes isn't a crime, repeating them is. Discusses mistakes at RARE Enterprises with the audience with ease.

Pulitzer was homeless

He slept in the lobby of a hotel

They kept kicking him out

Later in life he bought that hotel

Everyone knows his last name but few know his unbelievable life story — read these show notes

This thread is about the technical setups I use day in/out to trade the markets 📒

1⃣Wedge break (WB)
2⃣Wedge break pullback (WBPB)
3⃣Breakout Retest short (BORS)
4⃣Breakout Retest Long (BORL)
5⃣Breakout 10ema PB (BO10PB)
6⃣Breakout 21ema PB (BO21PB)

That's my playbook 👇

1⃣ Wedge break (WB)

Price forming an orderly pullback contained by a down trend line (DTL). You want to see low volume within that wedge formation, with small down swings ideally.

Buy:
• DTL breakout ideally on higher than avrg. volume, OR
• PIVOT breakout daily high, OR
• Intraday PIVOT breakout H1 high

Stop Loss:
• Low Of Day (LOD), OR
• Recent swing low

2⃣ Wedge break pullback (WBPB)

After the WB, you often have a retest of the DTL, we then find support and follow through on the upside.

Buy:
• PIVOT breakout ideally on higher than avrg. volume, OR
• PIVOT breakout daily high, OR
• Intraday PIVOT breakout H1 high

Stop Loss:
• Low Of Day (LOD), OR
• Recent swing low

If you want to remember everything you learn, take 3 minutes to read this:

According to psychology professor Paul Reber, our brains have the ability to store up to the equivalent of three million hours of TV…

But most people don’t ever come close to that capacity.

So how do you maximize your memory?

Follow these steps…

You have 2 forms of memory:

1. Long term memory

It stores:

• Skills
• Important days
• Repeated information

2. Working memory

It stores small bits of information that can be used for cognitive tasks.

The more information to your long-term memory, the more valuable it becomes.

You can build things upon each other and make valuable connections.

But here’s the thing…

To store information in long-term memory, it has to go through working memory.

That's how your brain filters out info you don’t need for a long time like:

• Your plane’s flight number

From important info like:

• Your phone number

But there’s a big problem with our memory…

4 questions I ask myself at the end of every month to refine my process:

1. Where did I continue to execute my process successfully?

--> This affirms I am not starting from zero each month. This is important because I take the time to recognize what I continue to do well.

2. Where did I see the most growth in my decision making last month?

--> This question allows me to identify the areas where I saw the most growth last month. I often see previous areas of weakness show up here after I identified and worked on them.

3. Where do I need to improve my decision-making based on my last month of trading?

--> This is where I pinpoint my areas of weakness. We all have them. Note that I don't say "what did I do that is bad?" but rather "where do I need improvement?" This is important for the psyche.

4. What advice would I give if my results from last month were somebody else's?

--> This is where I look at my results objectively. We often have a difficult time pinpointing our own weaknesses but no problem doing it for others. This is a simple yet effective perspective change

10 truths I wish I knew when I started trading:

Trading always was, is, and will always be a game against yourself. Nobody can make it happen for you, and there’s nobody to beat.

Your only chance of winning is to practice being a better version of yourself today than you were yesterday.

/1

Traders waste so much energy lamenting on "I missed this" - if all that energy was spent on fixing a problem they just identified — many of them would be better off than they are today.

Be a good problem solver, not a complainer. That negative energy is no bueno.

/2

Performance is a byproduct of position sizing.

Position Sizing stems from conviction.

Conviction is built by doing deep dives and studying specific setups in the markets, especially ones that tap into its structural tendencies consistently.

/3

Have a few setups you know really really well.

I have hundreds of examples on each, done deep dives & can trade them when I see them instinctively.

You have to know exactly what ur looking for…so u can repeatedly execute those setups & make them sources of income.

/4

There are thousands upon thousands of stocks that you can trade.

But how do you narrow it down to the best of the best?

In this thread, we'll highlight the 3 most important steps you need to take to create a Focus List (& how you can apply these lessons immediately)

👇🧵

By the end of this thread, you'll be able to:

✅ Scan quickly and effectively to build a Universe List
✅ Narrow it down further to a Weekly Focus List
✅ Find the best stocks possible to trade

It's that simple so let's jump in.

· Scan quickly and effectively to build a Universe List

🔎 Pullbacks
🔎 Breakouts
🔎 High Volume
🔎 Fundamentals
🔎 Momentum Edges

Here are the criteria you can use in your favorite scanning platform for each:

Pullbacks Edge 🚨:
· Above your favorite Key Moving Average Scan (> 10EMA, 21EMA, 50DMA)
· % Off Highs Scan (< 20%)
· Reverse Pocket Pivot Scan

Breakouts Edge 📈:
· 52 Week High Scan
· Volume > 2x Avg. Scan
· Price > 5% on Session Scan

I analyzed 25+ years of #Nifty data to better understand bear markets 🐻

Why?

Given the recent market sell-off and bearish stance of market participants, history and data is your best guide to prepare if we're headed for a bear market.

Thread with findings below 🧵👇
1/n

But first, do you know the definition of a bear market?

When any index falls 20% or more from it's all time high, it is termed to be in a #bearmarket 🐻

How do you calculate length of a bear market? The time duration in days from previous all-time high to market bottom.

2/n

🇮🇳 Nifty last 25 years (1997-2022*)

Number of Bear Markets = 8

Average drawdown % = -38.5%

Average bear market duration = 246 days (8 m)

Key takeaway - Bear markets occur every ~3 years and take on average 8 months to bottom

3/n

1997 and 2006 saw the fastest bear markets with Nifty correcting 20-30% in just ~1 month.

Unbelievably, 1997 had 2 bear markets! Just imagine suffering 20% drawdowns twice in a few months!

Mar 2020 Covid crash was the 3rd fastest and 3rd worst bear market.

4/n

Okay, how should we define Bear Market Recovery?

The no of days from market bottom to a new all-time high.

Sadly, bear markets take time to recover.

Almost double the time to recover to a new ATH compared to the time to form a bottom.

Avg recovery duration – 495 days

5/n

There is only one proven way to prevent blowing up your account:

Setting Stop losses.

Properly setting & implementing stop losses will save you millions over your career.

Here's a top down guide with everything you need to know about Stop Losses, broken down step by step 👇🧵

In this 🧵, we'll cover:

· The Goal of Stop Losses
· How to Place a Proper Stop Loss
· Answers to Frequently Asked Stop Loss Questions
· General Guidelines to Protect Your Account

& tons of examples!

Let's jump in 💪

Overall Goal of Stop Losses 👇

The goal of a stop loss is to cap your downside while maximizing the upside from proven setups.

It is impossible to be correct on every trade you make, so it is very important that you implement stop losses to contain your losing trades!

Let's look at some examples to show you how important stop losses can be:

$PTON (Weekly!)
$TSLA (2020 B/O)
$NVDA (1999 IPO B/O)
$AMPH (Last Week's Action)

In each of the examples above, you could have used proper stop losses to capture massive upside gains & protect yourself from huge downside losses!

Back-testing of some candlestick patterns 🧵

I hv back-tested patterns shown below on 500 stocks (Nifty 500 stock group as on today) since inception on daily timeframe charts.

Below is some interesting information.

I was doing to design multi-chart setups. But the information in the thread can be useful for people practicing candlestick chart patterns. There are many patterns & we keep coming across more. The data can give you a rough idea about the past performance of patterns.

Patterns are defined based on the popular rules of identifying them. I have also tested bearish patterns for bullish trades and vice versa (Contra approach).

Criteria: Hit ratio & returns of pattern giving 1:1 risk-reward if the entry is at the closing price of the pattern.

Some top bullish patterns have below hit ratio:

Inverted Hammer or Shooting Star – 74.72%
Multi-Harami breakout - 65.23%
Bullish Harami cross – 64.6%
Bullish Kicker – 63.53% (Got better returns)
Bullish separating line – 61.69% (It has got better returns)

Doji breakout hit ratio is decent (63.71%) but occurrences are v high so need more confirmation.

Engulfing and Harami patterns have got better returns when traded at next candle of confirmation.

Thread: 5 Important bullish & bearish chart patterns in technical analysis.

Triangles, Broadenings and Rectangles.

#trading #investing

Many traders analyse and practice western chart patterns. There are many such patterns and enough is talked about them in various books and resources.
Long back, I read a book “Encyclopedia of Chart Patterns” by Thomas N. Bukowski. It’s a brilliant work (Must read).

He backtested many patterns & ranked them based on their performance. Most imp is that he separated the patterns based on their performance in uptrend & downtrend.
I read about those patterns at many other places & in different theories and I realised that most of them are-

-variations of broad category of patterns. I have bifurcated these patterns in various categories.

Triangles, Broadenings & Brackets or Rectangle patterns are most common & effective patterns. Below are 5 bullish & bearish proven, time-tested patterns of these categories.

Bullish Patterns:
Rectangle Breakout:
Horizontal pattern breakout. Price remains between two horizontal lines before upward brkout. Its a decent continuation breakout pattern when appears in uptrend. Reversal pattern when appear in downtrend (Decent Risk-reward). Tend to pullback

There is one simple habit that William O’Neil, Nicolas Darvas, and every other Market Wizard share that is the KEY to their success & outperformance.

The habit? Analyzing their trading through post analysis.

Here is our guide to doing post analysis like a Market Wizard.

🧵👇

Post Trade Analysis (PTA) is one of the most important parts of any trading system.

It is the process of analyzing each & every one of your trades, highlighting:

✅ Setup/edge
✅ Market env. at time of trade
✅ What you do well/poorly

& more!

By the end of this thread, here’s what you’ll learn about PTA:

1. Non-negotiable Benefits of PTA
2. The most important metrics to look at
3. Letting results guide your trading
4. PTA Frequency guidelines
5. Top Trader Template
6. Secret Bonus Tip

Let's get right into it.

PTA Tip #1: Non-negotiable Benefits of PTA

By analyzing your trades, you are ensuring that:

· You will know what works best for you
· You will know what is holding your performance back
· You will know how to FIX your trading issues

& there's one more hidden benefit of PTA...

Analyzing who you are as a trader builds a foundation of CONFIDENCE.

If you are struggling with your confidence, there is no better place to start than taking a cold hard look at your results.

@Traders82 #Chapter3 : Price Action Trading Secrets
Disclaimer: I am going to share my experience in Price Action trading. Please note this is NOT at all a Holy Grail or even close so if you are looking for that, please stop reading here.

BUT if you want to learn about markets, supply & demand, how price moves & want to be on the right side most of the time, then continue reading. Once you read & understood these concepts, you need to spend 1000s of hours to screen various charts to practice what you have learnt.

ONLY this way you can learn price action trading so do I have your commitment on this?? I heard YES so get ready for the excitement.

1st Topic would be -

What is Price Action & why it is important?

1.What is Price Action & why it is important?
We all trade price every day. Knowingly or unknowingly but we all are associated with price. You buy a stock at 100 & I sell at 100, we traded price. So price is nothing but an agreement between 2 parties to trade something mutually

Bulls & bears often fight for a fair price which they think is right for them & they try to defend that price to keep their hold. Price action trading is the study of analyzing this tussle between them & helps you make trading decisions purely based on the price.

The best traders in the world have made millions from one setup.

The setup? A breakout from a base.

But what do these bases have in common & what should you be looking for?

Here are the most important characteristics of a proper base, broken down one by one 🧵👇

By the end of this thread, you will:

✅Be able to identify the main characteristics of a proper base
✅Understand subtle clues of accumulation
✅Have access to 20+ real world examples

Let's get started! 👇

Proper bases all have the following characteristics:

▪️ Shallow Base Depths
▪️ Prior Uptrend of at least 20%
▪️ Early Stage Base
▪️ Daily & Weekly Accumulation Signatures
▪️ Relative Strength Periods

Follow along as we break down each aspect in greater detail below 👍

#1: Shallow Base Depths

Base depth is a key component of a proper base.

We measure a base's depth from the absolute peak to the absolute low.

Institutions are the major base builders in the market, & the shallower the base, the stronger the institutional hold in the name.

Here are some good criteria to keep in mind when analyzing bases:

< 20-30% off the highs = best
< 30-40% off the highs = good
< 40-50% off the highs = acceptable under certain circumstances
> 50%+ off the highs = avoid (with exception to some younger IPO names)

11 harsh truths that changed my life (and may change yours):

Harsh Truth: You'll only see your loved ones a few more times.

In May 2021, I had a conversation with a friend that changed my life.

I was talking about living in California—so far away from my parents in Boston—when my friend asked how often I saw them and how old they were...

I said I saw them about once per year, and that they were in their mid-60s.

He said, "Ok, so you'll see them 15 more times in your life."

Gut punch. It sounds insensitive—but it's just real.

Our time is finite, but we fail to recognize it until it's too late...

Later that month, we sold our house in California and moved to the East Coast to be closer to our parents.

It was the best decision I've ever made.

I'll never regret those tiny moments—of doing nothing in particular—that we'll get to spend together in the years ahead.

Harsh Truth: Most of your friends aren’t really your friends.

They’re just along for the ride when it’s fun, convenient, or valuable.

Your real friends are the ones who are there for you when it's none of those—when you have *nothing* to offer in return.

Cherish them.

Everyone wants to tell you what to do.

Not me.

I'm going to tell you what NOT to do.

10 career mistakes I've made––so you don't have to:

Quit focusing solely on compensation.

Money and benefits are nice, but they're not everything.

Environment, advancement opportunities, and overall quality of life are far more important in the long run.

Instead of asking "how much can I make," ask "how much can I grow."

Don't get too comfortable.

You've been at your job for years.

You can do it with your eyes closed and both hands tied behind your back.

That doesn't mean you should.

Don't let 5-10 years slip away due to complacency.

Take control, challenge yourself, level up.

Don't be afraid to fail.

I'll take an employee who is willing to try over one who is not, every single time.

Good managers expect some level of failure within each project, in fact, they plan for it.

Put yourself out there, take a chance, it's the only way you'll advance.

Quit trying to do it alone.

People want to help.

Toiling endlessly on a project when you're unsure what to do next only makes you look inefficient.

Asking for help doesn't mean you're incapable, it means you're invested and shows you care.

The best traders take advantage of alternate entries to build positions before a stock becomes obvious to the crowd.

Here are 7 lesser known Chart Patterns that are a MUST in any trader's tool box 🧵👇

#1: Alternate Pivots

Alternate pivots offer earlier entries when compared to regular pivots.

These pivots are important because:

▪️ They offer the same if not better R/R then regular pivots
▪️ Less volatility around these areas
▪️ Allow you to start positions EARLIER

#2: High Volume Close (HVC)

The HVC is created from a big volume gap up.

The close of this day is an important point for institutions to support.

If institutions are in supporting this point, price should be very responsive - making it a great, lower risk entry.

#3: Pivot Retest

The pivot retest setup happens when price retests the prior support/resistance point & then rallies back through.

This can be a powerful setup as it acts as a 'shakeout' and reverses higher with stronger hands holding the name.

#4: In The Wick Setup

We are looking for stocks that open in the wick of the prior session's bar.

The buy trigger is when price moves through the prior day's high.

The stop loss should be the low of the current day.

If I stuck to this one rule the day I started trading I would have...

• Saved $1,000's of dollars in losses.
• Sped up my learning process.
• Avoided every major account drawdown I've had.

If you're new to trading, make sure you stick to this 👇🏼

The 1% Rule 🧵

The 1% Rule states that you should risk, at most, 1% of your total account on every individual trade.

This 1% risk is a function of two flexible components:

• Your Position Size: % of your account in the trade
• Your Trade Risk: % between your entry price and your stop loss

Want to take a larger position size? Make your stop tighter.

Trading a volatile stock? Size down on the trade.

The most important aspect of trading is risk management.

It's great to make money, but worthless if you don't have a system to keep it.

Over 50% of my trades are losses, but I'm still profitable because of the 1% Rule.

Keep losses small & let winners run!

"Nick, 1% risk isn't enough, my account is small."

New traders are EXACTLY who benefits the most!

By limiting each trade's potential losses to 1% it will take you:

• 29 straight losses to fall 25%
• 69 straight losses to fall 50%

It's tough to be that consistently bad 😅