BC TRADING GUIDES
Saved by @SUDRED12

A market wizard named Michael Marcus converted a $30,000 initial stake to $80 Million dollars over a period of 10 years.

Here are 28 lessons he considers very important for anyone venturing into trading, from his experience.

 1/ The importance of not giving up:

In Fiddler on the Roof, there is a scene where the lead looks up and talks to God.

I'd look up and say, "Am I really that stupid?"

And I seemed to hear a clear answer saying, "No, you're not stupid. You just have to keep at it."

So I did.
2/ On key price levels:

There are key price levels like

- previous day/week/month highs or lows
- round number levels

where you can have 1:5 or more worth RR of trades if you place yourself right.
The key is to hit the crest of the wave, just at the right moment.

If it doesn't work out, you have to get out.

Doing this, you can make several hundred points, risking 1/3rd to 1/5th of what you make.
3/ The secret to getting efficient at trading:

Cut down the number of trades you make.

The best trades are those in which all 3 things check out:

- Fundamentals
- Technicals
- Market Tone
Fundamentals - imbalance in supply/demand which could result in a major move.

Technicals - chart must show that the market is moving in the direction that the fundamentals suggest.

Market Tone - when news comes, market should act in a way that reflects the psychological tone.
Ex: A bull market should shrug off bearish news and respond vigorously to bullish news.

If you can restrict your activity to only those type of trades, you have to make money, in any market, under any circumstances.
4/ Importance of dynamic betting:

If you bet the same size when a trade meets all your criteria as with the trades that meet only one or two of your criteria,

you will remain an average trader.
When a trade is

- high probability
- fits all your criteria

you should bet larger than your regular trades that only fit one or two of your criteria for a trade.
5/ Why trend following is difficult now:

Nowadays, the moment the market breaks a key chart point, it is perceived by a whole universe of traders.

Now, you almost have to be contrary.

What do you mean by contrary?
You have to ask, "Isn't it true that all my fellow professional traders are already in? So, who is left to buy?"

The problem is that once you have defined a trend and takena position, everyone else has taken a position as well.
Since there's no one left to buy, the market swings around in the other direction and gets you out.

You didn't have to worry about this before, there was always somebody left to buy due to slow information reach.

Now, everybody is just as decisive and as fast.
6/ Identifying high probability trends:

There has to be a particular imbalance in the market that overrides everything else for a trend to be sustainable and give a decent trend movement.

Another exception is if we were to enter a major inflationary/deflationary environment.
7/ On surprise price moves:

If you see a surprise price move against you that you didn't understand, it's better to get out and look for the reason later.
8/ On handling limit moves in market:

Whenever there's a limit up or limit down situation for days in a row, it's better to become very very cautious after the third straight limit up/down day.

When volatility gets crazy under such limit movements, it's better to get out.
9/ On good times and bad times:

You have to hone your trading skills and craft when the markets and the times are very good.

By the time market gets difficult again, you should have the knowledge and skills to navigate through the difficult market phase.

So, keep learning.
10/ Getting caught in potentially intimidating disasters.

Whenever you're at the wrong end of a tail event, it's better to get out of your position first and think later.

What's bad can always get worse before it gets better.
11/ On trading success:

To be in the upper echelon of super-successful traders, requires an innate skill, a gift of sorts.

It's just like being a great violinist.

But to be a competent trader and make money is a skill you can learn.
12/ On Risk Management:

Always bet less than 5 percent of your money on any one idea.

Also be on the look out for correlation.

Correlated trades increase the risk with all else remaining the same which you don't want.
For ex: If you take a long position in two different related grain markets, that is still one idea.

If you're long Brent Crude and long WTI Crude, that's the same idea with additional risk.

So, be very cautious and wary of correlation among your trades.
13/ On Stops:

Always use stops.

Don't have mental stops.

Put them in the orderbook so that you commit to get out at a certain point.

Always pick where you will get out, before you get in.
14/ On being flexible:

If a position doesn't feel right as soon as you put it on, don't be embarrassed to change your mind and get right out.

If you become unsure about a position, and you don't know what to do, just get out.

You can always get back in.
When in doubt, always get out and get a good night's sleep.

Next day, things will appear much clearer and you can reevaluate your idea.

When you're in the trade, you can't think straight. You'll always be subjected to bias.
15/ Basic trading wisdom:

- Hold on to your winners
- Cut your losers

If you don't stay with your winners, you can't pay for your losers.
16/ On copying someone else:

If you try to trade someone else's idea or method, you're going to lose.

Every trader has their strengths and weaknesses.
As long as you stick to your own style, you get the good and bad in your approach.

But if you try to incorporate someone else's style, you often end up with the worst of both styles.

In the final analysis, you must have the courage to hold the position and take the risk.
If it comes down to "I am in this trade because Shyam is in it", then you're not going to have the courage to stick with it.

So, you're better off not be in that trade itself, in the first place.
17/ On Influence:

Be very conscious of the idea that you have to listen to yourself only.

Take information from others without getting overly influenced by their opinion.

If it is not your own idea, it messes up your trading.

It has to fit within your trading framework.
Always ask yourself, "How many people are left to act on this particular idea?".

You'll have to consider whether the market has already discounted your trade idea.
18/ On lead-lag trades:

When the news is wonderful, and the market can't go up, you want to be sure to be short.

Also, if you find a common behavior between markets/products, you want to sell the one that is lagging as soon as it starts heading down.
19/ On trusting/relying on experts:

Listening to experts can help only if you are listening to the right experts.

Most of these analysts or fintwit "experts" can't be a proper trader in a million years.

More money is lost listening to them.

So, do your own homework.
20/ Is market out to get you?

It's a foolish belief that there's conspiracy in the markets.

Market is bigger than anybody and sooner or later, it goes where it wants to go.

There are exceptions, but they don't last too long.
21/ On important traits to be a good trader:

Gut feel is very important.

All great professional traders have it.

Also, courage. Courage to try, to fail, to succeed, and to keep going when things get tough.
22/ On balancing life and trading:

If trading becomes all consuming, it is a torturous kind of excitement.

But, if you keep your life in balance, then it is fun.

All the successful traders sooner or later got to that point. They have a balanced life, and fun outside trading.
You can't sustain your trading life if you don't have some other focus.

Eventually you wind up overtrading or getting excessively disturbed about temporary failures.
23/ On revenge trading:

Fighting back by trading even heavier after you start losing NEVER works.

It's important to cut down very fast to the point of completely stopping if it gets bad.

Most of the time you'd be better off if you just stopped.

Never risk a blow-up.
The pattern will be: Lose, fight like hell, revenge trade, lose again, then cut back/stop, until you get on a winning track.

It's important to recognise this pattern before you get into the revenge trading mindset itself and stop yourself at the first step itself.
24/ On losing:

Losing begets losing.

When you start losing, it touches off the negative elements in your psychology.

It leads to pessimism.

So it's important to give yourself time before you get back on the right track, and scale down your size and frequency of trades.
25/ On the importance of position sizing and risk management:

Many people make money fast and lose it even faster because they are trading too big.

It's important to trade the right way, the right size, to sustainably grow as a trader.
26/ On stock trading:

There's bigger edge in stocks that aren't dominated by the professional traders.

Relative strength tells you what a stock has already done.

When there's high relative strength, the stock usually has exhausted itself.
27/ On trading bigger size:

As your capital size gets bigger and bigger, it becomes difficult to trade as you have to compete in fewer and fewer markets with higher liquidity.

So, it's important to scale the good habits and cut down the bad habits which will highly impact you.
28/ On acquiring trading skill:

If you can trade one market, you can trade almost all the markets.

The principles are the same.

Trading is emotion.

It is mass psychology, greed, and fear.

It's all the same in every situation, every market.
If you found this thread insightful, please go to the first tweet and retweet it so that many more people can benefit from reading this thread.

https://t.co/F2rYftdwo3
I write such weekly threads on the top one percentile traders and investors.

Follow me @thebuoyantman to always be notified of my next thread.

More from Shravan Venkataraman 🔥🚀💰

Shravan Venkataraman \U0001f525\U0001f680\U0001f4b0
Shravan Venkataraman 🔥...
@theBuoyantMan
Working on some execution optimisation related backtesting. I have so far been executing with market orders only. Going towards higher lot sizes, I'd like to optimise for minimal slippage.

First off, on NSE, if you place a market order, you get filled at the best bid/ask right?

If we want to optimise this, the first non-creative idea one can think of is, slicing the order into different lot sizes, and placing a limit order for each slice at the mid point of current best bid & ask.

But this requires your latency to be the least.

Why would latency affect it?

I looked at tick historical data, and there are more than 18-20 ticks in a second (auction and quote combined).

Even if you keep 10 ticks per second, your best bid/ask can shift from the time you place to the time exchange receives the order.

So, the next best thing that people can do is place tranches of orders every 1s, 3s, 5s, 10s, 15s - in their preferred time range, and get filled at the midpoint or best-bid+1/2/3/4/5 in the depth.

What you need is liquidity.

But if you're trading breakouts, then it's highly likely that your limit orders may not get filled if the action is too fast.

So, a retry mechanism is required in such cases.

If nothing works, you convert your orders to marketable and get filled at worse slippage.
TRADING
Shravan Venkataraman \U0001f3a1
Shravan Venkataraman 🎡...
@theBuoyantMan
Interpretation of Financial Statements - preliminary filters.

1. Looking for sustainable competitive advantage:

When looking for sustainable moat, you wanna see consistency - in earnings, in having low debt, in having growing earnings, low spending in capital expenditures, etc.

The longer the company has existed, and if it sells you the same product for years (like Coca Cola), it reduces production costs and other costs (R&D, Training, marketing) slowly as the company ages.

When costs are reduced, margins and profits increase.

2. What to look for in an income statement:

Let's take a look at Apple:

i) You want to see earnings grow at a steady pace. Take a look at the net income below.


ii) Another thing that's important is a consistent and high gross margin.

As a thumb rule, Warren Buffett wants to see a gross margin of around 40% or above.

Although not quite 40%, it's around that range with respect to Apple.


Compare this to Apple's competitors.

Samsung's gross margins are around similar range, highest being 45.7% in 2018, and Huawei had a gross margin of 38.6%.
ECONOMY
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Shravan Venkataraman \U0001f525\U0001f680\U0001f4b0
Shravan Venkataraman 🔥...
@theBuoyantMan
Have you ever had 4-5 profitable trades in a row, and you bet all your profits on your next trade feeling "in the zone" only to lose it all?

That's called as "hot-hand fallacy" bias.

I ran a poll recently to outline two classic biases we have as humans.

Thread below 👇👇


1/ *Hot-Hand Fallacy* first had its origin in the game of basketball.

If a player shoots few baskets in a row, people generally predict that the next shot will also be a basket.

This is ignoring the fact that each shot is independent of the ones that came prior.

2/ In this poll, 41.1% people voted that the batsman who hit 4 sixes in a row, will hit a sixer in the 5th ball also.

This is classic hot-hand fallacy.

Each ball's outcome is independent.

The probability is not 50% FYI (number of outcomes is not 2).

These 148 people who voted that the next ball will also be a sixer, did so because they believe that the batsman is on a hot streak, and that his streak would continue.

This is an emotional bias and is usually attached to human performance related events only.

3/ 45.3% (162) people voted that the 5th ball would be a dot ball, meaning the batsman wouldn't score anything.

These people displayed the classic "negative-recency" bias, which is also called the "Gambler's Fallacy".
TRADING
Shravan Venkataraman \U0001f525\U0001f680\U0001f4b0
Shravan Venkataraman 🔥...
@theBuoyantMan
Breakout-retest-breakout

this pattern is among the high probability setups one can trade.

60-70% of breakouts fail.

If the breakout sustains the reversal pressure and manages to break above the breakout candle high,

there will be travel.

You can then take the trade in either of the two places.

1) When price is pulling back to the point of breakout - take trade at the breakout point.

If it closes inside the pre-breakout zone, get out.

2) When price pulls back, then breaks out of breakout candle high.

(1) is lower probability than (2) but higher probability than just taking the trade when price breaks out first.

It also comes with lower risk.

(2) is the highest probability trade (probably with relatively higher risk).

That said

If the breakout is from a multi-week or multi-month compression zone

do not expect pullbacks to happen immediately.

If they do happen, more often than not, it's a breakout failure.
SCREENERS
Shravan Venkataraman \U0001f525\U0001f680\U0001f4b0
Shravan Venkataraman 🔥...
@theBuoyantMan
** MEGA THREAD ON INVESTING **

I was thinking about what kind of resources I'd want to have if someone has to start learning investing right now, the ones I wish I had two three years back.

This thread is a compilation of the best resources I have come across. 👇👇👇

Let's start with ** BOOKS **

1) The Intelligent Investor - Ben Graham :

Classic book, suggested by investors all over the world. Start with this book.

2) One up on Wall Street

Peter Lynch covers his strategies to find 10 baggers, and describes how an average Joe can do as well as the pros with simple methods and rock solid discipline and consistency backing it.

3) Common Stocks Uncommon Profits

This is a Phil Fisher classic.

It's on the other end of the spectrum as the book dives into a deep qualitative approach in value investing rather than being fully quantitative like Ben Graham's.

4) Security Analysis

Another book by Ben Graham that dives deep into analysing and understanding the valuations of any company you pick up to study.
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👍Like & 🔁Retweet to help beginners struggling with exits!

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Complete Guide to Swing Trading
A Mega Thread 🧵
With Live Charts and Examples

Comment " Yes " and Retweet if You want PDF version


Criteria for Swing Trading :

Uptrend HH HL Structure
Stage 2 Uptrend
Volume Expansion during Breakout
Pullbacks with Lower Volume
Base Formation ( Rectangle , Vcp Etc)
Relative Strength > 0
21 ema > 50 ema > 200 ema
Stocks near 52 week High
Stocks near All time High

1/n

What is HH HL Structure ?

1. A stock Maintains Bullish Momentum till it holds the last Swing .
2. Swings is an area from where stock reverses
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3/n


A structure of Lower Highs is good for selling side , as each bounces will be sold off
Previous Swings will now act as Resistance in Downtrend and Support in Uptrend

4/n


Enter Stage 2 Uptrend
Stage 2: The Ideal Buy Point for Traders Traders should look for bases within an existing Stage 2 uptrend and focus on breakouts on volume. Intermediate term traders can also use investor buy points
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Parimal Ade
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Impact of Repo Rate Hike on Stock Market!
Plz do retweet for max reach🙏🏻🙏🏻🙏🏻
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TraderLion \U0001f981
TraderLion 🦁
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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:

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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
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Summarizing the #Tax you have to pay while #Trading and #Investing in Stock Market.

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THE BATTLE OF TALIKOTA and the destruction of Vijaynagar (Hampi)
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