Why 90% of the traders even after winning 90% of the times gives it back to the markets?

Has this ever happened to you, That you are up 10% on the month and you feel crazy, but the next morning you give it all back to the markets?

What Causes You to Give It All Back?

Thread-

Trailing Stop loss.

The most underrated yet most important tool in trading.

A thread on Pyramiding-

What is pyramiding?

In pyramiding we add on to a position when it is going in our direction. Its basically opposite of averaging down.

MOMENTUM - Success of a pyramiding trade depend on this ingredient, the more the momentum the better pyramiding.

There are many way to enter and exit in a stock-

1. ALL IN - ALL OUT
2. ALL IN - SCALE OUT
3. SCALE IN - SCALE OUT
4. SCALE IN - ALL OUT ( I use this one)

Why traders use Pyramiding ?

More than anything what pyramiding do is keep your losers small and your winners - Big.

Pyramiding in my view keeps your dd smaller as your losers are very small because you enters with only a fraction of what you would have entered Normally.

BUT, not necessarily it should be more profitable than ALL IN- ALL OUT, Where one enters all at once and sell all at once.

HOW TO DO PYRAMIDING-

There are various methods which are used by traders for pyramiding ,while keeping the basic concept of adding onto the strength.

1. PYRAMIDING AND TRAILING BASED UPON STRUCTURE-

In this method we scale in or pyramid the qty when the stock breaks above

Why It's Hard To Run Profits And Limit Your Losses-

A thread-

In trading one of the important things we learn is that we should cut our losses short and hold on to the profits.

Most of us plan to implement the same from the next trade.

BUT!

When we take the trade, If the trade goes in profit we panic more then we would have panicked if the trade would have gone wrong.

Strange right, why would someone panic if the trade is going in profit.

New traders may not go through this emotion as they may have not gone through the Fear which a little more experienced (still not profitable) trader goes through.

Let’s name this little experienced trader Rahul.

So, lets say Rahul takes a trade, he buys Reliance at 2000, with SL at 1980.

He is ready to “ FOLLOW THE PLAN” of holding the profit and exit if trade goes wrong.

Now, Reliance goes to 2010, Rahul is happy, panicked, Feared.

"Don't change the trading rules after every trade."

If you do change them frequently then this thread is for you.

Let's talk about the law of large numbers and how it benefits traders to be profitable.

[Thread]👇👇👇

Most people start tweaking the rules, chart settings and the indicator settings because now they think they have found the holy grail.

But they again end up changing them after next losing trade.

If you believe in the law of large numbers then;

Changing the buying rule from buy 1 point above the breakout to buy above 5 points or any tweak like that will not make much difference in the long run.

Law of large numbers is best illustrated by the example of a coin flip :

It has a 50% chance of landing on heads.

If we flip the coin twice, we have almost exactly equal chances of any scenario happening: heads twice, tails two evenly split.

The probability of getting 5 heads and 5 tails on ten flips is just 8% but that probability keeps increasing as we increase the sample size.

If one flips the coin 100 times, the probability of getting 50 heads and 50 tails (P=0.5) increases to 70% and so on.

When the market conditions are not in favour of a strategy, it's normal that it will suffer from drawdown.

In this period most traders can't face the heat,

Richard dennis made "$80 Million " in 1986. That kind of money making put him squarely at the center of Wall Street .

How Richard dennis became one of the greatest trend follower of all time.

Thread-👇👇👇

1. Personality-

Though he made big profits in the year of 1986, but Profits and risk comes hand in hand.

He was down $10 million in a single day that year before bouncing back, a rollercoaster ride that would have made mere mortals lose serious sleep.

Yet Dennis cockily said that he slept like a baby during all that volatility.

His money making style was to go for the home runs and swing for the fences,But dennis was never a gambler.

Dennis was believer of the Empiricism philosophy.

Empiricism is rooted in the notion that knowledge is derived from experiment, observation, and experience

2. Family-

Dennis family was not of market operators. Dennis was always honest about his father’s “hatred” of the market, explaining,

“My grandfather had lost all his money in the stock market in the Depression. The urge to speculate kind of skipped a generation.”

Overthinking - The art of creating problems which weren't even there.

Thread on How Over-analysis leads to decision Paralysis-

What is Analysis paralysis?

In simple terms, analysis paralysis is a person's tendency to over-analyze or over-think upon a decision to such an extent that he/she fails to make a choice resulting in a paralyzed state of inaction.

How a retail trader trades-

A trader named Rahul, He know all the basics of markets, He also has made a system which gives signals on nifty, he has also encorporated good Risk management and Position sizing into his system.

One day he gets a signal to buy Nifty at 13500 with stop at 13450, he wanted to take the trade, but he wanted to get sure that the trade he has take should be a winner.

So he says just let me check the RSI if its above this level I will buy , he checks it and it was above his

level, then again he wants to check another indicator named MACD, he wanted to get sure man, Now he do the most intelligent thing to get sure he gets right.

He goes to twitter and ask his twitter Friend Trader knight he ask him that should I buy nifty at 13500,

My number 1 stock pick for 2021 is: Pine Island Acquisition Corp.

$PIPP

Let me break down why I think this will be THE SPAC of 2021. 👇

TL:DR – the management team is loaded with President Biden’s closest friends and advisors. No other SPAC has this level of access.

$PIPP company overview:

-focused on defense, government service & aerospace
-perfect focus when you consider who is on their Management Team

$PIPP Management

-here's where it gets EXCITING
-founded by John Thain (ex Merrill Lynch CEO and Uber director)
-then STACKED with veteran Government and Administration key figures

$PIPP Insane Management Connections

-the list of PIPP "DC Partners" includes:

-- President Biden's pick for Secretary of State (Tony Blinken)
-- President Biden's pick for Secretary of Defense (Gen. Lloyd Austin).

$PIPP - The Joe Biden Connection

- Tony Blinken and President Biden are close allies.
- Blinken has been an advisor to Biden for decades
- Blinken set to be appointed Sec. of State

1/x Vanna is back & ready to turn back on the charm! Overnight the market hit our weeklong target of **3705 and pulled back... We were able to take profits & play for a bit of morning digestion. It’s been a nice +3.5% in a week w/a few extra scalps along the way...But the best

2/x part has been the gift of Vol compression, which along w/ short Vol profits, has given us significant calendar expansion & dispersion opps, as predicted. I expect this to continue this week as well, as Ivol oversupply should continue to be the dominant force until 12/11.This,

3/x paired w/ the significantly increasing Vanna & Charm flows, will make it hard for any decline until 12/14 to catch meaningful momentum. This said, the narrowing of 20 day RVol as well as the 2 stddev of the 20 day just overhead should cap any rallies, given the dramatically

4/x overextended retail (8-day SMA of P/C equity is the lowest in 20 years) & institutional positioning. This push/pull, should ultimately keep the market fairly pinned this week...Jan 8th call’s on back are incredibly cheap w/ a GA runoff event straddle of only $55, which given

5/x the potential macro-cyclical consequences of the next 2 years of fiscal stimulus seems absurd...& In terms of a more short term trade,Tesla Vol is either too high or 12/18 on back calendar spreads in the SPX are too low, as there’s no premium being priced in for the inclusion

How position sizing can affect your trading performance-

Assuming that you are trading a Trend-following system with Big RR and low win-rate.

For example, assume that you risk one percent per trade on a 100,000 account
and you have 20 straight losses.

That one percent is of your remaining equity and at the end of 20 losses, you would be down to 81,790.60.

Now if you got a 30R winner and you are risking one percent of your balance of 81,790.60, your new equity would be 106,327.9,

You’ve had 20 losses and one winner though you are still up 10Rplus your equity is up by 6.3R percent.

Now, let’s say you risk five percent per trade on your balance. At the end of 20 straight losses, you would be down to 35,772.89 or down 64 percent.

If you risk five percent on this amount and get a 30R winner, you would be up to 89,621.48. You are up 10R, but because of your position sizing, your equity is still down over 10 percent.

#positionsizing
#Trading
#nifty50

This is why position sizing is the most important factor in trading if you get it right and you have an edge, you will do good.

Thanks for reading till here.
@AnandableAnand @jitendrajain @quatltd @sohamtweet