Learn To Unlearn

My journey as a full time stock trader has been been more than a decade now and what I have learnt in these 10 years is that it is easier to gain new knowledge but extremely difficult to unlearn. The market is full of information from various entities, right from your own thoughts to the ones you come across randomly over the internet. Every piece of information that you as a trader come across leaves a mark in your mind and thus has a deep impact in your trading performance.

Now imagine that you read some article or a blog or watch a YouTube video, which might have a negative impact on your trading. This is not because that the information was not right but it is because the information that you acquired does not fit your trading mindset. Say, you read posts on Twitter about option sellers doing well in their trading and they are generous enough to share the tips free to general public for others to benefit from them too. You being a directional trader, who have spent long hours studying price movements that results trending move, will definitely not gain from the posts shared by option sellers. Rather that is going to have an adverse effect on your trading. 

This type of information when absorbed by a trader it actually becomes very difficult to erase from the mind, and the trader succumb to the new knowledge that he has gained. Even though it sounds good to gain new knowledge and acquire more trading skills, in reality it might be working against you in the long run. 

So, try to introspect which type of trader are you, what is your trading strategy is all about and only then learn the tools that is suits you as a trader. Once you have recognized it, the learning part gets smooth and helps you to take your trading to the next step.

Hope the year 2020 to be a fruitful year those reading this article.

Cheers!

Purpose of trading

Well, this is still is December but the year 2020 is knocking the door, and as always including me there will be many who will have their big plans in place for the new years. And as usual many of the big plans will take a back seat and will never materialize, for the reasons never addressed. So, how about working on one of the many reasons that hold up against making our dreams come true, against the new years resolution to actually work in favor of us?

I think this year if not all, at least one of the few resolutions we make can actually become fruitful and keeping that in mind I am writing this blog post early December. So that we have enough time to work on our lofty plans and actually see it to get executed in 2020. 

The one and only plan that I am going to emphasize on is related to trading, so non-traders might want to skip this post, but hold on! Can you just think of a single instance in your life when you never had to make a trade off? If not, read on, and I hope it's going to be worth a read.

So as the title of the post goes, we need to define the purpose for our trading. This might sound silly, but it really has a profound meaning if you dig a bit deeper. Let's define the type of traders who are in the market (again, very broadly, I am not covering all of them, just to keep the topic simple). There are jobbers, long term traders (I call them speculators, and definitively not investors), market makers, intraday traders, swing traders, hobby traders etc. All of them have one objective that is to profit from their trades. But only very few have a purpose that they are aware of being in the markets and still trade. 

Purpose of trading is completely different from the objective of trading which unequivocally is to make profit. Purpose for an intraday trader will be different from two different traders, and similarly the purpose of the long term trader will be very different from another long term trader. Purpose of trading is a very personal thing, and let no one fool you on this that two traders have similar purpose of being in the market and taking the next trade. Your purpose for trading could be to build wealth for long term, could be to make enough money in next couple of trades to pay the bills for the month, could be to take asymmetric risk for a social media account, could be to take thousands of trades and build that retirement fund, could be to win a trading competition and so on. The list is non-exhaustive but I think I am able to put my point across through this post.

To be really be successful in trading or any field for that matter one has to define his/her true purpose for carrying out a task. Defining the purpose is to be honest to oneself and not getting carried away by what other's achieve or say. Once that is defined and internalized the walk is going to very smooth and will just require your valuable time. So, as there is still time for the year 2020 to kick in, why not use the remaining days of this year to define your actual purpose of trading the markets and based on that formulate your trading strategies to see your dreams come true as time pass.

Happy soul searching!

When the going gets tough

As a trader there will be times when the ride is going to get rough, a series of losses will strike your trading system, and thus there will be no positive cash flow. Worst thing that hits a trader is that, it's the trader who has executed all the trades and which has resulted in losses, so that adds to the burgeoning stress. The trader feels frustrated, demotivated and his mind looms with all kinds of negative thoughts. He might also start to question about his choice of being a trader, was is the right choice did he make? After all no one supported his decision of being a trader. All of these thoughts constantly run in the trader's mind, through out the day and if he one of those unlucky souls, then these thoughts does not leave him alone even in the nights. Those peaceful days and nights are gone for the trader. 

This is what the phase of draw down does to a trader. Draw down is a period when a trader goes through a phase of loss, that is the trader is not able to make profits higher than the losses and thus his equity curve does not see new peaks. Usually this phase can last for months and for many big traders and hedge funds it can last for even a year. And most of the traders never get out of this phase, that is never make new equity high. Never claim back the lost capital. More one tries to recover from the losses more one makes loss, and these losses pile up so badly that the trader looses all hopes to see his capital to grow back to the initial levels.

This is the time most of the traders breaks down. Start to seek for trading gurus, sign up for any cheap trading course by anyone who claims to only make profits in the markets. The trader looses common sense and is in a trap of the devil within. He is so shaken that he does not anymore believe that the basic market principles. He believes that the nature of the market has changed suddenly, especially after he has started to trade. So the mighty trader either quits and comes back later with a strategy to suit the new market conditions or does some kind of tweak to his existing strategy. I do not have to put it in words what happens after this, experienced and even new traders know what happens next. 

The basic thing which is not addressed is that stock market is not a money minting machine, it is like a normal business which has its own cycles. No trader can ever skip the down cycle as long as one is in this game. The only way to emerge as a winner in this field is to accept the conditions as they are. The market is what it is.

Escape Velocity

I have experienced series of undesired outcomes which has been repetitive in nature in the field of stock trading. I felt like I was trapped in a vicious circle of loosing. I tried to work upon many things to get out of this phase. I was able to get out of the circle with some amount of hard work, only to get back into it. The frustration kept on building up and the mind started to play games. Instability crept in. Started not only to feel like a looser but started to believe like a looser and worst of all, started to behave like a looser. My actions in all the aspects of life and not anymore limited to trading started to reflect a looser.

So obviously there was no way to get back to the path of success if I were to behave like a looser. Once I realized this I started to work on this aspect, and was able to get out of that vicious circle once again. As I said earlier it was a repetitive pattern. So, I am sure by now you know what was coming next. Yes, you have guessed it right, I got back once again to the circle of loosing, only this time I was anticipating it to happen. By now I was so sure of myself that I knew pretty well that, I will fail. For the first time I was not frustrated with the failure rather I was happy, as something that I was anticipating had come true. One might find it pretty silly or some might even say that I started to enjoy failure.

I started to understand the basic structure of the markets, myself and my surroundings, and thus I knew what was in store for me if I continue with what I was doing until now. I will stay in the circle of loosing. So something needed to be done, something needed to be changed. What was that something, I started to examine and re-examine my earlier phases of winning and loosing, but I did not change anything nor was I interested in finding a solution. I was just interested in knowing what I have been doing, just as the way I did it, with no justification, whatsoever.

I have mostly been an keen observer of nature and have always appreciated how nature works. I realized that if I were to get out of the circle of loosing and not get back to it, I just needed to work on one thing that will produce enough push, that can throw me far away from the loosing circle's orbit. Rest will be taken care by the force of the nature.

This structural change has helped me and I believe can help anyone to get out of the undesired state of current being. Just work hard on one thing and build the required escape velocity to transcend to the new orbit of winning.