iCharts Discussions

[uncannybal]

Trading promises a lot

Freedom to earn from the comfort of your home

Independence. (Trade while sitting on the beach or anywhere there is an internet connection)

Huge potential earnings. (Over 50,000 crores are traded in the market everyday)



But dont be misled



This is one of the toughest businesses there is



No broker will tell u this but 99% of stockmarket traders lose money

The only people who 'definitely' make money are those who sell 'How to become a millionaire as a stock, commodity or forex trader' books

But why is this business so difficult? Shouldint half the people win and the other half lose in this business? Why should 99% lose?

Good question

Here are few of the reasons why traders lose

Rule No 1

Emotions - If you have emotions, u will lose

This is because the market is a rough place. It never behaves the way u want it to behave. If the majority beleive the market will go up that day, it will do down.

Now the problem with emotions in trading is two fold.

To win back your money u bet double in the opposite direction. And u lose even more. Soon you are well on your way to ruin

Because emotions cause a trader to take irrational decisions

So emotions have no place in any trader because it is the thief of patience

This one factor eliminates a large proportion of traders. Without patience and calm rational thinking a trader is on the way to ruin

After all we are all emotional ppl who dont like losing money and get desperate when we lose.

But you quickly find out that desperation of losing matches euphoria of winning. When one wins and get euphoric, it is as dangerous as desperation of losing. One wagers too much on the next trade to win even more and loses all his winnings.

So euphoria and depression are two sides of the same coin and cause desperation which are equally harmful to the health of any trader

For example, never change your lot size on winning a few times but only on after a 2 month winning record (without leverage)

Discipline - This is required in dollops in a trader

When u see everyone running for the exit or entry door, it requres a lot of discipline to calmly assess the situation and study the basics and behave accordingly

There is no system that works 100%

In fact a 50% accuracy is more than sufficient

The reason for this is that when u lose you have a stoploss that does not allow you to lose more than a specified amount. But when u win u can win at least double that amount. So if u have a 1:2 risk reward ratio, u can win just 3 times to get Rs6 and lose 5 times and u still gain Re1. If you have a better system that allows u to get a 1:3 risk reward ratio then u can win just two times and lose 5 times and still gain Re 1

This should be easy right?

On paper

This is where the emotions come in

You cant trade randomly to get this win ratio

Only those with extreme discipline and lack of emotions can achieve these seeminly easy targets. Emotion will quickly race u past 5 losses in a row. Desperation causes traders to up the stakes to win more.

This is one thing u quickly learn in the trading market

Euphoria and depression (panic) are two sides of the same coin. Both cause a person to behave irrationally and without patience

Two more emotions that ruin a trader are hope and a 'desire to be right' (appreciation craving)

Hope is when a trader does something and 'hopes' things will turn around

This is an emotion which we have been taught since childhood to have, but must be overcome before one starts trading

Hope has no place in trading. The market has no sympathy for hope. Learn to be open minded and accept the market's behaviour without questioning it.

Like the alcoholics mantra says 'Lord give me the humility to accept what I cannot change and the courage to change what I can change and the wisdom to know the difference'

The first thing u learn in the market is that u cannot change the market.

You can only change yourself and improve your willingness to learn

Next emotion to eliminate is 'Desire to be right'

How often have u heard someone say ' I told you this would happen'

This statement stems from a deep desire to be right and to be appreciated for it

This is a dangerous desire in the trading world

If you want to be right so badly, you are willing to lie about your mistakes and highlight your successes and not learn anything. This could ruin you in the long run. Without humility and a desire to learn and improve, you will fail

Imagine somebody who was convinced about the 'India growth story' and went long and watched the market fall from 6200 to 4750. If he cannot admit he was wrong he will weakly repeat after every bounce ' I told you India is a growth story' and has missed a great shorting opportunity


Why are ppl so desperate to be right that they lie about their trades in sb? People want respect from others. They will say or do anything to get respect from their peers

This is a major fault in our human psyche

The only person whose respect we need to have is our own self. We need self respect

If we lie to get respect from others, we are putting ourselves down

The only way for a trader to get self respect is to make money

Getting temporary respect from others by lieing is detrimental to ones own self respect

Imagine if ure child is coming last in class. And everywhere u go u lie and tell ppl that she comes first in class. The child is going to feel awful that her parents have to lie about her performance since they r so 'ashamed' of her.

That child is ure self respect. Do not say anything that endangers the health of your own self respect

Hence as traders we should only think about making money to get self respect. Lies about our earnings will be counter productive to that goal

Let us improve ourselves to earn more money and self respect


As someone said 'The market can remain irrational a lot longer than u can remain solvent'
So give up you desire to be right and have to humility to accept the market as it is

So a cold hearted. extremely patient person who can take purely rational decisions inspite of everyone around him telling him the opposite without feeling euphoria on winning or depression on losing. A person who has no place for hope or no 'desire to be right' is the only person who makes money as a trader

The Bhagavad Gita talks of Viveka (knowledge) and Vairagya (detachment) and says that Viveka should always be accompanied by Vairagya for a spiritual person. So those who have achieved both are 'spiritual' persons. And those who have Viveka without Vairagya are merely 'scholars'

Can u be a 'spiritual' person?

[Kedarjd]

Very nice article uncannybal.

this part 'So a cold hearted. extremely patient person who can take purely rational decisions inspite of everyone around him telling him the opposite without feeling euphoria on winning or depression on losing. A person who has no place for hope or no 'desire to be right' is the only person who makes money as a trader'
doesn't it sound like 'Bhagwat Geeta' applied to Trading

[sunnyrockers007]

Interesting article

[uncannybal]

The Bhagavad Gita talks of Viveka (knowledge) and Vairagya (detachment) and says that Viveka should always be accompanied by Vairagya for a spiritual person. So those who have achieved both are 'spiritual' persons. And those who have Viveka without Vairagya are merely 'scholars'

[dineshdesai]

very nice article

[opportunist]

Uncannybal,

Words straight from the depth of the heart. I deeply resonate with the desire for NOT having the 'desire to be right'. That is what is reflected in my pseudo name - OPPORTUNIST - one who doesnt want to be right but just want to be on the RIGHT SIDE of the market javasc

Having said that I am far from attaining that goal. I do make the mistake of trying to be perfect and trying to be the 'astrologer' to the market. Icharts, particularly SB is a heady place to be in and for a long time I struggled to remain unaffected.

Let's 'hope' that we all attain the nirvana whereby we can become 'hope'less and 'desire' that we lose the 'desire to be right' at the earliest.

Regards,

Opportunist

[uncannybal]

Thanx Sunnyrockers

Ucb

[uncannybal]

Thanx DineshDesai

Ucb

[uncannybal]

Oppo

You r 'right'

We should lose the desire to impress others or show that we are right. We should just follow a system. Being right or wrong is incidental and does not matter as long as we r making money(i.e; following the system).And once we make money, even money should be no 'big deal'. Money should be treated as nothing more than the fruits of doing our job right

Ucb

[enroute]

grt article ...

[neemtree]

good article.

[uncannybal]

Thnx enroute

Just something I want to add that I just thought of

Why are ppl so desperate to be right that they lie about their trades in sb? People want respect from others. They will say or do anything to get respect from their peers

This is a major fault in our human psyche

The only person whose respect we need to have is our own self. We need self respect

If we lie to get respect from others, we are putting ourselves down

The only way for a trader to get self respect is to make money

Getting temporary respect from others by lieing is detrimental to ones own self respect

Hence as traders we should only think about making money to get self respect. Lies about our earnings will be counter productive to that goal

Let us improve ourselves to earn more money and self respect

[umesh1]

[
The subject of this thread should be "How to be a good preacher after learning lessons from failure"
lot of place available in himalayas for sadhus to settle they should not waste their time in material things

[rainbow]

UCB:

Great post. nicely crossed the 't's and dotted the 'i's.

this very nicely mirrors the ongoing discussion
on the other forum on strategy vs discipline.

The point is can one really stick to such 'monkish' discipline consistently?
amongst most people I have met, I can say I have personally seen only
two traders who possess this trait/quality in good measure.

and their trading capital, no surprise, is going north.

Never figured you to possess such profundity, though

Happy Diwali, all

Cheers
DJ

[uncannybal]

In Malcom Gladwells book 'The Outliers' he says that in multiple choice question papers with each answer having a choice of a, b, c, d or e, it is a lot better to choose'c' for all answers if one is not sure about the answer rather than guess one of 3 'close' answers

This is why following a system is better than guessing which way the market will go. It is like choosing 'c' for all the answers rather than getting lower scores by trying to 'guess' the answer when one is not sure