Thread by @jagtaparun007

Marekt always try to remove weak hands. let it be a simple Trending move or bit Complicated structures like reversal or fake Breakouts. It'll always find a way. & It's the only thing we can rely 101% on markets to do so.

A small thread.

Kindly Share, 'RT' if u find it useful.

Apparently, these 'weak hands' like to call themselves as Conservative traders. I agree Capital Protection is utmost important. But, if a trader is getting pushed out in just a pullback or starts to panic when position goes bit out of favor, then problem is risk management. 2/n

The Basic Principle of a Stop loss is to Cut the position when it indicates definite trend change. Many a times u must've seen SLs getting hit & Positions jump right back in favor.
What went wrong here...?
Did the trend changed suddenly..?

No. Only the weakest are out...

3/n

Problem lies within 3 most important factors.

i) Immature Entry Point.

ii) Wrong position Sizing.

iii) No command on Psychology Management as the Position Progresses .

I'll try to Emphasize on each factor & hope at least few retailers learn from this.

4/n

i) Immature Entry Point
In Trending market, Price goes thru pattern of
'Consoldation - Breakout - Retest - Pullback - Consolidation ----'

Ideal Points to enter in any Trending move is Pullback Low Or At the retest point of the Breakout.

While the Price action is happening, Major part comes into waiting for Better entries. Mistakes happen here. When u see the Breakout running, u wanna get in as soon as possible & 'Not miss out', Which results in 'Entering at top of rally & sitting thru. the Entire pullback.

If the move is sideways, Better sit it out & wait for it to break out.
(It's hard) It's a Reality, we may loose more in Sideways market more than what we can make in Trending market. Actual Trading is different, 'Trading ka keeda' is different. Wait n Execute or chase n Die.

ii) Wrong position Sizing

Lot of retailers like to go 'All In' with whatever they've got. This creates urgency to see Green M2M as soon as possible & rather than watching the chart, they start to watch m2m.
& Obviously Bcz of the higher Position size, trade goes wrong.

Even if it's a normal retest or just a buffer in Price action, your position will show volatile change in PnL. In response you'll start to Doubt ur Analysis (which is still valid btw), you start to panic & whilst price action just makes a bit deeper buffer & BOOM, ur SL is gone.

Only solution for this is to Scale up the Position rather than going all in.
The method I use is 1/3rd Position Sizing. Basic logic is to add Proportionately as the Trade progresses in favor & cut down as it goes against. Nothing is Complicated about it. Cool.

iii) Command on Psychology as the Position Progresses.

We tend to naturally overwhelm when M2M is green & worry when it's red. Well, it can't be eliminated completely Bcz, obviously we're humans. But, Only thing we can do is 'manage' our Behavior in both conditions.

This relates much more to the previous point of Position Sizing. Once we've our Size in control, Behavior is comparatively much more easier to handle. So, just be ready to accept if the outcome if the Analysis goes wrong. More importantly, manage ur 'after Exit' Behavior.

I'll be adding Few Examples with recent chart to show How can we manage the Trades better instead of getting pushed out at the wrong times.

Stay tuned for that.

✌🏻