So you want to make it as a trader, in short time?
I am going to sound discouraging but that’s how the reality will look like. I am just going to point out the main bumps ahead of you.
1/n
1) Methodology
It’s a ocean of info and you’ll be overwhelmed instantly. Most probably duped for many months /years by tips/paid services, TV channels. It will take years to find out what works for you, considering your mindset and temperament.
2/n
2) Capital - If you’re still left with capital, which will be insufficient in most cases, it is likely that you’ll never go through a cycle of trades. So yeah again chances of quitting here is very high, not trading itself but a methodology, you believed or developed.
3/n
3) Borrow Methodology-
I have nothing against workshops if it shortens your learning curve. But again if “you” didn’t spend time on a “method”, it’s likely that you’ll never deploy big capital on it, worse still, you might stop it after consecutive losses.
4/n
5) Risk Management-
All risk management comes with your position size. Trading is not a get rich scheme, which can be done on the side, it takes immense dedication and just like any other business, keep your expectations reasonable, and the market may reward you.
All the Best.
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Most preferably <2L, since chances of blow-ups are extremely high in expectation of higher returns.
Ideal Expectations(IE) - Stay break-even or more and build confidence in your skill, develop setups.
1/n
Intermediate
5-25L
This is the side-income category. Cannot reliably support family expenses only from trading income alone. Advised only if you pass the beginner stage and have confidence.
IE - 3-5%/month, more is possible depending upon skill and market conditions.
2/n
Professional
25L-1cr
The most ideal size - 50L. Stomaching drawdowns and increasing returns both would be fairly possible from there. Consistency should bring you here from Intermediate levels. Can go full-time if you feel like it.
Earnings announcements are public announcements that display a company’s earnings, or lack thereof. As the earnings announcement gets closer, implied volatility tends to increase. After earnings are announced,...
1/n
the uncertainty of what will happen diminishes, and usually we see a rapid decrease in implied volatility because of it. Because of this phenomena, we tend to stick to premium selling strategies when it comes to earnings plays. We can take advantage...
2/n
of the implied volatility crush by selling premium prior to the announcement, and buying it back after the announcement.
Earnings trades are not for everyone, as they involve high amounts of uncertainty and random movements.
What is Implied Volatility (IV) and How it can be used?
IV of a underlying shows how volatile it might be in future.
Options prices affect IV.
IV increases when premium is bought.
IV is not an input in pricing model but can be estimated from it.
1/n
1 Standard Deviation Move -
In statistics, one standard deviation is a measurement that encompasses approximately 68.2% of outcomes.
Implied volatility can help you calculate probability. When it comes to IV, one standard deviation means that there is approximately a 68%..
2/n
probability of a stock settling within the expected range as determined by option prices. In the example of a Rs. 200 stock with an IV of 25%, it would mean that there is an implied 68% probability that the stock is between Rs.150 and Rs.250 in one year.
3/n
Only Execution part, will not dwell on how to predict direction.
No complex or neutral strategies explained.
1/n
Cash
I consider Cash better than Futures for long side. It gives a good risk profile for you to operate in as a retailer. Preferred for a swing buy as BTST days are done with the new SEBI rules. It's good to have momentum with you but is not a must in shorter time frames.
2/n
Futures -
Shorter time frame can be traded with futures, though a big risk for a normal retailer. A 5% move in the underlying can make or break your account. Momentum in your direction is must, to enter.
Min Capital 12L required, to mitigate and tolerate swings in RIL Fut.
3/n
1.5L capital shrunk to 1.32L because I took some stupid brokerage plan in ICICIDIRECT. Fortunately/Unfortunately I doubled this money trading stock futures by the end of the year, mostly buying and sitting tight.
2018. Music stops with Kim rockets. Holding futures overnight was disastrous, especially February. Somehow I was managing to hold on to my capital but never made any money. Things continue same for another 3-4 months with me going to selling options.
2/n
Will make money here and there and will lose it all in one trade by end of month. I remember crying for losing 34k in Adani Enterprises options due to liquidity on expiry day, this was my monthly income so far and lost in one day. Then considered moving to index options only.
3/n