Thread by @theBuoyantMan

Yesterday, we had a meeting with a trader who joined in 2017 and part of the first batch of energy traders at our branch.

These are both traders who trade based on fundamentals, lowest churn and roundtrips done every month, but most of the months profitable type traders.

These guys used to work upwards of 15-16 hours every day in their first two years, and even come in during weekends to do fundamental research and backtesting, understanding what has happened historically in the 10 years prior.

Since this is energy market, they went back in time through every year, and understood different things.

How markets react during and after hurricanes that affect US Gulf coast, how the demand and supply metrics affect price, how the spot market affects futures, and so on.

Initially they were also doing intraday trading, but based on their trade logs and journaling, they identified that they weren't that good with intraday or technicals all that much, and they figured out positional trades, holding the trend and riding them is their strength.

Once they identified that, they never did more than 10-15% of trades on an intraday basis after that.

They catch trends based on macro and fundamentals, and they ride the trends currently. This is their strength and they doubled down on it.

The most important thing that helped them was the process of backtesting. They did the backtesting manually - but events based backtesting. In a specific event, what happened historically, what has higher statistical possibility, and what could happen now - kind of analysis.

Once they take a view, they analyse the probability and put on high probability low risk trades, discretionarily, but backed by statistics from the past when such occurrences have happened.

There's so much to learn from this.

1/ Most of us don't even maintain a trading journal. It's very important to journal your trades and exploration when you are a beginner.

This helps you know what doesn't suit you, what you're not good at, and what you shouldn't continue.

2/ Once you find your strengths, you have to remove the things you do that you're not particularly suitable at and focus on what you're good at.

When I started, I was decent and made profits here and there. My losses were not that pronounced.

But, I sucked at being a discretionary trader. My strategy of in and out in stocks based on random things wasn't scalable.

As a trader, it's important to find something that scales to a crore and beyond. Otherwise, it's useless to trade and spend time on it.

Once I decided to stop discretionary trading and learn the skills necessary, I didn't really grasp the chart patterns, trend lines, indicators and such subjective things.

I wanted a data driven way, and naturally being a programmer, I wanted to focus on what I already know.

So, I doubled down my efforts towards backtesting ideas and finding things that work.

Different people have different inherent and latent strengths. Journaling is the process that will bring efficiency into our trading, and that's what I did too.

3/ Riding short to mid term trends. These guys I spoke to had positions on for anywhere from a week to four months. They had lowest churn, but they were earning as much as the highest earners in intraday trading.

Their trading was relatively stress free.

4/ Also, their trading involves not paying all that much in transaction costs and commissions since they have the lowest churn.

This is something that works for them, but generally when you begin, it is a good practice to not make your broker rich.

5/ Another thing I believe helped them is the sheer amount of work they did.

Most of the Indian fintwit want crores in results with only one or two hours of effort per day. Sometimes not even that much.

Most people look at trading like an easy money endeavor.

What we don't realize is that trading is the hardest way to make money. Like everything else, it demands everything you have got, to make money and find an edge.

Once you find an edge, you can exploit it alright. But until then, you have to keep grinding.

Grinding is the key.

6/ They traded very volatile products initially, believing that the more points they can cover, the more money they can make.

This is similar to what many people in our market do too, starting off with option selling or futures trading.

They lost a lot of money doing that. In our market too, many who start off with FNO, lose dearly, some lose all their capital.

When we start, it's especially important to keep our losses as little as possible while still learning.

That can happen only if we choose products that are low-risk, typically cash based stock trading, swing trading type, or risk-defined option spreads that are hedged inherently.

7/ Most important takeaway is that they are viewing this as a marathon and not as a sprint. You can't be in a hurry to make money, especially with trading. Hurried money goes away hurriedly.

So, I hope these things help you approach your trading better going forward.

I'll continue to share whatever I am experiencing/learning at my workplace so that you can better your approach towards trading and the psychology around the trading process.