We live in an extremely competitive society and everyone wants to benchmark themselves with the very best. However everyone cannot be a Mukesh Ambani, a Sachin Tendulkar, a Rakesh Jhunjhunwala or a Tom Basso. Fortunately we don't have to be to live a happy and prosperous life
I doubt Warren Buffett spends sleepless nights thinking that in the last 5 years he has made less than 20% while Jim Simons has exceeded 60. In Investing and Trading, even 'mediocrity' is actually quite good.
In a seminar Samir Arora pointed out that even if your Portfolio was made up of Stocks which were 150th best, you would handily outperform the Nifty by as much as 9% and generate a CAGR of over 25%.
His take- nobody knows what will do well in the Markets and it is easier to identify what will not do well than what well. So if you cut out the obvious losers and end up with an average of 150/500 on the Nifty, you will handily outperform the Index and even most Professionals
Why shouldn't the same philosophy apply to Trading? Cutting out the most obvious flaws in our Trading will yield a far more satisfying result than trying to emulate the Trading style or Returns of some of the Marqee Traders- much of which is questionable in the first place
While this may not help those who are Trading methodologies without an edge- save to reduce their losses- it can have a mind boggling impact on the Performance of Profitable Traders. Personally the area I am focusing on is cutting down my big losers
Analysis shows that had I cut down just my 5 biggest losers to half the loss suffered, I would have added a full 4% to my Performance. Many such small tweaks can make all the difference. Identifying and cutting down mistakes is easier and more productive than learning new tricks

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More from @KatariyaPran

2 Apr
A 50 lac loss on a Capital of 1cr will destroy you as a Trader. But let me tell you that even on a Capital of 50cr it will send you in a depression. Which is why scaling up is so difficult. Probability of bigger losses keeps increasing but ability to stomach them goes up slowly
Investing is a compounding game- Trading isn't. Which is why the legends like Rakesh Jhunjhunwala, Radhakrishan Damani and others focused on Investing after generating their initial corpus from Trading
Forget feeling depressed after making big losses, people feel depressed when in a particular month they don't earn what they feel is their entitlement or quota from the Market🤣🤣🤣
Read 6 tweets
20 Mar
Trading is a business of Probabilities not Certainty. So the road to Trading success is to take many high probability Trades and let the odds play out in your favor. 'Many Trades' is key here because probability is subject to the law of large numbers.
The very worst Traders are the ones who rely on certainty- the kind who look for a 80-90% success rate in the Trades they do. You can find then all over Twitter extolling the remarkable accuracy of some 'gurus' calls while singing his praises
Backtesting is the hot topic these days and relies on years of data to arrive at the Expectancy of a Trading System or Strategy while giving you a fairly good idea of the volatility of the Returns you can expect and the drawdowns you can be subjected too
Read 13 tweets
15 Mar
Have had a number of DM's following the elearning video. Clarifying some issues. Please understand I am not an intraday Trader and obviously my methods will not apply to short very term time frames. The first was on how I identify levels
I do it in the evening after the Market and I look at Support or Resistance on Candlestick Charts Also for common Patterns both for entry and failure. I look at P&F Charts- 1% on a daily TF. I will also use Relative Strength to identify sectors and the best/worst stocks in them
Will also look at Renko Charts as Swing Points are easier to identify on them. Sometimes I will also look at OI for underlying where I have larger stakes. Of course will always keep an eye on IV's. Once I have these levels, I will use them to take positions the next day
Read 8 tweets
13 Mar
The power of beliefs is amazing! I lost almost a 1000 followers because many were offended when I said that one required a crore to make a living from Trading. People desperately want to believe that they can regularly churn out 60-75k monthly with an investment of 3-10 lacs
By the same token they want to ignore Nithin Kamath's recent statement that only 1% on Zerodha make better than FD Returns from Trading. They would much rather believe Trainers who claim that 80% of their Trainees make outsize Returns from the Market.
The other reason many were upset was that I never discussed any charts or strategy. That's because I don't believe in the one size fits all approach. How you form a view is important and is the soul of your trade. How you structure a strategy around that view is unique to you 1/2
Read 7 tweets
7 Mar
There is a popular saying- 'lies, damn lies, and statistics.' Most Risk Management philosophies that Traders base their systems on are grounded on some form of statistics be they Expectancy, RR, Win Loss Ratio, Drawdowns etc. But how realistic are these really?
So a system with an Expectancy of 1 means you will make 1 on every 1 Risked. But over how many Trades has this Expectancy been calculated? 100, 1,000, 10,000? Statistics on such types of analysis generally follow a Normal Distribution represented by the famous Bell Curve
To get a good representation of how a system will work out, you need a very large set of observations. Very few Traders capture these. Secondly, and more importantly, the figure is not absolute. It is subject to a fairly wide range of variance
Read 8 tweets
24 Jul 20
There are many great setups from some of the world's best Traders in the world available for on the web- all of which have edge and provide a great living for their practitioners. Some such as breakouts, pullbacks, flags, pennants etc are simple and well known even to beginners
Unfortunately 95% of Traders are unable to Trade them profitably and waste their entire life in trying to discover one which they can. The problem is not in the setup per se but with other issues such as Capital Allocation, Position Sizing, Money Management and Psychology
All these issues appear to be very simple in nature, and can probably be summarized in one page, but turn out to be extremely difficult to implement in practice. To some extent they are counter intuitive to the way we are conditioned to think.
Read 11 tweets

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