MASTER THREAD ON 10 RULES FOR SUCCESSFUL TRADING β‘π§΅
1. TRADING PLAN 2. BUSINESS 3. BACKUP 4. TRADING CAPITAL 5. STUDY TREND 6. RISK CALCULATION 7. TRADING SYSTEM 8. STOPLOSS 9. DRAW A LINE 10. PERSPECTIVE
TRADING PLAN
A trading plan can be as simple as deciding to buy above these levels and sell below these levels. Usually trading plan also called as homework has to be done one day prior to your trading day.
For FNO it might be a daily task. For cash players it can be weekly.
TREAT IT AS A BUSINESS
Trading is one of the most flexible businesses out there. It's you who decide to run the shop or close it for a day. Always treat it like a business. Calculate your loss, sunk cost, depreciation, bad debts etc too. Yess trading had these terms too.
BACKUP
Now here backup should be in 2 terms. One should be that your trading income shouldn't be a decisive income. Always rely on other sources too. The other back-up which is least talked about is Technology back-up. Having an additional back-up like an additional
Internet connection or additional system like an extra phone or laptop is necessary too. Technology is meant to have hiccups and that shouldn't act as a source of hindrance to your business.
TRADING CAPITAL
The no. 1 rule of trading is it shouldn't be done with borrowed money/capital. Usually such hindrances create performance pressure and ultimately wiping out your capital as certain extent. Unless and until you are not comfortable, you won't be profitable. Period.
STUDY TREND
The golden rule of trading is be with the trend. You might get stopped out 8/10 times but those 2 times if you follow religiously can give you enough money to come out net net green by YTD. Not staying with trend is like going uphill river side. Ain't a good idea.
RISK CALCULATION
Risk first reward later. The mantra of trading. Always remember you should know and calculate the amount of money you are about to risk. Your emotions will definetly play as we are humans lol. But those emotions should not affect your trading decision.
TRADING SYSTEM
Here trading system doesn't mean how many screens you have π Trading system can be as simple as sell below VWAP and buy above VWAP with some additional tweaks. Follow these 2 steps religiously and see the discipline building in. Don't hop onto 10 systems in a week
STOPLOSS
BHAI ISKO CAPS MAI PADHLO. ALWAYS USE STOPLOSS.
STOPLOSS NAI LAGAOGE TOH MARKET TUMHAARI LAGA DEGA.
I HOPE THIS STATEMENT IS ENOUGH TO MAKE YOU UNDERSTAND THE IMPORTANCE OF STOPLOSS
DRAW A LINE
As a discretionary Trader just like we are you should always know when to draw the line. It by any means does not mean that you got to stop trading. Remember one thing. Never lose touch with the market. Never ever. Trade with 1 lot or go with 1/5th of your usual qty.
PERSPECTIVE
Trust the process. You as as trader will be defined during the drawdown period. Trust your system. Trust the process. Focus on losing small and winning big. Focus on the big game. Don't try to outrun the market. Focus on surviving for the next 2 decade. PERIOD.
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- Origin: Charles Dow, co-founder of the Wall Street Journal and Dow Jones & Company, formulated Dow Theory in the late 19th century.
- Development: Dow's theory was based on his editorials in the Wall Street Journal where he analyzed the behavior of the stock market.
- Significance: This theory is the cornerstone of technical analysis, providing a systematic approach to understanding market trends and behaviors. It laid the groundwork for many other technical analysis theories.
2οΈβ£ Basic Principles of Dow Theory
- Market Discounts Everything: All available information, including news, earnings reports, and even future expectations, is already reflected in stock prices. Therefore, analyzing price movements alone can provide insights into market behavior.
- Three Trends:
- Primary Trends: Major movements lasting from months to years. They represent the overarching direction of the market.
- Secondary Trends: Intermediate corrections or reactions against the primary trend, lasting from weeks to a few months. They are often seen as pullbacks in an uptrend or rallies in a downtrend.
- Minor Trends: Short-term fluctuations lasting from days to a few weeks, often seen as noise within the larger trends.
- Trends Have Three Phases:
- Accumulation Phase: Informed investors start buying or selling stock against the prevailing trend.
- Public Participation Phase: The broader market catches on, and price movements become more pronounced.
- Distribution Phase: Informed investors begin to sell off their holdings to the less informed public, typically marking the end of the trend.
- Confirmation and Volume: A trend must be confirmed by price movements across major market indices and should be supported by trading volume.
- Trends Continue Until a Clear Reversal: Market trends are expected to persist until definitive signals indicate a reversal, even amidst temporary fluctuations.
13 Stock Chart Patterns that You should know ππΉ
A thread ππ¬
On a very basic level, stock chart patterns are a way of viewing a series of price actions that occur during a stock trading period. It can be over any time frame β monthly, weekly, daily, and intra-day.
If you can learn to recognize these patterns early, they will help you to gain a real competitive advantage in the markets. Just as technical indicators can help your technical analysis trading, stock chart patterns can contribute to identifying trend reversals and continuations.