Market Holidays - 2012

New year !

Am not a kind who seek advice or make resolutions on the New Year. I look at a new year or any festival day as a just normal day. I never follow any custom or tradition if my heart doesn’t go with it. But end of 2010 was different. I made a resolution which I have given at end of this post.

I was doing moderate in trading by 2009 but did some major blunders in early 2010 and had some hectic experience. I was not in full rhythm and constantly making errors but I was consoling myself with the fake excuses with my MBA and the busy schedule when my second son was born.

Stopped trading Nifty by mid of 2010 and was analysing my trading mishaps for some time. Somehow I felt that nifty is not my comfort zone and started looking for other markets. Got a link to commodities and had a good friend who initially supported a lot to understand the commodity markets and movements. In the pause period after leaving nifty, I have back tested several systems which made me clear that trading discipline and approach is far more important than a system which I was actually looking far. Trading system is like a light house but the discipline and approach is like a swimsuit without which you can’t swim for long time to reach your goal.

I started my commodity trading in last November with a mere capital which was all I have after leaving nifty camp. Price movements were quick and theoretical back test results lured me to make some aggressive moves in commodities initially. Obviously, lost some money in the initial days but had a hope and more than that had a satisfaction as I was doing something on my own without depending anyone. This hope and satisfaction pushed me to arrange funds to pump fourth time in the markets.

Started the trades following a system and got some clean profits. But devil mind was not sleeping at all and peeped several times to do some intra trades or contrary trades against system. I was greedier when profits were pouring and got panicked when continuous whipsaws were happening due to highly volatile movements. These pushed me into wrong decisions such as early exit or late entry and sometimes did poor averaging. All these err was swinging my trading account up and down. I was able to only hang around my invested capital and couldn’t take any profits in my hands. I have missed out some superb mega rallies in crude oil and copper which would have doubled my capital in a blink of time but I couldn’t sat tight. Almost 5-6 months gone. I was watching yes only watching my profits but could not see them in my books in a big way. Kind of frustration was going on in my mind. I was so sure that system is generating profits.

Then, that trade took place on the 06^th May 2011 which I can’t forget in my life. I shorted Crude Oil around 4925 and within 2 days it tanked to 4450-4400 levels. I covered it for 40k profit. Neat 40k profit from margin of 25k. But the further furious fall lured me to reenter the shorts at lows around 4300. After my entry, it bounced sharply and made a mess by averaging it with another 2 shorts. By close to the end of the day I had to square-off all three three shorts with huge loss as bounce was more furious in the late hours. Lost about 60k in a single trading day.You can see the short form of contract note at left side bar under the title of “perfect failure”.I have framed it :)

This trade opened my eyes as how a interruption in a good trading system can spoil your smooth life. After this trade, I stopped all my stupid moves and strictly moved on with discipline. I was doing everything right after that trade except that I could not learn the art of sitting tight. Several crude oil and copper big movements were missed. Am still learning the art of sitting tight but I can say that I have improved.

For the last 4-5 months, I trade Crude oil, silver and sometimes with copper. I have laid some guidelines and rules. I do not bother about the gain or loss in the trade but am making sure that I am playing within the rules I have laid.

I have written the following resolution by end of 2010. I have made these lines with a hope that I can do well with commodities with a disciplined approach.

I should rock this year..

>Let profit runs. Cut the losses.

> Never ever hesitate to follow the signal from system whatsoever loss you are in.

> Remove fear.

> Develop patience.

Let this 2011 will be a historical turn in my trading life!

I can say now that I have almost followed everything of the above at least to my satisfied level. I can feel the peace for last 4-5 months and also see some cash in my account.

Having a great hope that will do better in the coming years!!

How much one can earn in the financial markets?

I used to face this question from my friends quite often. OK, how much one can earn from the markets?.

This is my concept from my own experience.

Let us consider 10 friends enters into market for investment. Most of us enter into markets from investment perspective and later switched to trading.

First round - In the first 1 or max 2 years, they lose all their 80-100% capital. 5 out of 10 friends do not return to markets again.

Second round - 5 friends return to markets with reloaded capital. Capital swings + /- 40-50% for next 1 or 2 year and finally almost 75-100% capital is lost. 4 friends take back the left out small capital and say goodbye and never return to markets.

Third round - Only one remaining person stops trading for a while after 2-3 loss making years. He analyses his past trading carrier and decides about future. He lay plans and enters with additional capital (mostly borrowed) for the final innings. He always remember his past wounds and accidents freshly in mind and plans his travel very cautiously. Very rarely people go wrong in the third round of trading.

If someone who cannot survive in the market even in the third round, trading is not for him and he misconceived that his passion lies in the markets which is wrong. He should stay away from the markets.

If a person can survive at least for a year in the third round, then he is capable to stay in the market for long time.

Ok, how much he can earn. After passing 3-4 years i.e, surviving after all the three rounds, one must be having a rule book of his own to approach markets. This rule book is obviously from his good and bad experiences. This will help him for sure in any kind of circumstances. If he has a discipline to follow his own rule book, he can earn peacefully at least 50-100% returns per year.

Yes. This is possible for sure. If a trader is in the market for more than 3-4 years and if he can't still make 50-100% returns in a year, then he should stop trading and think proactively to change his approach.