08102012

Nifty opened near PDC and sold. IR formed. Bias was negative and I was looking to go short. It formed a small range within the IR and I went short when the third attempt to move up failed.My target was PDL.Nifty scared me a lot when the breakout of IR Low failed .There was no follow up buying. Tested the patience for nearly 90 minutes and finally went down.TP near BRN.Expected a BOF at BRN on second test , but it came too late.

Discipline

Originally the word “Discipline” refers to the systematic instructions given to “disciples” to train them in an activity which they are supposed to perform. This requires following a code of conduct. In trading parlance discipline means sticking to our own trading plan. While trading, many of us find it difficult to do this as we succumb to our emotions such as fear and greed.

Trading discipline involves behavior change. We must train ourselves not to take emotional decisions and act such a way to protect our own best interest. This is done by overriding the emotional reactions and sticking to our original trading plan.

What motivates one to change the behavior? There are many approaches. The simplest and the easiest one is by changing motivation. One of the oldest ideas in behavior change is people dislike pain and enjoys pleasure. They will do the stuff that reduces the pain and increases the pleasure. This requires an incentive, punishment system which increases the pleasure when they perform a behavior and cause pain when the desired behavior does not occur.

As far as trading is concerned you need not design a motivational approach. It is inbuilt. If your trading method is having an edge and makes money when traded properly, that itself will motivate you to be disciplined. Losses will prevent you from violating your profitable trade plan.

Most struggling traders believe their core problem is discipline. This belief is further reinforced by the “Trading Psychologists” who themselves cannot trade and “Trading Gurus” who can escape the responsibility by blaming your” Lack of discipline” when their methods are not working.

If your methods have edge and they are working, you do not need to make extra efforts to be disciplined or focused. The returns which you get will motivate you to be disciplined.. In my humble opinion, there are no psychological problems related to trading alone. If you have any, it may affect the other areas of your life also.

If you think you have some, go and get it treated as early as possible.

Decision Making

Trading is all about Decision Making. As traders we are continuously making decisions. We need to decide on the price levels to initiate a trade, which direction to trade, where to keep stop loss where to exit etc. Good trading decisions will make money for us .Being consistently profitable is becoming better at this decision making skill.

Any decision making process involves three steps. These are Gathering information, evaluating the necessary inputs and deciding upon the possible action. Information overload is a major constraint for effective decision making. So we need an effective filtering of information inputs to a manageable level. Focus only on the right and important  information . Avoid the extra information having negligible impact.

I have seen traders monitoring a plethora of inputs. They track everything you can think of. Elliot waves, Fibs, Gann, Parabolic SAR  a dozen moving averages, different oscillators, trend lines and channels. Sorry, I forgot the floor pivots and Camarillas. Supports and resistances are also very important.Oh No, I almost missed the time cycles,Wolfe waves and ORB.

If you mark all these levels on a chart, it will cover the entire chart space. Monitoring all these levels is almost impossible. Even if you do, it is not going to make you profitable. Instead it is going to make you more confused. But it will help the “Trading Gurus” for sure. They can find some or the other reason for all the price behavior and convince you that " lack of discipline" is the root cause of your trading failure.

The sooner you define your decision making process, the better. Decide on your information inputs, how to weigh them, and what actions to take on them.

To attain knowledge, add things everyday. To attain wisdom, subtract things everyday. ~ Lao Tsu

04102012

Nifty gaped up above PDH and moved straight up. Did not expect a channel move as it had gone up a lot. As expected it moved in a range all the day. BOF of HOD was the only trade taken . This Counter trend trade ended as a scratch.

03102012

Nifty opened near PDH . IR formed and BOF of IR low skipped as there was no space for the price to move. Went short on BOF of PDH/IR High. TP at LOD. Long when third push down also failed.As day traders we are going through a very difficult period.Let us hope the situation will improve soon.

01102012

Nifty opened near PDC and spent the entire morning session in a 12 point Initial range.Went long as I could keep the SL below PDL.TP when the previous day afternoon range high resisted. Expected a BOF of PDH which did not happen.