What are my Goals

In my last blog,(If you havent read the previous blog, recommend reading it here first,before proceeding) we spoke about 2 important concepts instrumental to winning the war on the markets....
1) The concept of Risk/Reward (Cut your losses, let your profits run)
2) The concept of working with probabilities (having odds in your favor)

We also spoke about evolving a trading methodology, a trading system (also stylishly called as "your trading edge") which incorporates these concepts. Each individual's trading edge is unique to them because Trading/Investing are highly personalised and customised endeavours.

"For a Trader, Learning about self is as important than learning about chart patterns"

The first step to evolving a trading edge is to first truly understand yourself. Understand and seek answers to your qualitative aspects such as:

1. What defines you as a person?.
2. what kind of a personality are you? (patient/impatient, aggressive/conservative etc)
3. what are  your inner fears? (Fear of failure? fear of incompetence?,unknowns?etc)
4. how disciplined are you in life in general? (are you commiited? focussed?etc)
5. What are my beliefs about the market? (Gambling den?, only luck?, wealth creator?)

Seek answers to quantitative aspects such as:

1. Am I a trader or an investor? There is a distinct distinction in the thinking and planning process and, in the way both of them operate ..And you can wear both the hats at the same time but with different plans.This is further defined by:
1. What are my trading goals? Short term regular income or long term investments or a mix of both
2. How much time do I intend to put in? (Full time or part time  or only knowledge gathering time for investing) 
2. What is the capital I can deploy? How much of it can I afford to lose? (no one wants to lose money but the nature of the markets is such that you need to know whats your loss bearing capacity.i.e max drawdown limit)
3. Global wisdom on trading says "never risk more than 2% of your capital on any single trade". Based on this, (ofcourse you are free to change it as you wish) and my own personal capital, what instruments can I trade? Futures or options or only Cash? or a combination?. Do note that if you are an investor, the question to ask is how much do I allocate per investment stock? 
4. What time frame can I trade in? Weekly, Daily, Hourly, 15 min, 5 min? Let me explain this: If you are a futures trader with a risk appetite of 5000/- per trade, then your operating time frame  has to be intraday ( 15 min, or 5 min maybe max 30 min). With the current lot sizes and risk appetite of 5000/-, your stop loss level has to be very small and that will most likely happen only in smaller time frames.......Selection of operating time frames is proportional to your risk appetite per trade........It is also for this reason that if you are an investor and would like to use charts for entries, then you should look at bigger time frames....weekly, monthly, qtrly because you can theoretically hold the stock with much bigger stops or forever.....

As you seek answers to the questions above and create clarity for yourself, you will realise why it is self defeating to trade based on calls or "tips" given by others. You will realise why it is so important to evolve your own trading methodology ,your own system, YOUR OWN EDGE,(because everyone has their own unique emotional and financial make up).

However,  If you must depend on someone else, then make sure that your trading style and foundational conditions above matches with that of the person you are depending on....Also you have to make sure that you do not take calls given by every other expert....Not because they are wrong but because YOUR trading style/foundations may not be aligned with theirs. Every expert or analyst have their own individual personalised trading edge and calls are given based on that edge......for it to work for you, you have to internalize and keep trading that edge repetitively rather than keep flipping from one expert call to another. We often hear people complaining that his calls are good or his calls are bad......Wake up fellas, it is not the trading calls that are the problem...It is working very well for the person giving the call....The problem is YOU.......Because you have not bothered to understand your trading goals, your risk appetite and your foundational alignment with the person/s whose trading calls you are trying to follow. It is because YOU have not understood the foundational concepts of probablity And It is because YOU are impatient and lack courage of your conviction to keep trading that edge.

Until next time,

Stay tuned and Happy trading!

PS. Do feel free to reach out if you need help with working on your own trading edge.