My Trading Journey - Market Analysis for Jun 20th, 2020

It was 2003. The start of a major bull run in India. I started trading the stock market right after college as a 21 years old kid. Got a job straight out of college and with the salary earned from the job, I bought stocks. I remember feeling very entrepreneurial about the whole thing and also very proud of myself looking at all my friends who were busy spending their money. 

I remember starting out with IPOs at first. It was a 'cannot lose' scheme at the time. I am talking about the boom of the Indian stock market/Nifty which is where I first began trading - the year was 2003. The very first IPO I put money in turned out to be a scam bank. Luckily or perhaps unluckily I managed to sell what I got allotted in the IPO with a small gain. Encouraged, I began to voraciously read anything and everything I could lay my hands on with information on the stock market. During these initial days, everything I did was in cash transactions. I had no clue about futures or options at first. But reading quickly changed that. In an attempt to boost my profit returns, I turned to leveraged instruments. I got lucky a few times and decided it was da bomb. 

After a while though, the profits started disappearing and I began to run a loss. It was then that I read somewhere that option sellers make money, 90 percent of options expire worthless and so on. So I thought this sounds like a sweet setup and began selling options. Naked ofcourse. Thing went good until one day the price started dropping on me relentlessly after I wrote some puts. I remember keeping on adding margin to one trade over and over in an attempt to stay in the trade...Eventually ofcourse I ran out of money. My first bust and it wasn't my last. 

These cycles continued on and on...I don't even remember how many times. I kept on discovering new things, trying them out, busting after a while, moving on..rinse repeat. Somewhere along the way I learnt Technical Analysis, rejected Fundamental Analysis, but still kept busting out. Luckily for a guy fresh out of college, there is only so much of a salary you can burn off. So I kept on playing. I was what Jesse Livermore would call a 1st Class sucker. 

It had been around 8 years or so in the market when some kind soul in a group I was a member of started to instill into me money management and position sizing rules. That along with psychology of trading, winning, losing. Slowly my trading started to turn around in that I was no longer losing on balance. Instead some wins, some losses...Net on net I was not losing or winning. During this time I remember I used to spend more time in the markets and analysis than what I used to put in my regular job. I discovered some great systems, put in some good money management rules...and started to make some money finally. I think after around 8-9 years or so of losing in the market, I finally began to make money. I don't think it was a turn on a switch on anything sudden..it was a slow and steady kind of thing. Certainly took its time. 

Ed Seykota once said everyone gets what they want from the markets. Some folks are just hardwired to lose money. Infact most of us are this way initially. We have to get rid of this mindset and move toward a winning mentality to stay ahead in the game. Most successful traders went through a very painful period of struggling and losing before they actually have something that works for them. And then you continue to work on it and improve from there.

It is only when I dropped my ego and stopped having this need to always be right that I began to consistently make money. You do not have to be right ALL the time. You do not need to catch the exact top or bottom. A lot of traders with less than 50% win rate make lots of money. Cutting losses and letting the big ones run - this is the name of the game. Money/risk management above all things. When you drop the ego, you do not have the need to take so much size either. If you are a gym goer, you have seen the ego lifters... put on 3X the weight they can handle on the bar and doing quarter squats risking injury to satisfy their frail ego... who are they fooling?.. Same thing with trading.. Once I dropped my size.. when I started moving amounts that I could actually deal with - this is when I began thinking straight without ego.. without being blinded by greed and fear.. and making the right decisions at the right time. Sure the size was small and profits were smaller - but I began making money. Reduce your size and your risk - this is how you can operate without emotion clouding your judgement.

Below are two posts I wrote up a while back on trading for a living...and metrics. I have been trading for 17 years now. First 8-9 years I lost money on balance. The next 3-4 years I made money but never managed to keep it. From there it was a slow process of managing to become consistently profitable over time.. As I wrote above, risk management/sizing rules/ and a system which I follow now in my room - all of these made the difference to my profitability. It was a long process and I know that the moment I stop following my risk management rules, my process, my system, I will fall into bad patterns again... As with everything in life, in trading also, you get what you put in.... Do the work - wherever you are in your trading journey - remember it is not a get quick rich scheme and you have to continue working on yourself  and mindset until you become consistent... It only took me around 12 years.  :)

Trading for a Living

Trader Metrics

Happy Father's Day to all the dads out there!!

Princely Mathew hosts The Smart Money premium service at ElliottWaveTrader.