Comment on Mr Consistent returning incredible returns

Madan commented on 24 Dec 2013, 06:55 PM


Lot of questions..let me give my best shot. Congrats for sticking with the market for around 3 years..most of them don’t stay that long(i am referring to serious traders not ppl who come to gamble or have fun)

1. I believe big money is made in positional trading and if you are good, you will be in the direction of gap atleast 75% of the time. Thats where your money is made. 2 out of 5 trading days, mkt gaps up/down more than 25-30 pts and chops the whole day. I have also seen quite a few intraday traders making money but not seen many staying in trading for a long time.

2. Farther the stops –> smaller the size is a function of money mgmt and its got nothing to do with our confidence of trades. The ‘confidence’ thought comes from the point that you believe you can predict market moves but honestly, you cannot do it dayin/dayout. So, you are better off leaving that thought outside your doorstep.

Please read Mark Douglas book and he talks about how every moment in market is unique and how every trade is independent of the previous trade’s outcome. Having said that, i don’t vary position size based on ‘my confidence’ of the next trade as i don’t know what my next trade would’s a very important concept for me to understand and that has changed the game for me(i have also mentioned this in the interview)

3. I don’t have positions all the time in the market..there are strategies like STOP-and-Reverse which let the traders to trade in the mkt all the time. Some of my trader friends do SAR and quite a few, uses discretion in SAR system itself. One losing streak would shake their confidence and eventually, they fade out. SAR system doesn’t work that way – you are second guessing the system..very counter-productive for your equity curve in long term..whenever i say long-term, i refer to more than 5 yrs minimum.

4. Honestly, there is no book involved in my learning.. Nithin asked me the same question and i said it is just sheer number of screen hours..nothing can replace shortcuts here in this profession.

5. It depends on the position size..when our size is low(lets say 1000 shares of Nifty), 3 pts should be enough for most of the market conditions…please do remember to increase it when VIX is know what i mean?

6. I quit researching on indicators (stopping the search for holy-grail) & visualizing techniques to live through my feelings of the trade. I still do it every day.

I hope the power situation in Erode has improved..btw, i am originally from chennai 🙂

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