Mr Consistent returning incredible returns

December 21, 2013

Traders,

Madan is part of our illustrious top 25 traders from almost 35000 who trade at Zerodha. He has won 3 challenges in a row, and he is consistent, not very aggressive, and has still managed a return of over 300% in the last 1 year + trading with us on a good sized trading account. Following is the very interesting interaction I had with him on his journey, his trading and money management strategy, and more.

Name: Madan K

Education: B.Tech (University of Madras), M.S (Virginia Tech, USA)

Background: Worked in the US for 5 years after graduation, came back to India for good in 2009. Wife is an M.S from Virginia Tech too.

Madan

Madan

From Computer Science to Trading Markets, how did it all start?

Have always wanted to do something more than a 9-5 kind of job, and had tried various ways of making money part-time. I had always been fascinated about the idea of financial markets from young, but got exposed to it only when I went to US for my masters. My friend used to trade the markets, and soon I started trading E-mini S&P, Soybeans, and more, this was back in 2008. Β What also helped then was that I worked from home, and hence was able to trade part-time.

Was it all smooth in the beginning?

Smooth πŸ™‚ Β I blew up almost USD 70,000 in 2008, in just under 3 months. I tried all kinds of indicators, backtesting, and only then trading on them. I was spending quite a bit of time, to figure out a strategy that can tell me what will happen next. Out of desperation to recoup the losses, started taking random impulsive gut trades as well.

What happened next?

My biggest influence came from a full-time trader John Carter (author of “Mastering the trade”), and things started to change slowly. Also thanks to “Trading the Zone” Β book by Mark Douglas, I started to firmly believe that “anything can happen next in the markets, and I don’t need to know that to make money trading”. It was a completely new perspective to how I was trading previously, instead of worrying about finding what happens next I started to now think that every moment in the market is unique, I started looking at trading more as a study of probability.

Came back to India for good in 2009, traded the US markets in the nights for a while until waking up and trading when everyone around was sleeping got to me. This is when I shifted to Indian markets and started trading on Nifty and Banknifty.

Why only Nifty and Bank Nifty? Why not Stocks?

When trading stocks, you are taking a chance of trading against an insider who probably knows more about the stock than you, lowering the chances of winning, not the same case while trading indices.

Can you give a brief on your trading strategy?

Trading strategy now is just pure price action with support and resistances.

Can you explain the concept of “Price Action Trading”?

Price action is a form of technical analysis, but it is unlike most indicators that I had given a shot when I started off. Most technical indicators usually try to predict the future based on past prices whereas in price action trading the main focus is on the relation of the current price to its past prices.

So if you look at my chart, you will find no indicators, not even candlesticks, just bars. Price leads indicators always. πŸ™‚

How are the trades planned?

It is based on the breakout of pivot high/low value of 10 min chart, these keep changing as the day goes by. I never wait for a pull back, always entering only on breakouts.

What about Stoploss and Targets? How many trades do you take on an average and what is the success ratio?

There are no predefined stops, stop loss is based on the previous pivot low (If I am long) and vice versa when short. I just keep trailing them when market moves in my direction.

Similarly there are never targets put, I cannot put my will on market by putting a target. I don’t try to guess what is the maximum I can make on the trade, I just trail my stop, markets tells me what it wants to give and I gracefully take it. πŸ™‚

I typically end up taking around 15 trades on Nifty and 15 on Bank Nifty in a month, usually lasting between 3 hours to 5 trading days. Around 45% of my trades are successful, but as a breakout trader, I catch a lot more when I am right, and there is always a stop based on the recent pivot low/high depending on if I am long or short to limit the loss when I am wrong.

What about the money management strategy?

When my account was small, I was using “Fixed Ratio” method to build the account aggressively, it is now more of “fixed fractional”, let me explain.

Using fixed ratio, I increased my account size from a few lakhs to a decent size now. It has only 1 variable, called delta. Delta is basically the maximum drawdown of your system (Basically backtest your strategy for 8 to 10 years, and you will know what Β has been the maximum drawdown historically). Β Assume you have Rs 100,000 in your account and you have found the maximum drawdown to be Rs 20000 for 1lot. You can now increase your trading size to 2 lots once the account balance goes to Rs 120,000 (profit of Rs 20,000), and so on. If the account balance goes down, you reduce the size, this is a very aggressive way and was good when my account size was small.

In a fixed fractional, you basically risk no more than x% of the account balance per trade. So if your % is say 2%, when the account balance is Rs 100,000 you risk Rs 2000 and if the account goes to Rs 110,000 you risk Rs 2200. This is the strategy I follow now, a lot more conservative Β because of my increased account size.

Favourite Books?

  • Mastering the trade by John Carter
  • Trading in the Zone by Mark Douglas for Trading psychology
  • Disciplined Trader by Mark Douglas for Trading psychology
  • Definitive guide to position sizing by Van Tharp for Money management
  • Market Wizards by Jack Schwager
  • Trading for a living by Alexander Elder

How does it feel to be part of the top 25 amongst 35000 traders in India? What are your future plans?

Feels good, but I will feel a lot happier and content when I can be 100% efficient in executing my plan. I strive to focus on process goals rather than profit and loss, but I guess money follows when you meet your goals. πŸ™‚

Future plan is to continue trading for a living, with a lot more capital hopefully.

Parting notes/quotes that have helped you, for the benefit of all readers

  • Plan the trade and trade the plan
  • It is impossible to predict market turns
  • Losing trades are a natural part of trading
  • Focus on process goals rather than profit/losses
  • Step away from the screen and Get a Life!Β 

___________________________________________________________________________________

We wish Madan all the best in scaling his trading account and winning many more challenges.

I hope the above interaction is insightful, do click here to read similar interviews with some of our outstanding winners of the 60 day challenge.

Happy Trading,

Nithin Kamath

[email protected] Zerodha, working towards breaking all barriers that I personally faced as a retail trader for over a decade. Love playing poker, basketball, and guitar. β€œYou don't have to be a hero to accomplish great things---to compete. You can just be an ordinary chap, sufficiently motivated to reach challenging goals.” - Edmund Hillary

899 comments

  1. gautammm says:

    Very helpful, thanks for this, and best of luck Madan..

  2. LondonVisitor says:

    Thanks for the interview. A lot of valuable tips and advice.

  3. Sameer khan says:

    Best of luck πŸ™‚ was nice reading

  4. Guru says:

    Thanks for the interview Madan :- best of luck πŸ™‚ have a nice future ahead

  5. Puney says:

    Best of luck madan πŸ™‚

  6. Manish says:

    Thanks for the insights Madan. Best of luck for your trade and hope I can learn some πŸ™‚

  7. denish says:

    Thats all gud madan, but plz clearly explain, your trading technic with chart printscreen.

    denish patel

    • Raja says:

      Brother, probably you did not realise the value of his simple comments. It is deceptively simple but loaded with wisdom. More important than techniques and strategy learn and use Money management. Learn to keep losses small. Learn to conserve your capital. That’s what he says. For technique of entry and exit just use support/resistance. You cant predict the market as he says, but you can follow it. He has given a wealth of advice and book references which if followed diligently will be more than sufficient ,but alas we all look for the silver bullet which will give us 1000% Returns every trade. That is impossible.

  8. masali chanabasappa says:

    thanks

  9. raj says:

    Any blogs for the readers to understand your strategy

  10. Kathiravan says:

    wonderful article

    Also read high performance trading by steve ward

  11. abhijit says:

    congrats Madan…!!! Thanks for sharing your experience….!!!

  12. Pawan_Arora says:

    Congratulations Mr. Madan, Since you play on breakouts of Pivots, what is your plan to tackle the slippage issue as your trading size will grow with time. And currently how much slippage do you face?

    • Madan says:

      I already face slippage of 1-2 pts in NF and BNF’s around 5-7 pts…right now, i have been able to make more than slippages.

      I know a trader who has a decent size account and he says once we reach 250-300 lots in Nifty futures (most of them use 1 lot/lac and we are looking at 2.5-3 cr account) – the slippage is gonna be easy 5 pts..so, a trader’s returns would drastically go down as the impact costs go up.

      Alternatively, i can go for an higher time frame, reduce the no. of trades/month – ofcourse offsetting the potential returns…its a tradeoff for trading bigger size with breakout strategy !!

      Hope it helps.

      • Pawan_Arora says:

        Thanx for your reply.. you said,”Most of them use 1 lot/Lac”.. How many lots per lakh you personally play?

        • Madan says:

          U r welcome…i use 1 lot/ 1.25-1.4 lac …

          on a side note, the whole slippage and impact costs worsens if somebody is using SAR type of system as he/she has to squareoff and take new trade in the opp direction .. essentially, ‘how much scaling up can be done’ is based on the type of idea/system a trader uses.

      • Akhilesh says:

        Hello Madan,

        First of all Congrats for your success in the capital market. I was wondering have you ever considered automating your trades for reducing the slippage? I think slippage is more when you trade manually.

        • Madan says:

          Yes – i have quite a bit of experience in automation trades when i was trading US markets…automation is something that has to really catchup in India for retail traders like us. but, slippage is independent of manual or automation trades in my case as all my trades are entered well before the price reaches my entry point.

  13. t.raj ganesh says:

    dear sir. i am new to trader zone. i congrtulate for sucess trader. sir can brief with viewer slippage to override in this market…trg

  14. Ankur says:

    Sir can you please share your returns in % terms against your trading capital employed for trading per month. It will be great if you share your trading size like below 1 cr between 1~10 cr or above 10 cr

    • Madan says:

      Ankur,

      I keep all my money in the trading account. So, not sure, what you mean by ‘Trading capital employed’ ..please elaborate. This is what happened. Lets say, i have 50L in the account – in 2013, i have made 1.5Cr..the returns were pretty evenly distributed in all the months..this is just for illustration.

      Personally, i would not worry about the returns. i was just focused on executing my plan efficiently..returns just hpnd this way.

      I am not comfy revealing my account size in a public forum..Sorry about that(even if its a range)

  15. Balajee.R says:

    congrats Madan, Good to see you winning

  16. RTK says:

    Thanks for sharing these information so openly. It is next best to a direct learning class from you πŸ™‚
    I have astrology as a hobby and am curious to know about your horoscope chart. If you feel comfortable, I would need Date, time and place of birth. In return, I can answer any questions you have on it πŸ˜‰ though it is a good idea too if you don’t care about astrological indications.
    You could email me privately too at rtkaushik-at-hotmail-dot-com

  17. VENKATARAM says:

    Congrats Madan, Wil you please conduct one Training class on Trading stratergies for us:-)

  18. Upendra says:

    Great interview Madan. Thanks for your views..and how can I reach you.??

    • Madan says:

      Please post your questions in this forum and i would try to answer it. If Q&A is public, it might benefit a lot of us.

      • Dinesh says:

        Hi Madan,

        I would like to ask you about your experience from shifting from US markets to Indian markets. I understand you traded part time in US but how is the shift to Indian markets? Do you trade full time there and what is amount of money is best to start with in current situation? How smooth is the transition? Did you do any job in India or directly went into trading? What kind of financial plan you had when you started like that? I have lot of questions about the process. I do not want trading methods or tips just your experience as I am thinking of something of similar line of plan. Let me know if I can contact you in someway thanks. If you could write your experience or transition and process in here also. It would be great.

  19. rm says:

    Thanks for the interview Madan! It is a great help for those on the learning curve.

  20. DC0267 says:

    Congrats Madan
    you have any web site for other traders

  21. Sajeev says:

    Congrats Madan – great to see you doing well…. You have mentioned that you use pivots… What pivots do you use – calculated ones like Woodie’s or Swing high low pivots?

  22. Atul says:

    Congratulation Madan.
    Good to hear that it is possible to get consistent returns by trading. I am just curious, do you have another full time job or you are trading full time? In case you have another full time job, how do you manage the existing position or enter new position while working?

  23. Madan says:

    Atul,

    I trade for a living. No other source of income or job.

    Hope it helps.

  24. Thahir says:

    Very informative

  25. Manjith says:

    Congrats Madan

  26. mahendar says:

    very useful, Thank you, all the best

  27. Kumar says:

    Hi Madan Congrats for the accomplishment.

    I wanted to how you use the pivots. it would be great if you explain with an example.

    Thank you.

  28. Darshan kn says:

    This really inspires the aspiring traders, thanks and wish you all the best
    Darshan

  29. K V Manoharan says:

    Very useful to traders.
    Do you trade options? What is yr, view on OPTION SELLING trading?
    K V Manoharan

    • Madan says:

      I used to trade options before but completely stopped it as i was not able to place my option orders based on underlying instrument ..that’s one of my request with Zerodha (eg: like thinkorswim platform in USA).

      Long story short, i don’t deal with options and if you are talking about naked selling of options – i would rethink about it.

  30. Karuna says:

    r u a mechanical trader or discretionary?

    • Madan says:

      My rules are set and i guess it can be called as ‘mechanical’ .. but, i use discretion when India VIX goes above 20-22. I might take some profits out of table, etc..

  31. Alok says:

    Congrats Madan and Thanks to Zerodha for inside of few traders.

    Its is confirmed that different trader has different strategy to suit there personal behaviour and attitude. So its very dangerous to copy some one…instead one can choose any one trader method like Madan choose Mark etc.

  32. GERARD DSOUZA says:

    dear madan,

    thanks for the wonderful insights…. just wanted to ask you a question? what is your view on commodity trading?

    does the breakout strategy work and what is strike rate?

    Gerard

  33. Sukh says:

    What order type do you use for breakout orders that you are able to enter well before?

  34. Sukh says:

    You said you use 1.25-1.4lac for trading 1 lot nifty. If you trade 5 lots, do you keep about 6.5 lacs in your trading account?

    Margin utilized will be only about 1.25lacs so about 5.25 lacs will be idle. Is that for drawdowns that you calculated using historical backtesting?

  35. vikram says:

    Using 10 minute pivot may result in lot of losses in whipsaw market (especially using SAR for every pivot up/down). How do you tackle that?

  36. VIJU PAUL says:

    VIJU PAUL
    very very useful to traders
    congrats Madan…!!! Thanks for sharing your experience….!!!

  37. Ashis says:

    Congrats …..would like to ask you if you take counter trend trades like breakout failures ?..thanks in advance

  38. Madan says:

    Nope. I don’t take breakout failure trades.

  39. Mak_T says:

    Congrats Madan……
    Winning in a row 3 times goes great…. Its not simple winning, but making capital 300% and thats great.

    Just want to ask:
    1. For swing/positional trades, the TF of 10 minutes is ok? I mean more liquid TFs are 15 min or 60 min? Do you feel working with 60 min TF will delay entries/exits etc?

    2. How many points do you make? I mean what was the score for last few months?

    Regards,
    Mak_T

    • Madan says:

      1. TF is just somebody’s comfort. I don’t want to sound like a cliche but as you know Lower TF = more no. of trades & higher TFs = lesser trades. Whipsaws are independent of the TFs as it all depends on the SL right?..think about it.

      I know somebody might be thinking 1 min will give more whipsaws than daily TF..it looks like that as you have more no. of trades on 1 min than daily timeframe…but, we should see the %age of trades that are getting whipsawed and guess what, it would be the same between 1min and 1 day over a period of 3 yrs or more.

      2. Well, it depends on the market..as i said in the interview, i take what mkt gives..i had two consecutive -ve months in 2013 and i lost 4% and 5.2% respectively off my account size i had on January 1.

      I also don’t believe in aggressively increasing the position size when my acct size increases..as a matter of fact, i have increased lot size only once this calendar year..most of us think it is easy to increase lot size when the acct grows but its easier said than done. I have personally seen traders who perform well with small acct like 1L but cannot perform in the same intensity when their acct size is 1C…lot of psychological things are into play here.

      When the acct size is 1L, you can afford to lose the account and fund it again..there is no ‘fear of losing’. But, when the acct size is 1C, fear of losing is extremely high as its big amount….i can guarantee you today that most of us would not be able to scale up the way we want as we are all wired with the primitive insitinct of ‘fear of losing’ .. that does not mean that we can’t do it but it is just not easy as we think it is.

  40. Sajeev says:

    Hi Madan,

    Thanks for your earlier reply… I am also a pure Price Action Trader however trade using the daily charts and both Nifty and stocks… Based purely on anecdotal experience, in the last few months, I have been struggling since there are higher than usual false breakouts and breakdowns – bull and bear traps…. Earlier my success ratio used to vary between 45 – 65% but now it is down to about 25%… I was wondering if you are seeing the same thing on your shorter time frame charts…

    • Madan says:

      If your system has seen this before, there is nothing to worry about..you got have the stomach to withstand this drawdown (if there is one).

      To answer your question, i didnt see this in my system. December was challenging a bit but i am net positive (6%)

  41. Hello Madan, First of all congratulations to you. I feel much more confident knowing consistant results can made trading. I would like to make a career of trading too. I am free right now with no commitments and I wish to make the best use of this time.

    Note to Zerodha – I would also like to see an option where we can enter trades based on another security or index. Like Option Buy/Sell based on the price of Spot/Future Nifty. That would be a nice tool to have.

    Thanks to Zerodha for making an initiative to help traders by connecting them to already successful and helpful traders. You guys are doing a great job. And a suggestion – More questions in the interviews will surely help us.

    I have a few questions. I’ve been trading for about 3 years now and have not really made big money. And making up for losses with pocket money. So, it will help me immensely if you answered my questions. Thanks in advance.

    1) On average how far are your stops? – I trade MOSTLY intra-day and I mostly keep 10 point stops and sometimes 20 point stops.

    2) Do you vary position size with the level of confidence in the trade? – I vary them with the level of confidence in the trade and also according to how are my stops are (farther the stops, smaller the position)

    3) Do you have positions in the market all the time or are there long periods of time (4+ days) when you think its better to stay out? – I am very selective and try to trade only when there is action. I usually put on around 7-15 trades a month.

    4) I’m interested in this price action trading you spoke about. Is there an online resource or a book that helped you with it?

    5) You spoke about using the SL-L order. How many points away do you place your limit price? What has worked best for you?

    6) Is there one thing that you changed in your trading style or money management that helped you immensely? If so please share it with us.

    Thanks again. And sorry for the long list of questions.

    Regards,
    Arun, Erode, TN.

    • Madan says:

      Arun,

      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 be..it’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 that..no 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 high..you 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 πŸ™‚

      • Madan, Thanks for answering all the questions in detial. Its nice to know you are originally from Chennai :). The power situation

        is much better this year. Hopefully it remains this way going into the less windy months.

        I totally accept your view on being with the gap ups/downs 75% of the time, trading with the trend. I probably have to look at positional trading much more actively. I haven’t had much success position trading but I’ll give it a try albeit in a small way.

        And thankfully I have never tried to find the holy grial. I’ve always had the view that if price is what they are derived from, why not look entirely at price. I’ve had not many problems following plans. Its only the ideas I lack.

        And for the VIX part. I agree it reflects the current volatility but there are still times when VIX is very low and the market swings crazy at certain price level. But on a general level it sure works well. Anyways, it doesnt affect me, as far as entering positions go. I wish it concerned me :D. It probably is of a lot of importance to someone who trades larger sizes like you.

        Share with us some of your best “War stories” and also good ones you’ve heard from your friends. πŸ˜€

        Thanks again. And Happy New Year. πŸ™‚

        Regards,

        Arun, Erode, TN.

        • Madan says:

          Arun,

          It will take a hell lot of time to talk about War stories and other good stuff. We have a small meetup(a group of 4 traders) in BLR every month (its a closed group). If i start typing stories here, i would have to spend the next 2-3 hours typing.

          But, i am glad you got certain points in the right sense.

          Happy holidays and new year to you as well.

  42. Hi Madan, Many congrats

    I have a dilemma. All the PIVOT calculating AFL (that I have) reference future quotes and will give superlative profits in back-test. In other words you are trading from experience and gut and cannot back-test your system.

    AM I Correct.

    Now since Pivots are pivots only in the hindsight, you gotta have a second indicator or a price action strategy to decipher fake ones from the real ones. Am I on the right track or totally off it here!!!

    • Madan says:

      Manish,

      Thanks.

      Backtesting is a skill and when i backtested my idea in esignal, i go through each and every trade manually to see if there are gaps against me and discount those pts from my system. I use the simple swing pivot high/lows and it has suite me just fine.

      I don’t have second indicator..but i have certain visual patterns that have been working in the mkts for the last 10 years..Again, you are thinking there is some secret here..Believe it or not, there is none..secret is you, your psychology and your efficiency in managing your money. Ofcourse, all these factors are valid only if you have a +ve edge in the mkt. Any kind of psychology or money mgmt cannot save us from losing when we don’t have a statistically proven edge.

  43. Vincent says:

    Could you please post a chart with a few recent trades. It would go a long way in helping new traders like myself understand.

    Regards

  44. Pawan_Arora says:

    Some of the fellow members want to know Madan’s System, his charts his screenshots and his trades, They do not see the 5-6 year of efforts he had put into designing one system. They do not see that he paid 70,000 dollars as tution fee before he could make one successful system. He clearly told that he is facing 1-2 points of slippage at those entry points in one of the reply ,the more his system will be made public the more will be the slippage at those points then Why should he make his system public?

    But most of us do not want to burn those many hours of Hard work. All we want is ready made system which is proven and tested. And I am sure even if he gives his system most of them will NOT be successful, until and unless they make their own system depending upon their own style. Remember your last big Loss, Was if because of some Trading system or because of your own hesitation to cut the loss. It is evident that most of the big loss happens because of psychology and bad money management and not because of any trading system.

    People should take inspiration that Money can be made in trading and then put the required hard work to earn from markets. There is no free lunch in this world.

    • Vincent says:

      Dude, we all know that he has worked very hard to come to this level. Yes, we all pay tuition fee to the market. Maybe not $70K but in our own smaller accounts we have had loses. There is nothing wrong in wanting to learn from someone who excels in trading.

      As far as his system goes, he has already “revealed” his system in the interview. He said it was trading breakouts with visual pivots. All I said was it would go a long way in helping someone new like me to show it visually on a chart.

      What has that got to do anything with slippage? Slippage is a function of account size and market depth. It has nothing to do with showing or not showing a chart. Those are previous entries which were already done.

      • Madan says:

        Guys,

        Whenever i meet traders in small meetups here in Bangalore, i always make sure i don’t talk about any indicator, idea or strategy. I always talk about money management, psychology, war stories, emotions involved inside and outside trading. And i am not gonna change it here.

        You will not see a post from me depicting charts on what i do. And that is one reason i don’t have a blog or twitter page (posting calls).

        Pawan: Thanks for pitching in. I exactly know what you mean. I resonate your thoughts for other reasons.

        Vincent – Please don’t take this in wrong sense. You asked a sensible question and my answer is ‘ i am not gonna show any chart or anything of that sort. Not that its a secret, it just saves me some time on explaining it .”

        There are very few people who ask questions outside of idea/strategy/indicators/parameters and nothing wrong about it..I was like that..but, a trader would eventually come out of it and understand(hopefully) that this ‘game’ is much beyond those mathematical models/indicators.

        Hope it helps.

    • Ram Charan says:

      @Pawan, u said that Madan is not disclosing his strategy because he will face more slippage. Then why do u give calls? Because more number of people will buy at the point u buy, so u’ll also be facing more slippage, no?

  45. Mak_T says:

    Hi Madan,
    Few questions more…. Plz answer whenever free…

    1. Do you trade options intraday in the direction of swing?
    2. If yes, its ATM/ITM/OTM?
    3. For placing trades in BNF, what is slippage for a small trader with 1-2 lots?
    4. Just want to expand horizons, How big ppl trade? I mean for NF & BNF how big traders have you seen / heard of? (I am not asking your lot size etc here….)

    Regards,

    • Madan says:

      1. I don’t trade options at all.
      2. So, this Q. is irrelevant.
      3. 1-2 pts max..most of the times, you wont see slippage. It depends on the market condition right?
      4. I have seen 250 lots in nifty. Beyond that, impacts cost becomes really high and the edge gets eaten by impact costs.

      And i am not a ‘big’ trader. Once i start trading, 250 lots in NF, i will let you know myself on the impact costs πŸ™‚

  46. Ashish says:

    Madan, congrats for your stupendous success.

    I am retail trader with a capital of 2 lakhs. I would like to know if you provide any advisory services to clients by charging a fee? Kindly request you to give calls and help small traders make money…

    Thanks

  47. Madan says:

    Ashish,

    Honestly speaking, i was expecting this question from someone much earlier πŸ™‚

    1. I don’t believe in advisory services as you are not gonna learn anything from the person giving calls – you are just following his calls without knowing what’s going on behind it. How much ever i convince you that you will learn something out of it, its a lie. You will never learn anything from following a person’s call.

    2. So, if you are gonna be in this profession for the long haul, please do yourself a favor. Stop following somebody’s call, rather put the work in. To sustain long term – Get ready to lose some money, be ready to spend atleast 3 years of learning and have a understanding spouse(if you are married).

    But if you are into this igame for the short term (just to make some quick bucks), please follow someone’s call but you are committing a big mistake(in my opinion)

    3. I just feel its not ethical to make people follow me for two reasons:

    a) i know my system drawdown and my psychology is attuned with it. But, most of the times, the subscribers quit when there is a series of losing trades. They just don’t know that ‘streaks’ (both winning and losing) are part of this game and they cannot withstand drawdowns.

    b) Most of the times, if not all, the subscribers quit the subscription at the wrong time(usually after a losing streak). There is no way to avoid this. I cannot sleep well when i know that people following me(atleast 95%) would lose money because they will quit in the middle. And the worst part is if i am an experienced trader, i know this fact even before starting the subscription services.

    4. If my system/idea is so good, why would i want to make the few extra thousands(or lacs) per month by giving a subscription service? All i need to do is relentlessly execute my setup and i will make money (maybe a delay of couple of years depending on my acct size)

    5. Subscription service will negatively affect my psychology. I would feel pressurized to keep on winning and the regular crowd will never understand that losing streak are normal(sometimes 10 in a row) and they will keep questioning me whenever there is a losing streak. This will erode my emotional wealth and i am not really dumb to pledge my emotional wealth for few thousands/ month. I might come out strong here but if somebody who is looking to follow people get my message, my post is worth it.

    Please understand that i am not hitting on subscription services. All i am saying is that i cannot do it for the above mentioned reasons. If other people are doing it, thats their choice.

    Hope it helps.

    • Vijay says:

      Hi Madan,

      Congrats on your success.

      By far, this is your best post in this blog. It succinctly talks about the ill-effects of following a subscription service. You have literally nailed it. I see that your posts are coming out of experience.

      Thanks so much for taking your time out and answering questions.

      Keep up the good work.

    • Ashish says:

      Madan,

      Thanks for your response. With all respect to your viewpoints, would like to post my views reg. advisory services.

      1) You are true, one is not going to learn much from following advices. But for an individual with 10hr job and other responsibilities at hand, i feel it is difficult to learn the tech analysis from scratch, build a strategy, back test, execute, rectify etc. Easiest way is to follow experts like you who have spent enough time in building a strategy.

      2) Thanks, will give a thought.

      3) True, all the subscribers need to know the risks associated by following a strategy. If in long term, a strategy is going to make money, subscribers should be upfront told that a minimum time frame of 6 or 9 months needs to be kept. So that subscribers who are looking for short term gains are weeded out. As you said you learned through experience, I hope even subscribers would learn with experience.

      4) Agreed, for successful traders like you, making money from advisory services is equivalent to peanuts:)….But i feel real satisfaction comes from the gratitude, thankfulness and wishes from your subscribers and the feeling that you are helping many people make money for their livelihood…it is a ‘win-win’ situation and has a moral dimension to it..

      5) Agreed, it effects ones psychology. But if subscribers are upfront told about the risks, i think it can be handled.

      Ultimately, it is one own decision to provide advisory services and from your post it seems you are not for it.

      Thanks and wish u the best and keep winning!!!!

      • Madan says:

        Ashish,

        Its upto the individual on following an advisory service. As i said, if a person’s goal is not to become a successful trader, advisory service is good for him.

        I could not resist laughing at the 4th point and i completely disagree with the moral dimension you are bringing. Well, at the end of day, it’s your choice. I am not gonna bring up a discussion on this topic because it is not my cup of tea.

        Actually, i need to thank Zerodha for letting me reach out to strangers and answering their questions. When i started out in trading, i had nobody to answer q’s i had abt psychology, money mgmt. As a matter of fact, one of my relatives is a full-time trader for more than a decade now and till this date, i don’t know what he trades or i don’t even know his broker πŸ™‚ Remember, he is such a nice guy and we have working relationship. Most of them don’t bother sharing or helping people.

        I love sharing with people and advisory service is not one of them as the monetary part of it skews things pretty badly.

  48. Surya says:

    Hi Madan,
    After you started trading, how many years did it take you to become consistently profitable? You said 45% of your trades are winners, what is the ratio of winning trade size VS loosing trade size?
    Thanks

  49. Kathiravan says:

    As a Trader I would attribute Madan’s success to patience and never give up attitude; Also the impact of Mark douglas on his trading style. I would urge all the traders to look at this video

    http://www.youtube.com/watch?v=GhKJ9P3agRc

    Mark douglas is phenomenol

  50. santhosh.n says:

    yas it is trading

  51. Ambarish says:

    Congrats Madan. Excellent pointers and thanks for sharing this with us!

  52. mohmed says:

    adan.
    i was looking for swing high/low pivots (as you told you use that for your trading)on nest provided by zerodha. but i could not find the pivots option anywhere.can you please tell where it is ?

  53. Madan says:

    Mohmed,

    I draw the lines manually in my charting platform.

    I use eSignal for charting and i am afraid that i don’t know how nest trader works. By the way, i still use NOW not Nest for execution.

    Hope it helps

  54. suresh babu says:

    hello sir, I trading morethan 1 year not earning money, loosing everytime any idea to win intraday trading. I am very much interested in trading my stratergy can’t working. I bought tips from calloption putoption, niftytech which are working profitabily I like option trading. How I can win in this intraday trading in option

    • Madan says:

      I wish i could help you. But, i do know that trading is not for everyone. You need to intorspect yourslef on what’s happening.

      You said you trade for 1 year. Do you have a Trading journal? If yes, what does it say? If no, why you did not journal your trades?

      • Harsha says:

        Hi, congrats!!

        I’m trading from more than 4 years and I am not in profits till date. I’m really confused how to do a trade, for any kind we need one reason to buy or sell, well all my reasons are going against me.
        How I have to work to drive in a right path ?
        Thanks.

  55. PRATEEK says:

    Hello Mr. Madanji
    Sir i lost most of the money in market because of subscription , i totally agree with you and have started trading myself
    sir i want to ask you how important is volume for you and secondly do u trade on expiry date or day before ,
    sir pls reply
    Thanks

    • Madan says:

      Prateek,

      This is the first step towards getting into the ‘successful’ trader path (i.e. quitting subscription and trading with your own idea). But there is no guarantee that you will still win. Can i guarantee that i would be profitable this year? I cannot but i can really work towards it. So, start working towards it.

      I don’t worry about volume that much. I don’t open a new position on expiry. I just manage the existing positions, if any.

  56. Hello sir i am working as prop trader in capstone securities analysis i am trading in us market i read u traded in us market,sir are you still trading in us market or left?if you are trading please can i get your contact no

  57. VVS Prabhakar says:

    Hello Madan,

    Congrats. Hope your performance inspires others to improve.

    Can you please share specifically in which months you lost money trading during the last couple of years? Also, please specify whether it is calendar month or expiry to expiry.

    Thanks,
    Prabhakar.

    • Madan says:

      Prabhakar,

      Is there a specific reason on why you want to know this info? Would really appreciate if you could answer me the logic behind this question. I don’t get it.

      By the way, i have mentioned the answer somewhere in this same blog (in the comments section). I had only 2 negative months (calendar month) and it is 4% in Jun 2013 and 5.2% in July 2013 respectively off my account size i had on January 1.

  58. VVS Prabhakar says:

    Madan,

    Thanks for the reply.

    I am testing a break-out strategy in live market with small quantity and would want to scale-up soon. Wanted to check the performance of the strategy in those months which your system gave loss.

    Thanks,
    Prabhakar.

  59. Alex Dsoza says:

    @Madan………Do you belive day trading is gamble? I prefer Positional highest lot was NIFTY 160 lots……what about you…….Do you averege you losing position?

    • Madan says:

      Alex,

      1. No, i don’t think daytrading is gambling. I personally know few people who successfully daytrade but eventually, they have moved into some kind of Trading education business..not sure why. So, thats why i mentioned its very difficult to see a profitable daytrader over the long run..other successful traders always have some kind of carry overs either as options strategies or plain vanilla options or just regular futures carry over.

      2. I don’t average my losing position…NEVER EVER. When my SL is hit, rest assured, i am out. My cardinal rule.

  60. Karuna says:

    do u do multiple time frame analysis or all ur decisions are based upon just one timeframe?

  61. Mak_T says:

    Hi Madan,

    What is the good time frame for Swing Trading NF? I am asking this becos many times last half an hour action is important for next day’s opening and TF like 60 min can’t catch that. Any inputs on this?

    Regards,
    Mak_T

    • Madan says:

      You could try 30 min TF. But, we can never come to a conclusion on timeframes as you will always miss some trades in whatever timeframe we use. The faster we come out of all these small parameters, the better it is for a trader.

      Hope it helps.

  62. Pravin says:

    Congratulations Madan on achieving such a great success.. way to go…..
    In one of the answer you mentioned on visualizing technique, could you please elaborate more on that? Is it similar to meditation?

    • Madan says:

      Pravin,

      Its a big topic by itself. Its basically training your mind to practice various ways of handling emotions while trading. It was very effective to me.

      If i were you, i would start by reading the book called ‘PsychoCybernetics’.. its a pretty old edition but very relevant even today.

      After reading the book, you would be able to connect the concept behind that book and trading. Please feel free to post your questions after reading the book.

  63. Sajeev says:

    Madan,

    To an earlier question you had said that you don’t enter fresh positions on expiry but just manage positions. What if your systems gives you a signal on the day prior to a big event – like RBI policy or FED meet, do you take the signal and if you do take the signal then for such high volatility days do you have a deeper stop loss than usual.

    Thanks,

    Sajeev

    • Madan says:

      Sajeev,

      I don’t follow news at all. There have been instances where the mkt moves like 2% in BNF and later i figure out that it was RBI announcement day. So, both my backtested and real trades did not take all these events into account.

      Nowadays, i just keep track of them as i would get very nimble around 11 AM (usual RBI announcement time) in executing trades (if i had to close out or create a new position). FED announcements – no change in the plan as it happens overnight anyways.

  64. SMrajan says:

    Hi Madan,

    Are you active in any trading forums like traderji or TSF? If yes please let us know your id there so we can follow your posts over there.

    • Madan says:

      I post once a month (avg) in Traderji and i would not call myself active. And, i would like to remain anonymous in Traderji but there is this user named ‘Smart_Trade’ (he is also a moderator) who might know me as i have interacted with him couple of times via PMs πŸ™‚

  65. Pravin says:

    Thanks Madan for quick reply.. I have already started reading book by John Carter, the PsychoCybernetics will be next on watchlist πŸ™‚ I will come back to you in case of any questions. Thanks again.. take care..

  66. PRATEEK says:

    Hello ,
    Madan ji ,
    I have a technical querry , i would be happy if u solve it ,even my broker was unable to answer it properly ,

    Que. – Why there is a difference in the Total Buy Quantity and Total Sell Quantity in future contracts , for eg. total buy qty in nifty today was 11.71 lac where as total sell qty was 6.55 lac, how is this possible , as far as i know for every buyer there has to be a seller in a contract , so how can the buy and sell quantity differ .

    Thanks.

    • Vincent says:

      TBQ is the number of shares waiting to be bought, and TSQ is number of shares waiting to be sold at respective prices mentioned in their limit order. and TTQ(Total traded Quantity ) is the number of shares which exchanged hands.

  67. Karuna says:

    do u scale-in into an existing position or ur 1st entry is ur final entry? similarly, do u scale-out at different areas/targets or ur final target is ur only target? thanks

    • Madan says:

      Karuna,

      I don’t scale in or scale out of my positions as they have to backtested as separate strategies. I used to do All-in/scale out when i was trading US markets but later relaised that every exit tgt has to be tested as a separate system.

  68. vikas says:

    Hello Madanji,
    how many nifty points given by your system in 2013?
    Thanks.

  69. Ramesh says:

    Hi Madan,

    Congrats. Thanks for answering all our silly questions.

    Do you do any kind of fundamental analysis or you do only technicals? What is your take on fundamental analysis?

    • Madan says:

      Ramesh,

      Thanks. I don’t do any kind of fundamental analysis for my trades. As i am a short term trader, FA is not even relevant to me. I don’t do technical analysis either. I follow only price.

      There is always a debate on which is best – FA or TA.

      Some people believe it’s a game of fundamentals. They’ll study the company reports, PE ratios, dividend yields, or wider economic factors such as the retail sales or crop reports. They aim to find a stock or commodity which is valued differently from what they believe is its true fundamental value. They’ll then enter expecting the fundamental factors to push price to their perceived ‘correct’ value.

      Others believe it’s a game of technicals. They’ll use indicators, which are simply a derivative of price, in an attempt to predict future price movement. As price moves in a particular direction the indicators will follow, eventually triggering our novice trader into the market. There is rarely any thought as to what caused the initial price movement, or whether or not the context of the current market supports continued price movement.

      In my opinion, neither is correct. Trading is not a game of fundamental or technical analysis. Trading is a game of understanding people and how they make decisions.

      True, your competitor is not one individual. Rather, you trade against the collective market which is made up of millions of other traders and investors all making individual buy and sell decisions.

      Price moves in response to the net order flow that results from all these individual buy and sell decisions. If the net order flow is bullish, price will rise. If the net order flow is bearish, price will fall. It’s as simple as that. The fundamentals don’t move price and in the same sense, technicals don’t move price. Order flow moves price.

      Hope it helps.

      • Manish says:

        Fundamentals are important when you are managing million/billion dollars portfolio. Technical can be used. Both FA and TA works in trading. Real question is when we use it.

  70. Ram says:

    Congratulations Mr. Madan,
    I would like to read the book “Mastering the trade by John Carter” wil you please kindly give the reply that do we get this book.

    Thank you. Happy Trading,

  71. Jack says:

    Sir, what has your average returns been per month (in percent) since you became profitable on?

    • Madan says:

      Jack,

      Last year was 300/12, isn’t it? Infact, i made lot of psychological errors on the way that it negatively affected my returns my a huge percentage. This year, one of my primary goals is to execute my trades with 100% efficiency. Market slippages are not in my control but pulling triggers (or not taking profits early) whenever i see my setup, are completely under my control.

      When i turned the corner for me, i was able to consistently make money. BTW, i am consistently profitable (quarter to quarter) for the last 3 yrs.

      Hope it helps.

      • Jack says:

        Thanks for the reply sir. Yes, it is in the interview that the last year it was 300% but maybe it was very good year for you. Just wanted to know the average over the past 3 years.

        In any case Sir, wish you great success and hope you become the next Jhunjhunwala!

        • Madan says:

          Jack,

          Personally, i don’t like talking about percentages. Honestly, i am not very comfortable with this %age conversations but Nithin wanted to mention the %age returns in the blog.

          You mentioned Mr.Jhunjunwala – he’s a living legend. We are all so small infront of him. But, in this profession, everyone has opportunity to make decent money. Problem is scaling up.

  72. Lalith says:

    Hearty Congratulations Madanji. Great to see a consistent trader. I was skeptical about people winning only for a quarter but you are doing great.

    Zerodha – please write blogs on people who have won for a long time not just traders with exorbitant returns on 1 quarter or so. We can learn a lot from people like Madan.

    Madanji – How difficult it is to be consistent in trading? I have a full-time job right now and i trade commodities in the evening. I would eventually want to quit my job but not sure how to go about it. Can you please let me know about the pre-reqs that are to be satisfied inorder to go full time in this profession?

    Happy new year πŸ™‚

  73. Madan says:

    Lalith,

    Thanks for your kind words.

    Its great to see a right question from a person who is looking to go full-time in trading.

    I would make sure the following are set –

    1. Calculate your monthly household expenses (i maintain a diary of my daily expenses and i have been doing that for the past 4.5 years since i moved back to India)

    2. Have atleast 2 yrs of backup money – equivalent to your 2 yrs of household expenses. This is extremely important for the first few years as you cannot trade to make money(to buy onions and tomatoes). Initially, your goal is to trade right and not trading for making money. This may sound counter-intuitive but this is very, very important. I can’t stress this enough.

    3. Another important thing is that you should be profitable(maybe not by a great margin) for atleast an year before you quit your job. If you are not profitable part-time, it is going to be very difficult to be profitable doing it full-time (due to the pressure involved in ‘making’ money)

    4. This may come as a bummer but have atleast 10L in your trading account when you plan to go full-time. If you don’t have 10L, work until you have it.

    5. Once you start making money full-time, increase your lots slowly (def. not in proportion to your acct increase)

    6. Get healthy big time. Working out atleast 4 times a week is important. Healthy body = healthy mind.

    Good luck to your future endeavors.

    • Kathiravan says:

      great advice madan> thanks

    • chaitanya says:

      Hello, Madanji

      Congrats for your great success, I am also a full time trader and I am doing Intraday from last 3 years and still struggling for consistently profit. my main problem is I am unable to stick to one trading systems,

  74. Paramesh says:

    Hello Madan,

    Congratulations on your success. Your answers in the comment section are extremely informative and valuable. In my humble opinion, it is actually better than the blog itself. Thanks a lot.

    Your candid answers to the q’s posted in the comments section clearly indicates that you are walking the talk. Please continue answering questions and i hope more people share your interview in their facebook and twitter sites so that a large crowd of traders can benefit out of it.

    For the good of a larger community, you should start writing a blog or better yet, Zerodha should drill you with more questions and post it as your second part πŸ™‚

    @Zerodha – What a wonderful interview. Your best interview so far by a huge margin.
    This piece is a real gem and the comments section is a reservoir of knowledge and wisdom. Kindly do more interviews like Madan and no disrespect to others but this guy is amazing. Real knowledge is scarce in this profession and most of the people out there are just paper traders.

    As i live in Bangalore, i have a request to make with Zerodha. If possible, kindly arrange a traders meeting with Madan in Bangalore. That would be the best new year gift to us.

    Thanks once again,
    Paramesh, Bangalore

  75. vicky says:

    Hi Madan,

    First of all, thanks a lot for your candid replies in this blog. I have three question.

    a) How much is you trading based on mechanical approach (based on 10 minute swing pivot, support/resistance) and how much is based on your experience (of seeing particular setup/pattern earlier)? To be consistent, is it your experience playing out or your set of trading rules? For example, in my case, if I try to enter short based on my system, but if I see asia market closing strong and the US market futures in the green, I do not take short. Similarly, if the market is in 30-40 points whipsawing, I ignore the signals and move to the higher level pivot.

    b) Also, how much time are you in the market? Does it happen that you are waiting for 2-3 trading days or more for your proper entry?

    c) Since you deal in NF as well as in BNF, which one do you find better? Did you start with both the markets from the beginning or added NF or BNF later?

    Thanks

    • Madan says:

      Vicky,

      1. 95% is mechanical with 5% discretional. As i said somewhere earlier, i am trying to figure out if i can make it 100% mechanical. But, my discretion usually makes money. So, i do not want to disturb the whole process now. On a side note, i don’t worry about any other market. So, no watching of US market or losing sleep over it when US mkts move against my position. πŸ™‚

      2. There are days where i go without a trade. Sometimes, its 2-3 days as you said. Best part is i don’t stare the screen all 6:15 hours of the market. I probably look at the screen not more than an hour a day. I have alarms set up at important price points and hence, no need to watch the screen continuously.

      3. I started trading BNF only from last September (2013). So, it was only NF until that point. I got interested in BNF because of recent USDINR volatility.

      Hope it helps

      • vicky says:

        HI Madan,

        You mentioned that you put alarms at important price points. What are these price points? What rules do you use to differentiate between important and unimportant price points.

        thanks

  76. Prakash Kamath says:

    Hi Madan,
    Congratulations on your success and best wishes for the future.
    Every reply of yours clearly shows the level of understanding of the various concepts and the kind of hardwork(mkt hours) you have put in.

    Thanks for all the valuable inputs.
    Speaking of myself, i have been in the market for sometime and have paid some good amount of tution fee πŸ™‚
    Over the last year read good number of books searching for the holy grail of trading, only to discover there was none. Finally managed to comeup with a system which I find my self comfortable with.
    The study of markets has in a way been a study of self.

    Thanks to Zerodha for helping us connect with wonderful people like you, who are so humble after all the success.

    Regards,
    pK

    • Madan says:

      Prakash,

      Thanks… “the study of markets has in a way been a study of self” – i completely concur with this statement. Glad that you understood it.

      Good luck for your trading.

  77. mangoman says:

    HI Madan,

    You said you have set up alarms at price points…how do you do that?

    • Madan says:

      Mangoman,

      Funny handle name.

      Alarms can be set in the charting platform – eSignal.

      Hope it helps.

      • Jack says:

        Zerodha, can you please introduce price alerts in SMS when a certain level in Nifty gets broken. Like SMS when Nifty > 6320 or something like that.

        It will be good to get Alerts via SMS as we dont have to monitor price every minute that way.

        I dont mind paying for such service.

  78. mangoman says:

    Madan,

    So this e-signal will send sms to my mobile? Is this e-signal free from Zerodha?

    • Madan says:

      Mangoman,

      eSignal is US-based company and offers India NSE and MCX data for a fee. So, i am not sure if you get SMS alert to an Indian mobile number. I have never tried it.

      I am sure Zerodha’s new platform would have this kind of feature. I will let Nithin talk about this πŸ™‚

      • Ilyas Shaikh says:

        Hi Madan,

        I have a quick question for you….if possible could you please help me to get e-signal site where I can contact them for Indian Market. I would like to get MCX data in continous contract format for Multicharts platform.

        It is just too difficult to get MCX data (Continous contract) for MultiCharts.

        Hope you can assist me on this..

  79. stock says:

    Dear Madanji,

    When i read your interview i didnt feel that much about your knowledge.But when i read all your answers from here then i realized your success not comes easy !!!!! Lot of dedication and hard work you done for that…..Congratulation sir ……
    sir, if you are comfortable pls share your software setup….It will help us lot……..you have mentioned about e signal……Is it available in India? how much it cost ?I appreciate your response

    • Madan says:

      Stock,

      Please check esignal.com for futher details. I trade only NF and BNF – so i need only NSE data. I pay around USD200/month as i believe quality data is important and a decent charting would not be bad either.

      If you are a budding/small trader, it does not make sense to goto eSignal charting by paying close to 12K INR/month…not at all.

      By the way, Zerodha is coming up with their own software (not NEST trader) in few months. If what Nithin told me is gonna materialise, then we are in for a sweet surprise πŸ™‚

      Lets hope for the best.

  80. Varesh says:

    Hi Madan,

    From your answers it looks like you only trade NF and BNF or do you trade any stocks too ? If so how you pick particular stock for a day to trade ? Do you use any screener for this ?

  81. vinay9995 says:

    Hello madan,
    first of all congrats on your success. Traders like you are truly inspirational to all newbies. Reading stories like these will make us believe that we too can be successful in markets provided we put in the necessary hard work and learn from mistakes.

    coming to my case i’m a newbie means completely new to the markets.i’m 22 years old and grabbed my first job and got a trading account. I want you to tell me how should i approach my learning process. please suggest me a few books (for newbies) through which i can learn how to trade and setting up my mind set for trading. and do i have to join a technical analysis course to learn the basics of tech analysis…? I just know want is nifty and options and futures. i know hat is what.. but could not gather courage to trade as i dont have any basis for my decisions.
    I would appreciate it if any one helps me in this regard.

    thank you

    • vinay9995 says:

      I just dont know where to begin intraday or futures or options or commodity futures.. my capital is 20k. and i wont have any regrets in paying that sum as my 1st installment of my tuition fee..:)

  82. Madan says:

    Vinay,

    First of all, welcome to the markets. You are one decade younger to me and i wish there was someone who told me about markets when i was your age πŸ™‚

    1. With 20k, you don’t even have enough margin to buy a Nifty lot and keep it overnight. So, please increase your capital base to atleast 1Lac. Lets assume it takes around 12 months to do that.

    2. While you are building up that capital, read couple of books like ‘Trading for a living’ , ‘Trading in the Zone’, ‘Psychocybernetics’ and few more. Start implementing the ideas discussed in psychocybernetics – basically visualizing as if you trade properly with fine details (some form of meditation, you could call)…This is not some crap i am making out of thin air..this is being practiced by almost all the achievers in every field..esp. in sports..Trading is also a performance related activity like sports.

    3. Promise to yourself that you won’t put up a trade until your capital reaches 1L…not when it is 90K…Biggest bane for newbie traders is the ‘urge to trade’. If you can have the trading capital of 75k-80k and still not trade but just patiently read books, understand things and watch the market – i think you won half the battle.

    4. I know the next 12 months would be agonizing to just patiently watch the market and do nothing else…basically, you are developing an important virtue called ‘patience’ and you are learning how not to trade at your every whim and desire (very important)

    5. Don’t waste your money on tech analysis courses. You can learn much more than that from books.

    6. Once you reach 1L or 12 months (whichever comes first), it time to think about what to trade..if you are sitting on hands for the past 1 year, you probably would have identified the instrument you want to trade. For convenience purpose, lets assume its Nifty futures. I am assuming Nifty futures as most of the newbies automatically lean towards buying NF options for obvious reasons.

    7. Based on our assumption of trading NF, start with only 1 lot. By that time, you would also have identified a system/idea/strategy (backtested) to trade NF and start implementing the idea. Here, you would start feeling emotions like fear of losing, greed, euphoria and so forth.

    8. There is absolutely no way to handle the above mentioned emotions without experiencing it and market would take away your money while teaching you about these emotions. No choice.

    9. Assume that you lose your 1L and if you still want to trade the mkts (most of them wanna come back to mkts to recoup the losses but the right reason is the ‘passion’ one has for the mkts), then rebuild the same 1L capital and come to the mkts. There is a thin line b’ween ‘addicition’ and ‘passion’ and it won’t make sense to you now.

    10. This new 1L may last for a while. It depends on whether you are learning from your first account blow-up. If you have not learned anything from the first blow-up, mkt will again take all your money. But if you are learning from the mistakes and vow to yourself that you will never repeat the same mistake, you are much better off than previous phase and the learning starts.

    11. Eventually, you will attain a point where the losing would be minimal but you would still not win much..but, keep at it and you will be probably on the way to making money in the mkts.,

    12. Assumption 1: I have assumed that you trade the second account because you have ‘passion’ for the mkts and not trading to recoup the losses.

    13. Assumption 2: I have assumed that you put in the work to identify your personality (some ppl like short term trades, some ppl are swing and some are long term) and also have identified an idea (lot of work involved here too).

    14. Assumption 3: I have assumed that after1 year, you would have stopped looking for a better idea (ppl call it ‘search for the holy grail’). But, if you are still looking for that idea which rakes in money every trade, you are still stuck in that vicious cycle.

    15. Assumption 4: I am assuming that you would have learned how to manage your risk in every trade (money mgmt)

    Contrary to the popular belief of newbies, trading is not that easy. Millions of people all over the world come into markets to make their next million in a short period of time and they also vanish in no time. So, if what i have said is not correlating with your belief on trading so far, you are not alone. So, atleast for your sake, get ready to put the work in and you would be rewarded with fruits (no timeframe can be predicted here)

    I wish you good luck and hope that you could persevere the next few years !!

    • vinay9995 says:

      Thank you Mr. madan for such a detailed reply.. I just ordered those books on flipkart and sent my trading capital to my dad’s account..i will follow these steps and hopefully will find my holy grail of market in the near future… thank you so much…

      • Madan says:

        Vinay,

        Good that you ordered the books πŸ™‚

        If you are looking for the holy grail, let me break the bubble for you. You won’t find it. But, you will find a method/idea that you are comfortable with.

        Good luck !!

    • Kathiravan says:

      mind blowing answer!!! what i like about madan’s answer is he emphasizes trading discipline again and again

    • sandeep says:

      very valuable information sir,

  83. pappa says:

    What is your answer to those people who think ‘Trading is NASHA’ (Addiction)?
    Does trader contribute in any way to economical progress?

  84. Madan says:

    Pappa,

    1. ‘Trading is addiction’ – depends on how you see it. It is a profession like any other but the lure of easy money is bringing people into it. Tell me a profession where anybody with some money can come and be a player. This low barrier coupled with ‘easy money brings the ‘addicition’ dimension into it.

    2. Trader is not contributing a lot to the economical progress but he does contribute a little indirectly.

    a) Traders absorb the risk of hedgers(eg: farmers, jewelers and other stakeholders of various raw material businesses) by giving market for hedgers to come and reduce their risk. Without traders, hedgers will not be able to transfer risk and hence, could be detrimental to the overall economy (lets say, there is a sudden fall in corn price..if a corn farmer has not hedged his position in the futures market, he is doomed to fail)

    b) Traders give liquidity to the capital markets where investors want to invest in companies (this applies only to cash market most of the times)..If there are no traders, then investors cannot invest in a company and inturn, without investors, a company cannot expand and which will inturn, affect the overall economy.

    I can only think of the above two pointers and this is my opinion.

  85. Paramesh says:

    Madan,

    Excellent write-up again. You possess a great gift of explaining and writing things. I can’t thank Zerodha enough for this.

    Are you considering to write a book in trading? That would be extremely useful for many.

    Keep going.
    Paramesh, Bangalore

  86. pankaj says:

    Madanji, please tell us, what is drawdawn % of your system, and min and max dd %?

    • Madan says:

      Pankaj,

      Min drawdown = 0 (don’t u think so? πŸ™‚ )

      Max drawdown = 35% (in backtesting)..in real trades, it is 30% so far.

      Avg drawdown = 15%

  87. Karuna says:

    i am a new trader. i have not read any psychology books ever. can u in a line or two(or even more) help me understand in what way psychology books help. thanks πŸ™‚

    • Madan says:

      Karuna,

      Anything we hear or read for the first time ever in life creates a new wire in the brain. Most of the traders don’t understand how psychology plays an important role in trading. When we read a book on trading psychology, we get lot of ‘aha’ moments where we think why did i ever not think this way on trading? A new wire is formed which will help you to see trading in a different perspective.

      I always needed books to create a new wire in my brain. you might be different. People are different. I still read 1 hour every day on trading or biographies or some similar books..i really love Behavioral psychology books nowadays and i love to draw similarities between the books i read and trading.

      As a matter of fact, i have blown my account twice which equals to 70K USD but i guess Mark douglas book created that new wire in me about psychology.

      Hope it helps.

  88. sameer says:

    sameer,
    congratulation to you madan for your success.i want to know how many points you have gottten today, last week and in the december series in nifty future. please share it.

    • Madan says:

      Sameer,

      I hate to repeat myself but i have told sometime before that i don’t like to discuss points made, account size and returns.

      Sorry about it.

  89. Saeed says:

    Hi Madan, Congratulations and wish you continued success.

    I have a question related to drawdowns. You retain 60-70% cash to support for drawdowns! I am still trying to catch up on this concept to support for draw downs. So in this case, would you let your trade sink into 60% of your drawdown? How exactly do you use this?

    Also, can I join your meetup group as a participant. It will hep to learn from your experiences.

    Thanks,
    Saeed

  90. Madan says:

    Saeed,

    I would be doing cross-margining and would keep my 60% in Liquidbees (to earn 6% after tax). 60-70% is the cash remaining in the account after taking care of the margin. It is not to support drawdowns.

    It is just that i would like to keep my trading account money different from other things. Recently, i came to know that cross-margining can be availed through ETFs and i will convert the cash into Liquidbees pretty soon.

    By the way, we don’t include new guys in our meetup. Its more like casual meeting of few friends. We know each other for a while now. Hope you understand.

  91. Mak_T says:

    Hi Madan,
    Really a great going with trading & educating as well…..

    Most of the Q’s are answered still a few ones….

    1. You dont use FA (thats clear) but when you say no TA and no news thats confusing. I am not able to reconcile 10 min TF and pivots based approach without TA. Then do you trade order flow?

    2. Dont you feel its good for Newbies to start with some indicator than purely Price Action? So a system with indicator will be little better than Pure PA esp. for beginners?

    3. Please suggest some good strategy for a newbie like me. This is only to paper trade or just with 1 lot trial trades. It will go a long way as we begin to study various books listed above.

    4. I went thru “Smart_trade” at TJ. Great Person. But he too has some indicator based strategies such as SWIFT & Momentum. Of course he is very good trader and himself must be trading pure PA. So going purely without indicator will be tough. Suggest some good Short Term strategy for Intraday & positional. I mean what’s second best to Pure PA for newbie.

    Regards,
    Mak_T

  92. Madan says:

    Mak_T,

    1. I don’t use order flow. If you cannot be without indicators, thats fine. You will have to figure out something you are comfortable with.

    2. Indicators will give you the feeling that you are ‘in-tune’ with the market. I never put down TA or FA. its just we tend to believe that Indicators or PE ratio(maybe useful for long term..i don’t know about that) is the key to successful speculation. But, in my opinion, price precedes everything. If you are comfy with Indicators, pick 1 or max 2 and see how you can build a system with it.

    Timeframe is dependent on how frequently you want to trade.

    3. I am sorry that i cannot suggest you any. I know few traders who see the moon waning and waxing periods to trade, some use the relative position of Jupiter-saturn-mars (basically astrology) to initiate/close a trade,and in CME pits, some people always wear only green shirt and they refrain from using toilets before the mkt opens (i am not making this up..this is true).

    People have various ways of trading the markets and i cannot say which is right or wrong. There is nothing right or wrong. If one is comfortable with what they are doing to trade the markets, that’s all matters – being comfortable.

    4. Again, you are asking me to give you a fish but i am saying that i have seen various fishes and i eventually figured out one kind of fish that is good to me and my stomach. Trading is not about accomplishing things but it is about the journey we encounter. Please go and lookout what is comfortable for you.

    To say the least, its really putting me in an awkward position when somebody asks me to suggest an idea. Ideas are everywhere(most of the books has something to offer) but what is comfortable for us can be known only through one way – by trying them in real market conditions .. maybe on paper.

    Not sure if it helps you but i just poured my heart out πŸ™‚

    • Mak_T says:

      Thanks Madan. I fully appreciate all your inputs.

      Regards,
      Mak_T

    • Anand Kumar Rai says:

      I just reading your replies for couple of hour and come to know how good human being you are.
      So humble and proper reply. So much good things in those replies if really want to succeed in market. God bless you and remain same forever.
      Good luck.

  93. vinay9995 says:

    Dear madan,

    Are you maintaining any blog..? Not for trading calls or something but to give inputs in how to prepare yourself for a trade and other psychological stuff as i understood without a right mind set no one will succeed in trading or any other business, so it would be helpful if people like you give advices to newbies.. right now you are replying here which is fine but please do consider maintaining a blog or something.

    Thank you….

    • Madan says:

      Vinay,

      I don’t have a blog. When i start something, i would like to devote my complete attention to it. At this point of time, i am not sure if i can do any justice in writing a blog . But, i will think about it.

  94. Karuna says:

    how do u protect urself from issues such as power cut, internet disconnection, etc? if there is any other issue that u think is worth sharing, pls share that also. thanks!

    • Madan says:

      Karuna,

      I have 24 hrs backup in the place i live. Previously, i used to live in a place where there was no real backup. I used to have a big inverter that runs my PC and laptop for full 9 hours. For internet connection, i have internet dongle and have my brokers number handy.

      Another important thing to maintain is the trading journal. Other than log for trades,it would help if we journal even our emotions when we enter the trade, when the trade starts going in our favor/against us, stop outs and profit tgts(if any)…you will feel very different emotions in each of these stages. Identifying them (being aware) is the first step to understanding it. Over a period of time, the emotion patterns starts to repeat and you can really work on them.

  95. Sumit says:

    Sir,

    Your datafeed is eSignal, your software is?

    What is your view on automatic buy/sell signals?

    Thank you,

    Sumit

  96. Sumit says:

    One more question Sir. Do you do your analysis during the market hours or your setup is ready even before the market opens?

    Thank you

    Sumit

    • Madan says:

      Sumit,

      As i mentioned in the interview, the stop losses and entry point for new trade keeps changing as the day goes by. There is nothing much i can plan before the day starts..(maybe, i could plan the 1st trade of the day)

  97. Karuna says:

    suppose u get a buy signal in nifty and at the same time a buy signal in bank nifty also, will u take both or do u prefer keeping only one position open at one time?

    happy new year to you and to all the others reading this πŸ™‚

    • Madan says:

      Karuna,

      I would take both the positions. Just have to manage the risk and position sizing carefully as both tend to move in the same direction.

  98. pappa says:

    Madan,

    Earlier You mentioned that Trading is all about journey not accomplishment.
    Does it mean that you are totally at the mercy of market movement by keeping unpredictable approach?
    Have you already setup some kind of alternate source of income? Or dependent upon your spouse?

    • Madan says:

      Pappa,

      The moment we think we have accomplished something – we get complacent and get the feeling of pomposity. That is the reason i said it’s a journey. I don’t want to sound philosophical here but we are all in a sense play this game with an attitude of ‘I know everything’ but when there is uncertainty involved, all we can do is to put little money in risk to see whether we are in the right direction of the market. That’s all i do day in/day out.

  99. rocky says:

    madan,

    BTW whats your Traderji id

  100. sambit says:

    madanji, please tell us you are mainly a day trader or a positional trader. do you take positions just after market opening from 9.15 am to 9.30 am and before closing between 3 pm to 3.30 pm what is your strategy on taking positions during market hours.

    • Madan says:

      Sambit,

      My trades duration is anywhere between 2 hours to 5 days. Trades would be initiated/closed at anytime of the day. No rules there.

  101. suresh says:

    Hi Madan,
    i read the entire comments on this blog i really appreciate the amount of patience you have to reply to each and every question posted.
    Thanks a ton for your valuable comments and look forward for more of psychological inputs as stated by you it very true the setup,technical,price action and all other in puts is only 10 % and 90% is your self and your mind that matters in live markets.
    great going,
    wish you all and your family a very happy new year-2014.

  102. arcus says:

    Have you read the books by Bob Volman, Lance Beggs, Al Brooks?

    They incorporate pure price action in their respective books. (with few MA’s)

  103. Karuna says:

    just to give me a general guidance on pivots, can u recommend a source. if u think it will give me a hint of ur strategy, u can simply ignore this message. i don’t wish to force u in anyway πŸ™‚ thanks!

  104. sambit says:

    madanji,
    wish you and your family a very happy new year. you have written anything can happen next in the market then on what basis you are keeping positions from 2hrs to 5 days. please explain it.

  105. Madan says:

    Sambit,

    Thanks and you too.

    Its a good question about that belief. I would highly encourage you to read ‘Trading in the zone’ by Mark Douglas. He explains the concept in detail.

  106. Rohit says:

    Madan,
    For trading Nifty Futures, do you watch 10-min chart of Nifty futures or Nifty spot chart?

    -Rohit

  107. PRATEEK says:

    Madanji ,

    Today was real testing day for traders , nifty took a U turn and wiped out all the profits ,
    did you loose or gain today ,if you gained today ,at what time the confirmation of sell signal came according to your strategy .

    Pls reply .

    • Madan says:

      Prateek,

      I am wondering how this information would help you in trading. I am not getting into details but i had 2 trades in NF .. 1long = +23 points..short from 6383 ..holding it overnight.

      Please refrain from asking these type of questions. I could have easily not answered this question but i want you to tell me the logic behind your query (kindly let me know)

      • PRATEEK says:

        Madanji ,
        Sorry if u did not like the que ,
        i am also watching the market last 3 months (after loosing money on tip providers) I also got the same signal around 12.00 with my strategy
        pls mail me at [email protected] (bcoz i cannot ask ur email here ) for detailed discussion.

        Regards

        • Madan says:

          Prateek,

          Its not about whether i like the question or not. I was only wondering how the answer to your question would help.

          Now that you are testing your own methodology, good for you. Keep forward testing it and if i were you, i would test your idea with 1 lot and see what happens in real time (if your schedule permits you to do that).

          Good luck πŸ™‚

  108. Karuna says:

    incase of back testing, how many samples do you recommend one to consider?

    incase of forward testing, after how many trades/samples should one come to a conclusion that his/her strategy is performing well or not?

    while testing(backtest or forward test), do u prefer number of samples or time period(like one must test his strategy for say 100 samples or one must test his strategy for say 6 months)? which of the two do you think is wiser?

    thanks!

    • Madan says:

      Karuna,

      In my opinion, back testing is not about samples but how long it has been tested. If it can include couple of market cycles, thats the best parameter to test your idea. I would say 8-10 yrs is a must.

      I don’t go with samples because sample size is based on the strategy. There are strategies which trade only twice a week and there are ideas which have 5 trades in a day. So, you can’t just go with samples. But ofcourse, anything less than 100 samples is not gonna cut it either.

      Hope you understand.

  109. Darshan kn says:

    I read the entire blog, really informative, thanks a lot to Madan for patiently answering all the questions, I started believing in visualization hence ordering the book PsychoCybernetics,

    Thanks to Zarodha for the interview,

    Darshan KN

    • Madan says:

      Darshan,

      Thanks for the kind words.

      The principles discussed in that book is useful in even other aspects of life. After all, our mind conceives and achieves what we intend to do.

      Good luck !!

  110. Karuna says:

    Baba Ranchodas Shyamaldas Chanchad of 3 idiots says find some work in which you will have fun. But Warren Buffet says that if you are having fun and finding it(stock market) exciting, then perhaps you are on the wrong side.

    I want to know if you are having fun trading or its boring?

    • Madan says:

      Karuna,

      I am getting all kinds of questions in this blog. Very interesting.

      At times, its very boring as you do the same things dayin/day out but most of the times, you enjoy it as you never know what the mkt is goona do next…i just love that uncertainty.

  111. RAHUL says:

    Karuna ,
    I think Karuna’s que was useless , bcoz she is comparing a stock market giant with a fictitious character i.e Aamir Khan , first of all there is no line of comparison as warren Buffet says is ” Pathar kee lakir ” in stock market ,
    I think Karuna is confusing anxiousness with fun , when real money is involved there is no fun there is always anxiety
    but Karuna keep going ,u seem to have impressed Madan , but i dont think it is of any use ,
    as Madan is not going to tell u his strategy , anyways keep trying ,best luck. LolZ

    • Karuna says:

      my friend, i never asked him for his strategy. different people have different interpretations of each and everything. u did not like it, its absolutely fine. i am in no way trying to impress anyone here. all i wanted to know is whether stock market is fun or boring from Madan. instead of asking him directly whether it is fun or not, i brought in Warren Buffet and fictitious character Aamir Khan. if u have trouble because I used a fictitious character, i request you to follow robin sharma as he too tells the same thing as aamir khan. thanks for sharing your view. i understand that too many people don’t accept creativity.

      • Rahul says:

        Karuna good going , i was kidding dear

        • Karuna says:

          ok, thanks for understanding πŸ™‚

          • RAHUL says:

            I think Karuna u have a good interest in share market , which generally girls lack , good to see that , Msg me on ******** , so that I can share a secret with U , Only if u r interested , have a nice day

          • Karuna says:

            if u really had a secret, this thread would have featured u and not Madan. thanks anyway and happy trading.

          • RAHUL says:

            By the way I dont trade with Zerodha , secondly I did not force you ,
            God shows the path where ur goal is , but the person has to walk on its own
            you will always get once what u desire by heart , but u have to judge the time when the thing is offered to you by nature
            better search internet and keep googling for share market software//indicators ,etc, if u think you will get that way.
            People like Madan will confuse all the more( he does not use TA ,neither FA nor any other thing , jus by dumb look , he is able to earn in market where 95 % fails , use brains how can this be true ,- but i dont blame Madan , no one will tell the right path on any forum , will u tell ur neigbour’s if u get a hen which lays golden eggs. )
            keep getting misguided
            I thought of sharing my secret , thought that a girl should be helped , bcoz i would not loose any thing ,
            now better dont Msg me for any secret , msg me for a days trail and u will know what u have missed ,or dont even msg , i will post my call on this forum jus for u ok ( tell me when to do , not tomorrow( i’m busy) , any other day )
            happy search / googling ( bcoz i thing thats what u enjoy)
            I’m a CA by the way and not a ordinary person , and have studied market for 6 years.

          • Karuna says:

            sir pl spare me. no need to post any call also. i am happy with my trading results. even i do not use any indicator. just pure price action. IMHO, this is the best thread i have come across. for whatever i have read that Madan has written, my intuition tells me that its absolutely true. he is in no way confusing me but infact giving me more clarity by plugging in the missing gaps. i am really grateful to u because u lent a helping hand to a girl, but girls aren’t as weak as ppl believe them to be.

          • RAHUL says:

            Karuna ,
            There was no reason for using the word ‘Spare’
            I think u r over excited with your work ,
            I thank God , i was saved ,
            live ur way ,

          • Karuna says:

            glad that u are saved πŸ™‚ best wishes and happy trading(or investing, since u r a CA).

  112. Karuna says:

    hi Madan, do you restrict yourself to trend trading or do you even take counter trend trades? thanks!

  113. sambit says:

    madanji,
    when do you carry forward your position for some days while
    you are in profit or in loss.please clarify it.

    • Madan says:

      Sambit,

      I just follow my game plan – it does not matter whether i am in loss or profit. If i get a trade and if i had to close it within 3 hours, i do it. If i have to keep it overnight, I always carry the risk of market opening adversely against me. but, still, i just do it. That is my part of my system and no element of doubt creeps in my mind πŸ™‚

  114. Amol patel says:

    Suggested Book by Van Tharp, mark Douglas, Alexander…. are pretty expensive. Any way out ??

    • Madan says:

      Madan,

      I am not sure what to say Amol..I don’t really encourage piracy as we are stealing somebody’s intellectual property (via online pdfs..if they are available free by author, thats a diff story)..well, this is just my opinion,

      • Karuna says:

        Hi Amol,

        If you have kindle(by amazon) on any device, keep a track of the deals that amazon.com offers. the ebooks may not be cheap always, but there r times when they offer huge discounts esp. on the ebooks. there r some books(not necessarily related to trading) which i bought at almost 60% off just by keeping a track on how much discount they offer everyday. whenever i see a good deal, i press the buy button. hope it helps πŸ™‚

  115. sambit says:

    madanji, thanks for your kind answers.some more questions in my mind please answer these.
    1-do you believe operator or market maker see our position when we enter so that
    after sometime market reverse during day trading?
    2-do you take caution for your overnight position i.e taking small size or taking huge size with no problems?
    3-do you take entry position at a time or taking some lots and after sometime taking some more lots to average. likewise do you take exit position at a time or exiting some lots and after some time exit some more lots?
    4- i think no particular rule is working in the market. one day it works but other day it fails. no doubt you are an excellent trader how do your rules work please share it.

    • Madan says:

      Sambit,

      1. I don’t believe market is getting manipulated by anybody (esp in Index futures)….Stocks could be a possibility. And, even if we assume that they watch our position – i really think we don’t matter to them individually. They might push up or pull down a bit at important support and resistance levels to shake weaker players out. But, none of these things can be proved statistically.

      2. Nope..i go with same position size. But, if there is a huge announcement pending from FED, i might reduce my size by 20 %

      3. I don’t scale up or scale out. Until this point of time, i always do all-in/all-out..As i said earlier in this blog, if i do scale out, i will have to test every exit as a separate system.

      4. I believe a traders edge (outside of methodology) is largely dependent on how good he can manage the money. So, my MM rules are working just fine so far. I am just fortunate enough to follow it to the dot.

      Hope it helps.

  116. damodaran says:

    madan,
    what would you suggest for aggressive day traders those are making huge loses..

    • Madan says:

      Damodaran,

      To be blunt, only advise is to stop trading right away and revisit the whole process to figure out what’s wrong.

  117. Karuna says:

    if it is ok with u, can u share ur trailing stop technique? thanks!

  118. Madan says:

    Karuna,

    As i have mentioned somewhere earlier, I use the simple swing pivot high/lows. So, as long as there is no change in those levels, i don’t change the TSL. But, when there is a new Swing low(assuming we are long), that would be my new TSL. I usually keep couple more points below the Swing low as TSL.

    Hope it helps

  119. pappa says:

    Hi Mandan,

    Some queries,

    1) Have your ever considered trading Positional Nifty Options? Any specific reason?

    2) How do you manage Risk:Reward ratio?

    3) Any plans to trade Forex?

    4) What are your future plans as the full time trader?

    5) Are you planning to safeguard your financial interests by putting funds gradually into Real Estate?

    -Regards

    • Madan says:

      Pappa,

      1. Nope.

      2. I let the market tell me what it wants to give. By doing historical backtesting on the idea, one can figure out the average R:R easily.

      3. Nope.

      4. Just build up the account to a ‘desired’ size and keep trading it. I don’t have plans of trading after 3:30PM as i love the lifestyle i have write now πŸ™‚

      5. Yes – I would obviously use the money i make in trading to diversify into various assets (this is after taking care of the living expenses). But, i see tremendous opportunity for wealth creation .. Life is exciting !!

  120. Karuna says:

    like mentioned before, i am a new trader and may not have complete understanding of vital areas of trading such as psychology, money management, etc.

    by money management u mean the management of ur trade after entry, right? so in my understanding, money management and trailing stop is one and the same thing. am i right?

    • Madan says:

      Karuna,

      Managing your trade is trade management..not MM

      MM basically what you are willing to risk to figure out if you are right in your market direction. MM can be based on the account size, volatility of the instrument or some other criteria like that. But, the bottomline idea is still the same. I would highly encourage you to pick up Van tharp’s book. Very good read on MM

      • Karuna says:

        sure, thanks πŸ™‚

        • Karuna says:

          just one more thing with regard to this. is money management and risk management one and the same? thanks!

          • Madan says:

            Karuna,

            I have seen it being used interchangeably. But if one understands the concept well, it does not matter how it is called.

            We all know Risk is the possibility of loss. The instrument we trade or the loss we incur is not the risk. The ‘possibility of loss’ is the risk. In the matter of trading futures(or stocks), and aiming for profit, risk is fundamentally unavoidable and the best we can do is to manage the risk.

            Risk can be mitigated in the following ways (this is not an exhaustive list):

            1. By properly managing money
            2. Inclusion of diversification and instrument selection into the back-testing process.
            3. Clear understanding of expectation of volatility and return (to mitigate psychological breakdown)
            4. Sticking to the system.

            Hope it helps πŸ™‚

  121. sonali says:

    madan,
    sometimes do you try to enter into a trade in a rally to get 5-10 points with in 5 minutes during day trading in nifty future? how can one judge a rally will be small or long? in a moment we see we are in profit but after some time we see we are in loss, so what strategy we should follow during day trading?

    • Madan says:

      Sonali,

      I don’t fix my targets like 5-10 points and i don’t indulge in strict daytrading. Market would tell me whether the trade is going to be intraday or overnight..I don’t have the luxury to decide that πŸ™‚

      I am not sure how a person could judge the size of the rally. I have not see anybody doing it on a consistent basis and i am confident that i won’t see any in the future as well.

      Yes – that’s what make trading what it is. People come into trading with a mindset that they will be able to come out easily when they are in profit and they would be able to cut their losses in a jiffy. But the truth of the matter is ‘trading is not an easy profession’. Having said that i would also be the first one to dismiss the popular notion that it is the ‘toughest’ one in the world. It’s not true, in my opinion.

      It is pretty simple but not easy…People confuse simplicity with easiness. And at the same time, they confuse ‘inability to make money’ with toughness in running the profession. You see where i am going with this.

      Hope it helps.

  122. Sumit says:

    Madan Sir,

    You will recommend a trader to go to gym for fitness or for yoga for a calm and composed mind? Which of two will you recommend? Sorry for asking silly question, but I personally feel it is important question for me. Thank you.

    • Madan says:

      Sumit,

      I don’t know much about yoga – so cannot comment on it. But lifting some weights and doing cardio is of tremendous help to a trader.

      It is not a silly question … healthy body = healthy mind..no one can refute this !!

  123. ramesh says:

    madan,
    do you give market price order or limit order during entering or exiting a position?

  124. saluja says:

    madanji,
    are you always taking single sided position or also keep hedging position while taking position in nifty future?

    • Madan says:

      Saluja,

      I don’t hedge my position. I used to hedge positions before major events but nowadays, i just reduce my position..it works better for my psychology.

  125. sonali says:

    madan,
    thanks for your genious answers, please answer these-
    before entering into a trade which things you keep in your mind and decide to take a new position? what is your strategy to exit from a position? which clue you get from the market that tells you to cut your position intraday or to keep it overnight?

    • Madan says:

      Sonali,

      I have told whatever i could in terms of entries and exits. There is no specific rule that would let me decide on intraday or overnight. If i am stopped out intraday, then the trade is ‘intra-day’. If i am not stopped out intra day, then the trade is a overnight trade…its as simple as that.

  126. Nilesh says:

    Hi Madan,

    You said in one of the comments above that you dont believe in Market orders. However there is a risk of Limit order not getting executed in a fast moving market. How to you manage this risk?

    • Madan says:

      Nilesh,

      I see whether my limit orders are getting executed..If not, if the market has not run away too much from me, i would enter in that price. But, i won’t chase the market. I would let the market come and fill me in or i have no trade.

  127. vicky says:

    Hi Madan,

    Firstly, you come across as a very knowledgeable trader.

    Recently, i have observed that market makes a good move up or down for a day and then gets into choppy days for next 1-2 days. In such days, market will make high and then low and then take out high once again. These movements are limited to 30-40 points move. since it is very difficult to know the market move beforehand and every moment is unique. How do you decide if you have to take long or short or again long based on your 10 minute swing pivots? Or do you wait at high level support/resistance (like previous day high/low) to enter the trade to avoid these moves? Also, it is difficult to know if the next day may turn out to be trend continuation or reversal after such whipsaw day, do you book profits before end of day even if your TSL is not hit or always carry your position next day and not be worried about gap up and down?

    • Madan says:

      Vicky,

      It would be very difficult to explain the answer for the first question by words as i take some visual patterns into consideration. And, i am afraid that i am not gonna show a screenshot of the chart anyways.

      I don’t wait for any S/R levels of previous day or whatever day it may be.

      I don’t book profits prematurely..never!!

      As you rightly mentioned,if my TSL is not hit, i carry my position over as i am not worried about the gap up or gap down situation. These gaps are a everyday phenomenon and it is inbuilt into my system by default..no worries there.

      • vicky says:

        Hi Madan,

        Thanks for your reply. Trading is simple (before we start trading and once we become master, but the journey is difficult). I put a famous quote from Bruce Lee (famous martial artist) – “Before I studied the art, a punch to me was just like a punch, a kick just like a kick. After I learned the art, a punch was no longer a punch, a kick no longer a kick. Now that I’ve understood the art, a punch is just like a punch, a kick just like a kick. The height of cultivation is really nothing special. It is merely simplicity; the ability to express the utmost with the minimum.”

        Now regarding the first question, to put it another way, Generally I see myself having upto 3 trades in whipsaw days as it is not possible to know whether the market will be whipping up and down. It is only in the evening we can see that we had whipsaw day and could have avoided these whipsaws by either not trading or keeping TSL at 2nd level pivot. As your trading style is 95% mechanical, Do you also see yourself having 3+ trades in such whipsaw days? And do you tighten or loosen your TSL based on such market conditions or do you have fixed TSL at swing low + fixed points (based on your mechnical trading)?

        Thanks

        • Madan says:

          Vicky,

          I don’t have more than 2 trades max. a day..Sometimes no trade for 2-3 days.

          No tightening or loosening of TSL and my TSL is always based on the market. I don’t tweak my TSL based on the previous whipsaws.

          Hope it helps.

          • PRATEEK says:

            Madan ,
            How was ur day today ? I think today was not a good day even for experienced people like u , or am I wrong ?
            Pls tell in relation to NIfty future

          • vicky says:

            I appreciate your candid replies on this blog. In fact, in my opinion, this blog is more than enough (and definitely worth more than the trading books/seminars) for any experienced trader to read between the lines and come out with a good system (based on swing pivots) and healthy mindset (trading selectively, no get rich quick, no fear, no greed, be mechanical, let market decide how much it wants to give you). Thanks once again ….. You are an very thoughtful trader with clear mindset and good human being….

          • vicky says:

            Hi Madan,

            One more question ( I hope I will not trouble you with more questions). If there is a gap up/down against your position, do you wait for first 10 minute candle or pivot before you close or reverse your position or do you close at the open itself without waiting? thanks

  128. Madan says:

    Prateek,

    I was short from Jan 2nd and closed my short position yday. I am flat right now. But, to make you feel better, i also want to say that i got whipsawed on 30, 31 and 1st (with less size though as volume was extremely bad)

    Vicky,

    I wait for the 1st minute hungama to get over .. will act after 1 minute.

    Hope it helps.

    • vicky says:

      Hi Madan,

      your replies are of definite help to us.
      By the way, there were many 10 minute swing pivots on 3rd jan against the short trade of 2nd Jan taken by you, but you closed your position on 6th jan. I am surprised why your TSL of swing low was not hit during 3rd even if it was few points away. Does it mean that you do not trail your position at every swing formation? thanks

      • Madan says:

        Vicky,

        I trail every swing formation but i also have visual patterns. So, this is the reason why i don’t get into detail. it cannot be explained without a screenshot and i don’t intend to post one here.

  129. xuv 500 says:

    Hi Madan, congrats.
    You said earlier,’I don’t have more than 2 trades max. a day..Sometimes no trade for 2-3 days.’
    When you don’t have a trade for 2-3 days or you are carrying trade for 2-3 days, what you do during trading hours ?
    I read that you don’t trade equity.Do you constantly visit screen at intervals ? or remain infront ?

    • Madan says:

      XUV500,

      Thanks.

      I have sound alarms at various price points. I hardly watch the screen(maybe 30 mins a day)…Most of the time, i am watching movies or reading something off internet..I read a lot..So, it works well that way.

  130. stock says:

    Madan,It is very interesting to know you are not watching market each and every moment !!!!!It is shocking information .So we can make money even if we are not watching closely…..Anway one more question to you….From your interview I have trading experience with International market(US)..How you differentiate with US market with Indian market ? I think your valuable comment will help one who is trading with international stocks..I appreciate your response

    • Madan says:

      Stock,

      US stock market is less volatile than India (last few weeks might be different a bit). But they have fantastic volume both in futures and options. Some Tier2 stocks in US as as much as volume as SBI here in India (no. of contracts traded)

      Not sure what you specifically need to know.

      • stock says:

        Madan ,I agree with volatility and volume.what i want to know same stretegy which you following Indian market will it works US or any other developed market ?I reasonably good with Indian stocks But that stretegy doesnt work with me in UK stocks…so Do u follow any different stretegy for US market? or your Indian stretegy works fine their as well ??

        • Madan says:

          Stock,

          I see the question now. Markets are different and one shoe will not fit all the size. Having said that, your idea may not do well in UK/US stocks but they should do reasonably well even in those mkts if the underlying idea is based on something ‘solid’.

          I might get 50% returns in India over a period of time but if i apply the same idea to S&P, it may earn only 20%. But, if your idea earns 100% in India and 5% in US, something might be off here(we are assuming that the kind of mkt – bull,bear, less volatile, more volatile, , flat/choppy, sideways but volatile, is similar between the two markets). There could be a situation where your idea is attuned to only India market in 2013 but not attuned to a one-way rising mkt like US in 2013. So, you cannot discontinue something if it doesn’t work in other markets..One should be prudent enough to understand various market conditions and should know their strategy in-out to understand how it would behave in various market conditions. This comes from experience and any amount of reading cannot replace this knowledge.

          Just to give a broader example, lets assume someone employ the same strategy of buying whenever the stock gives a 1-2% correction (like what people did in US in 1995-1999) to the years 2000-2002 & 2007-2009, you know what would have happened. 1995-1999 was a period where anyone can enter stock market , buy some stock, keep it for 6 months – he would have made 10-20% return just like that…but all these people got burned in 2000-2002.

          1. So essentially, one should be crystal clear on what their idea is,
          2. See if it is based on something solid(just not MACD or some indicator) and
          3. most importantly, how it would behave in various market conditions, then

          He’s much ahead of the game and he can trade in any market.

  131. Mak_T says:

    Hi Madan,

    As of now almost every sort of question is asked and you have very well answered everyone of them. One point I wanted to ask was: Can you elaborate when you say “Get OFF the screen & Get LIFE!” Its so very true! I know a friend of mine whose family is frustrated with him as he is trading thru out the day and in evening & morning keep doing back-testing to tweak his strategy or find better strategy. So much time goes just in vain doing all these. No time for exercise or socializing or even with Family. How to address this? I mean what do you feel is a IDEAL DAY for you time-wise?

    • stock says:

      Mak_T, True !!!!! I too know lot of same like people….before Mr Madan mentioned he is not watching mkt full time …..that means it is not necessary to watch all the time…Good learning point !!!
      I appreciate Madan’s response this matter

    • Madan says:

      Mak_T,

      Only way to learn about it is the ‘hard-way’. The trader has to burn out and he would(hopefully) understand that there is life outside of this profession. This is not common only with trading – it is the case in almost all the profession. I see that trait in all my friends.

      This is what i do dayin/dayout –

      1. wake up around 7:30 AM, do cardio, do some visualization before the mkt opens,
      2. Mkt opens
      3. Read non-trading news for 15-20 mins, talk with wife over the breakfast, watch a movie in my living room(not in the PC), sometimes i help her in cooking(most of my trader friends would not believe this..but this happens pretty frequently in my house)
      5. I could do all these things as my sound alarm is pretty loud and i can hear those sounds from anywhere in the house πŸ™‚
      4. Eat morning snacks like fruits, nuts
      5. Eat lunch around 1 PM
      6. Read a book for an hour
      7. See my open positions around 3:15 PM (just to make sure i have right quantity if my taking it overnight..i could accidentally have more or less size), Close my terminal around 3:35 PM and write my trades on my journal.
      8. Goto bed for a nap for 1:30 hours..wake up around 5:30 PM, eat evening snacks like boiled whole grains, hit the gym for doing some weights(or goout to play cricket/badminton near my place).
      9. Come back around 8 PM…eat dinner, sleep around 11PM and wake up again around 7:30 AM in the morning.
      10.So, my screen time during mkt hours is approx. 30 mins (whenever there is an alarm..thats it..no time else)

      I hope i gave you a picture of what i do everyday and i love what i am doing. I also do frequent trekkings in/around Karnataka (once in 2 months)

      Hope it helps.

      • Karuna says:

        interesting, i am jealous of ur daily routine hehe πŸ˜‰

      • Mak_T says:

        Thanks Madan. This way every wife will want her hubby to be a trader …. Simply great… Keep going.

        Regards,

      • Pravin005r says:

        Thanks very much for your insight and sharing your daily routine to us. I have one doubt on this. As you have said you sit in front of screen for approx 30 min whereas you trade using 10 min TF. As per me, since you are using 10 min TF, then you need to see the screen in every 10 minutes in order to revise SL/TSL. How you manage this ?

        Is your trading system automatically revise SL/TSL and When TSL hit your alarm sounds ?

      • sandeep says:

        perfect

  132. Madan,

    Since we are building the new trading tool, I had a couple of questions for you, excuse if they are lame ;), never have looked at price action style of trading:

    1. Is tick by tick so much more important to you than say a 10 minute OHLC or 10 min candle ? Any reason why?

    2. You are looking at how many ticks per bar on your nifty chart?

    3. How many days of historical can you look at one time on esignal for Nifty with your bar size?

    4. Can you export tick by tick in CSV on esignal?

    • Kripal says:

      Hi Nithin

      Sorry for interrupting as the question is asked to Madan only.

      I am not a day trader but know many day traders and as far as i know most of them will be happy with one min chart data.

      thanks
      Kripal

    • vicky says:

      Hi Nithin,

      if possible, please include the ‘high alarm’ or sms/email facility if price reaches certain point. That will also help us to spend off screen time during market hours.

      thanks

  133. Madan says:

    Nithin,

    Good luck with your tool development. I am super excited about the possibility of reducing my data cost if it suffices my need.

    1. 10 Min OHLC is good enough for me but tick charts (esp fibonacci numbers like 133 , 512 tick charts) are very useful for daytrading..I am sure lot of your clients are daytarders and if you can offer them tick charts, it would be a good USP for you. Ubtil today, i am not aware of any charting software in India that can plot tick charts.

    2. We can specify any number of tick size in the parameter box.

    3. for 1 min chart, we can go as back as 5 years of data

    4. Nope..esignal does not allow export of tick to csv.

    For the benefit of others, Tick bars plot the price of each transaction. Tick bars differ from time-based bars because tick bars plot prices based on a transaction-by-transaction basis while time-based bars plot prices during a specified time period. A transaction can represent 100 shares, 200 shares, 1,000 shares, and so on. When plotting tick bars, price and number of ticks are the only factors used, as time and volume are not considered.

  134. Karthikeyan says:

    Hi Madan,
    It could be great if you could give me the snapshot of the book “Mastering the Trade”..Because the price is of the book is around 3k ..So,i should not buy the wrong book …

  135. kripal says:

    Hi Madan

    Thanks for answering so many questions..

    You have mentioned keeping a journal. Can you tell how do you write a journal? I mean if you keep it in a word file? or just save charts with comments on them? what specific points you write in journal?

    What i do is write comments on chart itself and then save as image.

    thanks

    • Madan says:

      Kripal,

      This post is going to be long as it is a very important topic. Bear with me for a moment.

      First of all, most of the newbie traders do not journal their trades..there is a reson for that behavior. If we keep a journal, then we will be forced to take responsibilities for our actions in trading rather than blaming the market, blaming others(eg: market makers, software glitches), wife, neighbor’s dog and whatever πŸ™‚

      Records keep us honest. John (author of ‘mastering the trade’) used to tell me that “your equity curve never lies..what went right/wrong in equity curve can be analysed only by journaling the trades”

      Personally, i have an excel file for journaling my trades and i also have done some VBA coding to incorporate certain functionalities in it. I backup my trading journal every week as it is my whole life of trading in a single file..i take utmost care to not lose it.

      Key things in a trading journal:

      1.It should have observations about you and your trading and about the markets themselves. I’ve found that trader journals usually are skewed toward self-analysis and include little in the way of market observation. When I began as a trader, I printed out intraday charts of each day’s action and wrote comments on these, pointing out the patterns that I wanted to watch for in the future(like what Alexander elder of Trading for a living suggests) After some time, this identification of pattern becomes automatic and thats how i identified the visual patterns that work for me.

      2.Observations about your best trades must be included.- Many traders use the journal as a means of self-criticism, and they only journal when they’re having problems in the market. Additionally, it should also tell your best trades so that you can focus on them more.

      3.Journal should outline specific steps for improvement. It is not enough to write vague generalities, such as β€œI need to hold my winners longer” or β€œI need to stick with my discipline”. Identifying specific steps you will take to hold winners (proper setting of profit targets(if any), self-control strategies, etc.) or maintain discipline (risk management, taking breaks, etc.) makes the journal a game plan for the next day/week/month. Such review is an essential step in the kind of continuous improvement that marks winners across all disciplines.

      4. Number of long and short trades – Some people are so smooth in taking short trades butt they have hard time taking longs. This is a real problem for lot of newbies.

      5. Number of winning and losing trades

      6. Time holding trades

      7. Time holding losing trades versus winners – It is very hard to make money over time by holding losers. Eventually, the size of the losers becomes greater than the winners so that even a trader who has more winning trades than losers can end up in the red.

      8. Profit/Loss broken down by long and short trades and broken down by market condition. This is particularly useful for discretionary traders. It tells them if they trade ranges better than breakout movements; If a trader’s performance is significantly worse in one mode than another, then its time to start examining their trading for needed improvements.

      9. It should have ‘entry note’, ‘exit notes’ and ‘what would i do differently’ columns for every trade taken.

      10. Drawdown percentage – to identify the drawdown and see if it matches with the system’s expectations

      11. It should have provision to subtract the commission+other stuff we pay irrespective of winner or loser.

      12. A nice equity curve graph is a must.

      Hope it helps.

      • kripal says:

        Madan

        Thanks a lot for the detailed answer. Thats hell of a work to be done in an excel file… πŸ™‚

        • Madan says:

          Kripal,

          I agree about the work involved in excel file.

          I don’t want to sound weird but, why our tool selection should be different from a surgeon? Would one be comfortable if he/she sees a surgeon (who’s gonna operate) with a butcher knife going in for a operation?

          These parameters need to be tracked and a trader needs a good tool to do that πŸ™‚

      • Sunil says:

        Dear Madan,

        Amazing writeup about trading journal. I have read various books and has actually read about trading journal preparation but this is in another level. This is like bible for trading Journal.

        Man, how do you have so much knowledge and information? You must be crazy about reading books. You don’t need to write about things in detail but you are still doing it. You are such an inspiration to all of us and i wish other successful traders share stuff like you.

        You have a big heart and God bless you.

  136. Karuna says:

    in my understanding, a trade plan is nothing but the steps u follow to identify a setup and to execute it. am i right or is there something more to it?

    • Madan says:

      Karuna,

      In essence, you are right but there is much more to a trading plan. Lets see the key features.

      1. Reason for trading this year – very important

      2. Markets to trade – this will include instruments and thier corresponding size

      3. Trading strategies for various mkts mentioned in #2

      4. Execution methods — this section talks about entries and exits

      5. Any other misc trading rules like no new trade on expiry, etc..

      6. Drawdown rules

      7. Personal life and Health – like hitting gym, playing, trekking, weekend parties

      8. Office setup – should include backup plan for everything including electricity, internet, PC

      9. Yearly goals (if any) – personally, i don’t keep trading goals.

      • Sunil says:

        Thanks for this information. These pointers are worth their weight in gold. Wonderful post. This blog is like a gold mine for amateur traders. I am gonna read this Q+A session one more time patiently. No book reading this month for me.

  137. machonitti says:

    Madan,

    Congratulations on your determination and resolve to stick to your trading plan. I appreciate your humbleness and humility whilst being successful. The wealth of information you graciously provided on this board will no doubt rekindle the right spark in a lot of folks (including myself). Have a great year ahead and God bless.

    @ Nithin…The Zerodha team has done a commendable job in arranging these interviews. Keep up the good work. Thanks, heaps.

    • Madan says:

      Machonitti,

      Thanks for your kind words. Appreciate it.

      Yes – Nithin has been instrumental in creating this post and i can’t thank him enough for giving me an opportunity to share.

  138. Happy Go Lucky says:

    Hello Madan, congrats on the great stuff and even more on replying to so many posts above. I am 20 now and have been following markets since past 6 years. Over last few months, I have developed a trading strategy for Nifty and punch in EOD numbers manually in excel sheets and take my trade based on it. As my capital is 50K and growing monthly, I trade just Options and have observed that MOST of the time if when my indicator is LONG or SHORT for 4-5 days and Nifty falls 20-25 points each day ( Total 80-100 ), I gain just 15-20 points out of options where as NF would give me those 80-100. I don’t trade in NF because even I believe that I’ll mentally need 100K for it. I also take trades on equities (CASH) based on break outs with volumes. I won the 60 day challenge (Just 5% net in 60 days) too based on both of the above despite losing 15% of my capital in 1 day when I decided to try 1 minute candle stick trading in BNF fut ( Lesson learnt ). I probably would have done much better if that day wasn’t there. Would you suggest me to stop OPTIONS? My positions can go on for 4-5 days and are SAR. Suppose my SAR is breached intraday, I still will wait for EOD to confirm it. Ofcourse, if SAR is breached and a limit it crossed, I reverse it off in intraday itself. I felt NF will expose me to more risk, options are doing good but they hardly give me any points except on days with a 50+ point move on NIFTY and when the market moves against me, Options tend to lose more points than they gain. If I trade options, I need just 10% of my capital to BUY 1 lot and the remaining funds are ideally distributed for my SHORT, MEDIUM and LONG term equity holdings. I have learnt TA by paper trading US Markets at night as I couldn’t Day Trade in Indian markets due to school. I am practically trading since past 1 year and before that it was all virtual. I feel that having a strategy with HIT rate of 40% will also be good enough as long as you can keep the RR excellent. Really looking forward to guidance by Seniors like you.
    PS: I don’t have access to internet everytime as I am a CA student doing my articleship.

    • Madan says:

      Hi there,

      Congrats on making 5% in your challenge. Good start. According to Zerodha, only 10% of the people made money in a quarter.

      I am not a big fan of options and please read one of the previous posts where i gave some idea to a person on ‘how to start trading'(according to me)

      As i mentioned somewhere earlier, the only reason people buy options(in their early years) is because of ‘less money’ needed. You are not alone. Do you want to be in this profession for long term? You are also pretty young. Why can’t you wait to trade in futures until you have a lac in your account? Only you can answer this question.

      I also hope that you know why options lose value when the market does not move much.

  139. stockshas says:

    Congratulations Madan !! you are an inspiration to people like us who think trading stock markets can be taken as a full time job.

    I wish you all the best and keep inspiring πŸ™‚

  140. arcus says:

    Madan,
    1) Do you use Mental SL orders or Manual Stop loss order?
    2) Are the SL orders, Limit or Market?
    Thanks,

    • Madan says:

      Arcus,

      1. No mental SL .. I have real SL in place
      2. SL-Limit..this is the reason why i have alarms set. When the market comes near my SL price, i get nimble.

  141. Karuna says:

    assuming u r long at 6200 with stop at 6150(-50). now it rallies to 6300(+100) but the next minute itself comes down to 6150(-150 and the stop price) without creating a swing low. so basically, since there was no swing low, u could not trail ur stop and ur initial stop was still at 6150, which was hit. inspite of 100 points rally, u could not benefit out of it.

    i am sure u would have heard or read the following words – never turn a winning trade into a losing one. in the above case, u were at a profit of 100 points, but still got stopped since there was no swing low to trail ur stop. in such a case, how will u NOT turn a winning trade into a losing one?

    though i have fixed targets, for my trade management, even i use technical stops. but at times, a swing low is not formed and the price just comes down and hits my stop. how can still benefit from such a situation? thanks!

    • Madan says:

      Karuna,

      I see what you are saying. Nobody can turn this situation into a winning one(unless they have a fixed target and that target should have been less than 50 points)

      Whoever said that statement is talking about general scenario (95% of the time) . What he would do if the market drops the same way next minute? Nothing..he would have just taken the SL and move on..This situation is part of trading. There is nothing you can do about it.

      If it stops me out, i just move on to the next trade. Next trade is a new trade and goal is to be alive next day.

  142. Shaan says:

    First of all a Big Thank you for sharing your matured thoughts on trading.
    1. How many points after brokerage and costs (say 2 points for NF and 5 points for BN) are you able to make month after month? (On an average) (for both NF and BN)

  143. prakash1 says:

    Hi Madan
    Congratulations and thank you for sharing your wisdom here. Wish to follow and learn more from you in some medium.
    I would like to know whether back-testing should be done on Nifty Spot or Nifty Future.
    If we do on nifty future we will see some months gap up and gap down from expiry due to premium or discount. It should be considered or we should work on NS only.
    What you say on trend following with averages on higher time frame. Hr or Daily.

    Thank You Once again for Sharing you experiences.

    • Madan says:

      Prakash,

      Thanks.

      Backtesting can be done only with Nifty spot. I don’t know of any vendor who gives back-adjusted continuous futures data for NF and BNF.

      Trend following is a very subjective topic and I would not give too much importance on MA’s. Please pick a timeframe you are comfortable to start with and you can work on higher or lower time frames on the way.

  144. pappa says:

    Madan, Thanks for being generous to answer so many questions, Regarding GAP up/down,

    1. How do you handle situation where market opens far above/below of the predefined SL level?

    2. How do you avoid false breakouts?

    • Madan says:

      Pappa,

      1. I wait for 1-2 minutes to cool off and come out of the trade. This risk is always embedded in overnight positions.

      2. There is actually no way to know if a breakout is true or false (unless a trader have hindsight bias πŸ™‚ ). Thas where money mgmt kicks in. Need to follow MM to the dot to see if the breakout is fake or true. No easy way out.

      • vicky says:

        Hi Madan,

        Regarding Breakout Failure trade, you basically do not worry if the breakout is true or false and wait for your TSL to be hit to close your position. That’s why you are referring to MM in this case. Am I correct?

        By the way, in my opinion as well, you are absolutely correct if the BOF is true or false. I have seen fake breakouts and then fake BOFs and so it is advisable to stay away from such volatility and let market decide over time.

        Thanks

  145. Shaan says:

    How many securities you manage at once? Do you take follow the growth policy or dividend policy for profit taking?

  146. PRATEEK says:

    Madanji ,
    Price action strategy was working fine for me since last month , but last 4 days from Monday , im getting opposite result ,is it also same with you ,
    Pls reply ( I am worried ,)

    • Madan says:

      Prateek,

      You lost money 4 days and you are worried? I am not sure what to say. Drawdowns and losing streak are part of this profession..You cannot run it without experiencing them frequently(how frequent depends on your idea and timeframe)

  147. Kathiravan says:

    i will answer it for Madan;Madan trades only nifty and bank nifty heee

  148. PRATEEK says:

    Kathiravan ,
    Whom query r u replying ?? and everyone knows what u r telling ,

  149. ravi says:

    Madan,do you use volume in your tech analysis?

    • Madan says:

      Ravi,

      I don’t take volume into consideration. I have told this before.

      All,

      I think the questions have started to appear again and i am not surprised. The Q&A section is pretty huge now and there is a huge chance that someone might not read it fully or skip certain portions.

      I am gonna refrain from answering the questions that have been answered already. Hope you understand.

  150. gtsaccess says:

    hi madan,

    Price action is like back bone but taking assistance of an indicator will help reducing the loss. To trade in Price action needs a bunch of experience and disciplined practice. I think you deserve it.

    Good luck.

    • Madan says:

      Thanks for your kind words.

      It does need little bit of experience and lot of discipline. Thats why everyday is a new day and its 100% in our hands to make things work or screw it up. Following the plan completely is a successful trade(made money or not is immaterial)..but following it(even if the trade makes money) will open gates for disaster.

  151. pappa says:

    DO you think that impact cost (Slippage) is inevitable part of order? Is there any way to avoid or minimize it?

    • Madan says:

      Pappa,

      1. Impact cost is a function of the ‘thickness’ of the market. Even few lots in cardamom would warrant an impact cost but for nifty, buying/selling 175-200 lots would start showing some slippage.

      2. If there is a runaway market, we will have slippage again.

      No way out..gotta live with it.

  152. chethan icc says:

    Dear Madan,

    I wish to know what historical chart you use for day and swing trades. I believe you have not answered above.

    Thank you,
    Chethan

  153. Dear Madan,

    Pl explain about pivot high/low trading method.

    Nooruddeen.C.H.

  154. Madan says:

    Rahul,

    Thanks for writing your views down and giving me an opportunity to explain things a bit clearer. Let me try.

    1. It is true that i watch only 30 mins of screen but what you have failed to understand is that it is 30 mins of chart watching in a day. That does not include my time answering queries, reading my email and other stuff. Its sad that you did not see this point.

    2. Whenever i stare at the screen for a longer time, my psychology screws me up and i tend to take my profits early..cutting losses would never be a problem for most of us. So, i stopped watching charts a while ago.

    3. I have seen.analysed/backtested various strategies and have had my own share of 15 hr days. But i agree with you on this. People should not think i look at charts only 30 mins a day. It is the case today but it was not few years ago.

    4. You yourself said that it is tough to earn in markets by just watching the price all the time. That is very true. Reason is that our mind would start playing games with us. We just need to stick with whatever works for us.

    5. If my sharing does not earn a penny, so be it. Well, that is not the intention of answering q’s anyways. The intention is to let other traders know that they have to take care of certain aspects other than idea/strategy.

    One more time, let me repeat myself..If you are coming here to make money out of what i am saying directly, you are in for a shock..you have tipsters for that (please try it). But, if you are here to understand what a trader goes through in his mind, you are in for a treat.

    I tried my best to not hurt anybody’s feelings/emotions but if did, be assured that it was never my intention.

    • Mak_T says:

      I was curious how you handle this question as it was like “GAP Against Overnight Position”….. Thumbs Up. You have done really very well….
      Need to learn a lot from you….

      Regards,
      Mak_T

  155. Umesh says:

    Hi Madan,

    Ignore these kind of comments. Rahul is just plain jealous about your success, He was looking for tips from you or your idea and he din’t get it, so he is upset as well. A real trader knows the value of your answers and don’t worry about him. You will find these kind of people in every profession. naysayers.

    he does not understand the simple fact that there can be 100’s of ideas in the market but the common theme with all successful traders is their money management and the way they deal with the psychology. Don’t post anything about your idea rather post on MM and psychology. We value your advice. No real trader would agree with his bulls**t. Let him go figure out things with tipsters (let him learn from them..he will know that there are not many people like you who does not derive profit out of their sharing).

    By the way, most of the tipsters start giving advices/suggestions, run a blog and eventually start the subscription service..it’s a common formula. try your luck there, Rahul.

    • Rahul says:

      Umesh
      Dont try to gain sympathy from Madan , i also know madan is ace player in market , but like no one can learn swimming by reading books or by others experience similar goes with market , and when u ask query it looks u r begging in froont of madan , stop doing that , he will not reveal d secret and also u shd not ask , keep doing if its fine wid u , good day

      • Umesh says:

        Rahul,

        Last post was my first post in this blog. I have never posted here before. where is the question of me asking secret? well, I am not looking to get Madan’s secret as i don’t believe there is a secret in the markets. You are the one keep repeating that there is a mistake. Keep looking and you will get it. hahaha

        When somebody asks a query to Madan, according to you, it is begging. What world you live in? People ask questions to others to learn. this has been the case for 1000’s of years. and there are people like you who would just want the fish. stop spamming this space with your nonsense. what a pity.

        You must be hallucinating on a sunday morning and i understand that. Keep doing that or better yet, go to tipsters/subscription providers. you will learn so much(a lot) from them. actually, 2 persons who got featured in Zerodha is running subscription service now, join them, you will learn great things. go and have a look at their q&a section. no real quality or content and after gaining popularity, they start their service. they are looking for people like you. you are an asset to them because you anyways don’t understand anything about markets, you believe there is a secret here. Deadly combination you have and these guys know how to capitalize on your gullibility. Wake up buddy.

  156. chethan icc says:

    Hi,
    My question was not about your charting software it was about how many days charts with what candle duration you use for intraday and swing.
    Thank you.

    • Madan says:

      Chethan,

      Sorry that i did not understand your question.I don’t classify my trading style as intraday or swing….So, as i work on just Price action, i need as little as 7 days worth of chart. But for backtesting, i suggest people to do it atleast for a min of 8-10 years.

      Hope it helps.

  157. pappa says:

    This blog is meant for candid discussion about trading, psychology, Money Management. Every trader builds it’s own trading system & no question about asking each other secrets. Trader A’s Secret may prove Nightmare for Trader B while Trader A’s Nightmare may become Secret for Trader B.

    sharing Secrets is Bad but sharing Emotions is Better.
    I want to Thank Madan for nice discussion.

  158. Surya says:

    Hi Madan,
    I have been trading the markets from 5 to 6 years and I agree with every statement you have made in this blog.
    Thanks a lot for pointing to the book Psycho-Cybernetics. I has been extremely useful with life in general.
    To people looking for secrets and easy money, I have to say that there are no shortcuts to become a consistently successful trader. It is simply not possible to achieve that without many years of hard work, perseverance and good amount of risk capital.
    Regards

  159. jawahar says:

    Dear Madan,Thanks for educating us.You have given very nice talk..Somewhere in the blog,you said you dont put your tgt,just go on trailing SL.Nice.Q1.How many points away you keep your trailing SL.Q2.You have to keep tracking market to update your trailing SL till it is hit.How you manage ?.kindly reply.I will be obliged.

    • Madan says:

      Jawahar,

      I guess you did not read between the lines. Thats ok. My SL is dependent on the pivot points..so, no fixed number there. Based on the distance between entry and pivot, i change my lot size.

  160. xuv 500 says:

    Hi Madan,
    My share of queries πŸ™‚
    1. I re-read your Journal post.But it will be much useful if u can post a sample journal excel, at least the fields with masked contents or a part of very old journal.

    2. I understood u trade ONLY NF and BNF. But do u trade individual scrips based on EOD ( delivery based).
    If NO, then u re-invest part of ur earning via MF route ?

    3. If possible, please share ur experiences during transition period when u discontinued night US trading and switched to NF and then towards FTT. What hurdles u faced doing trading+job etc.

    Keep up good work πŸ™‚

    • Madan says:

      XUV-500,

      1. The current journal i am using cannot be shared (have a gentleman agreement with the person who developed it for me that i would not share it with anybody..he’s crazily good with VBA and excel). I will look for my old journal in my backup (i have been using the current journal for the last 4 years)

      2. I don’t trade individual scrips. I am exploring various investment options for the money i am making.

      3. It was a tough period. When i moved to India market, i was not so used to this kind of volatility(intraday) So, had a rough patch for first 2 months.

      I am doing FTT from the day i moved to India. I have never worked in India ever and i don’t know what it takes to work here. I see that people work for long hours here and i really admire those people who could juggle both their work and trading. But when i was in US, i was doing work from home for 2 years before i moved to India. That was the period, i was trading full-time(definition wise) because of WFH flexibility. I was just lucky to have a WFH job and completely utilized that privilege.

      Hope it helps.

  161. mangoman says:

    Madan, You have mentioned many books

    I feel my strategy is quite working.. But I lack in psychological aspects. Which book talks about the below aspects more and very useful in your opinion

    1. tips/concepts to avoid thinking abt market all the time
    2. cutting losses short
    3. letting the profit run

  162. mangoman says:

    Madan,

    Also on what basis you categorise a market whether it is trending or rangebound?

    Do you use Vix ( volatility) in your strategies?

    • Madan says:

      Mangoman,

      There is no one certain book for all the things you have asked for. Please go through some Mark Douglas books and Brett Steenbarger book. You will find bits and pieces of what you are looking for. The funny thing about book reading is that different people get different things from the same book(it completely depends on the stage of trading they are in). This is the case for any book of any field.

      I don’t use VIX for strategies but i use it for position sizing.

  163. ranvijay says:

    sir ap next target kya dekhte ho nifty ke liye

  164. SMART Trader says:

    Hi Madan

    Congrats for winning Zerodha challenge thrice in a row.
    You have proven that markets can be traded profitably with pure price action.
    I too trade pure price action on Nifty Futures and am trading for a living since Sept 2013.
    I have written a small E-Book on the subject explaining some of the concepts and tactics I use for my trading. The book can be downloaded for free from

    https://docs.google.com/uc?export=download&id=0B6diW1C5-bN9ZHZwS3d2ZzVHMVk

    I request you to kindly go through the book leisurely and give me your valuable feedback.I would like to get a serious feedback from a consistently profitable price action trader like you.

    Wish you a happy and prosperous 2014

    Rajesh.

  165. Ram says:

    Madan Sir,
    please ignore Rahul’s comment. Every one knows that Trading in Stocks is risky and 90% of traders are loosing money in Trading. Why don’t Rahul understand other that 10% of people making super profits. And thanks for your KIND & WISE answering in this blog.

    Rahul Sir,
    I know that it’s difficulty to beleive 300% profit in a year+. The number ”300%” profit in single stratergy is disturbing you (consider that Madam is a successful Trader). Please ensure there is no point of misguiding or begging. This is communication blog and Madan is patiently answering all our quiries by spending his valuable time to answer. If he don’t do that we wil disapoint and i feel this is one of a learning process to become a successful Trader and we wil choose what is good and useful for us.
    Rahul Sir, can you please share with us that HOW TO BECOME A SUCCESSFUL TRADER.

    Dear All,
    HAPPY PONGAL…..

    • Madan says:

      Ram,

      Thanks. I was just sharing whatever i could.

      I am uncomfortable whenever this 300% is mentioned in a post. This percentage is obviously drawing a lot of attention.

      We all should strive to trade properly and focus on the process goals rather focusing on some number. If we can do that day-in/day-out, money will follow.

  166. Karuna says:

    do u have any such rule that if ur stop is wider than say 50 points, then u simply negate the trade?

    before anyone tells me that Madan will not tell me the number, i would like to make it clear that i only want to know if he has any such rule and not the number.

    thanks!

  167. Madan says:

    Karuna,

    No. I will change my size according to the stop. I take all my trade setups.

  168. Shaan says:

    Thanks a lot Madan for these wonderful insights on trading. I was very fortunate enough to work very closely with one of the other 5 times zerodha challenge winner Pradeep Kumar A (http://zerodha.com/60-day-challenge, the first photo in the winners page). Here is what I feel the commonality between the winners

    1. Concentrate on trading correctly than on making profits
    2. Concentrate on MM and psychology than on strategy
    3. Comfortable with the system who’s win rate is less than 50%
    4. Thorough understanding of probabilities involved (Probabilities instead of Prediction)
    5. Act on the edge without hesitation
    6. Comfortable with the losing streaks… (Mathematically 13 losses in a row is a possible for 50% accurate system when the number of trades are more)
    7. Understand the risk, reward
    8. Have a system for handling uncertainty
    9. Consider loss as a price paid for the piece of info
    10. Keep the system simple and effective
    11. they know that the common instruments for wealth creation can not even beat the returns of inflation and they also know that trading is one of the clean business which is scalable..
    12. let the profits run while cut the losses short
    13. have got all the rules in place (starting from how much money to invest to when to stop trading). We call it complete trading system
    14. Do not switch between securities
    15. Greed and fear does’nt rule their trading…

    Wish Madan and the 10% of winners a huge success in their trading journey and life…

    Madan, you promise to be the Ed Seykota for this group. Continue the good work.

    Best Wishes….

    • Madan says:

      Shaan,

      Thanks for your kind words.

      I agree with you on all the pointers. But you could have avoided posting links for an external website that offers subscription services. I always wonder why people offer subscription services when they make money consistently in markets…One can easily scale up if they know what they are doing. It is beyond my understanding…sadly, we underestimate our fellow human-being’s intelligence in seeing the truth.

      People would think that you are promoting(or self-promoting) a tipping website and this is really lame. All your nice pointers would get submerged with the activity of promoting a subscription website..without that external link, this post would have been awesome..my 2 cents.

  169. PradeepKumarA says:

    Madan,

    It was not a self post. It hurts when something this sort of things happen. I am glad that the links are removed.

    Madan, I am following the blog from the beginning and I appreciate your patience in answering the queries. Great cheers for your success in trading and best wishes for all your endeavors.

    Shaan, please refrain from posts that contain personal information.

    Usually I don’t involve in blogs and never thought that I would post in ZConnect.

    • Madan says:

      Pradeep,

      Glad that it got sorted out. Appreciate you for taking it in the right sense.

      When i said self-post, it was directed to Shaan. He might be a stakeholder of that website.

      Happy trading πŸ™‚

  170. saprsha says:

    Hello Madan,

    Do you use scaling in or scaling out of positions?

  171. Karuna says:

    assuming u r long in nifty and u get a sudden strong move of say 100 points in ur favour. will u book ur profit or trail stop or any other technique to capture some profits or will do nothing?

  172. Karuna says:

    say ur entry is 6100 and stop at 6000. so basically % of risk from entry is 1.63%(6100-6000 / 6100 * 100) i.e. entry price – sl price / entry price * 100. its is said that for intraday trades this % should not be greater than 1% because its too wide of a stop for an intraday trade.

    if u r ok with it, can u share ur average % of risk from entry. thanks!

    • Madan says:

      Karuna,

      My theory is pretty simple. I don’t care about the point difference between entry and SL.

      Lets say Acct size = 7L, number of lots traded = 5, sl = 40 pts away. So, money wise, i am risking Rs.10000. So, i am risking approx. 1.5% of my account.

      But in another trade, lets say my stop is 70 pts away..i am willing to risk only 1.5% of my account which is Rs.10500. So number of lots i would trade here = 3 lots only as 3 lots would amount to approx Rs.10500 of money value at risk.

      Thats why i said in some other post that i take all my trades and adjust my position size accordingly. This can be done only if you trade multiple lots..if you trade less than 3 lots, then implementing this position sizing will be an issue.

      Hope it helps.

  173. Karuna says:

    somewhere u mentioned that if an event is coming up, u will reduce ur position size. may i know from which source u come to know about the event(s) lined up?

    • RAHUL says:

      Madan ,
      U did not tell how do u change ur trailing stop loss , if u r on screen only for 30 min ,

    • RAHUL says:

      Karuna better do a Private chat with Madan ( if he also likes)
      ur doubts are dumb and boring ,
      its seem that u r doing time pass by asking free queries ,
      what lame queries , y do such people ever trade

      • Karuna says:

        if u find it boring and dumb, why do u even read it? wonder what really is bothering u? u seem jealous of Madan’s success. request u to stop commenting on my questions since they were directed to Madan and not u.

      • Sumit says:

        Mr.Rahul, many of Karuna’s questions and questions by other members has helped a lot of people like me. If you think Karuna’s questions are dumb and boring, why don’t you start to ask intelligent and exciting questions?

        Sumit

  174. Karuna says:

    i am still a new trader and sometimes i notice that i haven’t followed my trade plan after having taken the trade. i am sure u wouldn’t make such a mistake(given the experience u carry), but incase u did(for the fact that we r all humans), what would u do? simply continue with the trade or just exit? thanks!

  175. Sumit says:

    Sir,

    When you carry forward your position, the next day you place your stop loss order at 9:15:01 sec or wait for a few minutes for the volatility to settle?

    Sumit

  176. Mak_T says:

    Hi Madan,
    Few questions which are (hopefully) not raised yet especially about BNF…
    BNF is extremely volatile to trade. It moves fast but again lot size(25) is half of NF(50) but moves are nearly more than double. So these doubts …..

    1. How you adjust capital between NF & BNF? What I mean is that, if trading capital is X then how you divide between NF & BNF?

    2. What capital you recommend for BNF per lot? For NF i read that you preserve 1.2L -1.5 L, but how much for BNF?

    3. How was the migration from only NF to NF +BNF for you? Any points on trading BNF?

    Thanks & Regards,
    Mak_T

    • Madan says:

      Mak_T,

      1. If trading capital is X, NF = 0.4X, BNF = 0.6X

      2. 1.5L is ok for BNF. Let me make it little bit clear. Lets say i have 3 L in my account. I trade 1 lot of NF and 1 lot of BNF. Not 2 lots of NF and BNF. I don’t trade 1 lot of NF and BNF simultaneously per 1.5 lac. I am just extremely careful with my trading capital and i refrain from putting myself to extreme seesaw in both my equity curve and psychology. For me, emotional wealth is more important than money wealth.

      3. BNF is a beast by itself. It casually moves 50-60 points in few seconds. I was watching it for a while before i started trading it. I don’t believe in DEMO trading as it is useful only to understand the execution software. So, i traded BNF with 20% of what my size would have been and moved to 60% size in 1 month, and 100% size in 2 months.

      It requires a trader to be extremely nimble to trade BNF. Compare to NF, BNF is also less liquid. So, slippages are huge in runaway markets and when the order does not get filled, it puts us in peril as we would get into the mental battle of whether we should wait for the market to come to our price or get the order filled in CMP. I guess, the decision making capability gets matured with experience.

      Hope it helps.

      • jawahar says:

        Dear Madan,in your reply above you said you dont trade 1 lot of NF and BNF simultaneously per 1.5 lac.Means you dont take position at a time in both NF and BNF even if your capital is 3 lac instead of 1.5 lac.IN other way,I explain if you have taken position in 1Lot of NF with 1.5 lac and you see good oppurtunity in BNF to take position with another 1.5 lac in you a/c,will you take both positions or prefer to do one trade and miss other trade.kindly reply.

        • Madan says:

          Jawahar,

          I said i need 1.5lac to trade NF and another 1.5 lac separately to trade BNF. So, i should have 3L if i have to trade 1 lot of NF and 1 lot of BNF simultaneously. I don’t want someone to think that i trade 1lot of NF and BNF together with just 1.5L in the account

        • Madan says:

          Jawahar,

          You did not get what i said. I trade both of them together but not with just 1.5L. I need 3L to trade them together. This is for 1 lot.

      • Mak_T says:

        Thanks Madan. Cool & quick …
        All the very best….

        Regards,
        Mak_T

        • PRATEEK says:

          Madan ji ,
          I am stuck with my strategy , pls help ,
          sir , sometimes rally (either downward ur upward ) last for 2 hrs , sometimes 3 hrs and sometimes even for whole day ,
          so i have got the answer whether the rally is upward or downward ,
          but i am not getting the answer for time for which the rally will continue
          for eg today downward rally started from 6330 in nifty but suddenly changed at 12.33 pm where from the market started rising and came to 6330 , therefore I could not earn even after seeing profits ,
          so pls help me with the above problem
          I would be greatful ,
          Thanks

          • Madan says:

            Prateek,

            The problem lies within you and not in the strategy (i am not commenting that your strategy is good or bad but the focus of my answer is on the way we think).

            You are thinking that you can predict the size and the duration of the rally. In my opinion, both cannot be done consistently. First, you need to understand this basic concept of trading. We are all very good at advanced things in trading.but not in the basics. We are all guilty of this (and guess what, some never get their mind right to understand it..but that’s ok..market is made up of all kinds of people..that’s what make what mkt is)

            I don’t know what you have to do to get this concept into your brain..maybe taking a resolution not to watch stock market channels, not reading stock related websites,newspapers and other sources of info..i don’t know..but this gotta be done.

            Nowadays, i am seeing this trend emerging in twitter/Facebook (social media is the most popular media now) as well..so, many pundits and wizards trying to ‘predict’ the market. Not sure how they do it. One thing i know about them is they are not sipping pina colada in the beaches of the world..they are still tweeting in twitter and showing their face in TV’s. They know so much about where the market is gonna go and where it will stop and reverse, but still loitering around here..irony, isn’t it?

            All we can do is follow where the market goes..In the process, we are gonna lose some money, but that’s perfectly fine. You cannot predict market top and bottom on any timeframe and if you could, definitely not better than a monkey throwing a dart. For sure, forget about figuring out how long the rally (or downfall) will last.

            Predicting is analyst’s game not a trader’s game. We all need to be cognizant of that.

            • PRATEEK says:

              Thank u for ur time and reply ,
              but frankly speaking i did not try to predict , but only wanted to know where one should stop loss or book profit , if i dont get an answer then i will have to continuously trail my SL , for that i will have to be contentiously on screen .
              is that the way ??

  177. Prashu says:

    You said you use SL L order type for placing the orders. Don’t you run the risk of trade not executing and running into more losses than planned especially for exits…

    How many points do you keep as the difference between the trigger and limit for Nifty and Bank Nifty?

  178. Madan says:

    Prashu,

    Yes, i do run that risk…part of trading πŸ™‚

    My difference in pts b’ween trigger and limit will not serve you any good. Because, it depends on the size we trade.

    If one is trading only 1 lot, even 30 paise in nifty and 1 re in BNF is more than enough(on 95% of the trades), if one is trading 150 lots of nifty, 5 pts difference would look small and in BNF, it is much worse.

  179. pappa says:

    Madan,

    Knowing that Nifty fut is highly liquid, have you tried buying/selling 150 lots @ market price?

    If yes, what was the difference between average exit price & your planned exit price?
    Coz many times we see orders worth 5000-10000 qty getting executed in market depth.

  180. jawahar says:

    Dear Madan,I have some queries,above in your reply to MAK_T.Kindly reply.

  181. PRATEEK says:

    Madan ji ,
    I am stuck with my strategy , pls help ,
    sir , sometimes rally (either downward ur upward ) last for 2 hrs , sometimes 3 hrs and sometimes even for whole day ,
    so i have got the answer whether the rally is upward or downward ,
    but i am not getting the answer for time for which the rally will continue
    for eg today downward rally started from 6330 in nifty but suddenly changed at 12.33 pm where from the market started rising and came to 6330 , therefore I could not earn even after seeing profits ,
    so pls help me with the above problem
    I would be greatful ,
    Thanks

    • PRATEEK says:

      Thank u for ur time and reply ,
      but frankly speaking i did not try to predict , but only wanted to know where one should stop loss or book profit , if i dont get an answer then i will have to continuously trail my SL , for that i will have to be contentiously on screen .
      is that the way ??

      • Madan says:

        Prateek,

        Good to know that you are not trying to predict. Really good.

        There are various ways to exit. Some people use Fibonacci levels, others use predetermined exits, some use Trailing SL, etc. I have found that the last one(TSL) is more attuned to my ideology of trading. I completely believe to my core that markets will decide what it wants to give and when – i don’t have any control over it. TSL perfectly fits my belief. That is why people say “we dont trade the markets but we trade our beliefs about markets”

        With all due respect, i would want to ask you a question. My intention is to make you think in the right direction(according to me) not getting an answer from you. Infact, please don’t answer it here but answer it to yourself. What makes you think that you could make money in your job(if you are working) and you tell your boss that you cannot put 100% time in the job? And What would happen to your job if you say that you cannot be in the chair(if its a white collar job) most of the time?

        You are telling that you cannot give your attention to the market all the time but would like to make money/learn trading? Is it even feasible? Its like a doctor telling that he cannot attend patients but would want to learn how to treat them successfully. Please think in those lines. This profession is no different. The issue is too many of us think that trading is easy. It is true. But, as i have mentioned in some post earlier, it is simple but not easy.

        Honestly, i can exactly see where you are coming from..been there, done that. You have a passion to learn and i congratulate you for that.

        Having said all this, I am not saying you should quit your job t’rrow and be full time here but you gotta figure out a way to drive your focus on the markets. Maybe trade EOD charts and see how they pan out for you. I am not sure if this answer really helped you but i hope against hope that you get the gist of this post.

  182. KAMAL says:

    Congrats dear madan
    it is good you hv consistently succeeded in your efforts as it is a commendable effort no doubt this is my first visit to this page and therefore i was a bit inquisitive about your break out strategy cud u elaborate on it with the help of a live example of any of ur past trades without mentioning the actual volume u traded

  183. PRATEEK says:

    Thanks Madanji for ur sweet at the same time valuable advice ,
    i also believed that for making money , i will have to devote 100% time for the market ,
    but I was little amused by ur post that ur screen time was only 30 minutes , it really surprised me ,
    that how come a swing or a day trader can generate wealth by just being in the market for 30 min ,where in most people lose even after constantly gazing the market !!!

    • Madan says:

      Prateek,

      Answer to your question is ‘you will understand what i am saying as you gain more experience in trading’ πŸ™‚

      This is getting really boring now. I have told multiple times in previous posts(issue is people don’t read the previous posts or they don’t understand it) on what i meant by 30 minutes. I have a system in place, alarms set up at important price points. All i need to do is trail my SL or put a new order(if any)..why anyone would need more than 30 mins to do execution? Lets say you put 5 orders in a day..how long it takes for you to put the orders and SL? 5 hours?…no…the reasoning behind taking the trade might take that long but i have pretty much made the decisions automatic. I don’t see why it is considered wrong or what baffles people?

      Right now, i am typing this post. Does that mean that i am not focused on my trades? this is my bread and butter..i can’t lose focus even for a minute. But, if there are other ways of tracking price points, why would i need to be in my office room all the time?

      Please do me a favor and reread the whole blog to understand what i meant by 30 mins. I explained in detail to a person who had the same question.

  184. Sumit says:

    Sir,

    My relatives and friends know that I am a stock trader. Inspite of not being successful, some relatives and friends are behind me to teach them to trade. So I am assuming that you will have more pressure from relatives and friends since you are successfully trading. How do you tackle these people?

    Sumit

    • Madan says:

      Sumit,

      Good question. You have 2 options here.

      1. Talk about trading to them and get more questions

      2. Never talk about trading and get less questions.

      Questions will never stop but they eventually die down. Ask them if they can teach you what they do and you start making money in it. Its not really feasible right? They would have put so much effort and time(and face failures) before reaching to where they are right now..You could tell this in a polite way. If they still don’t get it, its their problem.

      On a side note, if you believe you are doing OK in trading then, it is not really bad to teach somebody(only if they really want to learn). Its’ your call by then. But ofcourse, others would also want to join the bandwagon. Most of the times, people want you to tell them ‘what to buy/sell’..they don’t want to learn trading. We gotta accept this fact.

      Hope it helps.

  185. PRATEEK says:

    Madanji ,
    I think TSL is just a action , but not the logic ,
    for eg to put TSL order , i need to know the levels at which to put my TSL
    i was eager to know which levels u follow to put ur TSL ( if you dont mind sharing that )
    it would be of great help
    Regards

  186. KAMAL says:

    Dear Madan

    i am reposting my question “i was a bit inquisitive about your break out strategy cud u elaborate on it with the help of a live example of any of ur past trades without mentioning the actual volume u traded” it seems thru foresight or for some other reason u did not answer my question pls do give the query a little thought and reply

    • Madan says:

      Kamal,

      Maybe you did not go through the Q&A section completely..not sure why.

      I have clearly stated elsewhere that i don’t post charts or discuss trade ideas. Sorry about it.

  187. How can i get the favourite books prescribed by madan ?…..???

  188. Sumit says:

    Sir,

    Are you using wifi internet, 3G, wired internet or anything else? Just want to know which is more reliable. Thank you.

    Sumit

    • Madan says:

      Sumit,

      I use fiber broadband and i also have a 2G dongle for backup. I always felt wired internet(cable or fiber) is much more reliable than dongles.

  189. machonitti says:

    Madan,

    1) Is it necessary to go through the usual grind of studying candlestick patterns and the part of TA that uses the most commonly used indicators, initially, before getting a hang of how to trade using Price Action Analysis.

    2) When starting out, is it prudent to begin with Options trading and then slowly move on to Futures. I ask this because one needs more capital to trade the Futures market than compared to trading Options.

    3) Hope I’m not rude, if I ask, whether you took any private mentor-ship program with John Carter.

    • Madan says:

      Machonitti,

      1. Not necessary. I have never studied candlestick patterns but i have studied lot of indicators. But, later decided, that i just falling prey to ‘paralysis of analysis’ when i study more of indicators. Slowly took indicators off my screen and currently, i have none.

      2. I don’t advocate options buying at all. If you really interested in just ‘buying’ options, you could try deep ITM of atleast delta = 70 (but their premium would be high which invalidates your need to pledge less money). Its pretty equivalent to buying futures.

      3. Nope..i did not take his mentorship program but i used to connect with him a lot when i was trading US markets. I don’t speak with him much often nowadays(as i trade only India mks and have also moved out of US) except for being in touch via Facebook πŸ™‚

      Hope it helps.

  190. machonitti says:

    Thank you, Madan for helping with the replies.

  191. Karuna says:

    madan, whenever you have the time, can u in a few words help us understand how john carter/his book has helped ur trading. thanks!

    • Madan says:

      Karuna,

      John’s book was one of the first books i read in trading. It helped me in understanding psychology and other aspects of trading(esp trader’s plan)..I never had a plan before that book..well, 60% of his book talk abt proprietary indicators (which is of not much use).

      So, if this question is to decide whether to buy it, it’s your call. It was useful for me and i cannot say if it’s gonna be useful to you.

  192. arcus says:

    Hello, Do you do intra-year compounding of your account.

    For example, lets day you start at Rs 100 in Jan and make around 12.5%/m and by Aug you end up with Rs 200.

    Now, you do intra-year compounding and from Sept to Dec continue making 12.5% on average on the Rs 200 to end up with Rs 300 by December?

    • Madan says:

      Arcus,

      I have increased my lot size only once this year. After making 100% somewhere in the middle, increased my position size by 20%..thats it.

      I am pasting an excerpt from a post i have written above – “most of us think it is easy to increase lot size when the acct grows but its easier said than done. I have personally seen traders who perform well with small acct like 1L but cannot perform in the same intensity when their acct size is 1C…lot of psychological things are into play here.” Having said that, the fastest way to blow your account is by increasing lot size proportional to the account size increase. I have experienced it before.

      Not sure if this answer has helped you πŸ™‚

  193. Sumit says:

    Sir,

    Somewhere you mentioned that you place your TSL Rs.1-2 below the swing low points. What is the logic behind the same? Why not place it exactly at the swing low?

    Thanks,

    Sumit

  194. Mak_T says:

    Hi Madan,

    1. What are you further plans? I mean how you plan to grow your money that you make thru markets? Only real estate or you plan to do some other thing like Option Selling with some strategies to maximize on Time Decay etc.

    2. There must be some limit to how much money can be made by one single strategy like break-out. So do you plan to increase strategies or just keep on increasing lot size by approx rate of 20% per year as you described earlier.

    Thanks & Regards,
    Mak_T

    • Madan says:

      Mak_T,

      I don’t like to discuss my futures plans on a public forum in detail. But, option strategies is on cards (condors, butterfly,..). I did not think much about the size restrictions..i might increase the instruments i trade.

      IRF(int. rate futures) in NSE looks promising (volume wise)..i used to trade 10 Yr notes in US. They move pretty slow but gives good trends..eventually, i stopped trading them as they were pretty slow for my appetite (by then)…but, now i have gotten older a bit and hopefully mellowed down :), i guess i can try IRF’s…will watch IRF for 6 months and will decide on it…most of the banks are still waiting for internal approval to trade them..once they get it, i believe their volume would be better than Nifty.

      But, one thing for sure – will not trade after 5 PM ..would love to have some time in the evening to enjoy life πŸ™‚

  195. Joseph says:

    Dear Madan,

    Can u explain the rollover procedure please. I have never traded futures but intend to do so in the near future.

    Joseph

  196. NPANT says:

    Hi Madan, Congrats on having mastered the Art and its residual benefits like 300% returns! Now that you have mastered it, All the Best for perfecting it! Also, given the amazing start to the new year, with a 4% return on the 2nd day of the year, I am sure you will repeat the feat. What do you suggest about trading on larger time frames on part time basis? I have tried full time trading for something and have been a failure at that. Seems I can not draw consistent returns from this Art. It seems you have been trading for 5-6 yrs now and have been consistently profitable (on qtrly basis) for 3 yrs. That is also a feat on the account size you deal with (which can be easily ball parked at 1-2 cr). This game is not about size, its about a process implemented correctly and consistently, but psychology does get affected with larger size – so your feat becomes all the more important because it was on a larger size and scale over a larger duration. Can you let us know what has been your returns year wise for last 3 yrs (as it was 300% last yr) ? As advised by Nitin that like an individual trade there should be a SL to trading itself and it seems that SL has been hit. Not sure trying any further would be called ‘persistence’ or intoxication? πŸ™‚

    • Madan says:

      Npant,

      Thanks.

      1. I have heard (don’t know anyone personally) that some people trade with EOD charts. They just check the markets at the end of the day and put their orders next day morning. You are the best person to know what would work for you. Good luck !!

      2. I don’t discuss returns. Sorry about it.

  197. KAMAL says:

    hi madan,
    i am putting up a link and want to understand from u whether what the article says is something that u do for your trading http://www.swing-trade-stocks.com/price-action.html

    • Madan says:

      Kamal,

      Very nice article. Thanks for sharing. Price action trading is same all over the world. But, how we use it differ from person-person. Different people = different style.

  198. Hi Madan,
    This is Nice discussion you have posted among all the QA Session, I would like to congratulate you for your great success in Stock Market.
    I have once concern and may be i have answer for the same please explain if may wrong.
    U trade with 30K for nifty future and keep 1.20 lac spare. as you management says for not full spend with single index trading . u keep 1.5 lac in account and trade with 30K.
    This is what i observed if some 5-8 trade got fail , u can have sufficient money to make new position where u can easily cover the losses with you 45% success trade ratio.

    Multiple trade can be fail but 1 trade can recover your loss need patience for such trading behaviour.
    Kindly clarification if observation is wrong .

    Looking for Encourage communication with you.

    Thanks,
    — Pradeep

    • Madan says:

      Pradeep,

      I have explained it elsewhere why i have that money in my account.

      If a trader tries to recoup his money lost in 8 losing trades in a single trade, he would probably not have the trading account to put the 10th trade. But, you have understood well that there are gonna be losing streaks. For a 45% winning ratio system, one can easily have 15 losing trades continuously. How he handle them separates a winning from a losing trader.

  199. PK says:

    Hi Madan,
    It would be of great help if you could answer these.

    1.After you found the strategy which you are using at present, how did you make sure that you followed it?
    Was it based on the confidence derived from back testing?

    2.What were the major psychological obstacles for achieving consistent success?(commonly referred as trading errors, like jumping the gun, booking profits early etc etc) and how did u overcome them?
    (if you could describe steps you followed that would be of tremendous help)

    3.After your big loss in the initial days, how much time did it take for you to finally start winning consistently?

    Thanks,
    PK

    • Madan says:

      PK,

      Good questions.

      1. Back testing would obviously give you confidence to pull the trigger but what would help you when you face a losing streak? I started out with 1 lot, followed my system to the dot. It is really important because it creates that ‘discipline’ brain muscle in us. And, slowly and gradually move up in size. Remember, we are all in this for the long haul..no hurry. But, if a trader is in pressure to make money right away(and big), market will show him the road to adversity.

      2. If you have hurdles in these aspects – 1. Reduce size..i can’t stress this enough, 2. Create a plan and follow it, 3. Do not trade for monthly expenses (you can start withdrawing money for your expenses in the later stage but not when we have issues in these aspects..i believe these aspects stem from the urge to make money right away). So, please have backup money(to cover expenses for 3-4 yrs) while you learn trading.

      3. I have answered this q previously. But would answer again. It took me around 3 years.

      The second point needs a big answer(more details more on the pointers) but hope you get the point.

  200. Himanshu says:

    i haven’t read psycho cybernetics, but i have read about visualization on the internet. i want to know what do u visualise? is it a winning trade, is it following ur trade plan, or anything else? ty

    • Madan says:

      Himanshu,

      It is the whole nine yards. Starting from pulling the trigger to equity curve. It might sound weird for people who don’t believe this concept. I would highly encourage you to read the book ‘Psychocybernetics’ if you are interested to know more about it.

  201. sudheer9995 says:

    Hello mister madan… congrats on your success.. i’m a newbie to the markets.. and i dont want to trade options or futures. i’m more interested in swing trades like keeping a stock for few days or months and get returns. i just want 20 to 30 % return(per year) on my money and i can keep a stock for 1 year.. i just want to put my savings which are not required to me at present. so could that john carter book help me in creating strategies and procedures… i dont know much about markets.. thats why i’m asking this question.. please pardon if the question is too silly…
    Thank you….

    • Madan says:

      Sudheer,

      I don’t have enough expertise to recommend book for specific needs. I found that book useful and i thought fellow traders could pick some pointers from it as well.

      Good luck with your investing !!

  202. Karuna says:

    have u read books of Brett Steenbarger? any view?

    • Madan says:

      Karuna,

      Loved his ‘Enhancing trader performance’ book. Brett used to run a blog but stopped posting in it 3.5 yrs ago due to his hedge fund engagement. Extremely valuable blog. Have never seen such a wonderful, no-nonsense blog for traders ever and i doubt i would ever see it in future.

  203. Pradeep says:

    Hi Madan,

    Fantastic and Good Hint I observed from your through communication.In past 7 days I am paper trade the Nifty and Bank Nifty Future.

    Out of 7 trade Only 2 trade got success and 5 trade exit with stop loss. But Observation point is that . I am in loss with Only 2100 Rs includes brokerage.

    Brokerage Paid for 7 trade — 3500
    effective Profit earn from 7 trade = 43 point (43*25=1075)
    Effective loss = 2075

    This is s good and excellent I got of my carrier jut need to follow the SL STRICTLY. and trade as per you plan.

    Please suggest any observation among this post.

    Thanks,
    pradeep

  204. Sumit says:

    Sir,

    For rollover, you simply exit current month contract and buy next month contract?

    Sumit

  205. prakash1 says:

    Hi Madan,

    Could you please explain about swings. How to differentiate between valid and invalid swings.
    Do you use retracements for identifying Swing Low/High.

    • Madan says:

      Prakash,

      There is lot of articles on pivot swings. In my opinion, there is no way to find out valid vs invalid swings. Over a period of time, one might get an hunch on things but that is not a guarantee. This is the reason why we need to understand money mgmt more than technical analysis (or whatever a trader uses)

  206. Sumit says:

    Sir,

    Any source you would recommend for powerful and positive thoughts for the mind.

    Sumit

  207. chethan icc says:

    Hi,
    What are the security measures one should have in pc. Which antivirus you prefer.
    Tnk U.

    • Madan says:

      Chethan,

      I use Kaspersky and it is pretty good. There are free options too. I have not used them before..so, cannot comment on it.

  208. Naveen says:

    Hi Madan,

    Do you consider volume into account while taking a call?

  209. Mak_T says:

    Hi Madan,

    I have gone thru the suggested readings. Jim’s book is nice & Mark Douglass’s is a master piece. However while reading Enhancing Trader Performance, I had a doubt. There author (at least in first chapter) talks about “cool” Al & “frustrated” Mick and concludes with high performance people are like Mick than like Al who watch every tick without taking a break etc… So this is slightly confusing than previous two books. So does Brett S. talks of different philosophy of extreme hard work necessary for performance over relaxed approach? This makes sense that to succeed we need to work hard but Douglass points out EXACTLY OPPOSITE of this and says that winning in markets is not so much of knowing too many things but proper psychology and taking complete responsibility of everything that we do. Two totally different approaches and both talking on Psychology… Can you clarify?

    Regards,
    Mak_T

    • Madan says:

      Mak_T,

      Good question. I will try to explain my understanding of this aspect.

      Both of them are right in their own sense. Hard work is the necessary trait that keeps us going when the going gets tough. So, in the early phase, hard work is extremely important but in the later stages, one would do most of the trading related activities sub-consciously.

      Think about this. When Kobe or MJ throw a 3-point shooter in basketball, do they really think about how to
      coordinate the action between their hands and eyes? Do they really think about the angle the elbow has to bend in order for the successful shoot? Do they worry about their footwork while grabbing a rebound? The answer is ‘no’ to all the questions. But when they started out, they would have put long hours to learn the basics of the game. Once the muscle memory is set, its all about tweaking and being strong mentally.

      I gave this analogy because trading is also a performance endeavor and with any such endeavor, tremendous amount of repetition and hard work is needed to attain the muscle memory stage(in trading, it is brain muscle memory). A trader typically puts lot of work in the beginning and later, its all about how well he follows the plan he has put himself to. That does not mean that he can relax and see the road to riches. This game is like going to battle fresh everyday. If a soldier gets lethargic one day in the battle, he might lose his life.

      A trader should also constantly look for improving himself (remember, it is not improving the system but himself). As they say, the biggest ever investment one can make in their life is on themselves (both physically and mentally)

      Hope it helps.

  210. Sumit says:

    Sir,

    May i know how many screens u use? Many traders use 4-10 screens, but is it really necessary to use so many to be successful?

    Sumit

    • Madan says:

      Sumit,

      Number of screens does not matter. Some traders use multiple screens to see various timeframes/instruments or non-trading related stuff.

      Having said that, i have 3 screens – 1 for NF, 1 for BNF and 1 for execution and browsing/watching videos. I like them separate so that i can easily see what’s going on without the need to flip screens. Just makes my life simpler.

  211. Mak_T says:

    Madan, now one more question:

    If somebody says, I have a nice system developed myself; know that it works as an overall outcome; when I take a look at results EOD or EO week; I realize that my system gave me good trades. Its an objective clear signal system which is profitable. But still my problem is when I am actually in front of screen, I end up taking wrong trades or delaying trades for more confirmation or end up looking at a indicator I rarely used before and thus waste the opportunity. Where do you see fault laying? Is it in not rehearsing the system as hard work is lacking or not able to take the complete responsibility for my own success or something else? What could be the reason of such behavior?

    Regards,
    Mak_T

    • Madan says:

      Mak_T,

      The reason could be multifold. When i say ‘you’ in the below pointers, its not literally you but its just a figurative speech.

      1. Fear of losing – if this is your only disposable money, this fear would literally haunt to the core. Everyone has an humble start and you gotta take it slow. I have written a big post on how to start trading full-time/part time gradually. The only way to overcome this fear is to understand that it exists and have a big cushion outside of trading capital. This might sound counter-intuitive but thats what it is.

      2. You want the perfect trade..in other words, you don’t want a losing one. This is the reason to search for more confirmation from unknown/unexplored indicators. Been there, done that.

      3. You don’t have confidence in your system – real trading with 1 lot for 3 months would help.

      4. You have the strong urge to make money ASAP. This one reason could play a big spoilsport in our quest of mastering this game. As i said earlier, if a trader trades to meet monthly expenses, its going to be extremely difficult to increase acct size and has a lasting effect on psychology.

      5. You are in a drawdown and has a strong urge to make it back to breakeven ASAP. This can force us to not follow the plan.

      Hope it helps.

  212. vicky says:

    Madan,

    Since you trade both NF as well as BNF, do you see BNF as leading or supportive indicator? For example, if NF has given you a buy but BNF is extremely weak (say broken the days low), would you still take a buy in NF (ignoring BNF)? Or , another example, BNF has given you a buy and NF is still making your 10 tf pivot, do you buy NF in anticipation?

    thanks

    • Madan says:

      Vicky,

      I have moved on from ‘anticipating’ to ‘participating’ in the markets long time ago. So, no trades based on anticipation.

  213. NPANT says:

    Yes, Madan reading your blog and other winners of the challenge one thing is clear, Trading is a game of persistence and hard work. I myself have been not good game at the game until now, but have been able to come up with some observations : (1) All the four winners featured now had blown their initial accounts though the initial account sizes can vary widely from 10,000 to 10,00,000. Though this is not a necessary condition, but it seems it happens. A novice should also not draw wrong inference from it, that if he is blowing up his account he is going to make a top trader. Infact the learning is even the Gods stumble in their initial phases, so it better for a novice to start slow and focus on basics. (2)All showed the gumption and belief in self to get up, to do a brutally honest introspection of the self, identify the mistakes and over come the mistakes. (3) All had the patience to stick to an art which paid them in negative to 0, for some 2-3 years. Which tells about their persistence, positive attitude and passion for learning than trading.

    Also, about the most often referred wizard of literary world of trading – Mark Douglas, (Jack Schwager – in brackets because he does not talk on pyschology per se) and Naseem Taleb – none have been a great trader themselves. But, if we see, if we summarize all their 1000+ pages tomes in single word, it is Stop-Loss. Mark Douglas refers it as able it do what is needed, Naseem Taleb refers it as Black Swan (simpistic example : basically if you are leveraged even by 10%, and your startegy say’s markets can not go down by 90%, one fine day something unexpected, unimagined (black swan) might happen that might put you out of business.)

    So, it seems first step to start with is to develope the ability to execute the SL – without any sort of fear or false temptation/greed of reversal from SL point. If it is some reasonable SL with a risk limit of 1-5% of equity per trade, it is unlikely one will blow up his initial account, because that would give him a time to do the reality check and go and discover the basics. This basic thing every trader learns after having blown up the account. Though these should be the initial step, Risk Management and Money Mgmt learning happen to be the final steps for most of the traders – basically every trader starts with reinventing the wheel.

    • Madan says:

      Npant,

      Good observation. Unfortunately, lot of traders are in a revolving door model. They make some, lose some, and at the end of the year – stay at the same spot. Extremely unfortunate. But that’s what market is.

      By the way, none of the leveraged traders can escape black swan events. 95% of them would not survive those events.

      • Kumar Birla says:

        sir, the term black swan is new to me. i read it here for the 1st time. read more about it on internet. is satyam scam an example of black swan? could u give me 1 or 2 more examples of black swan pls for better understanding. thank u.

        • Madan says:

          Kumar,

          In market terms, black swans are stock market crashes that wipes out billions – maybe due to earthquake, war breakout, bomb in major city. This term was popularized by an author named Taleb.

          Please search online for further details on the below-mentioned events

          1. October 19, 1987 – Black Monday
          2. Sept 11 attacks,…

  214. NPANT says:

    Madan,

    It seems your strategy is sufficiently objective and so is your execution. Then why don’t you automate it? Normally, a Swing Low or High will also coincide with Highest High / Lower Low of a certain look back period. That way except for the money management part,coding for which would be complex but not diffcult, coding for the entry – exit criteria should be quite simple. Do you believe automation would add further to your trading efficiency? If no, what pit falls do you see with automated trading.

    • Madan says:

      Npant,

      I can’t automate as i have some visual patterns too. I have mentioned this multiple times in the previous posts. But, i am looking to make it completely mechanical but the trade-off is that the returns would get lower. Nevertheless, my quest to automate would continue i guess πŸ™‚

  215. arcus says:

    What percent of your trading capital do you risk for on each trade. Is it 1-2% of your capital or lower/higher ?

    What is your average risk : reward?

    Thanks.

  216. Rohit says:

    Madan, When do you stop trading current month futures contract and start trading the next month contract?

    for example: Do you trade January nifty futures contract today and tomorrow

    or

    Do you start trading February contract from today (and stop trading jan contract) since you told you’ll hold your position till stop-loss is hit and that can happen from few hours to 2 days.

    Rgds
    Rohit

    • Madan says:

      Rohit,

      I would try to rollover 1 day before expiry. If i don’t get to close my existing trade on both of these days, i would just sell the current month(if i am long) and buy the next month contract !!

      • Rohit says:

        But when you have to take a new position on 1 day before expiry, will you take curretnt month or next month? In case if you are taking next month contract, do you get next month futures chart in your charting software?

  217. jawahar says:

    Madan,Do you give any importance to vwap and mvwap while trading?hoping you will reply.

  218. mukesh says:

    sir, may i know how u trail ur stop incase of gaps? thanks!

    mukesh

    • Madan says:

      Mukesh,

      If its against me, its easy right? Wait for the market to cool off for couple of mins and come out

      If its in my favor like what’s happening today(Jan 30th 2014), then do the same pivot exits. I might lose out more but thats ok. Thats part of my system.

  219. Surya says:

    Hi Madan,

    Say I want to make 25% returns per month on an average(like you have been doing for the past year). Assume I have 10 lakhs trading capital and willing to trade 1 nifty lot per lakh. So I will be trading 10 nifty lots with my trading capital. With that trade size, I will have to make 500 nifty points per month on an average to make 25% returns. But I have heard that even the best of the best traders make utmost 300 points a months on average.
    So basically is it possible to make that kind of returns trading only one lot per lakh?
    I know you do not like speaking about % return numbers but tempted to ask this as i want to understand what is practical and what is not..

    Thanks

    • Madan says:

      Surya,

      It is doable but not easy. Every week/month/year is different. As i said earlier, we cannot force our will into the market. All we can do is trade properly. Personally, i don’t keep goals and take it with the flow.

  220. Prithvi Raj says:

    Madan,

    Do you reside in Chennai or Bangalore?

    Prithvi

  221. Rohit says:

    Madan,
    This is follow up question to your reply to my earlier question

    But when you have to take a new position on 1 day before expiry, will you take current month or next month contract? In case if you are taking next month contract, do you get next month futures chart in your charting software?

  222. Rohit says:

    Madan,

    Who is the authorized seller for e-signal in India? could you please provide the web link?
    According to you, which is the best charting software available in India?
    (you might not have used all the charting software available in India πŸ™‚ But from the information you have and the while discussing with your trading friends)

    • Rohit says:

      madan,
      adding to my above question about charting software:
      1) without considering the price of software
      2) considering the price of software

      Others, Please share your views about the best charting software.
      (Hope zerodha’s terminal will be out soon)

      Rgds,
      Rohit

    • Madan says:

      Rohit,

      1. As far as i know, there is no authorised data vendor for esignal(premier) in India. Viratech offers Advanced Get(advanced version of esignal) but they don’t offer the regular/premier. You will have to goto esignal.com directly to subscribe(it has become more expensive as we have to pay in USD)

      2. Without an iota of doubt, it is esignal. I am hoping Tradestation would come to India market but they are charting+execution platform and they told me couple of yrs ago that they are hitting regulations roadblock. So, no hope there.

      In my short stint, i have used Amibroker, Metastock, Ninjatrader, Tradestation and esignal for futures trading. I have tried AB and esignal in India. Other s/w were tried in US markets. Tradestation is really cool because you can also execute trades and automate things.

      For charting, esignal and TS are pretty close..Next would be NT, followed by MS and lastly AB…This is just my opinion. I don’t want to create a war on softwares.

      Having typed all this, I have to say that i use esignal more for their data stability than charting. I am ok with any basic charting s/w as i don’t use indicators but data quality/stability is a must.

  223. Sumit says:

    Sir,

    A member by name Jawahar had asked this question-

    “Madan,Do you give any importance to vwap and mvwap while trading?hoping you will reply.”

    May I know what is vwap and mvwap please? I am hearing it for the 1st time. Thank you.

    Sumit

    • Madan says:

      Sumit,

      Hate to say this but a little bit of searching online would answer your question. I might not do justice by explaining it here. Online articles are vast and well explained.

  224. Rohit says:

    Madan,

    While trading, do you consider larger time-frame support/resistance for taking profits or you exit your trade ONLY on trailing stop-loss hit?

    Rgds,
    Rohit

  225. stocky says:

    Hi Madan,
    if we pay $ 145/- per month to esignal…Can we get data ?( is it included) ..also i would like to know how many exchanges data can we get from their software( US,UK etc included ??) through this monthly amount?
    I appreciate your response

    • Madan says:

      Stocky,

      145 is just for software. NSE cash is $12 and NSE Futures is another $14 (to see Futures, one should also go for futures package for $25). So, i am paying approx 145+12+14+25/ month. You can also get other exchanges for more fee. Please have a look at their website for more details – esignal.com

  226. coolblr says:

    @Madan,

    Appreciate you taking out time to reply queries from folks here and that too in detail. Few questions from my side (more might follow :D)

    1. Any reason for choosing 10 mins time frame only? Or you see the patterns in other time frames also, but trade out of 10 mins?

    2. Interesting/useful/informative thread really and its nice to see great emphasis on the psychology part of trading which is the most important thing. You mention “visual patterns” about five times in your replies πŸ™‚ are these based on classic chart patterns or something else (I understand you would not want to give details, but asking are they same as classic chart patterns or different)

    3. The method you are trading currently – did you develop it when you started trading NIFTY or when you were trading US markets also? Did it work well on SP500?

    4. Not a question, but you mentioned that you traded in options earlier, and was really impressed with one of the strategies that you mentioned one could use in options, which clearly shows you seem to be a Guru in options as well. Yes I totally agree with you – we need something like thinkorswim for Indian markets too, I kept on emphasizing this in traderji’s Zerodha thread to Sachin, but a push from just one person is not enough you know. I would recommend this book (While going through this book I felt, why a book like this was never written on options before, and I liked the flow too, its like conversation between two people), if you get some time please read it – http://www.amazon.com/gp/product/B007OWOKQ2/ref=oh_d__o03_details_o03__i00?ie=UTF8&psc=1

    Cheers!

    • Madan says:

      coolblr,

      1. No specific reason..i am just comfy with that.

      2. Some are classic and some are not.

      3. It works on S&P as well. But, historically, S&P is not that volatile(except for the last 2 months)…For the last 2 mnths, CBOE Vix is consistently more than India VIX.

      4. I have a list of books to order – will include this book as well. Thanks for the reco.

  227. prakash1 says:

    Hi Madan
    Am just reading Position Sizing book. Is SQN ranking is apt to rate a strategy, are there any methods to rank any system. Can you please tell your system SQN rank.

    • Madan says:

      Prakash1,

      I do not know of any other method to rate a strategy/system. Not interested in revealing my SQN number. Sorry about that.

  228. machonitti says:

    Madan,

    Good Morning!

    If a person were to learn a programming language for the purpose of scripting/coding his own mechanical trading system, then which one would be less complicated, easy to grasp and above all, ideal for a trader’s setup. Is it mandatory to have prior knowledge of College/Engg. level Math or just rudimentary Math suffice?

    How about Python? Kindly opine. I’m sorry, if I might’ve overlooked any previous mention about this topic in one of your earlier posts. Thanks for your time.

    • Madan says:

      Machonitti,

      I am not really good at programming languages (even though my background is in Computer science). So, really would not know which one would be best for you.

  229. Mak_T says:

    Hi Madan,

    Thanks for all the answers to others and specifically to my question.

    Not sure whether you answered this or not; but just want to know what you treat as PIVOTS? I mean do you treat pivots as certain price levels or they are swing pivots (points) based on position of high/lows of previous and next bars?

    Why I am asking this is because, if we treat price levels as Pivots then they are known well in advance prior to day start but if we use Swing pivots, then they are known only after next 2-3 candles are complete.

    Regards,
    Mak_T

    • Madan says:

      Mak_T,

      It is based on previous bars. Few of the times, it would also coincide with certain price levels. But, i go with Swing pivots. I do not want to go further discussing this topic.

      Hope it helps.

  230. Arjith says:

    Madan,

    I recently bought eSignal data. Can you tell me the nifty futures symbol please. Thanks..

  231. coolblr says:

    @Madan, it would be great if you could post your old trading journal, if you got a chance to look for it.

    Also, I have tried to have a simple one on Excel or a book (and the habit goes away, for few reasons like missing charts, I know its all about discipline, and I kick my bucket for that all the times :D). One of the reasons it goes away are – I feel the excel or the book does not have an immediate chart look up for your winner/losers etc.How do you solve this problem?

    Cheers!!

    • coolblr says:

      Well I have it to some extent taken care of – by pointing it to the chart image file on local drive via a hyperlink, a good journal software would’ve been great.

      You mentioned to my earlier query about the visual patterns, mentioning its both classic patterns and others. BTW, what do you think of Al Brooks methods of price action trading?

  232. damodaran says:

    madan,
    do you give income tax on your profit from the market. i think we are giving various taxes for each trade being a trader, so do we need to file return if our income is less than 2 lakhs. please share your knowledge on filling income tax return.

  233. Arjith says:

    Madan,

    I am sorry I am asking you questions on esignal data. The support team just refuses to understand me. Would be grateful if you can answer this.

    If I want to create a watchlist for futures, do I have to type in symbols manually every month? are you aware of any way to simply import the list of symbols to the software?

    Thank you once again.

  234. Prashant kumar says:

    Hello Madan Sir,
    1.Can I use your strategy for trading stocks i.e. always entering on breakouts of high/low and trailing the stop loss?
    2.Where should I keep the stop loss? is it exactly at opposite high/low?
    3.Which particular 1 stock should I select for intraday or should I trade only in nifty future intraday?

    • Madan says:

      Prashant,

      1. I don’t see why it would be an issue trading stocks? After all, NF and BNF are made up of selected stocks. But, personally, i have not traded stocks with this idea.

      2. I have explained about it a few times. SL is based on recent swing low/high.

      3. I cannot select a stock for you and i am actually not a fan of strict intraday trading. So,really cannot suggest you anything there.

      • Prashant kumar says:

        Thanx for your reply sir.

        Can u pls explain in little more detail regarding the “SL is based on recent swing low/high” and how to trail the SL by giving any example…

  235. Kumaresan says:

    Sir,

    This question is general. You or Nithin sir many answer it. Thanks.

    When carrying forward a futures position, MTM is calculated on which price on the next day?

    Thanks..

  236. Abhishek rathod says:

    Hi Madan,

    Do you trade divergence between NF/BNF? If yes do you use it for swing

  237. Madhav says:

    assume u r long at 6100 with stop at 6000. as price unfolds, there is a swing low at 6050. will u place ur tsl at 6050 or u will trail only at a price above the entry price? ty!

    • Madan says:

      Madhav,

      My TSL moves only when there is a price movement in my direction. I am not sure how the TSL moves up when the price is going towards the Stoploss. So, to answer your specific example, Initial SL would be at 6050 and it moves further up when the market moves in my direction.

      Hope it helps.

  238. Madhav says:

    i have one more question for you. you introduced me to visualisation by recommending psycho cybernetics. i am just blown by this concept. i read the book once and i have started reading it for the second time from yesterday for better understanding. is there any other similar concept/technique you would like to introduce to us which u think has helped u a lot? thanks..

    • Madan says:

      Madhav,

      Glad that you are liking it. It’s such a powerful concept. Keep practicing.

      This is the whole idea of sharing what a person knows. Even if one person reading it gets it (or make something out of it), the job is done.

      • Madhav says:

        r there any more such interesting concepts which u would like to share with us? ty..

        • Madan says:

          Nothing really significant..But, i would definitely put lot of importance to Exercise and Nutrition..healthy body = healthy mind πŸ™‚

          • Dharan says:

            hi madan,

            congrats! for winning the challenge. I read all the previous questions, and ur answers. i would like to ask you some new set of questions.

            it says 300% return, just to get a better picture is it after [email protected] 30% that your profit is 3 times. like for 1 lakh capital, you made 3 lakh profit or you made 4 lakh plus but after tax, its 300%?

            do you increase your lots size every month, or just keep the same lot size through out the 240 trading days. This performance was achieved by keeping the same lot size or you increased it over a period of time.what rules you follow, or criteria you set before increasing lot size

            for a 20 point loss in one lot its 1000 rupees, when you do 20 lots its 20k, so how you handle your emotions when u increase ur lot size. how u handle those big profits and losses. many traders fail when they increase their lot size, according to you, what is the reason, and how u handle it.

            you returned back to India in 2009, so how many years it took for you to start making profit consistently in Indian markets.What tuition fees you paid in Indian markets?

            somewhere in previous questions, you have answered that your maximum draw down is 30%, is it like you have 1 lakh capital, and at one point u reached 70,000. or just like ur capital 1 lakh made a profit of 50k intially and a 30% draw down from that is back to 1 lakh.

            since you are one of the top 25 traders out of 35000, and has mentioned that your success ratio is 45%, from your experience have you seen people better than you, i mean what success ratio have you seen, over your trading career, which you dream to achieve. i have read in many books, that the best in the industry is 63%. Ed Seykota had a 60% success ratio over 6 years of trading.

            i am asking all this questions on behalf of many traders,like me.Hope you will share ur thoughts on the above questions.
            thanks

  239. Jackie says:

    sir i would like to know how many trades do u take in a week? in nifty and banknifty? thank in advance and congratulation..

  240. coolblr says:

    @Madan, the book that you mentioned on psycho-cybernetics is the book by Dr. Maltz? The new or the old book? or the content is the same?

    Cheers!

  241. Madan says:

    Dharan,

    I was not able to ‘Reply’ to your question..so had to type anew post…will try to answer your questions. If i have answered something before, i will mention it that way.

    1. The returns are before tax. Why would anyone calculate income tax? we do that at the end of the fiscal year πŸ™‚

    2. I have answered about lot size for last year before. I understand that there are 534 comments so far but would really help if you go through them in its entirety

    3. Have talked about increasing lot size and related psychology in various posts.

    4. Answer already about the number of years it took to be profitable. Paid my share to the mkt in US not in India.

    5. Drawdown is always peak to valley. If i had made 50K from 1L, total equity = 1.5L..So, peak is 1.5L. So, my drawdown in this case would be 1.5L – (30% of 1.5L) = 1.05..so, drawdown lasted till 1.05 and turned around.

    6.Not seen many successful traders but usually the benchmark i see is around 50%. It also depends on the Risk:Reward

    Kindly go through the whole blog to its entirety. It would have saved lot of your typing time but i do understand that it is discouraging just to see the sheer number of posts.

    Hope it helps.

  242. Neeta says:

    sir can i know if you show your data cost to esignal as expense while computing ur tax liability? ty

  243. sandeep says:

    sir if a group of traders wants to be mentored by u , r u interested in such type of activity ?
    can u share ur past trade details as a teaching basis so that one can look on charts and understand the whole structure ?
    u are sucessful in life , so if ur heart says can u , in future wants some followers of u and ur strategy .
    u can select mentees on basis of interview and trained them , this can also be done by virtual medium ….
    hoping some positive response ……..

    • Madan says:

      Sandeep,

      I have not thought in these lines. Mentoring traders need dedicated time and commitment and i am not sure if i am upto it (esp. in a structured way). it also imposes a lot of responsibility in me… Will think about it. Thanks for the suggestion πŸ™‚

  244. vinay says:

    hi Madan ,
    Thanks for your suggestions ..
    can you please guide me is it better to join training centers to learn about tech analysis stuffs.. i want to learn day trading skills…

  245. machonitti says:

    Madan,

    I totally second the suggestion/request put forth by Sandeep. There’s a glimmer of hope in your reply. Really kind of you to respond in a positive way. Please count me in as a mentee, if you may. Hope that day comes soon. That is, whenever you might be able to spare a couple of minutes on a weekly basis, if it’s not possible, daily, as per your convenience. Thank you.

  246. Vijay says:

    i know i will not benefit out of this in anyway, but still out of curiosity, i wish to know what has been ur highest risk reward ratio in nifty as well as bank nifty. thanks..

    vijay

  247. Arjith says:

    Sir,

    I am new to futures trading and have started with eSignal data on their software itself. Incase I use continuous contract, I do not need to change the watchlist every month, right? Thank you.

    Arjith

    • Madan says:

      Arjith,

      If you have only Nifty and BNF in your watchlist, you don’t need to change every month if you use continuous contracts. Symbols are NIFTY 1!-NSF and BANKNITY 1!-NSF. I am not sure about others.

  248. Prajit says:

    Madan,
    Thanks for your valuable answers in this post which helped me lot also thanks for sharing info like pshyco-cybernatics its really true resource for me.

  249. sanig says:

    Hi Sir. Your interview is interesting and inspiring for all newcomers like us. Just I have a few quetions for you and hope you will answer them.

    since you are among the top 25 traders, but you said, that you don’t trade options due to time factor involved. Have you seen any successful option traders in india. how big is their account size,some where in your earlier post you have mentioned that you know some one who traders 250 to 300 lots and the slippage is 5 points for a 2 to 3 crore account, do you think in our market you can by options for 10 or 15 lakhs without much sllipage if its in the money, or out of the money options. kindly share your thoughts. thank you.

    • Madan says:

      Sanig,

      I am sure there are successful option traders in India but i have not personally met anybody (who exclusively trade options). I know only few traders out of 1L traders we have in India. So, my sample size is negligible enough to come to any logical conclusion. Brokerage firm’s statistics might reveal the true info.

      Am not really sure about the slippage in options(as i don’t trade them) but can say one thing for certain. ITM options volume is pathetic in India and 90 – 95% of the volume happens in 1st, 2nd and 3rd OTM option strikes.So essentially, the slippage would be higher in ITM than OTM(1st, 2nd and 3rd) options.

  250. GEN says:

    Hi Madan,
    Good day to you,First of all congrats for your success,
    Sorry if I ask some basic questions

    1) Since there are no continous charts in indian futures how do you manage to chart on longer time frames,because to find support resistance we need enough history to trade,How do you tackle this?
    2) In india is not possible to place overnight orders so how do you manage this for STOP LOSSES/PROFIT TARGETS.
    3) OCO order capablitly is also not available so is there any work around for this.

    Regards

    • Madan says:

      GEN,

      1. eSignal offers conitnuous contracts for NF and BNF ( the instruments i trade..no issues here)

      2. I have mentioned earlier that i take the losses if the mk opens against me in the morning.

      3. Nope. We will have to cancel the other order manually.

  251. kathiravan says:

    thanks madan for your patience to answer all our queries for the last 2 months

  252. kathiravan says:

    madan wat about gold and silver futures trading where high volatility and liquidity exists; have u tried those instruments?

    • Madan says:

      Kathiravan,

      I have not tried them. As their trading time is more than 12 hrs for these instruments, i have given them a miss πŸ™‚

  253. coolblr says:

    @Madan, I have read your post here on full-time/part-time trading and how one should transition too. I have few more questions:

    1. When you are trading part time, a good gauge is one being profitable consistently, as you said in that post about one year and returns do not matter. But, can you tell me if account size during that period where you are consistent matters? As account size eventually means the position size, and smaller account/position size will have a different psych viz-a-viz when trading with larger position sizes. I understand it should be the same, but how did you tackle that problem?

    2. In one of the books that I was reading few months back, mentioned that when you are trading part time you should not go full time till you start getting the returns as much as you make in a full time job. How much do you subscribe to this? As the writer in his case mentions that when he started full time he started loosing money, but he was making money consistently part time. (In the writers case too, even when he was making as much money as full time job when trading part time, he could not when he started full time. A good trade plan should help, but how do you train yourself). Now, this is linked to the first question, if returns does not matter when trading part time, if going full time shouldn’t one know how much return he/she can make, if he/she can eventually live out of it (There is passion which drives, but as you said there is a thin line between passion and addiction :D) and eventually can sustain on trading.

    3. How was your transition, you do not have to give exact figures, but as an example, what did you do, you were profitable when you moved from part time to full time (I know it cannot be replicated to me, but just trying to understand what you went through). Was it easy immediately or there were hiccups and how you handled them? If you were breaking your trading rules/plans what you did to come back on track?

    4. It would be great if you could elaborate on how you transitioned from part time to full time in terms of position sizing and profitability as well, how was your experience.

    5. Another article/trader said that you should’ve a back up plan or some passive income when you transition from part time to full time, do you subscribe to this? Did you think about it when you transitioned?

    Cheers!

    • Madan says:

      Coolblr,

      Your questions show the maturity in your thought process and i can tell you that you are in the right track. You are thinking in the right direction..way to go.

      1. Good question. We can only do so much with the acct size right? If a trader can bring only a lac, so be it. He will have to slowly build it. Key is not to depend on the money coming out of trading. As you rightly said, psych would be different between 1 lac vs 1C account. But, everyone has a humble start.

      2. There are two school of thoughts. a) Make enough money/returns before going fulltime. b) Get some experience and plunge into the water to see how it goes. Both have their pros and cons. The best situation is to have a some kind of backup money for monthly expenses and go full-time. This could mean an hefty bank account or passive income or spouse working. I remember going through Van Tharp’s ‘Peak performance course’ and he states that one needs to make enough returns trading part time before venturing into fulltime. I agree with him partially but very difficult to implement..lets say a traders monthly expense is 50K and he could bring only 5L to trading. So, to cover his expense, he is expected to make approx. 8L(before tax) from 5L..that’s 150% returns and i am not saying for a moment, that it is not doable. But very few people can do this and on top of that, there is also an urge to build the account size. This can put tremendous pressure on the trader’s psychology. So, when someone goes fulltime in trading, the biggest leg-pullers are the account size and the need to make money fast.

      Bottomline – i would say trade part time but it is just delaying the inevitable. Eventually, the trader has to go fulltime to make this as a profession. Ideal scenario would be to have a decent trading acct (say 25L) and have 3 yrs of monthly expense stashed in FD or bonds. In this way, one can trade with peace(other vices of trading has to be handled anyways) and focus on trading properly rather than on making money.

      3. When i moved from PT to FT, i was just breaking even. No loss/no gain. There were lot of struggles in the beginning and was breaking my rules left, right and center. Eventually, mkt taught that i need to be structured to survive. This is where Trading journal really helps. We can go back and see what has happened when we break rules. It’s an ongoing learning process and the understanding on why to follow rules will come over time. Self-realization has to happen.

      4. It was not a smooth ride but well worth it. Please understand that it might take another 1000 words to type the experience but i see that you have the burning desire to understand what goes on in a trader’s mind at various stages πŸ™‚ We can talk about this for hours but to type it in, i need to hire an assistant πŸ™‚

      5. As i said earlier, you need to have fall back money to take care of monthly expenses for atleast 3 yrs..can’t stress this enough.

      Hope it helps.

      • coolblr says:

        Madan, Really appreciate you replying to my queries in detail.

        I am doing better since 1-2 years, well, I’d say some profits from not a big account and overall in the green for the year and for the account size the returns have been good. But as you said going to a higher account size and getting the same returns is not easy as well, which I understand, also have to get accostomed the fact that bigger position means bigger risk as well and eventually bigger drawdowns.

        I would say overall the methodology and system (Since more than 2 years there is no indicator what so ever on my charts, occassionaly I see 20 EMA and BB (20,2), even before that I stopped looking for the holy grain or trying out different indicators) seems to be alright and the mistakes that I use to make before have come down, especially cutting down on the losses.

        Things to improve as you mentioned, importantly on the trading journal part, I do maintain one, but have to accept that I am not completely desciplined with respect to that. Also, I think I have a mind block that the journal I have is not a great one (an excuse I suppose :D), there are no good journal softwares in the market. I kind of feel that an immediate chart reference against the trades needs to be there, trying to figure out ways to do that in excel or linking to the charts in the excel itself in someways.

        Will keep in mind about the points you mentioned about the backup money and the account size. Hopefully will take the route of inevitable and do the right things and hope to see success.

        Cheers!

  254. Raj says:

    Madan has written he started with 50L and at end has 1.5 Crore.

    He has made 200% then because 50 is capital and 100 is return then total is 1.5 Crores

    • Madan says:

      Raj,

      50L –>1.5C was given as an example. My account size could be 10K or 10C. I have never revealed it and has no plans to do that.

      But larger the account size, more tougher it is to rake in huge returns.

  255. CA Vicky Jain says:

    if given the option to use bracket order, will u use it? i understand that u don’t have targets, so obvio u will not use it for targets, but u will not have to punch stop order every morning.

  256. Madan says:

    Folks,

    I guess i would take a recess in answering questions for a while. I really enjoyed interacting with you all. Even the page is loading much slower. I never thought that we would see around 560 comments (including mine). Hope it was of some help. Have a safe and happy trading πŸ™‚

    Nithin – the page is pretty big now. Is there a way to make it load faster?

  257. Raji says:

    Well. With all the readings and interviews sound good, just my ounce of thought: Till towards the end, Madan never seem to have shared his look, Setup and Trade patterns – all he kept saying is his ‘secret spice mix’ of entry/exit and TSL setup through ‘chart setups’ and ‘visionary observations’. One would understand it is highly insensitive to share portfolio details, it’s personal choice. But I differ on a former one. Had every market wizard believed and followed this principle of knowledge sharing restrictions, a vast amount of knowledge pool on stock markets would never have existed in the world and so called internet that Madan is frequently referring to.

    There are opinions and views that one’s trading pattern or ‘SECRET SPICE MIX’ will be ‘disturbed’ if is revealed to a larger group. And some have strongly supported it and some have frustratingly cursed on it. And most of the posts and replies had an aggressive approach towards the group of ‘go and read on your own – after all I have done it for past so many years’. I certainly do not believe, given depth and breath of the market, if someone feels his patterns will be ‘disturbed’ due to larger usage and public revelations, I can only call it, a mere ignorance – After all, turn over every day is in terms of lakhs of crores.

    Dimensional pivots, Moving averages along with ADX and RSI work wonderfully and does the magic for ease trading. Most of the MAs still work wonderfully on larger timeframes. But one need patience and willingness to avoid intraday aggressiveness. I agree with Madan on capital and trade management.

    Some ellioticians in the field give wonderful reports for meager subscriptions. I am not promising that it works 100% but they share vast amount of knowledge that they have gained on their own research, education and experience. I certainly do not prefer to name any individual here as it would sound like marketing. All I wanted to highlight to Madan and his likely minded group is that, those people never thought sharing their knowledge would decimate them, their trades and the market – let me tell you that they don’t give tips but they merely share their analysis, including their journal!!!

    Madan, nothing personal here! Just sharing my frank opinions after reading your responses.

    There is no magic wand in this world for a successful trade. Just follow traditionally successful patterns and selected one or two indicators, and keep moving with smaller positions. Dimensional pivots with the mix of MA will do what Madan is talking about all along as a ‘secret spice mix’ – price based movements.

    All guys who feel satisfied and unsatisfied with this blog: Have a self-confidence, keep inventing and best wishes!

  258. RAHUL says:

    Raji ,
    As per me Madan appears very satisfied with his strategy ,
    there are many many people in market who charge subscription for strategy some give it free ,
    but think with cool mind ,
    if someone is thinking of earning money by subscription fees rather than trading ,then there is big big question on his credential ,
    believe me or not – its a hard fact that using indicator is gambling , but still the whole world is behind it .

    many people who were supposed to have possessed the remote of nifty once ,
    have failed because the are dependent on indicators ,
    i think Madan will agree with me

    Regards

    • Raji says:

      Rahul,

      Indicators always have lag effect – Everyone agrees to it. No doubts raised over the satisfaction attained by Madan and similar such folks. It’s a mindset.

      Whole lots of things available for free and as well as for fees. There are free open source softwares and paid softwares, free emails, paid emails, etc….But it shouldn’t raise question about the credentials of paid services – True, several paid services are worth nothing. But, all cannot be viewed with same lens. I tried a trial service of one of the much proclaimed winner in this blog – just monitored it for few days; alas! As usual all fails during real play – then there is a sting attached as usual, that, one cannot read other’s reactions to the market!!!!!

      My expressions were only about the heavenly sacret played around the secrecy of the strategy all through these discussions. It reminded me of one thing – “Astrologer syndrome”…If you go and meet an astrologist, he will self proclaim to be an extraordinary human – end of the day it is art and science of planet and stars positioning. Secrecy is meant only for the continuity of the business for the particular group/community and assurance of sustaining wealth for them to get rid of poverty. Same principle holds good for all such secrecies around ‘businesses’/’services’.

      I just go with 5 day, 7 day and 15 day dimensional pivots, this will change constantly the current day’s reference pivots as the trading hours progresses and this is what set as SLs for me; I tried to apply elliot wave principles and Fibonacci levels as well some times to understand likely momentum and targets – Just wonderfully takes care of the price action trading rules; Mine is positional and swing trading – Works wonderfully 60% of the times. Yet the toughest part is emotional management because of lack of it I get many trades wrong – still a toddler on this aspect. I have no hesitancy sharing my learning here! I earned a little, lost huge, but learned great! I am able to anticipate losses now!!

      Raji

      • Dharan says:

        raji
        first of all what madan has achieved is commendable…..for the account size he handles, getting this return in great. But there are many things which no retail trader is going to understand. If you break up his performance, then many will start cursing him, and will leave him all alone.

        As per his system, his drawdown is maximum 30% and average 15%, he has clearly mentioned that he uses approx 1 lakh capital per lot, so to get a 15% draw down he will make a loss of 300 points before his equity curve turns back. Now this is not acceptable for retail traders, they want 80% accuracy, not 45%.

        As A.E said compounding is the 8 wonder of this world, to get his performance of 300% return per annum, its enough if you get just 125 points per month, and keep on increasing the lot size accordingly every month. 125 points per month, is not at all attractive for a retail guy who is looking to get everyday 50 points, so his target for 22 trading days is more than 1000 points, where as madan has reach this 1000 points in 6 months time. So he is consistent, patient, and knows how to handle big money, and last but not least how to handle losses, because 55% of his trades get stopped out, 80 percent of the people lose out in this last point, they cant handle the loss, and press the self destructive button.

        so what he achieved is great, but when you break it up into pieces, it just normal and simple stuff, but we all fail to do the simple stuff, and complicate it beyond our reach.

        • Raji says:

          Dharan,

          Thanks for summarizing. I fully appreciate Madan’s strategy. In both of my posts, I never questioned or raised any doubts about his performance. He is honest when he said about his losses and patience.

          I am surprised about under estimating retail traders, their strategies, patience, expectations and knowledge. Many of them do very well, at least I have seen, consistent and make decent profits with smaller capital in size. Only limitation is they don’t come out in public forums.

          You are claiming again about normal and simple stuff, and you blame others of not doing simple stuff…What are those??? It is simple to do – but difficult to explain over blog posts????

          Do not divert topic again on Money psychology, emotion management, risk management etc….This is what happened in this entire blog post!!!! One should not underestimate and undervalue other human brains!

          • Dharan says:

            raji…..what you really want to know…i dont get what you want to know….this is madan blog, and i dont want to share any of my views here. If you really have want to know the simple stuff??….do mail me with ur doubts to [email protected]………i am not diverting the topic. If you are serious to know, clearly type in ur question. cool

        • Mak_T says:

          Excellent comment Dharan.

          Just 125 points and right MM, one can get 300% returns. Other way to explain is: Consider if someone is trading 1L per lot in NF and makes consistently 125 points on an average. So points made= 12*125=1500. Now 1500*50 = 75000 that is 75% returns on 1 L capital.

          Now as Madan explained about MM fixed ratio & fixed fraction; initially we will use more aggressive technique and add after every 20 K profits.

          So after 3 months, one will be trading 2 lots and after again 3 months one will be trading 4 lots and so on. So if we can do simple calculation, its easily 300% …..

          But again how many are going to do this in next one year. Very few , why? So thats where mindset comes in picture….

          just my 2cents….

          regards,
          Mak_T

  259. Prashant kumar says:

    Hello madan ji,
    I am now just tired of losing my hard earned money. Also I am tired of different techniques for trailing stop loss but none works. Pls explain in detail how you trail the stoploss. If u are not comfortable here on the forum to explain with high details then pls mail me on my email id “[email protected]”. Pls help me recover my hard earned money to come out this hell phase I am presently going through.

    • Raji says:

      Prashant,

      Spend some time and read the entire blog posts. You will not get answer for your question and medicine for your frustrations and that is what was told repeatedly. My views:

      a. Restrict to one or two scrips – I use TELCO, TISCO, HINDALCO and NIFTY – not all simultaneously but whichever develops the required signals.
      b. Try and understand swing pivots such as Higher High, Lower Low, Higher Low and Lower High
      c. Understand Dimensional Pivots and different timeframes – They develop like MAs but not exactly MAs. Real action happens on these points.
      d. Watching some of lag indicators such as ADX and RSI would help gauge any major trends. But do not use indicators to entry/exit. It never helps!
      e. Applying elliot wave principles and Fibonacci retracement rules will certainly help. Again this is also similar to point d.

      Madan certainly provided few inputs on Money management and positional sizing. These are good.

      I don’t know my intrusion to your question will satisfy you…but certainly you will receive a reply that go and study on your own.

  260. Raji says:

    Dharan,

    This is public forum – no one can question and take ownership. As long as this is available public, everyone has right to respond and counter the observations. If someone appears on public forum, they should discuss the topic without grey areas – This is an educative forum and not a place for marketing circus.

    I neither want to know any simple/complex stuff from anyone. I have spoken on behalf of 500+ folks who were excited about this interview and kept pouring queries expecting some magic answers. Neither I have a question rather I questioned the attitude of individuals in this forum against the masses.

    My comments neither addressed to Madan nor other individuals…When I said ‘you are claiming’, I didn’t point to you. Just wanted to bring down the unnecessary enthusiasms that fellow members showing in this entire interaction! Bye!

  261. Manish says:

    but u said short right? that too with no stop. and u said short call will work like magic by 3:20? what happened to the magic? its high time u understand why this page features Madan and not u.

  262. RAHUL says:

    Manish
    This is why investors do not make money ,
    i dont have remote of nifty ,
    i have to respect the trend ,
    if i would have sticked to my short ( which also made profit )
    i would not have got 30 pts in long and i would be a loser ,
    Markets dont follow us , we have to follow the market ,
    also i dont que that i am better than Madan ( not even 1% ) ,

    Good Day

    • Manish says:

      if u understand that u do not have the remote, why did u mention that ur short trade is going to work like “magic”? and when u gave ur long call, u’ve mentioned that ur long call is going to be a “sure shot”. when u don’t have the remote, how can u be so sure that ur long call is going to be “sure shot”? pls stop misguiding ppl. and yes, u r right, this is why investors do not make money. glad u understand.

    • Rahul,

      I’d appreciate that you don’t post any calls on this post or anywhere on Zconnect. The idea behind Zconnect is to educate, but we are working on a platform where you can share your trades with others. But until then do hold off giving any trading calls.

      Cheers,

  263. stocky says:

    Hi Madan, You are playing only Breakout ? Most of the time Breakout will turn into breakout failure…. and SL will hit immedietly .Any tips can u give how can we make sure breakout will happen this time ?

    • Madan says:

      Stocky,

      Have answered this one before..I am pasting the response here again.

      “There is actually no way to know if a breakout is true or false (unless a trader have hindsight bias πŸ™‚ ). That’s where money mgmt kicks in. Need to follow MM to the dot to see if the breakout is fake or true. No easy way out.”

      • stocky says:

        Madan thanks for reply, You mean book loss according to our stop loss limit and look for another opportunity ..Correct ?As a small investor what i experienced most of the time if i put stop loss 10-15 pts away…it will hit immediately and then price will move against me !!All operators know this well then they sweep up this price level(SL)…Problem is as a small player how can we manage stop loss level (more than 1500 rs stop loss i cant afford..that much less capital i am playing )..I appreciate any input from anybody

        • Madan says:

          Stocky,

          Your SL is based on some Support/resistance or just based on point value?

          Lets say, the S/R or pivot or whatever ref point you choose is 30 points away from your entry. What would you do in that situation? You have 2 choices – pass on the trade and wait for next one that confirms with your risk mgmt or reduce the lot size to match with your risk appetite. But if you are trading with only few lots in the first place, the second choice is not feasible. So, have to pass on the trade and wait for the next one. Small account has it own pros and cons.

          Hope you get the point.

          • stocky says:

            Hi Madan, I use stop loss based on previous support level. problem is if i choose SL 30 pts away from purchase point then i would wait for profit target at least 50-60 pts away..I dont have guts to carry forward position so most of the day profit target not achieve..But stop loss achieve..so net account always loss!!!!!

  264. munna says:

    congrats madan this is my first entry can u tell me u said that u r using 10 min bar and u also telling one should back test for 8 to 10yers wher will u get 10year 10 min data o future nifty please

    • Madan says:

      Munna,

      5 yrs of intraday data is available in eSignal. When i backtested, intraday data was available from 2004 onwards….now, its available from 2009..10 years might be possible with someone else but not sure who.

    • coolblr says:

      Google might help you here, you may not get for all the stocks, but NIFTY you should be able to get 5 mins data from 2004 I feel. Check it out…!!

  265. munna says:

    congrts madan this is my first post can u tell me wher u get 8 to 10 years 10 mi data as u told at we have to back test at lest 10 yers whre will we get 10 years of nifty fut intraday data

  266. jaya says:

    Hai Madan,
    Congrats for ur success,
    Please can u tell me about the continuous wins & Loss of trades, Expectancy of your system if possible

    • Madan says:

      Jaya,

      As my system is less than 50% winning system, statistically the consecutive losses can be as high as 20 trades. I have personally seen 16 trades in live trading. So, if someone pledges 3% in a trade, it is possible to lose 60% of the acct size. This is where proper money mgmt kicks in. Goal is to live today to fight t’rrow..survival is key.

      I dunno the consecutive wins as i don’t keep track of that parameter. Expectancy can be calculated from my previous posts(all you need is winning/losing ratio, Average Risk to reward)..don’t want to dwell into it much.

  267. munna says:

    madan thank u for your reply on intrady data but 5 year intraday data of spot or fut u clarify

  268. Rohit says:

    Raji,
    Completely agree what you’ve said here.
    What is “Dimensional Pivots” ? Is there a link or documents which explains this? If you have, Kindly email it to me. [email protected]

    Rgds,
    Rohit

  269. munna says:

    madan sir u told we get 5 years of intraday data of nift clarify wether its spot or fut nifty and one more think i am new to tecnical analysis i want to know the diffrense between days low and swing pivotlow plese help me sir and one more thing is why u use 10 min why not 5 min or 15 min

    • Madan says:

      Munna,

      Please google for swing pivots. After you read couple of them, ask your question here.

      To be honest, there is no specific reason for trading 10 mins. Timeframe is trader’s choice. The real question is’ Should i trade smaller TF’s like 5-30mins or bigger TF’s like 240min or Daily or weekly chart?’. Only you can answer that question.

      Hope it helps.

  270. Monk Trader says:

    Hello Madan…
    First of all congratulations for your success & best wishes for future trades and a big thank you for being so humble & helpful to others.
    It’s really fascinating to read your views, i can relate to your thoughts and your trading method, i have been trading in a similar way for past one year & its been good.
    My only question is that in case of gap opening in nifty…if market opens hugely against your position & suppose it has also jumped your SL in a big way then what do you do?
    I mean you close your position immediately & accept big loss or you wait for the price to come near your SL(the last pivot point).
    I hope i was able to convey my problem here, i am not good with words and i must say that you are really amazing with words & express your thoughts with amazing clarity.
    Thanks.

    • Madan says:

      Monk,

      I would wait for the market to cool off a bit, close my position in loss. This 1 trade cannot make or break a trader right? There is always the next trade. I never wait to take my SL…never, ever.

      Some traders have mental SL’s but i think i am not into that league yet and i guess i never want to be…Different people are comfy with diff mindset (that leads to diff exit mechanisms). Nothing is right or wrong in the market as long as we are able to protect our capital in a reasonable way.

  271. coolblr says:

    @Madan, I understand you mentioned you would take a break from this thread. It would be great if you could reply to this query.

    I went through your recommended book “PsychoCybernetics”, and found it to be very interesting. There are lot of things that we could apply to ourselves to become better not just as a trader, but in our day to day lives to become better person as well.

    Coming to trading I did find few things that we could apply (definitely the other things should also help us become better overall), it would be great if you could go over the things that you applied in your trading or your methodology/discipline/system from the teachings in this book.

    Cheers!

    • Madan says:

      coolblr,

      Your post made me come out of the recess a bit. πŸ™‚ Not sure, if its good or bad.

      I have applied the concepts in various aspects of trading.

      Disclaimer: For those who don’t believe in visualization, this post has no use. So, have a supermarket approach to this post – take whatever you like !!

      1. I used to have ‘pulling the trigger’ issue and after visualizing the execution of orders in a calm way, i guess i overcame it. Please understand that it takes time and effort as stated in the book. Nowadays, i don’t even blink before pulling the trigger anymore. It is as easy as transferring stuff from my left hand to right hand.

      2. Nowadays, this is what i do for 30 mins everyday in the morning. Details are extremely important to cheat the brain that it’s real. One should see, feel, hear as if its real.

      1. I visualize myself getting relaxed.
      2. Set goals – trading, personal and health…see myself achieving them. Remember, these change over time and new goals would replace old ones.
      3. I see myself in a relaxed state before my PC and executing my trades calmly..see the SL’s being set and trailing them(bith NF and BNF)
      4. I see my equity curve going up nicely and also see the trades in the journal that made that equity curve possible (this will take time to visualize but eventually, one would get it…this is more so true for traders who have lost money on the market and have not seen consistent money)
      5. I see a huge trade like the March 1st week trade and executing my plan calmly. After a windfall trade, i also see myself not getting high but still follow my plan in a calm way(being relaxed is very important in anything we do in life)
      6. I see mkt opening against me in a huge way but i wait calmly for few mins to settle and come out.
      7.I see myself not carrying pas trade as baggage. See myself clearing my mind and getting ready for the next trade without worrying about the outcome of the previous trade.
      8. Lastly, see myself entering trades in the journal and calmly switching off my system and getting out of the room

      So, you can custom-made your sequences based on your current needs in trading and other aspects of your life.

      Hope it helps.

      • coolblr says:

        @Madan, thanks for coming out of break and replying my query. Please keep an eye on this thread, I might ask you few more questions/queries (It will not be related to anything that you would not want to share, because I understand and respect it should be private and moreover, I know it is not going to help me, like the system you trade, or the returns that you’ve had or made, because like they say, even if I take the best system from the market, I can screw it up big time :D, because it would be me who would be executing it, not the person who developed it or owned it). It will be mostly related to psychology, trade management or money management.

        Coming to your reply to my query, really interesting, especially when you say “cheat the brain till its real” or otherwise what they popularly call it as “fake it till you make it” to get confidence, and eventually brain gets trained and it becomes natural from there. As you said there are so many aspects that the book explains which can be applied to our life and trading, to make it better. Highly appreciate sharing an example how you are applying visualization techniques in your trading. Will try to have some custom made visualization points both for trading and life to make it better.

        I would like to check on point number 5 that you made, did you mean you anticipated that move or even after that kind of huge move (Feb – March 2014 move was a superb move! Wooof..!!), you stuck to your plan and executed it?

        One more question, I remember you mentioning booking out profits early in case when IV’s go up (IV’s usually go up when market makes huge down move and wild swings with volatility increasing), this time it was the reverse, IV’s increased (because people rushed in to cover their calls) even when markets went up, did you do anything different this time?

        Cheers!

        • Madan says:

          coolblr,

          Well, i followed my plan to the dot in Feb and March..so no regrets there πŸ™‚

          Yes – i trade with less quantity when the VIX goes above 22-25. Just not too comfortable with extreme volatility as i carry over my positions.

  272. munna says:

    madan sir when i read your blog one think i notesed is u r not intrested in shring how many points u will get in mone mont an avergge why u r not disclsing this u clarify every trader wants to know how many points u got at lest in 2013

    • Madan says:

      Munna,

      Please tell me one logical reason for you to know that info. How it would help your trading? If i am convinced that it would help your(others) trading endeavor, i would gladly talk about it.

  273. Pattabhi says:

    Sir,

    I use eSignal data too. On the day of expiry, the continuous contract chart does not open up after the market hours. Do you have the same issue or is it only me?

    Pattabhi

  274. Somebody(don't wanna disclose ma name) says:

    Hello,
    Madan Sir, what will be your take if market gaps us next day with 100 points and you were holding a position, So will you take profits or keep trialing stoploss?

  275. prakash1 says:

    HI Madan,

    In the below reply you said you wont wait for the SL to be taken. It mean that you place you order for exit and entry as and when the pivot is formed. If so some or many times I see that Nifty Spot Pivot wont break but NIfty Future pivot breaks. If orders are placed we will hit and go in oppos direction. How you handle this situation.
    1. Keeping mental SL. Wait for nifty spot to come near or cross the pivot then exit the NF. OR
    2. Place the orders according to NF chart Pivot values get in trade and exit if oder executed in wrong direction and re-enter according to trend.

    Please reply let us know how to handle this situations.

    Madan

    Monk,

    I would wait for the market to cool off a bit, close my position in loss. This 1 trade cannot make or break a trader right? There is always the next trade. I never wait to take my SL…never, ever.

    Some traders have mental SL’s but i think i am not into that league yet and i guess i never want to be…Different people are comfy with diff mindset (that leads to diff exit mechanisms). Nothing is right or wrong in the market as long as we are able to protect our capital in a reasonable way.