TRADING-THE BIGGEST MIND

GAME ON EARTH
•Making some money in the market, in theory, is easy
making some money in the market, in practice, is also pretty easy
but making regular returns over a long period of time? This is not as
easy.
•The primary factor that determines your ability to make consistent
profits is psychological. You could be an extremely intelligent person, with
the best strategies on the planet, and still be a terrible trader. This is
not necessarily because you lack ability and potential, but rather because
you probably haven’t yet developed a trader’s mindset.
•A successful trader is one who is able to follow a set of rules defined by
himself.
•Trading is only endeavour where you make your own rule and choose to
follow them or scrap them.
 RULES
• Let’s say you made a rule for yourself that you will wake-up at 4 a.M. And
do exercise daily.
• When you break this rule, nobody cares, you don’t feel much of a
difference.
• In trading, when you don’t follow your rule, you move to the group of
traders who will definitely lose money over time.
• A rule can be as simple as “ I will not trade on Fridays “
• Now if you trade on a Friday and get away with it, or maybe made some
profit, this is very dangerous.
• This ensures you will again break your rules and soon there will be no rule
at all. Run away with your money before going there.
 RULE-1: TRADE WHAT YOU SEE, NOT
WHAT YOU THINK
• In trading, there is no absolute truth. At any given price, there are always
buyers and sellers.
• So at every price, someone thinks price will go up, someone else thinks
price will go down.
• If you start to think, you try to predict future. This is stressful.
• When you think and your thinking proves to be in line with reality, you
start thinking only and not trading.
• Trading is not about knowing future.
• Trading is all about act.
• Buy when price is going up, sell when price going down. Simple.
• Do not try to think, because human brain does some crazy things when it
thinks.
 THE PROBLEM WITH THINKING
• In the next video clip, your task is to accurately count number of passes
made by team in white dress.
• Https://www.Youtube.Com/watch?V=vjg698u2mvo
• The point is, when we engage our brain in some specific task, we become
blind to seemingly obvious things like what happened in the video.
• In stock market, sometimes we get so emotionally attached to some
particular stock that we cannot accept loss and cut the trade.
• The solution is, trade what you see, not what you think.
• If your setup says you should exit, you should exit, simple.
 MORE DANGERS OF THINKING
• Assume you lost last 5 trades you took. Will you take the next
trade as confidently?
• Assume your last 5 trades were huge winners. Will you still
take the next trade just like last trades? Or you will take bigger
trade?
• Both of the cases you are thinking and it will cost you.
 RULE 2- TAKE ONE GOOD TRADE AT A
TIME
• When you take a trade, treat it independently,
irrespective of previous trade results.
• Focus only on taking one good trade at a time.
• Then one good trade. Then one good trade.
• Good trade means trade taken according to your
set of rules.
• A good trade can win or lose. Factor is the set of
rules.
• If you take good trade only, over time you will
make money. Not immediately, but definitely.
 RULE 3- EVALUATE YOURSELF
• To be a successful trader, you have to get into
some habits.
• One of them is knowing your self.
• In the struggling periods of trading, you are going
to break many rules every single day. Identify
them and try to avoid same mistake again.
• Identify your mistakes in every trade and improve
by not making them next time.
• This is fast forward way to improve your trading.
 4 KIND OF FEARS
• 1.Fear of being wrong- this keeps us from taking
trades even when the setup is present.
• 2.Fear of losing money- this can tempt you to
change strategy, take another course, another
tips service, quit trading and so on.
• 3.Fear of missing out- this make us jump in a
trade when we are late to enter.
• 4.Fear of leaving money on the table- this makes
us take profit early and missing out on big profits.
 BRINGING IT ALL TOGETHER
• Last 3 trades you took, ended up in loss. Now you passed
the next trade setup thinking it might go wrong too.
• But the trade starts moving in the direction as indicated by
your setup.
• But you now feel how much profit you could have made.
Now you calculate how much more this can go and decide
to jump in anyway. Fear of missing out.
• Soon the trade slows down and starts to retrace. You feel
you missed the top. Now you don't want to miss out any
more profit. You won’t wait for exit setup, you take the
profit anyway.
• You do this over and over again, and over time you will only
accumulate losses. You will have nice trending stocks in
your portfolio but your account will go down only.
• So identify your fears in every trade and take an oath not to
repeat again.
 YOUR EQUTY CURVE
•Take your trading business
seriously.
•Record your account value at
regular interval.
•Your trading will have
drawdown periods, but it
should nicely head up.
•If your equity curve points
downward, there is
something wrong with your
trading discipline or strategy.
Take care immediately.
 EMOTIONAL ROLLER COASTER
• When you attach your emotion with every trade you
take, imagine how exhausted you will be with every
trade.
• In your life time you will take maybe thousands of
trade, can you survive this kind of roller coaster so
many times?
• In our risk management and probability chapter we
will teach you how to trade without emotional
involvement.
 NEGATIVE SUM GAME
TRADER DAY 1 DAY 2 DAY 3 RESULT
KIRAN Enters the trade Market moves Running loss Market turns and
against the trade. increase to 4.8%. 10% target is hit.
Running loss 2%. “WHAT A BAD “INCREDIBLE.THE
“THIS IS NOT GOOD” TRADE,THIS WILL HIT STRTAEGY IS
SL SURELY” BRILLIANT”

RAHUL Enters the trade Running profit Running profit Hits target of
1.7%. 4.8%. 10%.
“SLOW TRADE.IT’S OK. “YEAH,GOOD TRADE.” “GOOD,I AM GOOD
TRADER”
DIWAN Enters the trade Market rallies, The stock flies to The stock soon
running profit 24% profit. reverse and hit
6.8%. “WOW! I’M GOING TO trailed sl of 10%.
MAKE A KILLING IN “WHAT THE HELL.THIS
“NICE.” THIS TRADE” STRATEGY IS BOGUS.I
COULD HAVE GOT
MUCH BIGGER
PROFIT.I NEED BETTER
STRATEGY.”
 NEGATIVE SUM GAME
• While all 3 traders made same amount of profit, they felt different about the
outcome.
• They used same strategy, exited in same time, outcome also same, but one of
them are out looking for another strategy.
• It is a fact that the joy of having a 10,000 rs profit is much less as compared to the
pain of having 10,000 rs loss. It is emotional negative sum game. They do not add
up.
• If you give a strategy to an ordinary man that will surely give him 10 crore rs in 10
years, he will most likely modify it in an attempt to realize those results in just 1
year, and in the process he will create a habit which will give him 10 crore neither
in 1 or 10 years. For the same greedy psychology that made him change the initial
strategy will strike again and again when his new systems are not producing
massive results in short term. Master your mind. Master the market.