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Trading Essentials: 1) Trend or Consolidation

This document discusses the essentials of successful trading. It identifies four key aspects that determine trader success: 1) trend vs. no-trend, 2) momentum, 3) volatility, and 4) trading personality. Understanding these aspects, especially market structure and price action, is crucial to earning consistently in trading. A strong trading personality incorporates effective risk management, position sizing based on probability, and patience to only take high-confidence trades. Mastering market essentials and developing the right trading mindset through experience are necessary but not sufficient—traders must also have a strong understanding of price action to avoid losses and defeat predatory market participants.

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dhileep.bhashyam kumar
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186 views3 pages

Trading Essentials: 1) Trend or Consolidation

This document discusses the essentials of successful trading. It identifies four key aspects that determine trader success: 1) trend vs. no-trend, 2) momentum, 3) volatility, and 4) trading personality. Understanding these aspects, especially market structure and price action, is crucial to earning consistently in trading. A strong trading personality incorporates effective risk management, position sizing based on probability, and patience to only take high-confidence trades. Mastering market essentials and developing the right trading mindset through experience are necessary but not sufficient—traders must also have a strong understanding of price action to avoid losses and defeat predatory market participants.

Uploaded by

dhileep.bhashyam kumar
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as PDF, TXT or read online on Scribd
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Trading Essentials

It doesn’t matter whether the Trading strategy is 90% Successful or not, if you fail to understand and
implement any one of the above, your account is going to be blown away sooner are later.

Traders, especially New traders will be looking for some Magic lamp in Trading. Let me tell you with
all my learning experience, there is none. Whoever sells you that through Flashing their MTMs you
are their prey to Increase their capital, Understanding the Market structure is the only way.

If you don’t have the commitment for long term learning, trash this document and go ahead with
your quest.

In trading there are 4 aspects which determine the trader success.

1)Trend or No-Trend

2)Momentum

3)Volatility

4)Trading Personality.

All the trading Behaviour should be based around the above aspects

1)Trend or Consolidation:

This can be easily identified, and at times like in high volatile environment this will be very tricky.

Candlestick Length, overlapping candles, Dow Principles, HH-HL-LL-LH, Channels will confirm the
Trending and Non-Trending Behaviour.

As the Stock markets are fractal & stochastic in Nature, Every Minute Price action is unique.
Therefore, all the textbook Indicators will fail at some point in its own way sending the trader home
empty pockets.

The only way to earn consistently in trading is to have absolute understanding of the price action
and take the trades when the confidence levels are high & not by the random ticker movement.

Markets are driven by the Participants with muscle Power (Money) and they will always try to find
ways and means to defeat the small traders to fill their pockets.

Trending markets and Non-Trending Markets need Different strategies to work with.

Finding out the supply, Demand Zones & Weak & Strong Support Points are absolutely necessary.
2)Momentum:

We can call this as strength of the price, like an acceleration to the car.

This can be determined through the Candle Stick Overlapping, Candlestick shadows, Corrective to
Motive wave ratio, Market Profile, Order flow, Previous supply and Demand Zones etc.

Channel & Trend lines breakout with volumes will also help in Understanding

This momentum will be strong in High volatile markets and less strong in less volatile markets.

Momentum is what brings the money to a trend follower and consolidation for a scalper or range
follower.

3)Volatility:

Stock Markets always move to find a value in some area. Think this in terms of vegetable prices.

In times of sudden natural calamities, the vegetables prices fluctuate a lot and keeps on changing
violently until the day a fair price where the consumer and producer (Including Middleman) agrees
at fair value.

Same analogy but in more orderly fashioned way the stock markets are operated.

There are times VIX (Volatility Measure)is at 200 AVG of 16 and at times it went up to 80+, If
someone applies his same old trading logic then its like crime in trading, who ought to pay the price
in terms of heavy loses.

In General Fear contributes to more volatility and Greed contributes to Reducing volatility, but not
necessarily this has to be followed all the time

4)Trading Personality:

Even if by chance a person has mastered all the above things and if lacks the trading personality,
then it’s the same old story.

If you look at any successful traders, they will have a strong trading personality, when the market
deviates from that, they either stay out of trading or go with very minimal stakes.

A strong Trading personality must include

a) Risk Management:

How Prepared is the trader to the adversity? Does the trader have good Risk to reward ratio?

Having stop losses in place doesn’t necessarily mean trader have good trading system. The stop
losses might have worked in a different scenario but when the scenario changes, you may get series
of stop loss hits, which will defeat the purpose of good risk to reward ratio.

In Trading losses are Necessary to keep the trader Disciplined, what matters is how you manage the
losses.
b) Position sizing:

I call this as Blackjack Counting method. In casinos while playing blackjack, few exceptional gamblers
count the cards and when the probability is high they go with huge stakes and under low probability
scenarios they go with low stakes. Same applies to Trading too.

c)Patience: It’s the very key for any trader. I don’t take trades because ticker is moving, I take trades
because I am confident but not Impulsive in my Understanding.

Remember No-Trading is also a Trading strategy.

There’s more to it,

All said and Done, trading is a very vast subject, and it involves Theory, Practical and Trading
wisdom, The last 2 only comes with vast experience when the first One is fulfilled you don’t have
theory and even if you are in markets for 20 years then its an obvious answer to guess whether you
are losing or winning.

I Follow Market Profile, Order Flow and Price Action.

If you want to Learn

I am Dileep

& this is my no-9989039185

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