HOW TO START BUILDING A STRATEGY?

As it is said, a strategy is a reflection of a trader’s character. Whatever sentiments/emotions you have, reflect in your trading decisions. At first, people think that, ‘I will use xyz indicator and buy here and sell there’, thinking it’s easy to have a method that simple. But when reality hits, all the simplicity runs out of the window with your money. Trading is not for those who take it lightly. You have to respect the market before coming up with a strategy that suits your personality/mindset/character. 

One might ask, what does personality have to do with trading? And that’s where lies all the secrets. Newbie traders often run after YouTube channels, Twitter handles of some high MTM traders and try to copy them. They keep hopping from one setup to another. Because in the beginning, trader does not have the knowledge of risk management, importance of back testing etc. You should test your strategy for at least 100 trades before scrapping it. And that’s where they lack. But in my experience, you may learn the method from another trader but you cannot learn the mindset. You have to develop that on your own. There are certain ways of self-assessment when it comes to finding the right approach towards trading. Just because some day trader is making a killing in market every day, doesn’t mean you can replicate the same performance too. You might be well suited for positional/swing trading. Just like that if someone is better in swing trading, you may be crafted for long term investing if not that even for scalping. There is vast array of segments to choose from. From intraday to swing and scalping to options writing.

You can decide any segment as per your patience level. The only goal should be to make money. You are not here to be right or wrong. You are here to make a living.

Choosing a trading style is completely based on your patience level. If you are patient trader then you can go for short to long term trading. Find the good setups, take the trade and sit tight. Your actions should be either target or stop loss. You can manage the trade as per your style e.g., pyramiding or averaging.

If you are an adrenaline junkie, then intraday, scalping & F&O trading is your cup of tea. But remember that the lesser the trade duration, more the chances of losses. Because these segments are very much risky than that of others. You need the skill of sniper & the eye of an eagle to execute such trades and come out of it profitably.

Now the question is how to decide? There are some ways you can shorten the learning curve, some of them are as follow…
 

1.Mentor:

Mentor is the person who is willing to share his experience to those who seek to shorten the learning curve. Warren Buffet had Benjamin Graham, Rakesh Jhunjhunwala had Radhakishan Damani. Everyone needs a mentor, be it in a form of books or a person.  Learning what not to do is more important that learning what to do? And that is the biggest lesson I’ve learned from my mentors. A mentor teaches you that in a most practical ways by showing some real-life examples. He will also tell you when to trade and when not to. Because compulsive trading is one of the major reasons why traders lose big. So, finding a good mentor should be your priority.

Mentor is the person who is willing to share his experience to those who seek to shorten the learning curve. Warren Buffet had Benjamin Graham, Rakesh Jhunjhunwala had Radhakishan Damani. Everyone needs a mentor, be it in a form of books or a person. Learning what not to do is more important that learning what to do? And that is the biggest lesson I’ve learned from my mentors. A mentor teaches you that in a most practical ways by showing some real-life examples. He will also tell you when to trade and when not to. Because compulsive trading is one of the major reasons why traders lose big. So, finding a good mentor should be your priority.

2.Self-Learning:

There are some successful self-made traders who learned from trial and error. But you need to check the time they took to be successful. It’s not impossible but it’s time consuming. Also, you need to have lots of patience and money as well. Because self-learning is like flying a plane by reading manual. You have to do all the work from developing a strategy to back testing it and its too much lengthy process to start with. You can self-learn trading, but be ready to give it time.

There are some successful self-made traders who learned from trial and error. But you need to check the time they took to be successful. It’s not impossible but it’s time consuming. Also, you need to have lots of patience and money as well. Because self-learning is like flying a plane by reading manual. You have to do all the work from developing a strategy to back testing it and its too much lengthy process to start with. You can self-learn trading, but be ready to give it time.

3.Books:

the first love of any trader. For me it still is. I read as much as possible. The very foundation of my trading journey is based on reading. I read many books in my initial days. Some of them still helps me today. But textbook knowledge is not sufficient in real time trading. You can learn patterns such as triangle, channel, cup and handle and head and shoulders. But textbook patterns are so much rare that it’s exhausting to spot them on charts let alone trade them, unless you have a knack for them. It’s a good start but not the best process.

Aahh books… the first love of any trader. For me it still is. I read as much as possible. The very foundation of my trading journey is based on reading. I read many books in my initial days. Some of them still helps me today. But textbook knowledge is not sufficient in real time trading. You can learn patterns such as triangle, channel, cup and handle and head and shoulders. But textbook patterns are so much rare that it’s exhausting to spot them on charts let alone trade them, unless you have a knack for them. It’s a good start but not the best process.

Above information should give you some perspective on how to approach the market and build your strategy. Strategy doesn’t just mean a trading setup (Entry & Exit). It includes everything from trade setup to your mindset. Find the best possible way, stick to it and follow the path. Eventually you will reach the destination.


Keep learning, keep growing…!!

Peace.

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