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Four Ways to Manage Your Emotions While Trading

Hello to all of my readers!

I hope the past week was kind to you.

As I reflected on my one-year trading journey, I realized how important emotions were in my decision-making process.

The euphoria I felt when my targets were met, or the despondency I felt when I lost, was overwhelming to my psyche.

I knew right away that this was not the way I should be managing my emotions if I wanted to do this for the long haul.

After some thought, I was able to identify some methods for gaining control of my emotions and keeping my head above water when I suffered a loss.

I’m going to share with you four thinking approaches that have helped me and that you might find useful.

1. Keeping Expectations in Check

Photo by Andrea Piacquadio on Pexels.com

I had a psychological bias in the early months of my trading that if I took a position in a trade, it would be profitable since I had spent time identifying a great set-up and planned my entry and exits.

Didn’t it have to?

Well, little did I know at the time that trading isn’t like that.

 In short, trading and certainty do not go together.

I gradually came to understand that, like any other business, losses would be a part of the journey.

Consider the grocery shop in your neighborhood, for example. Do you believe that the grocery store makes profits in equal amounts every month?

It most definitely doesn’t.

Because the other variables for a grocery shop must remain constant to produce equal and meaty profits.

Let’s say the grocery store makes a decent monthly profit on average, but what happens when a new store opens nearby that provides products at attractively discounted prices?

The first grocery store will see a significant drop in footfall at this period, resulting in a few months of drawdown.

So, what do you think the grocery owner will do?

Do you imagine he’ll close the store, reshuffle his business, and start selling designer jewels instead?

Not at all!

To keep his business functioning, the owner of the first grocery store would have put in a lot of money and learned a lot of hard skills.

He would have foreseen that competing forces will impact negatively on the future.

During this time, he would be able to properly differentiate his services to outlast the competition in the long run.

Trading can be compared to the same analogy.

The lesson we can learn from this example is that as traders, we must be prepared for any unfavorable event that could result in a loss.

We have a lot of external factors in trading that we can’t control that can cause prices to go in the other way of our expectations.

As a result, every time we take a new position, we must understand that some external occurrences, no matter how powerful, perfect, or rule-based our analysis was, could result in trading losses.

Trading is compared to any other business, and properly so.

Because businesses don’t close after modest losses, and your trade shouldn’t either, because that’s how businesses work on Earth!

2. Risks that are Planned and Calculated Help to Reduce Anxiety

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In this merciless profession of probabilities, calculating the risk in advance is how you bring in a semblance of certainty.

When you know how much money you’re going to lose, it won’t come as a shock.

Position sizing, which includes risk management, is an important part of trade planning.

When losses occur in an amount with which you are neither familiar nor prepared, your confidence is shaken, and you begin to resent trading.

You’ll start referring to it as gambling.

Furthermore, and maybe more importantly, unmanaged risks deplete your capital.

When something unexpected happens, our anxiety level rises.

Anxiety cannot be eliminated, but it can be controlled.

It becomes an aspect of the expectation once you’ve specified your risk for the trade.

When you manage your anxiety, you improve your capacity to make decisions, which is critical for a good trader.

3. Mastering the Art of Trading will Take Time

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In the second month of my trade, I had the following thoughts:

I took a few courses and even read a few excellent books.

I began to trade.

Wow, for a week, I made incredible profits.

Why does everyone bring up the subject of risk? That’s nonsense.

Let us fast forward a few days:

*I’ve blown away my entire capital*

Gulp!

I had no idea my entire account had been wiped because I hadn’t established a stop-loss in intraday trading!

Now I’m thinking:

In retrospect, I understand that despite reading books and completing courses, I was still ineffective at identifying important levels and interpreting charts in a meaningful manner.

After a year, I can identify key levels, perform multiple time-frame analyses, and know that developing an edge takes time.

Interestingly, I have the notion that there is still a lot more to learn.

in a nutshell, never expect to become the next Mark Minervini as soon as you begin trading.

I believe that to develop as a great trader, you must not only work on a strategy that is comfortable for you but also mature your mindset.

It is not an overnight activity because it takes time to develop a new trader’s mindset.

You must bear in mind that you will be losing money in the beginning, so do your best to limit it to a minimum.

Always keep in mind that money follows a strong process.

Money will follow after you have a system with a good win rate and the ability to accurately identify entries and exits.

Consistent success in trading is the outcome of a good system, not the other way around.

Start concentrating on honing your edge and see how it develops.

Learn to be comfortable with hardships and embrace the struggle.

4. Stop comparing your P&L to Those of Others on Social Media

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If you’ve ever found yourself evaluating your trading performance by comparing your P&L to others’ who post theirs on social media, know that you’re not alone.

Many of us have done it, and it has made us feel quite insecure to see so many traders generating huge profits while we are stuck in a drawdown.

To begin, you must remember that not everyone is trading with the same amount of money as you are.

As a result, their drawdowns and profits will be proportional to their capital and risk appetite, depending on the size of their account.

Trading success isn’t measured by comparing your profit and loss to that of others.

If you want to see if you’re becoming better, compare your current process to the one you previously used.

Do you think you’re doing a better job of controlling your risk?

Are you consistently adhering to the rules?

Do you have a stronger grip on your emotions than you did before?

How does losing a trade make you feel today versus how it made you feel previously?

The best approach to assess your trading progress is to ask yourself these questions.

Money is the final product of the trading process, as I previously stated in this post.

There is no other method to improve the result except to work on improving your process and trade plan.

If you’re a novice, I’d advise you to avoid following accounts on social media that routinely post their profits.

Do give heed to accounts that discuss trading approaches and psychology.

Follow people who inspire you to better your trading process and add value.

It’s sad to see how many individuals are fooled by catfish accounts on social media, which boast of unnatural profit daily.

Keep in mind that there is a lot of sophisticated software out there that can manipulate P&L data.

As a result, I strongly advise you to stop engaging with such accounts and instead follow fantastic people that offer value to your life.

I hope that by sharing my ways of dealing with emotions in this post, you will be better equipped to handle your own.

After all, your mental well-being will influence your actions.

Please feel free to leave a comment if you have any advice on how you have dealt with unpleasant feelings during your trading experience; I’d love to hear about them.

Until next time.

NIFTY PHARMA ANALYSIS AND MY TOP STOCK SELECTION FOR THE COMING WEEK

Good day, readers.

I hope you had a wonderful week and are looking forward to Monday.

I’m back with another blog post in which I’ll look into Nifty Pharma.

The hot sector for the coming week will be pharma, as evidenced by a breakout post-consolidation on the daily chart.

Since May 10th, 2021, the Pharma sector has made a double top pattern and was in a consolidation phase.

Finally, on July 16th, the double top pattern was broken by a decisive breakout.

The basis for my analysis is a bull flag pattern.

The bull flag is seen as a trend continuation pattern.

It consists of:

a flag pole which is a rally of prices,

a consolidation phase,

and then a breakout.

After the breakout, I expect the pharma surge will resume in the coming week.

I measured the flagpole’s length and projected it from the 14527.3 breakout level.

I estimate a 22.6 percent increase in price to the target level of 17754.95, as mentioned on the chart.

For the coming week, I recommend keeping an eye on pharma stocks.

MY TOP STOCK PICK

DIVISLAB

This stock belongs to the pharma sector.

Technical Analysis:

  • There’s a bull flag breakout on the 16th of July’21.
  • The buyer’s volume looks promising on the breakout candle.
  • I am expecting a total up move till 5174.4.
  • You may scale-out your positions in phases.

Fundamentals:

  • It has the highest market capitalization in the pharma sector.
  • It’s ROE and ROCE are both more than 20%
  • The company is completely debt-free.
  • Promoter holding is greater than 50%
  • Free cash flow is good.
  • CAGR of Profit and Sales for 3 years is growing at a rate >20%

I hope you now have a better understanding of how to trade the bull flag chart pattern.

In the comments, let me know which sector you’ll be watching this week.

If you have any questions, please contact me at: 𝙰𝚗𝚊𝚒𝚍𝚊 (@anaida__sultana) / Twitter

Until the next time…

THIS IS HOW I LEARNED TECHNICAL ANALYSIS

Hello there, readers.

I’m sure you’re doing fantastic!

It’s Sunday, which means it’s time for another post.

Monday through Friday, I trade in the Indian stock market, and on weekends, I write about my trading experiences.

So far, I’m really enjoying both trading and blogging!

Today I’ll talk about how I first became interested in technical analysis.

Technical analysis is a trading discipline that uses price trends and patterns on charts to evaluate investments and identify trading opportunities.

(From Investopedia)

If you want to start intraday or positional trading, technical analysis is an important skill to have.

Mastery of which would yield fantastic results in terms of profit earning.

It was initially intimidating for me as a beginner.

Jyothi Bansal’s Udemy course was my first foray into learning it.

She is a SEBI-registered analyst, and her teaching laid a solid foundation for me to build on.

With that course, I learned how to draw trend lines, identify support and resistance zones, and became acquainted with a variety of indicators.

I took her course in 2020 and was initially uncertain about identifying trends.

I was also unclear about identifying peaks and troughs to determine support and resistance levels.

Due to my lack of confidence, I began to rely heavily on indicators such as moving averages, oscillators, and MACD to find entry and exit signals.

Indicators, unsurprisingly, did not work for me.

The buy and sell signals came in far too frequently. It was a complete mess!

Then, in order to improve my skills, I subscribed to some YouTube channels, which was another bad idea.

I strongly advise against using YouTube as a trading learning resource.

In my opinion, half-baked information over there does more harm than good.

And so, I continued to practice with smaller quantities and made a lot of mistakes.

However, in retrospect, I recognize how valuable those mistakes were.

While making mistakes, I gained practical experience drawing trendlines and identifying important price reaction levels.

After reading these books this year, I gained confidence in identifying critical levels:

1. John J. Murphy’s Technical Analysis of Financial Markets

2. Steve Nison’s Japanese Candlestick Charting Techniques

3. Brian Pezim’s How to Swing Trade

The books I mentioned above have been extremely beneficial to my swing trading.

I primarily trade based on chart patterns because they help me understand price objectives and stop loss levels.

I’ll share the link to the Udemy course I mentioned. Explore it because it is a valuable source of information for beginners.

The beauty of technical analysis is that once mastered, it can be applied to any market in the world.

What were the resources that helped you when you first began trading?

I’d love to know, so please leave your resource names in the comments!

Good luck with your analyses!

My Twitter handle is: anaida__sultana if you want to reach out to me.

Until the next time

Resources:

(You can find the eBooks that I have mentioned for free on this website)

(Link for the Udemy course)

The Most Common Stock Market Myths Dispelled

Hello there, readers.

I’m sure you’re doing fantastic!

I’m back with another blog post today, this time about how many people are wary of the stock market due to common misconceptions. I’m sure you’ve read or wondered about some of these.

I hope that after reading this post, you will feel more confident in starting your own stock market investments to build wealth.

Some of the common myths sound something like –

1. “But dear, trading and investing are nothing more than glorified gambling!”

Photo by Javon Swaby on Pexels.com

These worries are understandable, but they are not based on facts.

Analysis is one factor that distinguishes gambling from investing and trading.

Unlike investors, gamblers make uneducated guesses.

The stock market does not move simply because it can. It moves because there is a valid reason for doing so.

Understanding and interpreting those causes is accomplished through two methods: technical and fundamental analysis.

So, no, the stock market is not a game of chance.

2. “In the stock market, everyone loses money!”

Photo by Mikhail Nilov on Pexels.com

Um, not everyone.

There are no entry barriers to taking part in the market.

This means that anyone can invest or trade. There are no prerequisites such as degrees or certifications.

See, depending on where you fall on the spectrum, this is by far the best and worst thing about it.

Every day, many well-meaning but uninformed investors lose a lot of money because they are simply taking chances without taking the time to learn some basic fundamentals.

This reasoning is risky not only in the stock market, but probably in any other career field as well.

Is it possible to be successful in any profession without first learning about it? Exactly.

Those who took the time to learn some basic fundamentals, on the other hand, have been able to leverage the concept of “anyone can participate” to create wealth.

3. “I wish I had that kind of money that these guys on CNBC keep talking about when they talk about investing…”

Photo by Anna Alexes on Pexels.com

Contrary to popular belief, you do not need to be flush with cash to be a successful investor.

The media portrays investing as a means of accumulating wealth that is only available to the ultra-wealthy.

No, it’s not true.

You can begin with a small amount of money and invest in companies with strong fundamentals.

You don’t even have to invest all of your money at once.

You have the option of investing monthly, quarterly, or yearly. Whichever time frame works best for you.

Because of compounding, your initial capital (principal amount) will yield good returns over time.

4. “Reading and comprehending the financial statements of the company gives me nightmares!”

Photo by Keira Burton on Pexels.com

What if I told you that you don’t need any more math skills than a fifth-grader to predict whether a company will succeed or fail before investing?

There are numerous resources on the internet that will help you interpret a company’s sales, revenue, and profit numbers in order to make an informed decision about the company’s fate.

When learning to interpret financial data, use Google and YouTube to your advantage.

The financial records of a company are easily accessible online.

Take some time to read up; you’ll soon realise that picking a great company to invest in isn’t rocket science.

I hope this blog post has dispelled some of your fears about the stock market and inspired you to take your first step toward accumulating wealth.

Until next time.

You can’t know if you don’t try – Ron Writings

My Investment Journey

Hello readers,

Firstly, a very hearty welcome to my blog!

This is my first post, and I am thrilled to share with you that writing about personal finance had always been a goal for me.

I finally mustered enough courage to start this blog even though I am a newbie in the world of finance myself.

Holding a master’s degree in finance does not immunize me from feeling intimidated by all the finance jargons out there.

I mean, have you ever heard about the concept of compounding your wealth? It is being thrown around like confetti, but not made to seem half as fun!

Hearing it for the first time also made me feel bleh. It was boring, serious, and scary.

However, I would not delve into the art of compounding in my first post because there needs to be more groundwork covered, and frankly, I want to let you all know a little bit more about myself, and how I accidentally became an investor!

It all started in the lockdown of 2020…

There was a huge crash in the Indian stock market in March 2020 due to Covid-19.

Everyone was talking about it in every financial publication and business news channels. After the crash, the stock market has rallied in a northbound journey without stopping to look back.

My friends started to take advantage of the situation by investing in the markets, and day trading stocks.

I was inspired by the buzz around me and I started to day trade stocks from May 2020.

I took online courses to sharpen my day trading skills.

It was great until I started to lose more money than I made.

After reflecting on my trading style, I realized something important.

As a beginner, day trading was a bad idea.

Although I had good strategies in my arsenal, I was unaware of the rules.

I was unaware of the risks, money management principles and I lacked self-discipline.

I was not prepared to handle the time-sensitive nature of day trading stocks.

Then what happened?

Luckily, there is more than one way to participate in the stock market to reap the benefit of returns.

I discovered the art of investing.

After having considerable experience in day trading, I learned some important virtues of growing wealth. One of them being time.

I spent my time learning to differentiate good stocks from junk through fundamental analysis.

Once I bestowed the luxury of time to the stocks I purchased and held in my portfolio, I could see considerable returns.

So, if I have to put it all in a nutshell, I would say –

I failed my way to being a successful investor.

With this blog, I intend to share my mistakes and lessons with you so that (you can make new ones? Just kidding!) it can save you a lot of effort and shorten your learning curve if you plan on entering the stock market in the future.

I will also be sharing a lot of resources with you to get you started on your journey of making money through stocks in my subsequent posts.

Thank you so much you guys for reading till the end.

I hope you enjoyed reading it as much as I had fun writing it.

I will be seeing you all soon with a new blog post, can you guess what I would be writing about? Let me know in the comments!

Below I have attached a glossary of terms used in the post 😊

Day trading: Buying and selling stocks on the same day

Investing: Buying stocks to hold them for more than a year

Fundamental Analysis: Measuring a stocks’ value based on economic and financial factors

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