Sunday, July 17

Trading Lesson Learnt From my Trading Guru

The day I started trading I hoped to make lot of money, and ultimate goal of every trader is to trade for a living. My Guru asked me how you are going to make "a lot of money", I said some blah blah but Honestly speaking I did not had any concrete answer.  Somewhere in the back of my mind I secretly hoped I will catch the one big move that will make me enough money to trade like Big boys. Unfortunately the odds of catching the "big one" are probably the same as those for winning the lottery.
I hope many traders who are trading or willing to start trading will be facing with the same dilemma and confusion so today am sharing few fundas i got from my trading guru. Use them and see the change in your trading.

Have a realistic trading goal

First and foremost thing my Guru told me  "I should have a trading goal". The goal did not have to be a large one like being a millionaire in 1 year, Trading goal should be simple and realistic. Having a trading goal would help me focus better on the markets. I would come to see better opportunities (note this is not the same as “more opportunities”) as well as managing my money better. Since I did not have a very large trading account at that point of time ,My Guru suggested to start with a goal of netting 2500 per week out of the markets. So If I could do this consistently for four weeks, I should be able to net Rs1000 a month which is almost 10% return on capital.
I told my Guru "Sir its not possible for me to live of  Rs 10000 a month !". He laughed at my innocence and told " Bramesh "  If you could consistently net 2500 a week, using single contracts, for the next 12 weeks, theoretically there would be no limit on the amount of money I could earn by trading."   Still confused I asked how this was possible.
He said that no trader, who trades for a living, does so trading just one contract at a time. The power of making money in the markets comes through the use of multiple contracts. If you can net just 2500 a week using single contracts out of your trades, then with four contracts you should, in theory, be able to net 10000 a week, or 40000 a month. However, trading multiple contracts like this without first being able to trade consistently would be financial suicide

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