How to become profitable trader ?

If you complete this exercise I can assure that you will never
need any tip provider and help of any analyst in your entire life.

1)Select your trading analysis system :

- Conventional Tech analysis using indicators like moving

avg, rsi,adx,cci,volume,macd, ichimoku trading system
and many more.
- Elliot wave analysis.
- Gann astro analysis.
- Harmonics.
- Price action.
- Point n Figure analysis

Select any one system of your liking & throw away all other
systems, we don’t need more than one system to become
successful trader.

Select the strategy which have at least 50 % winning rate, if

more then well and good.

Fix the rules of entry & exit.

Your system has to be mechanical and very little or no scope

for subjectivity. Trade only the set up which your system
generates, not on your gut feeling.
 I am not altering rules of strategies. You must be able to
follow your own rules.

If you are not able to select the type of analysis then go for
demand supply analysis, it has very less subjectivity.

Select the chart time frame suitable for trading style.

For example for intraday trading your higher time frame has
to be hourly chart, intermediate time frame 15 min chart
and lower time frame 5 min chart for S.E.T.S.

2)Rules for position sizing :

1) Fix your per trade loss & per day loss. If the day’s
limit crossed then shut the terminal and go out.
Number of shares you buy or sell will depend upon
the stoploss and share price.
2) Per trade loss should not be more than 1-2 % of
your trading capital.

3)Trade management / money management :

1) Scaling down position size – Divide your position

into 3-4 parts. Exit each one part at target 1,
target 2, target 3 & 4.
2) Exit trade at break even. If your trade achieved
1:1 RR, then you can move stop loss to acquisition
price.
 3) Make a habit of exiting at stoploss and targets.
Don’t exit the trade in between.

4)Risk reward ratio :

a) You must trade set up which show at least 1:2 risk

reward ratio. Don’t trade if RR is less than 1:1.5

b) Carry over night positions only if RR is 1:3 to overcome

the losses incurred due to overnight gaps.

5)General rules :

a. Don’t trade on big event day like RBI policy election

day or any other announcement day. If you still want to
trade on these days then use higher time frame charts
like wkly and monthly.
b. Don’t watch any news media or social media during
trading hours.

6) Actual exercise : Thesis of trading.

a. With above rules complete the exercise of 100 trades

by using only one trading strategy. Till the exercise is
complete don’t trade by any other method or system.

b. Document all the trades in journal with charts.

 c. Make sure that you don’t increase trading capital after
start of exercise and change the rules of strategy in
between.

7) Advantages of thesis / exercise.

a. You will trade on your own calls.

b. It removes all your emotions of fear, greed and hope.

c. It develops discipline in your trades.

If you complete this thesis and preserved capital then you are
through the learning curve of trading. You just repeat the process
again and again. You will become successful trader.

Hope you all follow the rules and enjoy trading life.

Happy trading.

Dr. Somnath Babhale

MB., DMRD.