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The Loss No One Talks About..

We’ve been posting articles, newsletters and various other things on the social media for quite some time now. People have started to wonder that do we ever make a loss. Yes, we have made loss. In our trading journey of last 5 years, we have made losses for total 5 months out of 60 months. Is that a good thing and what was our learning? Let’s find out..


Scenarios of Loss


1) Market doesn’t favour your trade

2) You initiated at the wrong time

3) No hedge

4) Incorrect Position Sizing

5) Over Trading

6) Etc… (Include all the possible reasons here).


All the above scenarios have 2 things in common, Impatient Mind Set and Overconfidence.

So, if we boil down the real crux reasons for not been able to manage oour loss, it’s our Behaviour and Approach towards the system.


Our calculations are our mere efforts over the years to understand the behaviour of the premiums and formulate a system to give us opportunities, but the losses we have incurred, 3 out 5 times, it was our impatient behaviour and over confidence and not the calculations. Premiums never lie, human being does.


The fun fact is when you’re overconfident and impatient, you end up making a bigger loss than the loss made in a normal course of trade.



Actual Scenario


We have made a Net Total loss of 28% in last 5 years. I will discuss about 3 incidents of ours.


Loss 1 (June 2021): Our target was achieved in first week itself, so, we became overconfident about taking trades and went all out.


Loss 2 (February 2022) : Russia Ukraine War – One Gap down on Monday costed us a 3 months profit because we were overconfident, although calculations told us a gap down, we took a un hedged range trade.


Loss 3 (April 2022): In the last 30 minutes of the market closing(one of the trading days), market suddenly fell 600 points. We were sitting on a trade for which calculations asked us to be very careful off. Capital allocation was a mistake here.


Conclusion:


Losses are a part of trading journey, just make sure you don’t blow up your capital by taking rash decision or getting emotionally carried away. Let the trade come to you and don’t force the data on the market.


Constant practice of your researched and tested setup will get you desired results and set you up for life. Don’t decide how much profit you want in a month, rather, just keep trading your setup and see the results.


We have seen both the approaches, just diligently following your calculations and trading silently will make you achieve consistency. Trading under the pressure of required ROI although keeps you under check, but it has much more harmful effects like unnecessary stress, sleepless nights, constant pressure, FOMO, etc...


In our trading journey, so far, following are the points we have outlined:


1) Always be completely hedged (Even if you are a market maker)

2) Always be quick in your contra and reversal trades

3) Avoid tracking overseas markets ( It has Zero effects on your trading)

4) Stop your trades once your SL is hit 3 times.

5) Go extremely light during major events (Sometimes letting go is necessary. (We are not luck traders)

6) Always think from a seller’s mind that will give you an edge over most of the traders.


Option Trading can be very rewarding over the long term. I completely disagree with the masses that option trading can destroy you. Infact, the only way to protect your portfolio is by using smart hedging techniques.


We’ve been trading since last 5 years and my superiors have been trading since the time Option trading was introduced in India. We have done a good job so far and will try our best to maintain the consistency. Down cycle are needed so that you always get a different perspective in the market.


A trader has to go through the entire trading cycle which is...

Super Profits—Profits—Low Profits—Breakeven—Low Loss—Loss—Super Loss.


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