How to make money without losing money | stockbee


How to make money without losing money

To me the objective of trading is to make money without losing money. As far as possible I want zero drawdowns and no gyration in account. At the same time I want to grow the account aggressively  without using wild margin . 

It is the high wire act of managing this twin objective of making money and not losing money which one needs to develop skill in. Once you can do it , it is almost like free money strategy. Your downside is very limited and upside is unlimited. 

How can you do this if you are serious about making money trading ?

Select Proper setup with low risk

The first starting point is to select setups that offer you very low risks in case trade do not work out. Your risk in any trade at start of a trade is Risk= entry-stop

If your entry is very close to stop you have very low risk trade and in that case if the trade works your risk reward is very good. 

What kind of setups offer this kind of situation ?

Anticipation setups offer that kind of trade. The second best setup after anticipation is $ breakout. Most dollar breakouts that happen after a consolidation on high priced stock where the consolidation for several days was tight consolidation with moves capped at below .90 cents is very low and high reward setup. 

Anticipation setups like TSLA above are what I look for on a daily basis. In above chart stock traded down 14 cents two days in a row. A breakout from that level led to 8 dollar move next day. These kind of setups offer you very close stop to entry. TSLA went on to make 19 dollar move from that breakout.

This is a recent trade I made. Stock was down 4 cents before breakout. How close is your stop to entry in such cases. Stock just took of next day on breakout and I highlighted it just pre breakout on members site. 

When you find setups like this it is like finding free money.

Develop skills in trading anticipation setups

In order to become good at finding and trading setups like this you need a detailed process map to find them , plan a entry , plana stop , plan to manage stops during move , and a plan to exit them.

It takes time to develop skill like that. If you do this daily for few months you will become good at it. At first you will not know what to look for in a good setup but once you practice finding the very best ideas, anyone with average intelligence and motivated to make money can do this.

Use Buy Stop Limit Orders for entries

In order to get good entries in these kind of setups you can use BSLO orders. These orders are placed in advance before market open and are limit orders with  trigger prices and cap on price at which you will buy in case it triggers. The order also allows you to attach stop once entry gets activated.

Study historical patterns like these on stocks in last 3 months

Best way to learn this setup is by studying past examples of immediate period of last one month or 3 months.

Develop your own setup books by capturing several past examples of this. If you do that you will be instantly able to find A grade setups in current market.

Manage the trade post entry

Part of the skill in managing trades like these is to move stops to breakeven quickly once trade goes in our favor. Remember we are looking for free money in these kind of situations.

After trade is profitable keep moving stops aggressively or sell in batches. I sell my positions in lots of 20% or 25% along the way to lock in profit. I allow a small part of the original capital to ride longer with slightly wider stop.

Do all your work and planning before market opens

Anticipation trades are planned trades. You have so much time to think through on these trades between last night and market open. Ifd you do a good job of planning everything , you will have very few surprises once market opens and you will be in control of situation.

Supplement Anticipation setup with $ breakout, 4% breakout and Episodic Pivots setups

If you do good job of anticipation you will have more time to spend on other setups like $b/o, 4% b/o and EP.

$ b/o is next best setup after anticipation. Often it allows you entry with stop below 2%. The setup works  on high priced stock. It allows you to put lot more capital at risk on single trade.

Ignore the market noise and use situational awareness

If you have good setups and good skills in executing them , just ignore the market noise.

I trade my setup with very aggressive risk management without worrying about what market is doing . All these setups are self adjusting . If market is weak you will find more bearish sertups , if it is bullish you will find more bearish setups.

If you spend too much time on Twitter and other noise creating platforms , you will get influenced by that and not execute your strategy.

Trade to make money

If you are not very clear about why you are trading you are unlikely to make money. If you go with objective of making money in trading you will clearly follow a path of good profitable setup selection and stock selection .

If you want to make money trading you will take responsibility of your trading success and not blame others or market or luck for your lacklustre performance.

Surround yourself with successful traders

If you are pat of successful traders tribe you will benefit from the expertise and experience of those traders.
You will be exposed to new ideas and offered constructive criticism on your own ideas or troubles.

If you want to be profitable trader , hang out with other profitable traders

The foundation of successful trading is proper setup selection and then developing a process to execute that setup. The day you recognise that and commit to it, you will start making money....


Rajaram Pai said...

How many positions are you holding for a portfolio curve like the one you show?

Amazing returns and more than that amazing risk mitigation!
Best regards, Raj

Pradeep Bonde said...

2 to 3 positions. Not holding long term. all swing trades of 1 to 5 days