#CASHTAGS
The key takeaways from "#CASHTAGS: How Anyone Can Get Started in the Stock Market and Level Up as a Power Trader".
#CASHTAGS: How Anyone Can Get Started in the Stock Market and Level Up as a Power Trader
Why you should read this book?
The author explains the concept of trading and the basic structure and mindset that you should have. He explains that the entire trading process can be divided into four parts, which are: Toolkit, Trading System, Risk Management, and Emotions. The author believes that Mindset and Emotions are the keys to profitability in the stock market.
“The key factor that drives the stock market is not Intelligent Analysis but Human Emotions.”– Jesse Livermore
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Things to Remember:
The role of emotions in trading cannot be underestimated. Markets are completely a game of the mind. This is because they are traded by humans. It is we humans who are the market.
Once you realize this and begin working on your emotions instead of your systems, your profit and loss account will definitely change for the better. Buying cheap and selling expensive is the ultimate strategy, you should control your emotions and must not take decisions driven by these emotions. A stock market is a tool that transfers money from the impatient to the patient. Waiting is the biggest game in the stock market.
It is therefore imperative to focus first on changing your operating system so that your mindset is compatible with and receptive to the strategies and systems.
A simple strategy is the best strategy. While the author was learning to trade, he began with a few tools and indicators. Gradually, as he began to get better at it, he realized that these were not enough. So he began to learn more about them. He kept piling up his knowledge with more tools, thinking that what he knew was not enough to make money. Ultimately, though, he realized that he did not need an entire army of tools or systems. He just needed to work on my mindset, so that a simple trading system, such as a trend line or a moving average, could make money for him. And this is what happens with most of us, we engage in learning so much that we start to believe the things which are more complicated and complex will provide better results, but this is completely false. The simple the strategy the better it is.
One should always remember that the reward that one can make upon his trade/investment is never in his control but the risk is always in your control, so you should keep your upside open while closely monitoring the downside. Trailing stop losses works the best in this, which will help you to control your losses.
Return is never in our control. The only risk is in our control. Once we buy a stock, the first thing we ought to ask is: “What is my loss limit here?” Always Ask for stop-loss before making a trade and what is your risk.
To become a better trader, one may need to bring about a profound change in one’s personality. And that is what makes this journey the most interesting and fulfilling, more than what one has ever experienced. It isn’t about money but about the person you become. If you are merely interested, you will do what’s convenient, but if you are committed, you will do whatever it takes.
“Your point of power is always in the present moment, where you plant the mental seeds for creating new experiences”.
The author's request is, whenever you see one appear, place your right hand on your heart, take a deep breath and say the affirmation out loud. Repeat twice.
"I do whatever it takes."
The markets and our minds operate on two different systems, we need to change our mindset before entering the stock market. The reasons do not matter. The fact that you are losing money means you are wrong, and the markets do not care if you are right or wrong. You have less information in your domain than what you should ideally have to make money. Hence, the idea is to always be humble when you are wrong in the market. Accept that the market is always right since it represents the collective wisdom of all those trading it. In trading, we attempt to predict the future based on the past. But we need to remember that this prediction is only a probability and not a certainty.
We think we trade the markets. But the fact is, we never trade the markets; instead, we trade our beliefs about the markets. You never trade the market the market is always right. It's your beliefs and deductions which show whether you were right or not. There is never a right or a wrong answer. Whatever your beliefs are about the markets, they will direct your thinking and your subsequent actions. You, therefore, need to keep a constant vigil on what kind of beliefs you are forming. Are they empowering or disempowering? This applies not only to the stock market or trading but also to everything in life—health, relationships, business, kids, family, colleagues, and so on. Change your beliefs, and your circumstances will change dramatically.
Once you believe that you have knowledge then trust in it and put your belief because it is easy to earn money and be positive and show trust in yourself. Build whatever it takes attitude and never give up.
Upon realizing our lessons of failure, we can immediately take steps to move out of the failure zone. These are the following:
1. Accept that you have failed– acceptance makes the task easy.
2. Analyse why you failed– look for reasons. Most of the time, it is due to a lack of preparation.
3. Search for the lesson– this is the most vital step. Extracting the lesson from a failure requires having an open mind.
4. Try again– keep trying until you get there.
Make the declarations in positive language and state them explicitly. State only what you want. Be precise and clear. Some of the declarations that we make at our seminars are the following:
1. I am an intelligent trader.
2. I deserve to make a lot of money.
3. I am truly grateful for all the money I have now.
4. My confidence in trading is growing each day.
5. I enjoy the freedom of time in my trading profession.
6. My passive income is growing constantly.
7. I am open and receptive to all the wealth life offers me.
8. I attract abundant trading opportunities.
9. My capacity to earn, hold and grow money is expanding each day.
10. I gracefully handle massive success. One needs to keep repeating the above steps, continuously.
#CASHTAGS Principle: Conceive + Believe = Achieve ______________________ Dreams Do Come True
“The rule of thumb to succeed here, young man,” he said, “is to learn to book a loss! Once you learn this skill, you shall survive in the markets for a long time.” What happens when you don’t book a loss? Your mind is stuck and eventually, your money gets stuck too. This blocks you from taking advantage of the other opportunities that the markets present every single day. Incurring a loss is a given. There is no magic formula or magic system that will prevent you from incurring a loss. Every person who has ever traded on the stock market has incurred a loss, including the most successful investors who have lived on this planet. The traders and investors who have made it big, have made most of their money in less than 30%of their trades, with the remaining 70% ending up in losses. But they still end up being profitable because the profits on winning trades were big and the losses on losing trades were small.
In trading, flawless execution is the key to making it simple and profitable. Once we have a system in hand that suits our beliefs and our temperament, all we need to do is continue to execute it flawlessly. The more intense the emotions, the greater the need to manage them and have more rules. This reduces your need to think every time you take a trade. The majority of mistakes take place when our emotions get in the way of trading.
1% FORMULA
The simplest manner to calculate risk is to never risk more than 1% of your trading capital on a single trade.
Let us now consider how this formula works with the help of an illustration.
Trading Capital INR 10,00,000 (USD 14,925).
1% Risk INR 10,000 (USD 149.25)
Entry Price 400
Stop Level 380
Risk Per Share 20
Quantity to be bought = Total risk per trade / Total risk per share
= INR 10,000 / 20 = 500 shares.
Investment Amount = 400 * 500 = INR 200,000 (USD 2,985)
Amount realised on exit = 380 * 500 = INR 190,000 (USD 2,836)
(If the stop gets triggered) Loss Amount = INR 10,000 (USD 149.25) (Happy Loss)
One of the most important things to learn is that you do not need too many tools, you can manage with only a few of them. The idea is to go deep, not broad. Master a few tools in depth rather than learning too many of them in fragments.
TRENDS
Observing trends is by far the simplest way to trade the markets. This strategy never goes wrong because it follows a market trend at all times. When both the long-term (monthly) and medium-term (weekly) charts show an uptrend, one may choose to be an investor. When the short-term (daily) charts show an uptrend, you may choose to be a trader. This helps differentiate between the two, at a very elementary level. If the trends in all three-time frames are mixed, then one has to approach the markets from a trader’s perspective. If all three of them are moving upwards, you may approach it from an investor’s perspective.
MOVING AVERAGES
A moving average is the average price of a security over a set amount of time. This smoothens the price movement of the security. Once we remove the day-to-day fluctuations, trend identification gets simpler. The major thing is to use MA in a short timeframe to determine the trend and market structure. Using 4h MA will help determine the trend in the market and if the MA indicates an uptrend then it will help us understand that market will go up. Moving average is the simplest yet most powerful tool in the technical analysis toolkit. Moving average not only identifies the current trend in the market but also indicates their reversal. The moving average tends to follow the market trend. It does not predict the trend, but rather only indicates the movement of prices—whether they are above the average or below it. It does not predict how far they will go, whether up or down. In essence, it is a lagging indicator. When a short-term average is above a longer-term average, the trend is up. In contrast, a long-term average above shorter-term average signals a downtrend. A 200-day moving average is a most widely used and most popular average amongst traders and investors across major markets. A 100-day average is considered a good measure of a half-a-year, a 50-day average of a quarter of a year, a 20-day average of a month, and a 10-day average of two weeks. These are used as average benchmarks and are not necessarily a clear definition of the respective trends.
OSCILLATORS
Momentum is the measurement of the speed or velocity of price changes in security. It measures the rate of rising or falling in stock prices. It is a very useful indicator of strength or weakness in the price of a security. you will check the speed with which the security is moving up, to ensure you get the best returns in minimum time. This speed is the momentum. It is the measurement of the speed or velocity of price changes. The greater the momentum, the more money and the less amount of time to make returns. It measures the rate of the rise or fall in stock prices. Speed in vehicles is measured by speedometers, whereas the speed in a security’s price movement is measured by oscillators. There are two kinds of oscillators—banded and non-banded or centered.
The value of these oscillators does not exceed the level of zero on the downside and that of 100 on the upside. They keep oscillating in this range
These move around the median. In the absence of upper and lower boundary lines, their values may drop below the zero level on the downside and move above the 100 level on the upside.
Depth is the key. I believe that specializing and focusing on any one study from the technical toolkit helps one understand it in its entirety.
TRADING SYSTEMS
The questions “Where to buy?” and “When to buy?” are answered by systems. These are the rules, parameters, and conditions of buying and selling a security. They indicate the conditions of entry, the timing of entry, and the signals of exiting a trade. Systems are all about rules, which means they list down processes. This objectivity reduces your emotions in the business of trading. We now know that when emotions ride high, intelligence goes low.
Whenever a small wave moves opposite to a large wave, the latter will push the small wave in the same direction. Similarly, in price movements, when the HTF is in an uptrend and the LTF is in a downtrend, the HTF will pull the LTF into an uptrend from the point of inflection. For long, HTF should be high and LTF should be below.
So the tools should be designed in such a way that at a glance you can know what is happening right now. Keep the detailing only in the charts where there is action. The other ones should be pure price. Track different time frames to get perspective.
BOOK RECOMMENDATIONS
Super Trader by Dr. Van Tharp
The Market Wizards (considered a Bible for traders)
HAPPY TRADING!
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