Introduction – Trading Wisdom

Welcome to VRD Nation. This is the channel where we share in depth knowledge and experience about trading, investing, and stock market in general. So, if you are new to this channel, do not forget to subscribe. Now today’s topic is going to be a little bit different than the topics that we normally talk about, right?

So normally we talk about trading strategies, profits and losses, technology or different platforms, right? But in this video, I want to take a step back from the mechanics of trading and focus more on the philosophy of trading. So, the learning that I have gained, not just from my own experience, but also from the experience of my peers, of my colleagues, of my seniors and my students, I want to share those ideas.

I want to share that wisdom in a series of very short videos using practical real-life examples so that you can easily understand what I’m talking about. So today the wisdom that I want to share with you is to let the market come to you. Now a lot of you might be scratching your head. What exactly does it even mean?

Let the market come to you.

Well, let me start with a little story. Now, in the good old days, people used to send their kids to Gurukuls. The idea behind Gurukul was almost like a boarding school where kids used to go and learn each and every aspect of life. And when they come back, they will be much more matured, much more knowledgeable, much wiser.

Hence, the idea behind the Gurukul system was very noble, but the kids who went there for the first time, they of course felt very anxious. So, we had a kid like that who was supposed to go to Gurukul. The next day and he was feeling very anxious because he had always been with his family throughout his life and this was the first time that he had to leave his family and not just for one day or two days but for several years. So, the day before he went to the boarding school, he was talking to his mother. His mother was very much aware of the emotions that this kid was feeling about the food that he’s going to get, about the kind of housing, the kind of comforts that he was used to in this house, which he would have to of course leave.

So, in order to comfort him, she said, I will tell you a trick. And if you follow that trick, you will eat like a king and you will sleep like a baby. Now, after hearing his mother, the kid was very confused. He said, mother, I’m going to Gurukul where they will serve bland food and where I will have to sleep on the floor.

So how is it possible? That I can eat like a king and sleep like a baby. So, the mother smiled and said, look, you eat only when you are starving. Not just hungry, but you are starving. Don’t just eat because it’s breakfast time, lunch time or dinner time. Eat only when you are starving. So let the hunger come to you.

Let your body feel the starvation. And once you feel like you are starving, then whatever you will eat, you will feel like you’re eating like a king. And similarly, sleep when you are extremely tired. Don’t sleep because it’s night. Don’t sleep because it’s nine o’clock or 10 o’clock. Sleep only when you are so tired that you cannot even keep your eyelids up.

So let the sleep come to you. So, the trick was very simple that you let the hunger come to you. You let the sleep come to you. And when you are this tired and you lie down, even on a rock, you will sleep like a baby. So, the trick that the mother told her child had some very in-depth philosophy behind it.

Because when we let the hunger come to us, the sleep come to us, our mind, our body and our spirit would be ready for them. And it’s only when we are ready, we can really enjoy what is in front of us.

Therefore as traders, we have to follow the same philosophy that this very wise mother told her child. So, in the context of trading, we need our mind, body, and emotions ready for the trade.

Just like the kid who had to wait for starvation. In order to appreciate the food in front of him in the same way you need to trade only when the market comes to you.

Now, what exactly does it mean that the market should come to you?

Well whatever strategies that you have support, resistance, breakout, candlestick pattern, or any kind of system that you have, come up with a very simple rule of when you will take a trade based on your system.

And once you come up with that system, you basically wait for the market to come to the point and tell you that, okay, based on your system, here is an opportunity for you to take a long trade or a short trade. Let the market come to you and tell you that this is the right time to enter into the trade.

What happens in Reality

But this is not the reality, right? What happens is in real life, we don’t let the market come to us. We like to chase the market. And why do we do that? Well, a lot of reasons.

1. Fear of missing out

Number one is fear of missing out. So, this is something which even happened to me today, where we see a stock or the market is running away.

And the sense that we have at that point of time is that if we don’t take a trade, everybody else is making money. I will not be making money. So, we are forced to take a trade because there is an overwhelming feeling in us that we are missing out on something. So, we compromise on our setup. We compromise on our rules and we chase the market.

2. Acting on our Impulses

Similarly, a lot of us, we act on our impulses. We feel like, okay, let’s just take a trade. So, without thinking too much about what exactly the trade is going to be, where is your entry, where is your exit, what is your risk, what is your position size, you forget about all that and you just act on the impulses. You just want to take a trade.

3. Out of Boredom

And sometimes I have even seen traders who take trades purely out of boredom. So, they have been in front of the market, let’s say for two hours or three hours, and they are so bored now that they cannot handle this boredom and they eventually take a trade. So, I want to know how many of you have taken trades either based on boredom or impulses or based on fear of missing out.

Let me know in the comments below, because this is something that I want everybody to know. How common this feeling is and the consequences of acting on those feelings. Because what happens is when we take a trade, not when the market comes to us, but when we are chasing the market, we start to feel anxious.

Because we entered into the trade without thinking through our game plan. So, after we have entered into the trade, now we have to think about it and that causes anxiety. Sometimes it even causes panic in a lot of people that they realize that they have made a big mistake.

So, the bottom line here is guys, trade only when the market comes to you, because when the market will come to the perfect entry point as suggested by your strategy or your system, you will feel that your mind is calm. You will get better opportunities in trading. And most of all, you will avoid over trading. So, if you did not get an entry signal, let’s say two, three days in a row, you of course will not be trading for let’s say two, three days. So that will avoid all the commission and the brokerages that you would have paid.

Real Life Example

So let me take a real-life example to show you what I’m talking about. So today I had a bullish bias about the market and I was expecting the market to go up. But I had some work because of which I was not going to be available for the first half. So somewhere around noon, when I came back and I saw that the market had already rallied, I had that feeling of missing out, right?

The same kind of feeling which I was talking about earlier. So, because of that feeling, what I did was I compromised on the setup. I compromised on my strategy and I compromised on my risk management principles.

What I did was I took a long position somewhere around here. And immediately after taking a long position, I started to feel anxious.

Remember what I was saying earlier that when you chase the market, you don’t let the market come to you, but you go to the market, you chase the market, you start to feel panic, you start to feel anxious. That is exactly what happened to me. And I stayed in the trade for about 10 or 15 minutes and then I realized that this trade was not going to work out.

So, I exited the first trade. Now, fortunately, this trade made me some money, right? Somewhere around 8000 rupees, but I can only attribute this profit to my luck than my skill as a trader. Then after making this mistake, I realized what I was doing. And then I said, okay, I will now wait for the market to come to me rather than me chasing the market.

And after that, I took some really good two trades. So, you can see those trades here basically.

So, the first trade was somewhere around here when I was expecting the market to bounce back up. And the second date was taken here. Now from the second trade, of course I made somewhere around 20, 000 rupees.  The third trade which I took was even actually better, but I did not stay in the trade long enough to make more money because, because from 75 rupees, the option basically came down to almost 60 rupees, which basically meant a profit of another 8000 rupees.

So, this is a very practical example of how our emotions rule our mind. And when we chase the market, we make all kinds of mistakes, but when we wait for the market to come to us.  Trading becomes easy. I did not feel any kind of anxiety in both the trades because I was clear about my exit. I was clear about my risk.

I was very composed and everything was happening as per the plan. So, guys, that is what I wanted to share with you guys. Let the market come to you. Don’t chase the rallies. Don’t chase gap ups, gap downs. Don’t chase breakouts. Just come up with a system which is solid, which works for you and just stick to the system.

Wait for some kind of alerts to tell you that the market is ready for you. And when the market is ready for you, when the market comes to you, that is when you will find the market will give you the best opportunities available.

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