Healthy competition amongst Dalal Street Traders to show higher & higher earnings
Dalal Street has always nurtured a healthy competitive spirit amongst investors and traders.
Not a day goes by without investors and traders claiming to have raked in solid gains from their stock picks.
A few days ago, a trader stunned everyone by reporting a mammoth earning of Rs. 76 lakh in just two months.
How I made Rs 76 lakhs profit in 2 months?
YouTube video at 3.30 pm.
— P R Sundar (@PRSundar64) May 29, 2020
However, he couldn’t wear the mantle of highest-earner because another trader strolled by and claimed to have earned Rs. 73 lakh in a single day.
73L+ for the day
A New record for me
A Trend day which traders were waiting for since long, Was all prepared for the Breakout to happen this/next week [Check Yesterdays Tweet]. Upside BO was a surprise but executed the plan to perfection ??
Markets have been very kind ?? pic.twitter.com/BaM3qiTU2E
— Manu Bhatia (@bhatiamanu) May 27, 2020
Even this spectacular earning paled in comparison to the earnings of Rs. 77 lakh of another trader.
That trader claimed that he could have raked in a mind-boggling gain of Rs. 1 crore had he had not broken his own rules.
previous one of 35l..includes one Odin A/c..Saw 94l, greed of 1cr did me in..paid the price of breaking my own rule..Last but not the least a big thanks to our beloved PM ModiJi, ModiJi hey toh mumkin hey..
— Asit Baran Pati (@asitbaran) May 13, 2020
To be fair, the traders also show screenshots of their occasional losses, whenever they suffer it.
Wall Street traders also show screenshots
The culture of showing screenshots of earnings is also prevalent on Wall Street.
A trader nicknamed mori226 has created a World record by claiming to have converted $35,000 into a gigantic fortune of $1 million (Rs. 7.5 crore) in just a few months.
He had $35,000 in retirement savings in March — 350 trades later and he’s apparently sitting on $1 million https://t.co/iQSaBwOqKN
— MarketWatch (@MarketWatch) July 8, 2020
Trading secrets revealed
Thankfully, mori226 has been good enough to reveal the precise game plan that he adopted to achieve the spectacular success.
(1) Trend is your friend – anticipate it & ride it
It is elementary that traders who stay with the trend rake in big gains.
However, Mori has advised that we have to learn to “anticipate” it and position ourselves in a preemptive manner.
A textbook example of this is the CoronaVirus crisis.
Mori saw with his own eyes that the Virus was wrecking havoc with the World though the stock markets were defiant and surging to new highs.
“When China, the second biggest fucking economy in the world, was willing to take an extreme measure of forced quarantine of almost 500 million of its citizens, I understood just how fucking serious the virus was. Was that getting priced in the US stock market though? The potentially similar lockdowns in the US? No. Market was fucking hitting ATH at the same time. I shorted the shit out of everything about a week after market hit ATH. My instinct was right, I went up to $550k~ or so from this,” he said.
The exact reverse happened when the markets plunged to unimaginable depths and refused to acknowledge the great progress that was being made against the Virus.
“Bought ballsdeep calls from here and rode the wave back up,” he said.
“Learning to get a sense of the current trend is the hardest part …. Never try to “outsmart” the market. You’re going to lose you fucking shirt,” he has rightly advised.
(2) Let the winners run
“Hopping on the trend is not enough. People pull out too soon, or worse they insist on going the wrong direction,” Mori has pointed out.
“Letting my winners run and not pulling out too quickly let me get some big wins,” he added.
He has explained that traders who are lucky to home in on a hugely green position should exit from only a part of the position or put a trailing stop loss around 20%.
He personally puts a trailing stop only after the position is 50% in the green.
(3) Know a few stocks well but don’t over-concentrate
Mori has advised that traders should master a few stocks so well that they intuitively know how the stock will react.
At the same time, he has cautioned that not more than 25% of the account should be put into a single position.
This concept has also been explained by Spencer of SMB Capital.
“One of the most common pitfalls of trading stocks for developing intraday traders is their inability to maintain focus on a limited number of stocks and setups each day. This problem leads to under performance,” he has advised.
Oliver Velez, a noted trader, is also a strong believer in trading only a handful of stocks instead of the whole universe of stocks.
(4) Cut even a 90% loss because the 10% can bail you out
Every trader worth his salt swears by the concept of “stop loss“.
Mori has endorsed this advice and stated that even a 90% loss has to be cut because the remaining 10% may be useful to salvage the 90% through the “magic of options trading“.
(5) Don’t beat yourself over losses
Some traders get distraught when the losses are massive and are unable to think straight.
Mori has advised them to stay balanced.
“Learn to not beat yourself up over your trades/ mistakes/ woulda-shoulda-coulda’s. <- This right here was the biggest lesson I learned. Staying focused and not killing myself over my huge mistakes. That sense of dread and horror after seeing your account run up to $550k and then plummeting below $100k in a matter of a week or so, I know is horrific, but learn to focus on what you still have left and climb back up“.
(6) Be humble, respect the market
Some traders, especially novices, have a tendency of bragging about their winners and believing that they are the next George Soros and/or Rakesh Jhunjhunwala.
Mori has rapped them hard on the knuckles.
“Let me make one point clear. You are nothing. You are a nobody …. Learn humility, stop fucking bragging about your 1 or even 10 wins, and more importantly, don’t delude yourself into thinking you figured out the secret after your few trades. You haven’t. Learn to be humble, and always respect the market trends,” he has thundered.
(7) Stocks at ATHs have momentum and are good trading bets
It is elementary that if a stock has surged and is coasting at its ATHs, there are a number of investors and traders eyeing it.
Such stocks are ideal for making a quick buck because the momentum will propel them forward.
“When a stock currently is at ATH, I mean actual ATH not high of 52 weeks, then there’s a massive momentum going for the stock and chances are it will keep that momentum for a while,” he said.
Using this logic, Mori bought a truckload of AMZN calls even though the stock had already run up from $1.9k to $2.1k and raked in massive gains when the stock continued on its upward trajectory.
He has, however, cautioned that traders have to be ready to cut losses immediately in case the momentum peters out.
(8) Stay disciplined, Control emotions
Ultimately, Mori has advised that everyone can be a successful trader if they follow basic concepts.
“Stay disciplined. Control emotions. Losses don’t kill options traders, calculating your alternate universe net worth on your woulda-coulda-shouldas do,” he has concluded.