Psychology Of Successfully Option Trading by Ghanshyam

Discussion in 'Traders Corner' started by Michael Gonsalves, Jan 7, 2023.

  1. Michael Gonsalves

    Michael Gonsalves Member Staff Member

    Jun 26, 2016
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    "Yesterday I bought Calls & Puts and made money from both sided movements in the Indices. However, you remained empty handed. Why?" Expert traders explain the psychology of successful option trading and how we can also become top traders with multi-digit MTM gains

    Did you implement the LDCHL Trading Strategy?

    One of the simplest trading techniques as explained by Ghanshyam and other expert traders is that we have to keep an eye on the Previous Day's High and Low levels.

    Whenever the Indices breaches these levels, we can be reasonably certain that there will be a sudden upward or downward movement, as the case may be. This is because when the Index breaches the PDH, it is the cue for the Bears to cut their losses and exit shorts. It is also the cue for the Bulls to go long.

    The combined action of the Bears exiting and the Bulls entering provides the momentum for the Index to move upwards. The vice-versa is true when the Index breaches the PDL.

    Ghanshyam has explained the entire strategy in a simple and understandable manner with a number of real-life examples (see Bank Nifty LDCHL Trading Strategy by Ghanshyam, his "All Time Hit Option")

    The previous two days provided a brilliant example of how the strategy works. If we had gone short whenever the Index breached the PDL, we would have made a nice little packet of gains.


    Traders fail because they go all-in and are unable to hold on to their positions

    In his latest video, Ghanshyam explained that the primary reason most traders fail is because their position sizing is so high that they are consumed by anxiety that their positions will result in a loss or that their paltry gains will be erased.

    So, at the slightest adverse movement of the Indices, they exit their positions. They feel frustrated later when the market does resume its movement in the direction foreseen by them.

    To resolve this, Ghanshyam strongly advised that we take small trades and risk only such amount as would enable us to hold on without getting shaken out of the trade.

    "Agar aapki capital Rs 100,000 hain, toh sirf Rs 10000 ko daav pe lagaye. Isse aap ko dar nahin lagaga aur app sauda ko hold kar payenge," he stated. He has given cogent reasons for his advice.

    Ghanshyam also gave precise reasons by looking at the Chart as to why he bought Calls and Puts yesterday and at what stage he exited them.

    Why I bought Calls when the market was sinking

    Baadshai, also a sharp trader, made money yesterday by buying Calls even though the market was in a strong downtrend. He explained that one of the common characteristics of the market is that of retracement. Whenever the market gives a strong directional move, one can be sure that there will be a sharp retracement, even if it be short-lived.

    So, we have to watch for the first sign of the retracement and make our move.

    Yesterday, when the Bank Nifty broke the 42000 level due to strong selling, it was very evident that the market was oversold and a retracement is on the cards.

    Badshai bought the 42000CE and made a tidy profit of Rs 1 lakh+ when the Bears booked profits and sent the Index surging upwards.

    Take measured risks

    Badshai also explained that we should not feel shy to take the trade out of the fear of a loss. Instead, we should take measured risks with a measured loss which is within our tolerance level.

    "Mera loss Rs 1 lakh tha jo ke mere normal loss mein hain. Mein apna poora capital daav pe nahin laga raha hoon. Please understand the traders' mindset," he said.

    Keep trading simple. Use common sense to trade

    Badshai also emphasized that most traders are obsessed with studying numerous indicators before taking a trade and do not use common sense. This confuses them because the indicators give conflicting signals.

    "Maine simple dekha ke market 700 point downmove ke baad, 300 point upmove deta hai. Mein 80 point ka SL lagaya aur trade le liya," he stated.