This post i am writing for people who started practicing DPTrading recently. I am going to write about all mistakes we have done from the time of trading this method. I hope you find it useful and save effort/time/money as you can pin point few mistakes you making currently, also you can avoid doing the mistakes we have done in past.
1. Trying to frame strict rules or making a rule based system out of DP Concepts.
This is the biggest mistake people make. What we learnt from NiftyNirvana is all DOT's, we need to make a picture out of it (read as Trade Strategy/Plan). Let me elaborate further,, NiftyNirvana has given us below DOT's.
a) DP's such as PDH, PDL, PDC, BRN's, RN's, DH, DL, DO
b) Patterns BO, BPB, BOF, TST, FTC
c) Ranges
Now how you can trade? big mistake new people do is trading all setup's at all DP's.
That is correct way at all, today BPB of PDH may given 100 points & next 4-5 days PDH can be barb wired. Some times BO will work, some times BPB is better choice instead of jumping by BO. Some times BOF pattern wont give chance to enter by not giving a swing low to enter,, some times it does picture perfect pattern allowing entry.
So, my point is.. don't frame rules with DP and Setup's. We have to be very flexible and take decisions of how to treat a DP and which setup to trade,, depend on context under which price action happening right now. PRICE READ is utmost important.
Now the Q, how to read PA ? Well, this is where developing trade strategy comes. Design a trade strategy step wise as per your experience,, but make sure it follow below step wise procedure. That should act as Blue print for you to how to start your day and end your day.
Step 1 : How trend is in Day T/F
Step 2 : Defining Market Structure for the day, before market opens
Step 3 : Observe where market opened, how IR formed
Step 4 : Write down you potential trade setup's at a nearest DP
Step 5 : Once approached DP and forming pattern you wanted, start knowing entry and exits and be
ready with quantity to trade
Step 6 : If market doing some thing else than what you anticipated, change your view as market says
and update your trade plan accordingly.
Step 7 : Document your trades into trade journal
This is how we have to form a systematic approach. if you doing this mistake right now, you can rectify by designing a Trade Strategy as i briefly explained.
2. Over Trading
Below are possible reasons one may do over trading. my suggestion to overcome also i mentioned below.
a) Missing sharp move at opening bell ::
When trend is strong, we get to see majority move happen through gaps or move happen in initial
5-10 minutes. Don't be in a hurry,, market will give opportunity to get into trade with the trend
after doing PB in opposite direction. Sit patiently till then. Nobody can catch all the moves. Take a
Color Print of your Trade Strategy document and pin to your monitor. Follow it religiously.
b) Unrealistic expectations of ROI
This mostly happen if you form opinions from people who lure by posting heavy MTM's in social
media. I suggest to delete your social accounts or open them after market hours only.
Being a discretionary method, the outcome of DPTrading is purely depend on factors like,,
Practical experience of individual, capital, emotional balance of individual, physiological
advantages, Ability to assess direction quickly and get into trade plan, Ability to be flexible
and change plan as market changes its direction, Ability to sit through when trend happening
in study manner, ability to take partial profits and taking re-entries, Taking advantage from trade
journal to identify which setup's you doing well and keeping you trade strategy updated
List goes endless,, you see many factors influencing the outcome right.. then how you can expect
you will be profitable just by reading a book or doing paper trades of historical charts.
The real battle starts after you started taking trades on your own.
IMO have no expectations at all, if you can protect capital in initial months, consider you did great
job,, as the time goes you will turn profitable and grow further. Let the sstrulling phase take on its
own course. nobody can escape it.
3. Comparing yourself with other DPTraders
I have suggested solution for it already above,, keep you away from social media during market
hours. Stand on your own foot. Only thing should matter to you is your own trade log and trade
ledger.
All you need is a 50 page eBook of Nifty Nirvana, a testing phase for you when you started
practicing DP method, An uptodated trade journal, A trading strategy designed out of your own
screen time, experience, trade journal,self belief and conviction on yourself finally.
My wife used to wait for SMART TRADER post every day when he was active and comparing
her trades,, but she always end up with more confusion and making mistakes again.
She turned better trader only after being self dependent and viewing other's blogs only as a
reference but not trying to being a copy/replica of other trader.
Trading is a self game,, you have to find out what work;s for you and how it works for you.
4. Dealing with DP even after it becoming irrelevant
Best part of DPTrading is it's ability to use in any kind of market & specially it wont force us
to stay away during side way market like most of TA Systems (where whipsaws keep go on)
but one major what people do while trading side way market is, not removing a DP which lost
its relevance.
By the definition, we expect price to push away from DP and we try to trade in that direction
right! now when we see price revolving around same DP, ,making swing point high and low
then we anticipate it forming BW,, in such cases you should be able to guess ASAP and mark
DP as less relevance or much better you can remove from chart space as well.
In initial phase, common occurrence of a pattern for DP Trader is,, gaining well on a trend day and
loosing same on couple of range days. When we identify early that DP loosing its relevance, give
less importance to it and avoid trades from that location. that way your chart will be clear
and also you will look for better trade location.
5. Not maintaining Trade Journal
I consider this task of maintaining a trade journal is more important than taking trades itself!
If you don't spend effort in understanding how your trading journey going on,, how can you
identify your mistakes and rectify them?
My suggestion would be design an excel template with all columns like instrument, trade, quantity,
entry, exit, RR, P/L, reason took a trade, mistake done, weekly introspection, monthly report,
Time vs cumulative P/L graph, keep a check on costs incurred etc.
Treat trade journal as a mirror image of your trading face :)
6. Not focusing on Price Reading ability
This is most underrated topic IMO. but this is sole factor decide outcome of your trades over
a period of time.
Let me elaborate,, we all know during uptrend we buy at RL's,, down trend sell range high's,,
fading range extremes,, stay away from channeled moves,, all these are theory concepts.
But in reality,, how many instances market will give clear indication of trend for intraday?
Many a times, you will start a day with negative bias,, reverse from some DP and then turn range
bound, fail at higher level and resume down trend,, again turn range bound.. and from 2:30 it starts
bouncing from PDL and close above 2 day high,, and turning day trend also UP.
So, how will you read this PA if don't develop flexible mindset to change views as per price
movement and at the same time filter counter trend setup's as per strength of location, space to
move, whether critical mass get TRAP'ped etc.
EOD, every thing looks clean and your mind automatically see 2 setup's which worked out of 10.
and you may think, this is so easy to trade. But reality is way different,, unless you develop a
trade strategy for yourself, flexibility to change views, filter potential better setup's from mediocre
Also as i stressed out already, your improvement as a DPTrader will be depend on how much
quality time you spent in things like pre market preparation, trade journal, maintaining focus
during market hours, having a structured SCALE UP plan etc.
Let all your effort channeled in direction of improving PRICE READING ability over the time
all things will fall inline automatically!
7. Not Knowing which setup's / Days difficult to execute
I personally not trading TST, FTC any time after realizing they are difficult to take as per
my psychology. Similarly, you also make a list of setup's or days wont keep you in peace.
Example : TST, FTC patterns, Channeled days (as soon you realized/seen it), gap of 100+
points, Event day's, Expiry Days.
My suggestion for new people is to stay away on event days, expiry days
And there will be few days where you have to hold emotions and sit tight,, like a gap of 100+
happened,, wait for decent PB till good DP
That's all from my side. You can comment if you want to provide any other from your experience.
1. Trying to frame strict rules or making a rule based system out of DP Concepts.
This is the biggest mistake people make. What we learnt from NiftyNirvana is all DOT's, we need to make a picture out of it (read as Trade Strategy/Plan). Let me elaborate further,, NiftyNirvana has given us below DOT's.
a) DP's such as PDH, PDL, PDC, BRN's, RN's, DH, DL, DO
b) Patterns BO, BPB, BOF, TST, FTC
c) Ranges
Now how you can trade? big mistake new people do is trading all setup's at all DP's.
That is correct way at all, today BPB of PDH may given 100 points & next 4-5 days PDH can be barb wired. Some times BO will work, some times BPB is better choice instead of jumping by BO. Some times BOF pattern wont give chance to enter by not giving a swing low to enter,, some times it does picture perfect pattern allowing entry.
So, my point is.. don't frame rules with DP and Setup's. We have to be very flexible and take decisions of how to treat a DP and which setup to trade,, depend on context under which price action happening right now. PRICE READ is utmost important.
Now the Q, how to read PA ? Well, this is where developing trade strategy comes. Design a trade strategy step wise as per your experience,, but make sure it follow below step wise procedure. That should act as Blue print for you to how to start your day and end your day.
Step 1 : How trend is in Day T/F
Step 2 : Defining Market Structure for the day, before market opens
Step 3 : Observe where market opened, how IR formed
Step 4 : Write down you potential trade setup's at a nearest DP
Step 5 : Once approached DP and forming pattern you wanted, start knowing entry and exits and be
ready with quantity to trade
Step 6 : If market doing some thing else than what you anticipated, change your view as market says
and update your trade plan accordingly.
Step 7 : Document your trades into trade journal
This is how we have to form a systematic approach. if you doing this mistake right now, you can rectify by designing a Trade Strategy as i briefly explained.
2. Over Trading
Below are possible reasons one may do over trading. my suggestion to overcome also i mentioned below.
a) Missing sharp move at opening bell ::
When trend is strong, we get to see majority move happen through gaps or move happen in initial
5-10 minutes. Don't be in a hurry,, market will give opportunity to get into trade with the trend
after doing PB in opposite direction. Sit patiently till then. Nobody can catch all the moves. Take a
Color Print of your Trade Strategy document and pin to your monitor. Follow it religiously.
b) Unrealistic expectations of ROI
This mostly happen if you form opinions from people who lure by posting heavy MTM's in social
media. I suggest to delete your social accounts or open them after market hours only.
Being a discretionary method, the outcome of DPTrading is purely depend on factors like,,
Practical experience of individual, capital, emotional balance of individual, physiological
advantages, Ability to assess direction quickly and get into trade plan, Ability to be flexible
and change plan as market changes its direction, Ability to sit through when trend happening
in study manner, ability to take partial profits and taking re-entries, Taking advantage from trade
journal to identify which setup's you doing well and keeping you trade strategy updated
List goes endless,, you see many factors influencing the outcome right.. then how you can expect
you will be profitable just by reading a book or doing paper trades of historical charts.
The real battle starts after you started taking trades on your own.
IMO have no expectations at all, if you can protect capital in initial months, consider you did great
job,, as the time goes you will turn profitable and grow further. Let the sstrulling phase take on its
own course. nobody can escape it.
3. Comparing yourself with other DPTraders
I have suggested solution for it already above,, keep you away from social media during market
hours. Stand on your own foot. Only thing should matter to you is your own trade log and trade
ledger.
All you need is a 50 page eBook of Nifty Nirvana, a testing phase for you when you started
practicing DP method, An uptodated trade journal, A trading strategy designed out of your own
screen time, experience, trade journal,self belief and conviction on yourself finally.
My wife used to wait for SMART TRADER post every day when he was active and comparing
her trades,, but she always end up with more confusion and making mistakes again.
She turned better trader only after being self dependent and viewing other's blogs only as a
reference but not trying to being a copy/replica of other trader.
Trading is a self game,, you have to find out what work;s for you and how it works for you.
4. Dealing with DP even after it becoming irrelevant
Best part of DPTrading is it's ability to use in any kind of market & specially it wont force us
to stay away during side way market like most of TA Systems (where whipsaws keep go on)
but one major what people do while trading side way market is, not removing a DP which lost
its relevance.
By the definition, we expect price to push away from DP and we try to trade in that direction
right! now when we see price revolving around same DP, ,making swing point high and low
then we anticipate it forming BW,, in such cases you should be able to guess ASAP and mark
DP as less relevance or much better you can remove from chart space as well.
In initial phase, common occurrence of a pattern for DP Trader is,, gaining well on a trend day and
loosing same on couple of range days. When we identify early that DP loosing its relevance, give
less importance to it and avoid trades from that location. that way your chart will be clear
and also you will look for better trade location.
5. Not maintaining Trade Journal
I consider this task of maintaining a trade journal is more important than taking trades itself!
If you don't spend effort in understanding how your trading journey going on,, how can you
identify your mistakes and rectify them?
My suggestion would be design an excel template with all columns like instrument, trade, quantity,
entry, exit, RR, P/L, reason took a trade, mistake done, weekly introspection, monthly report,
Time vs cumulative P/L graph, keep a check on costs incurred etc.
Treat trade journal as a mirror image of your trading face :)
6. Not focusing on Price Reading ability
This is most underrated topic IMO. but this is sole factor decide outcome of your trades over
a period of time.
Let me elaborate,, we all know during uptrend we buy at RL's,, down trend sell range high's,,
fading range extremes,, stay away from channeled moves,, all these are theory concepts.
But in reality,, how many instances market will give clear indication of trend for intraday?
Many a times, you will start a day with negative bias,, reverse from some DP and then turn range
bound, fail at higher level and resume down trend,, again turn range bound.. and from 2:30 it starts
bouncing from PDL and close above 2 day high,, and turning day trend also UP.
So, how will you read this PA if don't develop flexible mindset to change views as per price
movement and at the same time filter counter trend setup's as per strength of location, space to
move, whether critical mass get TRAP'ped etc.
EOD, every thing looks clean and your mind automatically see 2 setup's which worked out of 10.
and you may think, this is so easy to trade. But reality is way different,, unless you develop a
trade strategy for yourself, flexibility to change views, filter potential better setup's from mediocre
Also as i stressed out already, your improvement as a DPTrader will be depend on how much
quality time you spent in things like pre market preparation, trade journal, maintaining focus
during market hours, having a structured SCALE UP plan etc.
Let all your effort channeled in direction of improving PRICE READING ability over the time
all things will fall inline automatically!
7. Not Knowing which setup's / Days difficult to execute
I personally not trading TST, FTC any time after realizing they are difficult to take as per
my psychology. Similarly, you also make a list of setup's or days wont keep you in peace.
Example : TST, FTC patterns, Channeled days (as soon you realized/seen it), gap of 100+
points, Event day's, Expiry Days.
My suggestion for new people is to stay away on event days, expiry days
And there will be few days where you have to hold emotions and sit tight,, like a gap of 100+
happened,, wait for decent PB till good DP
That's all from my side. You can comment if you want to provide any other from your experience.
