Cultivating the right mindset and attitude for successful trading

A few months ago, my 3 year old grandson Abhedya, told me that his teacher in school had taught him how to draw a "Standing" line. I was amused, but brushed it aside as one of the activities for kids. A week later, he told me now he can draw a "Sleeping" line. One more of those activities, I thought. Then again a week later, he now could draw a "Slanting" line, either from left to right, or right to left. I started seeing some specific pattern now, but could not pin point the purpose yet. Yesterday, when I met him, he told me he can now write alphabets A E F N M and a few more.

A new fact dawned on me. A big complicated process can be made easy and can be passed on to others as a lesson, if it is broken in to tiny yet actionable pieces of work. And this is what has prompted me into writing this article in an attempt to make it easier for fellow traders to understand the complexities of the process of trading by cultivating the right mindset and attitude towards becoming successful. Here, by successful, I mean profitable.

So let us break the process of trading into simple steps

  1. Waiting for the opportunity for entering the trade to appear
  2. Actually entering the trade, with the right position size
  3. Waiting for the stop loss or the target to arrive
  4. Exiting the trade
  5. Stop trading because most permissible number of trades has exhausted
Many traders are either unaware or ignore the 5th step in the process of trading, which is detrimental in Account size management. We will come to that a bit later.

Steps 2 and 4 are the easiest in the world for all traders. It is as easy as pressing F1 and F2 on the keyboard. Step 4 in many cases nowadays is taken care of by the trading platform itself by the introduction of Bracket Orders.

The most difficult part of trading is Step 1. In which, "knowing that the opportunity has not yet appeared and the wait is still on", plays a psychological havoc. Being sure that "my type" of trade setup is not there on the screen as of now, takes its mental toll. The trader tends to lose faith in his identified trading method and starts to believe that his type of trading opportunity will never appear on the screen ever after. This belief overshadows his entire thought process and he rushes into what is know popularly as "Impulsive" trade.

This makes, "Waiting for Opportunity" a big and complicated process in itself. I too, have been a victim of this mindset. But, by God's grace, I could come over it by some tangential thinking. And now that I can break it into tiny actionable pieces, lets see if I can pass it on to you as a lesson.

The art of waiting is a function of how precisely you can identify that your type of opportunity has not come. It has also to be coupled with the faith that your type of opportunity will come eventually.

I visualize the market, as one big kitchen, which, in its numerous "dining halls", regularly doles out "cuisines" and "dishes". It has numerous "cuisines" that it serves and within them there are multiple combinations of "dishes" within that particular cuisine. The kitchen serves only one type of cuisine at any given point of time. Few people relish it, and many people cannot swallow it. Once the time of that cuisine is over,  a different cuisine is served with a different combination of dishes. To a newcomer, this appears to be a feast and he wants to grab everything that comes up. Eventually, he can take no more and throws up what he already has had.

However, chaotic this kitchen and its service may appear on the surface, there are some underlying rules which never get broken. Understanding these rules will make it easier for us not only to get a sumptuous lunch and dinner regularly, but to carry with us a heavy parcel home also.

  • Food will be served in each "Hall". That means there will be my type of opportunity in every segment. Equity, Futures, Options, etc. I have identified Nifty Futures and Nifty Options as my types of "Halls". I strictly ignore every other meal in every other hall.
  • The "cuisines" will be served one after the other and the combination of "dishes" within them will be different for each serving. This means that the trading environment could be either up-trending, down-trending, sideways, volatile, gloomy, exuberant, anything. Within that, the environment could be in favor of a few indicators, and not so favorable for others. I have used this information to identify what price action does not suit me, and I strictly avoid entering into trade at such times. And since the combination of dishes in my meal will be different each time, I am also aware that the outcome of my trade could be different. But having chosen, the right "cuisine" for myself, the difference in outcome is within acceptable limits.
  • There will be no fixed sequence of serving these "cuisines". That means one never knows when the trading environment will change, and to what. This information helps me not to get into a predictive mode. Once, I avoid predictive mode, I almost nullify my wrong entries into wrong trades. 
  • A set of "cuisines" will be served at a almost preset frequency. Some will be doled out daily, or weekly or monthly and so on, but without a fixed time. This information, helps me to identify the setups that appear at a reasonable frequency to satisfy my requirements. It also reinforces my faith that the opportunity will appear soon enough and enables me to wait for it, easily.
The above visualization, helps me focus on my type of segment, my type of trade setup within that segment and limits the overall expectation from those trades. Everything else in the market is "Junk" for me, as I know for sure, that it will make me throw up and get sick.

But remember, I said there is a fifth step. "Taking a conscience decision to stop trading" 

Knowing that my type of "cuisine" will be served only at its preset frequency, helps me to expect that it might not be served so quickly once it is done with. This helps me restricting my number of trades per day, per week, per month and so on. I have as such restricted myself to the following few trades only.

  • One Intraday trade per day (if available) in Nifty Futures as per Futures Range
  • One Intraday trade per day (if available) in Nifty Options as per Options Range
  • One Intraday trade per week (if available) in Bank Nifty Options 
  • One trade per month in Nifty Options as a positional trade.
  • Two intraday trades per day in Nifty Options as per a new strategy that I am working on.
There are various ways, one can visualize the stock market. But the crux remains the same

  • A grand party playing numerous "genres" and within them "songs" or "numbers"
  • A super huge mall with different "sections" and within them "items" 
  • A huge gym with different "sections" and within them different "routines"
The crux remains the same. 
  • You need to identify what is "your type" of opportunity.
  • You need to wait for "your type" of opportunity to appear on the screen
  • You need to carry the faith that "your type" of opportunity will appear soon enough.
  • You need to stop for another day, week, or month for the next time "your type" of opportunity appears.
Remember, market is full of opportunities and no rules of its own. You have to pick up your type of opportunities and play within your rules.


It is a fact, that you do not trade the markets, you only trade what goes on in your mind.

Happy Trading !!!

Nilesh Deshpande

3 comments:

  1. फारच छान मांडणी केली आहे निलेशजी. ल‌ई भारी.

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  2. Excellent Writeup Nilesh ji ..

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