EDITOR’S NOTEIn this issue -1. Sumeet Jain explains the role of discipline in the life of a trader in his article – Discipline in Trading.2. Ananth Madhav portrays the objective of volume in trading in his piece – Measuring trades with volumes.3. Rajat Dutta illustrates two trading setups for the short term trader in his first article - Intraday Trading with Cups.4. Claudia Mincucci gives another great review of the Dow Award winning paper of 2008 about Style Index Momentum to generate Alpha byTibbs, Eakins and De Shurko5. Sahil Vijay gives a review on one of the most interesting and useful books for any trader – Fibonacci Analysis by Constance Brown.We await your feedback on <strong>ATMASphere</strong>. Please let us know what we can do to deliver content that meets your needs by sending an email toeditor@atma-india.net. You can also subscribe to <strong>ATMASphere</strong> completely free by clicking here.Sincerely,Gunjan Duaa.JULY <strong>2014</strong> ATMASPHERE | 4
Discipline in TradingOxford dictionary explains discipline as: “The practice of trainingpeople to obey rules or a code of behavior, using punishment tocorrect disobedience”. We are going to discuss the same, but only inthe context of Trading, trading in the stock, commodities and forexmarkets. The parts of the above definition we need to focus on are“Obey Rules” or “Code of Behavior”, “Punishments” and inculcating ahabit of obedience instead of using punishment to correctdisobedience.Trading demands discipline. Without which one may not survive themarkets, as in not able to trade another day. A trader has to bedecisive and rely on certain traits, about him; certain market factorsare it charts or any other rules he follows and be consistent to makemoney. He cannot afford to give way to emotions and takeunacceptable trading losses. The most important factor as manywould say is having a Trading plan. What I would like to point out is,having a trading plan is not enough. Sticking to the trading plan ismore important. One can recall here the words we needed to focusfrom the definition, Code of Behavior and Obey Rules.A trading plan is nothing but a set of rules, for some it’s a set oflevels, price targets, stoploss, etc. Call it by any name, does notmatter. They are a set of rules and one must militantly stick to them.The two biggest enemies that a trader has are Greed and fear. Theyare with him all the time. They follow him everywhere. They aremore potent when he is in front of the screen. If a position is yet tobe taken, greed can make a trader take a position, which was notmeant to be taken in the first place. If fear is more emphatic in themind then he will be frozen and unable to take up a new position.Sounds confusing, isn’t it? Militantly sticking to the trading plan,keeping emotions out of one’s mind would be helpful in suchsituations. One cannot imagine what happens to a trader who givesway to emotions and trades. An inexperienced or better to use theword-undisciplined trader at times is reluctant (greedy) or afraid(fearful) to take a loss, gives birth to another emotion called Hope.Hope seldom works in the stock market. Sitting in anticipation thatthe level will come again is a worst thing a trader can do. Similar is inthe case of booking profits. After these examples I think its clear whyI emphasized on the sentence: “Militantly stick to the rules”. A bigmarket wizard has said: Having no position is also a strategy. Thereare times when one should sit out and wait for proper entry.To sum it all up, one must stick to all the rules. Avoid trading onhunches. Make an initial position only when you are supposed to,book a profit or a loss at a level, which was pre-decided, whichevercomes first. At times having no position is also a strategy. If oneexercises the disciplinary actions outlined above, he/she has an edgeand has greatly enhanced the likelihood of being successful.Sumeet Jain, CMT is currently working as asell side analyst at Asit C Mehta InvestmentIntermediates catering to both institutionaland retail clients. He has more than 8 yearsof market experience and has been a activecontributor on both print and electronic media. He can be reached atsumeetsj@gmail.comJULY <strong>2014</strong> ATMASPHERE | 5
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