This is the most important concept which made me great money in 2022.

This is the skill which is GUARANTEED to make you a better trader

How do I handle big overnight gaps?

As I mostly take neutral positions overnight, I've been asked this a lot. So here you go.

1 : Take the right position sizing:

If you have the correct position size then there's nothing to fear from big gaps.

I like to take positions in such a way that I don't lose more than 2-3: incase of a big gap. This provides mental piece.

2: Have a calm mind:

This is of prime importance and somethin where most of the guys have trouble. Constantly panicking is going to do no good. What's going to happen will happen.

Having a calm mind allows you to think and act more clearly.

3: The 3 way rule:
If the markets open a a big gap there are not just going to stay there. Three things can happen.

a) It can go up : In this case you can use the move to recover our money.

b)It can go down : Just like the previous point you can take good advantage of it.

c) It stays there: After a big gap, obviously the IVs will explode. If the market stays then, premiums will be high and it will provide excellent opportunity to play neutral and recover your losses or atleast some part of it.

Most of the successful traders here are option sellers.

Ever wondered why?

Why we have chosen option selling?

Find our below

1: Being wrong and still making money.

We as option sellers can be wrong with our market view and still end up making money because of the power of theta decay and adjustments to some extent.

Adjustments work better as get closer to expiry since decay is the highest.

2: Theta decay

The biggest reason and one of the prime reasons is the theta decay.

Option sellers always have an advantage because the as time passes, the option premium falls even if the underlying instrument doesn't move.

3:Playing directional view

Option selling also enables us to take a directional view. In fact, directional view along with theta decay makes it a solid combination.

Debit spreads and credit spreads works great for a directional view.

4: Playing Neutral view

We can make money in option selling even if the market doesn't move as the otm options will go to 0 with the help of theta decay. It's the most fascinating thing.

This is what attracted many into option selling.

TOP 10 TRADING BOOKS THAT MAKE YOU A BETTER TRADER

I've read a number of books on trading and these are top 10 of them which I found the most useful.

1: Reminiscences of a Stock Operator

This book is a biography of Jesse Livermore, world's greatest trader.

It highlights his trading principles and trading psychology along with how he made and lost his fortune.

2: Market Wizards

This book has interviews with the biggest traders in trading. They are sharing their setups, psychology, the way they think and their experiences.

It's definitely an amazing read.

3:Trading in the Zone

If you're suffering from psychological problems related to trading then this book will solve them!

It talks about all the emotions and psychological barrier a trader goes through and gives a way on dealing with them.

4:Trade Like a Stock Market Wizard by @markminervini

This is a timeless classic and it contains excellent swing trading strategies for people who like to trade stocks positionally.

BENEFITS OF OPTION SELLING

Most of the successful traders here are option sellers.

Ever wondered why?

Why we have chosen option selling?

How to decide what strategies to use?

THIS IS THE ONLY THREAD YOU'LL EVER NEED!

Find out below

1: Theta decay

The biggest reason and one of the prime reasons is the theta decay.

Option sellers always have an advantage because the as time passes, the option premium falls even if the underlying instrument doesn't move.

2: Being wrong and still making money.

We as option sellers can be wrong with our market view and still end up making money because of the power of theta decay and adjustments to some extent,

3:Playing directional view

Option selling also enables us to take a directional view. Infact, directional view along with theta decay makes it a solid combination.

Debit spreads and credit spreads works great for a directional view.

4: Playing Neutral view

We can make money in option selling even if the market doesn't move as the otm options will go to 0 with the help of theta decay. It's the most fascinating thing.

Circle of Competence 101

Warren Buffett and Charlie Munger often reference the importance of knowing the boundaries of your circle of competence.

But what is a Circle of Competence and how does it work?

Here's Circle of Competence 101!

1/ First, a few definitions.

A Circle of Competence is the set of topic areas that align with a person's expertise.

If the entire world of information were to be expressed in a circle, an individual's Circle of Competence is the small sub-circle that represents their expertise.

2/ The idea surfaced in the 1996 BH annual letter.

"You don’t have to be an expert on every company...you only have to be able to evaluate companies within your circle of competence. The size of that circle is not very important; knowing its boundaries, however, is vital."

3/ A Circle of Competence is built over time.

It is built through experience, reading, dedicated study, and effort.

It is dynamic, not static.

It can expand as you deepen your knowledge in new areas. It can contract if you fail to nurture your existing areas of expertise.

4/ To engage this mental model in your life, there are two key processes to go through:

(1) Identify what falls within your circle
(2) Identify the boundaries of your circle

(1) is all about figuring out what you know, while (2) is about humbly admitting what you don’t.

“In search of the holy grail”

A thread-

Holy grail- A strategy Which can make money all the time.

After going through two phases of a traders journey, the initial success phase, and Only why do i get loss phase, Traders enter the third phase -

THE SEARCH FOR THE HOLY GRAIL PHASE.

This phase has no limits, It can end in 1 month and it may not end till lifetime.

What exactly is this phase?

When a trader covers all the basics, they know how to lower their losses, they know the power of risk management.

And few of them may even develop their edges and systems over time.

But after some time, they feel that they are doing something wrong and there is more to trading than what they know.

THEN COMES THE HOLY GRAIL PART-

Few of them start to Read more books about trading,finding articles about “How to win 100% of the time” and listening to Youtube videos of few big traders who make big in trading.

If u are looking to enter a scrip just before the breakout
what would u look for?
How would u identify scrips just before breakout?

Here are a few pointers
Carefully understand the them and use at ur own discretion
(All comments r compiled from a question i posed)

1/23

Price is testing the same resistance repeatedly since long.
But now in recent times it's forming multiple candles near the same resistance with low volume.
Observe it and see for opposite move.
As soon as u get a positive candle, get in to it.

2/23

1. Volume buildup (vol > when resistance point created) along with, increase in OI, increase in delivery % on HTF
2. On LTF, price stalling around breakout area for at least 1-2hr.
3. No major events.

3/23

Stock reaching breakout LVL with HL-HH
Contraction of price and volume near it especially near 20 days ma.
If there is any breach of the latest HL it should be followed by a bullish candle with good volume.
Left side of the chart has a rally with a very steep slope of ma.

4/23

Number of wide range green bars with high volumes.
If stock is at its ATH then it adds more conviction bcz there wont b supply after that point

Consolidation below the resistance, volume of the candles & strong bullish candle closing at near highs just below the resistance

5/23

Charts Time!
Follow the thread
$SPY $SPX $QQQ $JETS $NVDA $AMZN $XLE $XLF $PLTR $IWM $TRAN $MJ

$SPY
still looks very bullish on weekly, i expect it to move to 400 early next week

$QQQ
#QQQ similar on weekly, if it dips anywhere close towards 320, buy weeklies and monthlies as its gonna go right back up, below this line though we'll see what happens

$IWM
small caps have absolutely been on fire #IWM since elections, do you think the run continues?

$JETS
#Jets monthly chart - check out the base range it created since 2017 until pandemic, 28-32, looks like its creating a nice long pattern and trying to go back to that range, lets see if it continues and breaks 28 again