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How to Make Money Like a Real-World Trader podcast

Dec 24, 2019

Vijay Bhambwani shares some secrets about how to trade effectively from a practical point of view.

Tune in...

Here's more on trading:

Hi, this is Vijay Bhambwani. And in this video, I'm gonna share some more secrets with you about how to trade effectively from a practical point of view.

We all know that our education in school and college prepares us for the academic aspect of anything. May it be science, may it be trade, commerce, finance or even arts.

But there is no university bigger than the university of Life.

So, you might have read 5 bestsellers on how to swim. But unless you actually take your clothes off, get into your swimming trunks and dive into the pool, your lesson can never be complete. There is a saying among my community that you can learn all you can from your professor about investing, trading and making money... But if you really want to learn how to make money, you must go and learn it from a person who has actually made money from what you are trying to go out there and do.

So, the best way to learn about making money from the market is to learn it from a real-world investor or trader.

How is this any different?

The difference is actually as start as chalk and cheese. Let me share with you a small example.

This is where the Nifty had made a previous high. It came down slowly and then started to make a V shaped recovery rising all the way higher.

Whenever the prices exceed the previous high, technical analysts actually call it a breakout. Is it really a breakout? I would beg to differ.

There is something called a cost of carry or holding on cost. Take for example, the peaks made in the nifty and the bank nifty between May and July of 2019 respectively. If those levels are exceeded in November and December like they have, is it really a breakout?

What about a trader who has gone long at the previous peak, not wanting to sell at a loss is holding on those futures, rolling it over or carrying it forward from one month to the next would incur a financing cost or a cost of carry. For such a trader, every month, the cost of those long positions is actually going up.

So, on the chart, you could actually say that the breakout has occurred. But for a real-world trader, he is still in a very real notional loss. To that extent, a market practitioner knows that a profit comes only when the cost of carry has been factored in.

Or take for example, simple nuances like expiry. In the commodities space, expiry is a very, very different process. In this day and age, when regulations are changing as to how settlement will take place in the derivative segment. So, you have base metals, which are now compulsorily delivery settled.

The last five trading sessions will see delivery marking coming into play, so margins will be raised by the exchange on those five trading sessions, especially for gold and silver. The last five calendar days are actually delivery marking. So, we all know where, for example... hypothetical example. If the expiry on your terminal shows as 5th of February, you cannot really trade up to 4th of February or 5th of February in that future. Trading actually stops on 31st January because on 1st of February onwards, delivery marking takes place and margins on the remaining days go progressively higher.

A trader would therefore know that 5th of February expiry means you must roll over your positions on 31st January itself.

A non-market participant would therefore not factor into these things. Take for example, the expiry of the USD/INR. While on paper, the expiry would take place at 5 PM. But in the real world, the expiry actually takes place at noon.

The next month future becomes the current month future. So, the baton is being changed from one sprinters hand to the other at 12 noon rather than 5 PM, which is the closure of the forex markets.

These are subtle nuances that one learns after actually taking a plunge in the financial markets.

Who should you really follow? A textbook example of how to trade or a real-world trader? Which is why we at Equitymaster depend on the practical aspects of trading rather than the academic. I would believe in harnessing the real-world examples of how to make money rather than the theoretical ones.

In the real-world example, you're basically ready to hit the ground running and start trading from day one so as to generate spare and ready cash for your family to put food on the table rather than the academic method were in you learn through trial and error and expensive losses of what not to do in financial markets.

Learning lessons from what not to do is invariably more important than knowing what to do. And in financial markets, what not to do can sometimes be a lot more important than what to do. It can actually make the difference between a profit or a loss.

So in my service, I basically take care of all the imponderables, variables and all your factors that go into a ready trade, a high probability trade so that all you need to do is click on the button and rely on the trading signal itself.

Will continue to look out for new trading opportunities for you day in and day out.

Before I sign off for today, let me remind you to click on the like on this YouTube video subscribed to my YouTube channel. Please do not forget to share this video with your family and friends, and in the comments section, let me know what to think about this video. And what else would you like me to cover in my forthcoming videos.

This is Vijay Bhambwani, taking leave from you right now till we meet again in my next video. Take very good care of your investments. Thank you.

Vijay Bhambwani

Vijay L Bhambwani, is the editor of Weekly Cash Alerts and Fast Income Alerts. He is a professional trader, author, trading mentor, and lifelong student of the markets. He has been an active trader since 1986. Financial markets are his life and passion. Everything else in his life revolves around his main objective - trading. Vijay believes that no matter how much a trader has lost in the market, it is possible with hard work and smart work to get it all back over time. Understanding the method behind the madness of the markets interests him more than the profits. He specialises in predictive style of technical analysis, in the commodity, currency, and equity markets. That is the foundation stone of his style of trading - Neuro Behavioural Technical Analysis. Vijay trains other professional traders. He is empaneled with the BSE & NSE as a visiting faculty for various finance market courses. He created the early course content for the Diploma in Commodity Markets (DICM), certified by the Forward Markets Commission. He was a training mentor at the MCX between 2005-2009. He is the first author to have his book - A Traders Guide to Indian Commodity Markets published by CNBC Publishing 18, in 2009 - approved and sponsored by the NCDEX. Vijay has done over 8,000 TV shows in the last 17 years and has written over 4,000 columns/articles in the print and electronic media. He is one of the first columnists to write a weekly column in the English language print media after the commissioning of the MCX, via his columns in the DNA Money, Business Standard and others. Vijay lives with his family in the posh Breach Candy area in Mumbai.

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