Attributes and Variable of the Financial Markets Part 6:
Price, Volume, Liquidity and Volatility are the market attributes. Business Module, trading Edge, Discipline and trading method are our attributes.
Business model:
Includes capital infusion, risk appetite, winning ratio and reward over the set of trades. Scalability of business model after certain set of trades, which means withdrawing the partial profits to scale up the business activity.
Key variables of business model should be
Capital, capital allocation per trade, risk per trade, winning %, Risk to Reward
Trading Edge:
This is completely the analysis part, and which includes
Studying price behavior
Studying Volume patterns along certain price points
Understanding the key role of liquidity which market makers provide at certain price point tagged by certain volume point.
Understanding the volatility aspect due to changes in liquidity.
Understanding the key structure of the market means having overall directional hypothesis about the instrument.
Discipline:
Relentlessly following business model, trading methods and ongoing calibration of trading edge.
Trading Method:
We have demat long trading method, future long/short method or hedged methods using demat, fo and options. Trading method must have capability to handle volatility, maximizing profits on directional bias and protection against huge loss beyond our risk appetite. Going naked in one direction gives huge profits but it is normally observed that, if the capital is huge then very few can sustain the fluctuations of volatility. So, even though having a smaller account size one should train his or her eyes by building hedged strategies which has inherent capabilities to protect our interest. Winning huge once in a while or earning consistently as per business model is the choice one has to make.
Price, Volume, Liquidity and Volatility are the market attributes. Business Module, trading Edge, Discipline and trading method are our attributes.
Business model:
Includes capital infusion, risk appetite, winning ratio and reward over the set of trades. Scalability of business model after certain set of trades, which means withdrawing the partial profits to scale up the business activity.
Key variables of business model should be
Capital, capital allocation per trade, risk per trade, winning %, Risk to Reward
Trading Edge:
This is completely the analysis part, and which includes
Studying price behavior
Studying Volume patterns along certain price points
Understanding the key role of liquidity which market makers provide at certain price point tagged by certain volume point.
Understanding the volatility aspect due to changes in liquidity.
Understanding the key structure of the market means having overall directional hypothesis about the instrument.
Discipline:
Relentlessly following business model, trading methods and ongoing calibration of trading edge.
Trading Method:
We have demat long trading method, future long/short method or hedged methods using demat, fo and options. Trading method must have capability to handle volatility, maximizing profits on directional bias and protection against huge loss beyond our risk appetite. Going naked in one direction gives huge profits but it is normally observed that, if the capital is huge then very few can sustain the fluctuations of volatility. So, even though having a smaller account size one should train his or her eyes by building hedged strategies which has inherent capabilities to protect our interest. Winning huge once in a while or earning consistently as per business model is the choice one has to make.
