How to manage the loss and convert it into profit- NIFTY50

 Today, I engaged in two trades. Reflecting on my previous blog post What happened today in Nifty 50... where I admitted to letting bias cloud my judgment, I made a conscious effort to remain objective and strictly adhere to my Volume Price Analysis (VPA) strategy. Out of the two trades I took, one was successful, while the other was not as profitable.

Let's discuss the market movement first. The market opened with a gap up of 0.7%, but after that initial surge, it went flat for the rest of the day. Despite the overall flatness of today's market, I managed to end up net positive by sticking to my strategy.

Before diving into the details of the trades, it's important to emphasize the significance of following a well-tested trading strategy. Many traders fail because they rely on their gut feelings rather than a systematic approach. It's crucial to understand that no strategy is foolproof under all market conditions.

For instance, VPA might perform excellently in certain market environments but might not yield significant results in a flat market. Similarly, trend-following strategies tend to work better on larger time frames, such as a week or a day. The challenge is that we can't predict with certainty how the market will behave each day. We can only make educated guesses based on factors like the Volatility Index (VIX) and news events. A low VIX around 12 and a lack of major news might suggest a flat market, but this is merely a possibility, not a certainty. Therefore, it's crucial to react to market signals rather than trying to predict market movements.

Trade Details

Trade 1: NIFTY 04 Jul 24300 Put

In the first trade, I noticed the formation of a reversal candle and, according to my VPA strategy, took a position in the NIFTY 04 Jul 24300 Put option. However, the market flattened out soon after. Adhering to my risk management rules, I exited the position with a 7% loss. This highlights the importance of risk management and cutting losses early when the market does not move as anticipated.

Trade 2: NIFTY 04 Jul 24300 Call

Later in the session, I observed another reversal candle formation. Sticking to my VPA strategy, I bought the NIFTY 04 Jul 24300 Call option. This time, the market moved favorably, and I made a 26% profit from this trade.

Conclusion

Objectivity: Stay unbiased and stick to your trading strategy.

1. Risk Management: Always manage your risk and be prepared to exit losing positions promptly.
2. Strategy Adherence: No strategy works under all conditions. Adapt to the market signals and conditions.
3. Market Research: Conduct your own research and stay informed about market factors that might affect trading conditions.

Remember, it's essential to do your own market research before engaging in any trades. Keep learning, stay disciplined, and read my next blog for more insights and updates on trading strategies.

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