I was always wondering why a person does not successes in Market and most

common answer I found Trader do not have written trading plan.

You will ask me what does a Trade Plan means, the answer is a written simple
rules to based activity in the market i.e. all the actions are define such as

1. What Markets we will trade

2. What Time frame we will trade
3. What is the Rule of entry in the Trade
4. What is the Rule of Exit from the Trade
5. What will be the Stop Loss

These are some of the Rules which are followed religiously by a successful trader.

Today lets us look at the rules of trading.

A successful trader does not get emotional while in the market, and in front of
the charts while he/she see a particular scrip either going up or down.

Trader just sticks to rule set by him.

One of the most commonly used technical tool is the Moving averages. There are
many different type of Moving averages such as Simple Moving Average SMA,
Exponential Moving Average EMA and others.

A simple cross over of a moving average is define as a entry and again a next cross
over when ever come would be exit. These simple Rules are fixed. The Trader
works on the same all the time with discipline.

A most common is 50 and 200 period moving average.

A 50 MA cross over above 200 MA is a Bullish sign, commonly call Golden
Cross, and 50 MA period cross over below 200 MA is Bearish, commonly
called as Death Cross.

Note I have used the period which denotes the Time Frame of your Trading
activity.
Here are some of the examples on daily time frame.

Daily chart of Yesbank and Bhel as on year 2013

As you see price above 50 and 200 MA is bullish and Price below 50 and 200 Ma
is bearish.

As a trader one needs to define the Time period on which he is comfortable to

trade and sticks to the same all the time. For some intraday trading is good time
period and for some it is not.
Let us make rule for our complete Trading system. (You can change what is in
Red and Underline for making your Trading System Ready). I have specifically
used “will” so as to confirm the system. (This article was first written and
published in Atmasphere in 2013).

I set my goal to earn 1000 points in bank nifty in a month with a capital of Rs 1
lac.

I will be trading Indian Market and will Trade Bank Nifty. I will only take
maximum 5 trades in a day.

I will use a 3 Min time frame to execute the trade. However I will see 15 min and
60 min time frame candles.

I will use a 20 period simple Moving average. You can have any two moving
average.

I will also use RSI indicator on the chart.

Whenever the candle closes above the 20 SMA and IF there is an RSI divergence.
One more condition IF I see a 1 2 3 Reversal. The 3rd candle close is above the 1st
candle is a 123 reversal.

I will initiate Buy only when all these conditions are met.

It’s about the system and preparation of your mind set a belief that you would
carry during your activity in the Market.

The Fear of pulling the trigger is always be there, but one has to.

The Fear of Losses will always be there, but one has to live ever moment.

That why market is not for all they say, but that’s where the money flows in
abundance and where a bucket can be pull up every sec.
Above Bank Nifty 3 min time frame chart
Indicator is 20 SMA you can also use 20 EMA

Oscillator is RSI – above 50

Entry Exit are always Rule Based.

I used 5 candles rule to place my stop loss or Max 30 points on all trades.

My exit rules are also predefine. Either I trail my stop loss or exit completely on
minimum 1:1 or 2:1 trade.

I maintain a trade Journal and enter all trades taken with a note.

If I make 80 plus points in even 2 or 3 trades I am done for the day.

My maximum draw down for the day is Rs 1000/- if I am wrong in the first 2
trades I will not take another trade for the entire day. In this way I am sure that
the maximum draw down is maintained on all days.
Now in the year 2022, I have made a small tweet:

Time Period I used is 5 or 10 Min to enter the trade for the intraday system and
that to works about 60/70 percent of time, which is good enough to bring home
the money.

Now we also Trade 10 Min Rule to trade Bank Nifty. Capital now required is 2 lakh

As Volatility is high the Stop Loss too is changed based on the Time Frame used,
should not be more than 75 – 125 points, based on the Stop loss and Time period,
your Take Home would also increase. Decide the time period based on your own
personality as the Skills which you have developed.

123 Reversal above 20 EMA signals a Buy

One needs to define the max draw down for the day and max 3 or 4 trades max
per day initially.

Discipline of sticking to your rules defines you as a Trader. The more skillful you
become, the better.

I need to take home minimum average of 100 points a day, which come

100 x 25 days = 2000 points in a trading month, which means

2000 x 25 = 50000 per month minus the broking and other charges as take home.

One more Rule I follow is if I am losing for 3 days continuously I do not get to
trade for the Next 2 days. I then need to sit and study my Trade journal why I
have gone wrong and in this manner.

I keep discipline and train my mind to stick with the rules.

Patience Persistence and Practice are the key element for success as a trader in
the market. With clear and written down rules one can have a winning strategy.

Kindly note technique or strategy you use should be back tested and then
religiously implemented. Remember to Focus on the Goal of the day is more
important than anything else.

It‘s consistence in implementing the strategy which will make you a winner.

This article was writing for Association for Technical Analysis Mumbai (ATMA) and
published in 2013, as you see the Trading System could as simple and effective
with no complication.

Happy Trading.