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Note: This in reference to my post on how one of my customers using the directional strategy in my course made an amazing 42.78% return in 5 trading days. This made him richer by Rs. 16.26 Lakhs on Rs. 38 Lakhs margin blocked, of course in 5 days. Note that your results may differ. For more information please read this post:
Customers First Trade Makes 4 Lakhs.
Once I posted his amazing trading results on my website, I started getting too many emails from my paid as well as free newsletter subscribers on how Ravi did it. So I sent him a list of few questions which he replied the next day.
These are some of the questions I asked Ravi and I think Ravi’s reply sums it up all.
Q1) Ravi you are trader par excellence. Congratulations. Can you please first throw some light on your background?
Q2) Are you a Full Time Trader? If yes any reason you became a full time trader?
Q3) We see that you are MBA, CPA and TA. What kinds of jobs you did? Were they anything to do with stock markets? If no where did you learn the art of trading?
Q4) What books you have read to improve your trading and Technical Analysis knowledge?
Q 5) Before doing my course, what was your primary strategy of trading? Was it Intraday, positional or any other. Please also tell the medium of trades – was it on Equity, Options or Futures, or all?
Q6) I am sure before you did my course you traded on the simple logic of buy and sell or sell and buy with a strict stop loss. If yes, what was the strategy/technical reasoning behind taking a call?
Q7) I see that within 2-3 days of doing my course you put Rs. 38 Lakhs on the line on one of my strategies. That’s a BIG decision. What prompted you to take such a huge risk? Did you paper trade for these 2-3 days? If yes did you paper trade on 38 Lakhs?
Q8) You also deviated from the conservative directional strategy. It was Nifty Future Buy but you changed it to ATM Call option buy. I see you have written that you did it to reduce margin requirements. Other than that was there any reason? Please do not reveal the strategy itself. We just want to know the reason.
Q9) Did you paper trade the strategy with the option buy instead of the futures?
Q10) The positional trade was traded Intraday. Was it intentional or you saw that you were making a profit of more than 4 lakhs in a single day so you exited? And by chance the positional trade got converted into Intraday?
Q11) Do you enter the trade in a phased manner, like 5 lakhs on the line, then 5 more, then average the trade with another 5 lakhs until all 38 lakhs is blocked to get better rates on the trades?
Q12) This will benefit my readers who are TA themselves. What is the TA method that you still follow even after hedging?
Here is Ravi’s reply:
At the outset, thanks for showing so much love and admiration and a big shout-out to Dilip for his awesome work. Dilip, you have given my trading a astronomical push.
Before we talk about the questions and answers let me tell you – I am a regular guy who has made every possible mistake and has seen a lot of losing trades. The only reason I have started seeing success is because of never giving up and the hunger for learning.
I have decided to write this article as a narrative while keeping in mind to answer all the questions.
My background in trading and investing goes back some 30 years (I am 39 years old). My grandfather use to buy blue chip companies in the 1970-1990 and it was while reading out the stock quotes from newspapers that I discovered my admiration for the stock market.
My grandfather passed away leaving me a portfolio that contained IPO shares of Reliance Industries, Larsen & Toubro (L&T), Tata Steel and few more.
My background is in software engineering and I got my MBA from a top 10 school in the US. It was during my MBA that I studied futures and options in depth, right to the black-scholes model. I found the concept of options and futures fascinating in terms of trading psychology. A bulk of my TA studies took place while I was getting my MBA.
I use a very basic TA model that is made up of RSI, MCAD, EMAs and SAR. You can learn about these indicators almost anywhere, there is a ton of material on YouTube as well. The key is in the application though. It is my belief that 100% of the traders actually fully know how to trade, its the DOING that gets totally screwed up. So though knowing is important – the doing is the key. I cannot tell you how hard it is. I had to train my wandering mind to focus, be disciplined and I use methods like long distance running and exercising to discipline my mind.
I am not a full-time trader as I have other business commitments towards my family business and some other technology projects that I dabble in. I do not aspire to become a full-time trader either. Contrary to what you guys might think, I actually don’t like intra-day it is only if I see a substantial profit that I close trades intraday.
But I do not intend to day-trade – this is a losing game as day trading around the world is fully automated and machine driven. There are better opportunities over positional trades. Its just incidental that last few of my trades have turned out to be intra-day.
Learning the art of trading happens only when you trade. No amount of paper trading can give you that skill. Also its a mind game, so you will win if you have your mind under control even if your TA is suspect. Focus on the mind, focus on discipline and most of all control the greed. Better to have 20 small winners that you can repeat consistently.
Believe me, I have read NO books, all my training is from online resources and most importantly by actually doing stuff and knowing what does not work.
Life Before Hedging
Recently I was fascinated by YouTube material by one ex-GS guy – Anton Kreil. It was during this phase that I started looking up on hedging strategies.
One of Anton’s statements hit me and I quote “Naked punting is for idiots, if you want to be successful and over a long period of time then the hedging is key”. I already knew how to hedge and all the strategies but I never implemented them – see knowing and not doing here. 🙂
My approach prior to hedging was always directional trades with SL and with the consistent pressure of being right – I cannot tell you how much pressure that is and hence hedging. Hedging takes the pressure away and you can be relaxed. I so relaxed now because I know my max loss but I also know that I have time on my hand for the trade to work. Thanks to Dilip for teaching me all the best ways to hedge Options and Futures.
Why Dilip’s Course?
The reason I took Dilip’s course was simple – I thought 5000 for maybe something new, else it is no big deal if this turns out to be a fraud website.
His material turned out to be top class and I immediately incorporated his strategies into my trading.
The risk was almost nil and well you all know how suddenly I was made to recall, remember and see how beautifully hedging works. I know all of you are keen to know my results – let me tell you just because the market has just regularly fallen in Jan, my hedging has alone made me 30% return on the capital.
Now this isn’t rocket science – if you guys did the hedge as Dilip Shaw shows you would have made similar returns, I have no special skills that made me that return. Also, I went into trying these strategies hoping to make 5%-6% a month. I have been lucky by God’s grace that the market has been so highly volatile.
How I Trade Now?
I am quite comfortable with deploying capital when I know a strategy has good chances of working. I did worst case simulations using excel over the weekend on the new year. Only when I knew that the risk is contained I deployed the capital. That amount is of course not my complete capital but it is a substantial part.
As far as deviating from Dilip’s recommendation to buy Futures goes, I did that to keep my capital deployment low. If you buy ATM or just ITM Call instead of the future, it almost has the same effect. But there are inherent risks of VIX but then there is similar risk with Futures of either premium or discount. I choose to buy Calls when VIX is low. I have also bought Futures, and that was my biggest winner.
I experiment with quantities as well. So if price of the Call written is too high, to counter that I buy slightly more Calls or Futures. It is basically to keep the risk well balanced.
Yes, I do enter the trade in 2-3 phases. Phase One is when I know nothing about the direction of the market, after a while you can see the range that is when I add or modify the trade to take a slight bias (either long or short) and the final phase is when the trend is confirmed.
I use statistical methods of Normal Distribution, Volatility and Standard Deviation to calculate the range daily, weekly and monthly.
To give you an example, if my model says with 68% confidence that Nifty won’t break 7300 on a closing basis and 95% confidence Nifty won’t break 7100, I take my chances there.
Similarly I calculate this for daily range. When market approaches one boundary I close out the winning legs of the trade there and then still hold the losing legs with new insurance. If market even moves a little away from one boundary condition I make less loss on the other legs and I close those out.
This is slightly risky and not recommended, it is also very instinct driven in that moment, knowing that there is booked profit that can also act as insurance.
I hope this article gives answers to the questions you all had.
A Note By Me To Ravi:
Thank You Ravi. We hope you continue to trade like this and keep giving insights on how you trade so well. Congratulations from all of us.
Disclaimer: Ravi is an excellent trader. The results that you see here is not easy to achieve and your results may differ. Please do your own research before investing in stock markets.
Details about my option course which Ravi also took is here.
Update on 24-Aug-2016: I am still in touch with Ravi he is still doing good, in fact with time he has become more experienced and better. This is natural as you know. An experienced man is much better than a novice man in any job or business. Stock trading is a business and I am sure Ravi will only get better with time like most of you get better with time. I am not sure if your results are going to be similar to Ravi, but yes if you are wiling to work hard like him you may be able to beat average returns that you will make initially after doing my course.
Thanks for reading. If interested how to enroll for the course is written here.
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Very inspiring. I love the manner in which he describes his struggle. Would it be possible for him to throw some light on calculation of the confidence levels?
Calculation of the confidence level? That’s very personal, depends on the trader. I think he has replied that. He calculated the max loss in worst case scenario and was comfortable with it, so went with 38 Lakh capital.
I meant calculation of this level:
I use statistical methods of Normal Distribution, Volatility and Standard Deviation to calculate the range daily, weekly and monthly.
To give you an example, if my model says with 68% confidence that we won’t break 7300 on a closing basis and 95% confidence we won’t break 7100, I take my chances there.
Quote of this post :
“Naked punting is for idiots, if you want to be successful and over a long period of time then the hedging is key.”
Eternal truth for all traders.
Yes and still 90% of option sellers sell naked options. There was a time even I used to do. Just don’t do it – hedge it.
He has done nothing but a long strangle. This is sureshot way of loosing money. 4th to 8th Jan was period where nifty were doing very large movements. Plain straddle would have worked better this giving 68% returns(my backtesting). It was Ravi’s luck else putting 38/45 lakh rupees by buying options is like loosing many lakhs of rupees in a normal single day.
Even I am trading options from 4 years and have done lot of analysis of black and scholes model. I will suggest not to highlight this trade too much on your site else you will loose trust from various customers when they will blow up their accounts in order to try this.
Ultimately this is pure long straddle and you know what it means to trade it.
Good to know you have done a lot of analysis on options. It will be great if people like you share your knowledge on this site through commenting in the posts.
However what Ravi did is NOT Long Strangle. He traded the directional strategy in my course, of course with some twists by adding his own knowledge into it. Again it was NOT Long Strangle as claimed by you. Anyways thanks for your comment.
Would you explain why you call this a long straddle ?
Its a guess.
I have enrolled your free course and it is the 3rd day and reading all days docs.
I will go for the paid course once I complete the free course. I would like to play F&O with your proper hedging techniques, I have lost huge capital in this area. So need your proper guidance.
I enrolled for your free course a week back. However, have not received any reading material. Please check & send the same.
Hi RAMASUNDHAR, I see in my system that you have Subscribed on 13 Jun 2018 6:13 am, so the Day 1 email must have gone the next day morning at 9 am which was on 14 Jun 2018, like that your last day of free course was 18 Jun 2018. Please check all folders including promotion in your email on those dates 14 to 18 jun 2018 ….. If you still do not find then send me an email from this form. Thanks.