Rajandran R Telecom Engineer turned Full-time Derivative Trader. Mostly Trading Nifty, Banknifty, USDINR and High Liquid Stock Derivatives. Trading the Markets Since 2006 onwards. Using Market Profile and Orderflow for more than a decade. Designed and published 100+ open source trading systems on various trading tools. Strongly believe that market understanding and robust trading frameworks are the key to the trading success. Writing about Markets, Trading System Design, Market Sentiment, Trading Softwares & Trading Nuances since 2007 onwards. Author of Marketcalls.in and Co-Creator of Algomojo (Algorithmic Trading Platform for DIY Traders)

Drug your Trading – Lessons from Pharmaceutical Industry

1 min read

Article Republished from : Nifty Nirvana

Trading is a probability game. Right. I do not want to dispute that. I know very well that there are no certainties in Markets, only probabilities.

But I can’t agree with the way many traders approach these probabilities. For example, take the case of “Gap closure”. People research and conclude that during the past 70% of the time, morning gaps closed. They bet on this probability and act on it. They believe the probability will work in their favor and in the long run and they will emerge as winners.

drug your trading
[wp_ad_camp_5]

 
Usually Traders focus on one important technical set up and start tracking it. They do back testing and forward analysis on this technical set up for a while and compute the basic probability ratios for this. When they find this ratio favorable, they conclude that the pattern has a lasting and significant edge in the Market.

I approach this problem differently. Rather than finding the basic probability of the set up and betting on it, I try to find out the factors that made the set up work. I have drawn my inspiration from the Pharmaceutical Industry.

For centuries people relied on traditional medicines like plant extracts. Many of them were found to be very effective. The problem is these botanicals and herbal preparations contain various bio active components and identifying the exact effective component is a challenge.

First step is the extraction, isolation and characterization of active components in these herbal preparations and finding the exact effective molecule. Toxic studies and clinical evaluation follows before the drug is released. Easier said than done

I feel this is the right way to go. Instead of betting on the basic probability, we must go deep and find out the patterns inside these patterns. Identifying and isolating these favorable conditions will give us the real trading edge, I believe.

Rajandran R Telecom Engineer turned Full-time Derivative Trader. Mostly Trading Nifty, Banknifty, USDINR and High Liquid Stock Derivatives. Trading the Markets Since 2006 onwards. Using Market Profile and Orderflow for more than a decade. Designed and published 100+ open source trading systems on various trading tools. Strongly believe that market understanding and robust trading frameworks are the key to the trading success. Writing about Markets, Trading System Design, Market Sentiment, Trading Softwares & Trading Nuances since 2007 onwards. Author of Marketcalls.in and Co-Creator of Algomojo (Algorithmic Trading Platform for DIY Traders)

[Research] Youtube Thumbnail Indicator for Contrarians

Youtube Thumbnail Indicator is a modern-day contrary indicator and alternative to magazine cover indicator as the masses are shifting the consumption of content in...
Rajandran R
1 min read

Risk Management is only for the Poors – Game…

Game Stop Corporation a brick and motor video game retailer is been in the limelight for the last few days and thanks to Robinhood...
Rajandran R
2 min read

Investors are Dumb?

Last Thursday Elon Musk (Tesla CEO) urged his Twitter followers to use Signal App instead of Whatsapp over privacy issues. Elon Musk tweeted after...
Rajandran R
1 min read

2 Replies to “Drug your Trading – Lessons from Pharmaceutical Industry”

  1. Dear Sir
    I do frequent your site and I am a great fan of your articles.
    I would like to invite your kind attention to the fact that the above article you found in the Facebook group is written by me in my blog. Here is the link to the original writeup.
    http://niftynirvana.blogspot.in/2013/10/drug-your-trading.html
    I am really happy on my article getting reproduced by a well known person in the trading field who has in depth market knowledge and experience.I consider it as a great achievement.
    Sir, Please do visit my blog leisurely and let me know your valuable feedback

    Regards
    SMART Trader.

Leave a Reply

Get Notifications, Alerts on Market Updates, Trading Tools, Automation & More