I wrote a shlok ( line ) from hindu holy book "Geeta" below the name of my blog which is in Sanskrit language. That line defines the difference between trading & speculation.
Generally majority
of traders enters in a trade for profit. When you do a trade for profit ... you can be winner or looser. Both sides are open for you. This ambiguity make that trade speculation. Same rule apply to other professions also. Wherever you don't know the outcome of the trade or work but same time you expect win from such act ... That is speculation & nothing else. If you trade using particular chart pattern breakout or using some indicator signal or anything else, that can't turn this speculation in to trading because there is no guarantee of getting money out of that particular trade. Think upon this. If agree ... then read next paragraph.
Now question arises ... how can we shift from speculation to trading ? You can't become a trader until you left the habit of taking separate trades & expecting profits from each & every trade. H.H.Lord.Krishna said," who play's for win will get win & failure both". This is inevitable.
Algorithm is answer to this problem. Choose any chart pattern or indicator or combination of indicators you like. Study deeply about their success ratios. You can get more loss making trades than profitable trades in a whole year but calculate profit & loss also. If your signal system is not bad then you can see good profit at the end of the year. Profit making trades are big and loss making trades are little. Apply that set up on chart & do backtesting manually on charts . Multi-year manual backtesting is essential. It can take 2 to 3 months of hard work but it will make you sure about earning money. Never use computerised system for backtesting. Each & every trade should be taken.
Now you are trading not for winning the trade but because there is a signal to enter the particular trade & you have to follow orders of that signal. You expect nothing ( profit / loss ) from that particular trade. You are sure about your profit at the end of the year or 6 months etc. Now you are doing long short long short in same instrument in same quantity with good funds for loss. This is trading.
There is very thin wall between trading & speculation. Hope you can understand this article. There is lot to say but I think that ... readers want tips, calls etc. They will not like such basics.
