17 traders and 1 goal — profitable trading: This trader's team has success lessons for D-Street watchers

Moneycontrol News Trading is said to be a lonely profession where individuals overcome their limitations and discover strengths to achieve success. There are, however, few success stories in the world where a group of traders has come together to create magic.

Sitting in the heart of India in Indore, Madhya Pradesh, a group of 17 young traders has carved a success story rarely seen in the trading world. Normally, proprietary traders in India are either arbitragers or delta hedgers using derivative tools to exploit mis-pricing.  But these boys from Indore are directional traders whoare continuously exploiting opportunities in the market.

Navy Ramavat (@navyramavat), the team leader, started the journey alone and developed his own trading strategy. A screen reader who trades discretionary strategies using correlations in the market, Ramavat found technical analysis three years after successfully trading the markets. Later he graduated into system trading and presently trades over 10 strategies.

Along the way, Ramavat’s friends and acquaintances joined him leaving well-paying jobs to be trained by him as traders. Today, the team trades all markets in the country using all available instruments.

As for Navy Ramavat, he likes to spend his free time with family and friends if he is not trading. Besides reading books on psychology, technical analysis, health, and spirituality, Ramavat looks for the first excuse to go to the beaches in what he calls is a trip to assess his performance.

In an interview with Moneycontrol, Navy Ramavat talks about his trading and the building of his band of traders.

A: I am an Electronics and Telecommunication Engineer and was planning to go for an MBA course abroad but the untimely death of my father completely changed my plans. My father along with his partners ran a stock-broking firm, Indira Securities from Indore.

I was always fascinated by numbers, markets just gave me the opportunity to exploit it. My brother, Vijit Ramavat, introduced me to trading.

My trading journey started with a stock named Educomp. My brother had given me Rs 1 lakh to try out trading. This Educomp trade was also identified by him. He pointed out that the stock has broken out from a range on very good volume. Though I did not understand a word of what he said, I bought the shares and earned around Rs 7,000-8,000 on the same day itself. I was hooked.

A: I started as a screen trader, a large part of my individual trading is still discretionary based on screen reading. I developed a good knack of reading the price movement on the screen without looking at the charts.

I, like any screen trader, am looking for a correlation in the market. If the market is going down but there are stocks that are showing strength or if the market is strong and some stocks are showing weakness, then these are my target areas.

Suppose if there is a fall of 300 points on the Nifty but the stock you own is up by 1 percent, this shows the strength of your stock which is not displaying the negative behaviour of the market. The same logic can be zoomed in on an intraday basis.

Say if Nifty is down by 25 points but a few stocks in a sector are moving up, we would like to look at these stocks as now they exhibit sector support.

Correlation in the market is possible between two stocks. Like a pair that we track is Jai Corp and RIIL (Reliance Industrial Infrastructure). Generally, these two move in tandem where Jai Corp leads the way. However, there may be some days when RIIL takes the leading position. Our job as screen traders is to constantly look for such correlations.

A: I traded the markets using screen reading for over three years and only later did I add technical analysis to my armory.

By nature, I like to explore for new opportunities and that is how I started looking at technical analysis. This move helped my performance considerably. Having said that, I could now relate to a picture (a chart) in front of me from what I was anyways doing in screen reading.

Say if a stock has moved from 100 to 105 on good volume buildup. If it had a volume of 5 lakh when it was at 100 but volume picked up on the way and the stock added 50 lakh by the time it reached 105. Now if the stock moves from 105 to 106 and volume increases to 70 lakh it indicates it shows that the stock has withstood a lot of selling and continues to show strength.

This stock if I look on an intraday chart of 5-10 minute timeframe would show an excellent Step formation. On the other hand, if the stock moves from 105 to 106 and then corrects to 104-103 it has now formed a Pennant pattern. Here the screen reading merges with technical analysis.

The example also illustrates the importance of volume in screen trading.

In the technical analysis I do not use any indicators. My charts do not have any moving averages or indicators. I look for structures in the chart. I look at a chart the way a 10-year-old would. The chart, simply by its looks, has to speak out if it is in an uptrend or downtrend or sideways.

If the chart is looking bullish, that is moving gradually upwards, I would like to buy the stock. It should be a clean chart with few resistances in its upward journey. Even if there are resistances the structure of the chart should show strength as in the case of a step chart.

I have no hesitation in buying the stock even if it has tripled in price from its low. My stop losses are deeper at around 4-9 percent, so I do not wait for a pullback to get in. There are times when I have taken a trade with 12-13 percent stop loss but here the position size will be smaller.

I am normally a positional trader but if I get a good profit on an intraday basis I will book a large portion of my profit, but not the entire amount. I always let some position in the trade and ride the entire length of the move.

Another thing that screen trading has taught me is that if your trade has moved in your direction immediately then you are in for a good ride. Keep on holding to your winning position. But if it has not then there is a problem and you should look to exit if your stop loss has not been hit.

I also add to a winning position. If the chart is showing a steady step formation and is breaking out of consolidations or pennant I will add to my position.

My progression as a trader took another big step forward when I moved from technical analysis to systems trading. I have developed my own trading systems and have been trading in over 10 such systems regularly. However, a major portion of my trading continues to be discretionary since I am used to it and have more confidence in it. Performance wise also discretionary trading have given me a better return.

There are advantages of system trading as it takes away the emotional element. Since I trade all asset classes – equity, commodity, agri commodity and currency, system trading helps in covering all these markets.

I have been systems trading for nearly six years and there has not been a single day when I did not have a position. I take regular breaks in my discretionary trading but I do not interfere with systems trading. All six years have been profitable across all asset classes.

A: In exits, there is no fixed formula. If I have shorted a stock and if it has approached strong support I will come out of half my position. I will continue with the trend and keep on booking profits at every important support till my stop loss is hit.

I normally have a long and short position in the market. If the market is in an uptrend then 70 percent of my position will be long and the same goes for the short side. The difference is that in an up move the chance of holding on to a winning position for a long time is high.

But on the short side, the move is fast and so is the correction. Here if the bounce is 8-10 percent from its low I will be looking to exit. But then I would be keeping this short on the radar and will look for an entry to go short again.

A: My biggest achievement is my team. We have a team of 17 traders who trade together. I started alone but friends started joining me and then the word spread and more people who were interested in the market joined us. A few team members as those who had come to our office to work on some software and other stuffs but were attracted to trading and joined the team.

For me the team is very important, I am nothing as a trader without my team. If I sit with my team my energy level is different.

These days there are many young people who open an online account and start trading on their own. Their journey as a trader can pick up momentum if they work in a team. They can pair up with their friends or relatives with whom they can synch and trade.

Ours is a 17-member team with all traders from in an around Indore. Had we been in Mumbai we would have ended up being arbitragers or delta hedgers. But since we were not exposed to these type of trading which focusses on mispricing only, we developed our own niche which is much more scalable and does not suffer from redundancy.

As traders we support each other and are always in an exploration mode, looking for new trading methods. Since I have trained all my team members we have good chemistry and are open in sharing ideas.

A: All of us reach office around 8 am and glance through the newspapers. We look through the stock exchange notifications to see if there is anything interesting. We discuss this among ourselves and have a trading plan ready after looking at the charts.

During market hours we are continuously interacting with each other, tracking events and stocks. Since the team generally knows who is holding which stock, any member who sees some news or movement in the stock shouts out to alert the person who has the stock.

There is no allocation of particular stocks among ourselves. There may times when all 17 of us might be trading the same stock or sector. By the end of the day, we realize the overexposure and decide to bring it down by the next day.

Though we do not differentiate in the stocks we will be trading during the day, we have divided instruments among ourselves. Two of us, including myself trade in futures. There are two others who trade in options, who are now much better traders than I am. Five traders are involved in systems trading. Plus there is one trader who is very good at making trading systems who works on it apart from trading.

As a rule, we backtest all our strategies before implementing them. We have a five year equity curve of a strategy on a five-minute timeframe which helps us in knowing beforehand the maximum drawdown that can be expected in it.

All throughout the day, there are around 6-7 of us who keep on trying new methods. We encourage each other to do dip-stick testing. For example we look at how to trade structures work on a lower timeframe. We are now testing stocks on a relative strength basis, as in, how the strongest 4 percent of stocks behave. Even if money is not made on such trades we gain new information which is shared among the team members.

After the closing bell, all of us sit together and look at the sector indices. Here we try to figure out which sectors are in an uptrend, downtrend and sideways. This process does not take more than 10 minutes.

We repeat the same process for other markets – commodities, agri-commodities, and currencies.

After the process is over we write logs for our trades. Frankly, there are only few traders among us who write a detailed log. Since I am also involved in the broking business also I do not write a detailed log. But if there is a big loss or a mistake that I have made in trading I will mention it on my charts.

At the end of the week, all of us sit down to discuss our trades of the week. I start out by pointing out the mistakes I made during the week and ask for inputs from others on how to avoid it. In case one of us makes a big profit or takes a big loss this automatically comes up for discussion. The idea of this meeting is to learn from each other's mistakes.

All traders, even most professionals in the market make mistakes. It is important to keep the losses small and not let it hurt our confidence.

A: As a team, we have seen some really good days and some very bad days. We try not to give too much weight to these days. We know there will be many such days in our lives as traders. But as trading has more to do with emotions than anything else, performance does affect us collectively and individually.

If an individual trader is not doing well, we generally ask him to take a break, read a book or simply go to some place to reassess himself.

It is important to take breaks when you are very happy or very sad. Elation leads to overconfidence which may result in taking bigger bets and ultimate failure. On the other hand, a bad spell in trading may result in a loss of confidence. The break helps you to reset yourself.

What we have found out in working as a team is that underperformance is generally on account of not putting in the effort required. Profits do not decide if a trader is good or bad. There are times when despite the best efforts things do not fall in place.

We have a trader in our group who has not been performing for two years. He has been with us for three years but after the first year, he has not found his mojo. I have complete confidence that this person is a very good trader and will bounce back soon. He puts in the required effort but is making silly mistakes.

I can proudly say that as an organization and as a team we have produced some very good traders. We are continuously on the lookout for more people with who we can be in synch and trade together.

A: An important characteristics of a good trader is that he should be hard working. He may or may not have discipline in other aspects of life, but when it comes to trading he should be very disciplined. There are some very aggressive traders who are as aggressive in real life, but when it comes to trading they have controlled their emotion.

Another important trait that a trader should have is the ability to honestly self-assess himself.

Intelligence has little to do with trading. An intelligent trader may have a slight advantage with all the personality traits mentioned above, but without these traits, his intelligence is of no use. He will end up losing his money.