There's traders that trade discretionarily, and there's traders that trade systematically/via algos.
Then, there's @PRAFULKULKARN18 , who does both.
Here's 15 tweets derived from our podcast with him that talk about his trading philosophy, risk management & more ๐งต
1/15
Then, there's @PRAFULKULKARN18 , who does both.
Here's 15 tweets derived from our podcast with him that talk about his trading philosophy, risk management & more ๐งต
1/15
Bread & Butter:
He's primarily a non-directional trader who tries to keep his M2M as stable as possible.
A self-aware trader, Praful's his own worst critic when he makes errors.
Errors constitute taking undue risk or in execution.
2/15
He's primarily a non-directional trader who tries to keep his M2M as stable as possible.
A self-aware trader, Praful's his own worst critic when he makes errors.
Errors constitute taking undue risk or in execution.
2/15
Praful Takes the most risk on 1 DTE or 0 DTE, as he knows that's when his main edge is.
On other days, he takes 0.3 - 0.4% risk.
Instead of pyramiding, Praful likes to define the max quantity for the day, leveraging his positions only on thursdays.
3/15
On other days, he takes 0.3 - 0.4% risk.
Instead of pyramiding, Praful likes to define the max quantity for the day, leveraging his positions only on thursdays.
3/15
Concept of Incremental Risk:
Praful has a fairly unique approach as far as risk-management is concerned.
Say he's sitting on a loss, some sort of red MTM.
His first plan of action in this case is to close the day at break-even.
4/15
Praful has a fairly unique approach as far as risk-management is concerned.
Say he's sitting on a loss, some sort of red MTM.
His first plan of action in this case is to close the day at break-even.
4/15
Usually, traders tend to get more aggressive & try to leverage up or take some undue risk to get back in the green.
Praful's approach is to return to BE MTM, and *then* take more risk.
Extra risk is enabled by either having a directional bias
or trading closer to ATM.
5/15
Praful's approach is to return to BE MTM, and *then* take more risk.
Extra risk is enabled by either having a directional bias
or trading closer to ATM.
5/15
Using such an approach, Praful never has a drawdown greater than 2.5%.
A pretty remarkable feat, by anyone's standards!
6/15
A pretty remarkable feat, by anyone's standards!
6/15
Trading Psychology:
To Praful, the idea of protecting his 'capital' isn't nearly as important as protecting his 'psychological capital'.
Praful knows his strengths & limitations, & his modus operandi is to maximise that.
7/15
To Praful, the idea of protecting his 'capital' isn't nearly as important as protecting his 'psychological capital'.
Praful knows his strengths & limitations, & his modus operandi is to maximise that.
7/15
For example, before a night out, you know exactly what your drinking capacity is.
Perhaps it's 1 pint or 2 pints, maybe 3.
Instead of trying to increase your capacity & risk a potentially bad hangover/doing something stupid, stop after your capacity has been reached.
8/15
Perhaps it's 1 pint or 2 pints, maybe 3.
Instead of trying to increase your capacity & risk a potentially bad hangover/doing something stupid, stop after your capacity has been reached.
8/15
Similarly, if you know your risk for the day has been met, do not try to fight against the market.
This is usually a slipper slope, and there's no cones warning of the wet surface on this floor.
9/15
This is usually a slipper slope, and there's no cones warning of the wet surface on this floor.
9/15
Algo Trading Framework:
Praful does not follow a data-first approach.
If he has a hypothesis, he tests it.
If it looks promising in the first go, he will continue to optimise it and refine it.
If the said hypothesis doesn't work, he discards it.
10/15
Praful does not follow a data-first approach.
If he has a hypothesis, he tests it.
If it looks promising in the first go, he will continue to optimise it and refine it.
If the said hypothesis doesn't work, he discards it.
10/15
He doesn't try to fit his idea to the data.
With his current trading systems, he follows the same methodology as his discretionary trading.
He trades in a discretionary manner to understand the changing market dynamics to look for potentially more/new trading edge.
11/15
With his current trading systems, he follows the same methodology as his discretionary trading.
He trades in a discretionary manner to understand the changing market dynamics to look for potentially more/new trading edge.
11/15
For eg. recently he's decided it's best to cover your position once the premium decays to Rs. 10 or so on expiry days.
This is because he feels the current market regime is one of extended moves on either side followed by mean reversion.
12/15
This is because he feels the current market regime is one of extended moves on either side followed by mean reversion.
12/15
He's arrived at this conclusion by having traded discretionarily, watching the market live everyday.
This, is the ideas-first approach to developing trading systems.
From this Praful derived a method to adjust his strangles by utilising IV of individual strikes.
13/15
This, is the ideas-first approach to developing trading systems.
From this Praful derived a method to adjust his strangles by utilising IV of individual strikes.
13/15
He is of the belief that everything you need to know is available in the price.
Therefore, he uses IV as a sort of proxy for price.
14/15
Therefore, he uses IV as a sort of proxy for price.
14/15
If you enjoyed this thread, please like and RT the first tweet.
Check out our entire podcast with Praful on YouTube:
youtube.com
15/15
Check out our entire podcast with Praful on YouTube:
youtube.com
15/15
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