Situational Awareness Webinar
Defining the Purpose –
Situational awareness is a term used by Pradeep Bonde to develop an
understanding about the market and identify which setups are supposed to
work well in the on-going circumstances.
These are some of the points he asked us to focus upon in a blog post –
• What is happening in the market?
• Why is it happening?
• What will happen next?
• What does it mean in terms of my trading objectives?
• What can I do about it?
• Is it a good environment for breakouts?
• Is it time to put more size or reduce size?
• Is it time to proactively close positions or give them more room?
• Is it time to look for reversal setups?
Framing the Questions –
1) Understanding the market conditions –
a. What is happening?
b. Why is it happening?
c. What will happen next?
2) How will it impact your trading –
a. Which strategies are more favoured in current market situations?
b. Is it time to become aggressive or protective?
So, there are basically two layers in this framework –
1) Understanding the nature of your strategies
2) Understanding the nature of the market
We will amalgamate these two along with some of our own additions to
carve our own framework.
Understanding Your Setups –
We can bifurcate traders in two categories –
1) Capital Allocator
2) Turnover Based Trader
Capital Allocator -
A. Tries to identify where the money is moving in the market.
B. Is paid for holding a large allocation for a significant duration of move.
C. Right / precise entry or tight SL is not required.
For a capital allocator, finding a right stock is the key as the outcome will
highly depend on this. While decent size in a strong stock creates a huge
impact on portfolio, a wrong stock will create a similar underperformance
too as well.
Turnover Based Trader -
A. Earns money on turnover, not by sitting into a stock.
B. Is paid for finding a setup with edge (short term) and repeatedly turn it
as many times as possible to maximize their returns.
C. Entry, SL and exit optimization is required.
For a turnover based trader, chart reading matters a little, it doesn't have
much importance. All chart reading does for them is to tell that the
outcome of situation "A" has a higher odd of getting resolved into "B" rather
than in any other situation.
Understanding the setups for both types of traders – Refer to Whimsical
Final Questionnaire –
General Market -
1) Are we in a long-term uptrend or downtrend?
2) Where are we located in the trend?
3) Are we in short-term upswing or downswing?
4) Where are we located in the swing?
5) Is the market in transformation phase?
6) Any event which may have an impact on markets?
7) What types of stocks are moving in the market (large cap, small cap,
growth, junk etc)?
Positional Traders -
1) Where is the money flowing in market – Themes / Stocks?
2) Is the trend emerging in themes and stocks or is old?
3) Are other themes sustaining or exhausting?
4) Are other stocks sustaining or exhausting in the theme?
Swing Traders -
1) Are we in a bull swing in a bull market or bear swing in a bull market?
2) Or are we in a bear swing in a bear market or bull swing in bear
market?
3) Where are we located in the bull swing in bull market?
4) Where we may be in the bear swing in bull market?
5) Are the breakouts working in last few trades?
6) Is the shakeout first shakeout after an extended bull swing?
7) Is the market extended on downside in bear swing in bull market?
8) Are there any events which may have an impact on participation?
