Price Action Swing Trading with Mitesh Patel #Face2FaceLearnings
When I started Face2Face a few years back, I had only one objective - To Learn as much as possible in the share market. And to teach, there are so many people available. So just the right questions were supposed to be asked and identify the right people. So, I think the journey that I started for myself was beneficial for everyone! I have recorded 150 Face2Face videos till now. And I received so much learning. I treat myself differently. In the past three years, the learnings that I have done through Face2Face as a person, As a market participant, I have seen a different kind of maturity. So in this video, I wanted to say that,
I’m starting a Face2Face Learning series on my channel. What will I do in this? I will take each Face2Face video, and we will receive learnings from each video. So many people ask why you have done this! What learnings did you receive from this? I always say that if you see the complete Face2Face series, So you will get to know 2-3 things that will make your trading/investing journey a better one. I will try to give learning series on each Face2Face. Will make videos on each Face2Face. And the key learnings that I got, will highlight them. Hopefully it will benefit you and after that if you feel to watch the complete video, then you can re-watch it again.
I am 100% sure that you have watched the video from beforehand. But if you watch these videos repeatedly then it will benefit you everytime. Let's start. The first video of Face2Face, the top Face2Face recording is of Mitesh Patel. He is a trader in Options. He had said in his Face2Face even that I might be soft but my trading is very aggressive. That's correct and that is his style. And I thought I should record the first video of his because what he has learnt in his life as a trader, market participant is quite a good learning which we should take benefit from. So, let's start. I have made some notes for myself here which I will see and do discussions on each topic. You will see all these notes here even such that you can follow the pointers with my discussions.
He is a chemical engineer, well educated, used to do job and during job only he understood market. When he started he started with delivery based activity trading as he started in 2005 and the market's bull run from 2005-08, In that many people came and started delivery based work. That time it was a simple market. Take delivery, and money will be made. But in that journey an overconfidence even came. Started with delivery base, people participated in Futures & Options, but the 2008 fall money was lost. Many people lost, even for Mitesh. Actually when we lose money then only we understand that what is the second form of the fascility which is given to us.
So, leverage which is derivative and when you are getting that and making money you feel very good. But when the market falls, And when they leverage becomes a two-sided sword and it cuts you then you get to know that how counterproductive leverage can be. So he faced this problem in 2008 and he lost lot of money in the futures contract that he used to trade. Ultimately, Mitesh told a good thing that when a retail investor comes to the market then he earn profit for one or two times. And from that profit they get to know that they have understood the market but after that when there are 7-8 losses and looses confidence. Plus obviously your capital even finishes and generally what is the tendency? We try to refill the capital.
So one time when capital gets lost, we are not able to believe. And we refill and recover our loss which we call as revenge trade. Something like this only happened with Mitesh. If you get learning without losing then its very good. And for that only there is this Face2Face series. But many people have a habit, till the time they wont face loss, they wont learn. So, Mitesh learnt and shared it with you. If you could learn from this learnings then it will be very good for you.
The initial mistakes in the market are that we don't accept our loss and come again the market to trade. When 2008 came, Lehman crisis came due to which market reversed so that phase of taking and making money. In that phase firstly the money was made and then finally that money got used. So, he did many homework from 2008-10. But in 2010, finally Mitesh got to know about chart and he read few e-books in which RSI, volume-analysis and how to do intraday. And finally he started Options Buying. And when he got into this, a new phase of losing money started. Because under options buying, he says that ultimately you are buying a lottery ticket only.
And if that goes well, then you will earn money. But chances of being correct is less and that's why you loose money in net. So, finally he went into Options Selling. And one more interesting thing that happened in that video was you cannot do options selling in 2-3lacs. Because when you do Options Selling, then you should have so much capital that you can do adjustments and make your positions big.
He didn't say anything regarding the minimum capital but if you have 10-25 lacs then you can do better options selling because you will have the power of money. So, one statement got quite famous "Futures have unlimited risk; Options selling has a defined risk." He said that Options Seller has unlimited risk, which he said is wrong. Futures selling has unlimited risk, and in Options selling, even you can limit because you are ultimately trading the premium. So, you can use a stop loss when you are taking a premium. If you are selling premium, then even you can put stop loss. There is nothing like unlimited risks in option selling, every time, you can define your risk.
But one relevant thing that he had said regarding Options Buying is that it should be done when there is a clear trend for 1-2days. I think the initial money was lost, and from that experience, he understood that you can keep Options Buying for a long time. You can do it for a few days, but it's done in Options Selling if you want to make money professionally. I had questioned him, to which he replied pretty well by which we understand the whole structure. The first question that I asked was How to identify momentum in stocks? Because when we have to trade in any stock, there should be momentum.
There's a straight answer to that - the prominent people who are the operator knows that the stock will go up or down. And if you analyze delivery based buying or open interest, you would be able to predict the movement of big players. And ultimately, what does the big player do? Distribution and Accumulation. So, when they have to do buying, they will accumulate. And when they want to sell, they will do distribution. But peacefully. Not create much hype. Whenever there is an accumulation phase, then the volume is less.
Whenever there is a distribution phase, then the volume is less. If there is huge volume activity, he is not accumulating and distributing then. Secondly, it is essential to see a range breakout. And what he said was relevant; the longer the duration and its breakout take place, the longer will be its effectiveness. For example, if we see the range for a 5-minute chart, what does the range mean? A high and low constant forms a range; Then chances of a breakout being false is more. But suppose if you see a weekly chart and track the previous 20-25weeks And finally, you identify a stock in which there is a range breakout; the chances of that success are greater. In fact, in Face2Face, he gave a lot of live examples on which he traded actually, and he made money by trading by looking at the longer tenure range breakouts.
So to identify range breakouts is very important. What I understood, after going through the video again & again, is that Buying pressure & selling pressure must be gauged. If selling pressure, because ultimately there is an operator who buys and distributes. If the distribution phase finishes in less time then it means a big movement is going to come and vice-versa.
So if selling pressure gets absorbed in less time, it means a big move will come. So this accumulation & distribution phase and the range is the biggest price action theory he follows. And if you observe the price closely you focus on it carefully and make your observations to take out breakouts which go on for a longer time frame. Then obviously, you would be able to identify good stocks to make money. And how to do that? He doesn't do it in future. What he does is? If the breakout comes in the range, then the options for the below part of the range are sold. And obviously, he has the power to hold his position, and Mitesh has already a firm conviction in his trade because he has prepared himself for any contingency. He sold the call, but the stock reversed, so he knows how to square off. To take positions and square off differentiates the trader type.
The big people in the market never let the retailer find out what they are doing, and that's why they buy/sell in small quantities And whenever they have to trap the retailer, they make big candles. And the big candle becomes the trend changer. Because at that time, the retailer is trapped. If suddenly anything happens, then you won't expect what will happen. That's why the big people make it slowly. And from there, the new trend is identified, and at this point, traders like Mitesh participate in the market, and that's when the retailer exits from the market.
So I would say this is the key to learning in this whole Face2Face. So, one thing that I had asked him was, what's the time duration of your open trades? His theory was simple. If we get money from a trade-in 3-4days because if there is any breakout, it will stay in the next consolidation and create a new breakout.
If I get money in 3-4 days, I will exit. As I have to constantly identify new opportunities in the market. So if we earn from this breakout, I will search for other stocks. If a consolidation comes again after a breakout in that stock, then I might come again in that. On this, I asked him, How many stocks do you track? To which he replied peacefully that if you have to make money from the market, then efforts are to be made.
So he is doing chart analysis of every FnO stock, every day. This way he defines his range and whenever there is a breakout then only he trades. So limited trade and trade in large quantities and go in an aggressive market is his style. For that if we trade in FnO stocks, he identifies range on a constant basis. His trading style includes Nifty & Bank Nifty. And somehow I feel right because this will only help you earn big. You do small work daily or weekly, but make it significant. In that, only money is earned as an Options Trader or Trader. After that, we discussed risk management, and I think Traders like him are different because they know their risk assessments. They know that if I have this much capital, then 1% of capital I will put in per trade if my stop loss is this much in quantum, so my quantity should be this much.
How much capital? How much loss I can do per trade? How much is my actual stoploss? And what should be my quantity to substantiate my stoploss? This whole method is set in the mind. And that is what he is saying - to avoid overtrading and define the risk management principles. Will put 1% of my total capital in one trade, and this will only be my exit flow because the exit is as equivalent to an entry. Secondly, he is even saying that pyramiding is even a good idea if you are going right and increasing your quantum depending upon how much your capital is.
He uses VWAP of the previous day as stop loss. One thing which we have common is that he also believes that every stock has an operator. And if you are able to judge the operator's behaviour then more or less you will judge the behaviour of the stock. And the operator wants to trap retailers. So you will have to think that way that if any stock is moving on small candles then in that what is the operator doing? If a stock is moving in big candles then in that what is the operator doing? When you see a stock regularly, you know its behaviour And then according to candles behaviour you participate in that stock. Generally the operator shows big candles and traps the retailers. As he is selling options, so what strike price does he select? He said that he makes a range and select the strike price opposite to range because he is confident about his range. And the process of making that range, he has learned and practised it over a long period of time.
I asked, do you use option Greeks? To which he denied, because the premium value, momentum of stock includes all the Greeks. So, he keeps simple. The most critical point is that the execution is the key. And risk management and your execution plan, ultimately differentiates a good trader and a bad trader. Success ratio according to him, the high duration range breakouts have more than 80% success ratio. Basically what he is saying is observe quietly, market is over here and when the market gives opportunities then go all in.
How much capital should be there for trading, on which he replied the lesser the capital the lesser the risk appetite. So you should keep a bare minimum capital. Like if you don't have a chip, you buy-in in a poker game, as you cannot play. So poker players try to have minimum chip such that he can take some benefit in the game. How to become Mitesh Patel? He said that make your to own setup, it may take time. And don't change it. And work in limited sotcks then you can make money from the same setup which will give you more confidence, more your risk appetite increases.
What is the holy grail of the market? He said no holy grail, you are itself holygrail and you can only defeat/succeed yourselves. Figure out the way to participate in the market. Everyone has a unique style like Mitesh where he has done wonderfully good for himself. If anyone wants to specialize in price action, then this is the perfect video which can be seen. I tried to summarize although video was long. I will give the video's, hosted on elearnmarkets youtube channel, link below. Do watch it again to clear the concept and become a better trader. Thank you friends, I hope this series will be liked by you. Share it. And will create more videos like this. Thank you. take care. bye bye.