Yesterday, someone was asking me the best way to find their niche in the market, how to find their style and what would be profitable for them.

I’ll talk about what I think I’d do if I were to start again in 2016-17.

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I started my first job with an internship in 2015. I was making 50k per month as the stipend. I was having all this in my bank account and a relative suggested I get an LIC policy and suggested Jeevan Anand. I took the LIC policy. Then for investments, he suggested few mutual funds, and set me up with SIP every month in those mutual funds. He was a distributor and earned some commission.

His selection process was to look at moneycontrol riskometer and star rating and last 3 year returns. He set me up with 7 different mutual funds across 3 different types according to market cap.

Year and a half down the road, I checked my statements and found that they were all in loss despite consistent SIP.

I decided to take matters into my own hands, liquidated all of them. I got a Zerodha account right around Brexit. Started listening to colleagues talk about stock market, stocks they put money in and how they got to know about that stock.

Moneycontrol forum, Marketsmojo Mojo Stocks, etc., were the sources.

At that time, after demonetisation, all the stocks were rallying like crazy. The greed set in, and I started actively putting money in stocks that seemed to be moving. I didn’t know how to read charts or price movements. What did I do? I looked at screener.in, checked if quarterly results were good, if certain numbers looked okay, and just made some bets based on how many people are recommending it.

I convinced myself it was okay by reading sell-side research.

I did well in some, bombed in some, cut my losses at the worst possible price, didn’t book profits wisely and left a lot on the table.

I made back most of those losses through IPO craze by getting allotment in Dmart, Radio mirchi, CDSL, etc. I read value investing books, explored valuepickr and lurked around that forum for a while after ditching moneycontrol and marketsmojo. Started exploring screener websites and tried to understand fundamentals.

I never had the interest or patience for fundamentals. Plus, I realised the amount of effort and experience that we need to put in with respect to fundamentals - learning accounting, economics, valuation, and also the edge being in actual field work, talking to people, etc.

I realised it will take easily 7-10 years to get good at. Then I started checking out technical analysis, started with Zerodha varsity.

Varsity was good, decent, but it was just a primer, introduction.

Then I read many different things on technical analysis, and for some reason, I couldn’t fully convince myself to follow them. At that time, I was seeing a lot of PNL screenshot surge in Twitter, and until then I had only been in cash markets and hadn’t explored FNO.

Decided to explore FNO and came across Madan’s handle. He was posting loss screenshots for 3 months. I was amazed. Here is someone realistic, not everyday is profits, his last 3 months have been losing months and yet he’s posting everyday, sticking to his trading.

I read further and everything he had put out on his blog and zerodha interview. By 2019, I was almost convinced with the manual backtesting method and a friend of mine gave me a mechanical entry/exit approach with supertrend, which seemed to work well in that phase of market. I started manually testing it. Spent 5 months testing it and eventually trading it. But the drawdown maximum was high and capital per lot was also high. I realised that if we have to find an edge, we have to have faster iterations in ideas we test and not be spending months together testing only one variation of one idea. That’s when I started to use programming to test different ideas and quickly realised how much b.s is being peddled on social media in the name of “simple things work”.

Testing the different ideas being peddled as profitable showed their true color and made me realise something Stock market and edges in the stock market are simple.

But SIMPLE ≠ EASY.

It took me 3 years to learn this.

Someone who can simplify a complex process and mechanism down to its essentials is nothing short of genius.

Same applies to stock markets. You may think you’re not a genius, but genius comes from consistent and constant iterative improvements. It doesn’t just come with birth or genes.

So, what ended up happening was that I embraced programming and backtesting and understood what would work for me. My nature is that I need confidence to trade. For me to have the confidence to put on a trade, I need statistical backing of some kind, instead of random voodoo.

I won’t take someone for their word, no matter from the best book or the best trader in the world. I have a need to put the ideas to test and then understand the probabilities and then take the trades if probabilities are in favor.

95% of successful trading is confidence. That confidence tells you when to add, when to cut, when to close. Each person has their own way of generating confidence. For me it is backtesting and manual verification before I put on a single trade.

For some it is field work, reading annual reports, doing forensic accounting analysis, and their own valuation framework. For some other, it’s seeing a specific price action pattern on the chart and the price following a specific pattern of movement.

But everyone needs to have a factor that gives them the confidence to put on a trade and add size to their best trades. So, if I were to go back to 2016-17 period, how would I re-do my journey?

With the maturity I have now about how to approach learning or finding edge in a business, I’ll do the following. I was a software engineer. I studied computer science. I wasn’t a CA/MBA, so I didn’t have knowledge of accounts, valuation, etc.

I wasn’t an equity analyst, so I didn’t know how to do proper equity research and know what a bargain price is. But I knew coding. Although I wasn’t a data engineer, it was simple enough to pick it up. Data analysis related stuff would take me 1-2 months to pick up, and accounting-valuation and such things would take me a year to get good at. I’d price my time and if I were smart, I’d pick programming and data analysis as the way forward.

Before doing that, I’d at least do research about different methods to approach the market, different styles. But instead of picking one that I am attracted to, I’d pick something I can pragmatically pick up and iterate faster with.

Back then, I picked up fundamental analysis and thought I’d learn things as I went. But that was a painful road, one wrought with lots of misinformation. Choosing to start from strength is the best thing one can do - especially when they start in stock market.

If you’re from commerce background, picking fundamentals wouldn’t take that much time for you and with simple TA you can combine fundamentals with solid entry/exits. If you are from math/cs background, picking up data analysis won’t be difficult, so you can test so many ideas using programming and statistics and find out which ideas have merit. If you’re from arts background, you can pick up technical analysis because you’re naturally good at picking up patterns and you can pick things easily from TA. There are different other styles. But once you start from your strength, you can eventually pick up other things to smoothen out your rough edges.

For a programmer with a quantitative approach, it may be to understand price action and psychology better to generate better ideas. For a fundamental investor, it may be to understand growth, cyclicals, sector rotations better, and also to understand technical analysis better, to better his risk management.

For a technical analyst, it may be to learn some easy programming to test his ideas. Starting with your strength, your progress is faster, and sticking to your strength, you’re likely to find your edge sooner.

Jumping from one thing to another in the name of exploration is nothing short of trying to find the holy grail. Sticking to one thing and consistently iterating and improving up on top of it will get you much better results much sooner than if you were aggressively jumping ships, trying something for few months, giving up and moving on before any progress is made. It took me 4+ years to realise. It doesn’t have to take you that long.

If you’re beginning now, begin from your strength.

If you’re 2-3 years in the market now, don’t jump ship anymore, stick to what you have built and build on top of it. If you’re like me, 4 years down the road and realising something like this now, career in the markets is a marathon and not a sprint, so take your time, but at least start now and double down on your strongest suit. There’s a subtle nuance here.

You have to start from your strength. But within your strength area, you have to explore as many different ideas as possible.

If you’re backtesting, that would mean as many ideas/systems as possible.

If you’re in TA, observing as many patterns. If you’re in fundamentals, learning about as many sectors as possible before identifying your niche, something you’d be interested in studying.

Those who have succeeded in the markets have simplified their edge to narrow focus on few things.

But to get there, you must study. Study as many variations of ideas/approaches as possible within your strength area, and then refine your focus on to the most essential things.

Eventually what you find will be so simple that you’d be like “wow”. But to get there, you have to swim through a sea of complexities.