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How Karan Khanna Unstuck His Trading

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Written by Timothy Sykes
Updated 11/28/2022 5 min read

It sucks when your favorite trading strategy turns sour.

Everything can be going swimmingly…and then out of nowhere…BAM!

It stops working.

This happens a lot more often than you might think.

You see, many traders get complacent during bull markets, especially ones that last for a decade.

They forget that the trading environment can and will change.

And if you don’t adapt to the new conditions, you’re likely to get frustrated and start forcing trades.

The problem is not everyone knows how to calibrate to the new environment.

Thankfully, Karan Khanna has some words of wisdom for us.

Although he hasn’t hit that $1 million mark yet, Karan’s done well since joining my Millionaire Challenge in 2018, making over $250k.

However, he was closer to $300k at one point.

Yet, the strategies he relied on, mainly short-selling ideas from Tim Grittani, started to fail him in 2022.

Rather than keep pushing against a wall, Karan took a step back.

And that’s when his brilliant idea struck.

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Speaking at our traders conference, Karan explained his process to break down the patterns and identify the underlying market structure.

I know that sounds confusing, so allow me to simplify things.

Because the genius in his method applies to ANY chart.

It can help you unstick your trading and get you back on track in no time.

4-Types of Market Structure

Market structure is a fancy way of saying market framework.

It’s like a pattern but distilled down to its most basic forms.

For example, a stock can only move one of three ways: up, down, or sideways.

Karan defines market structure in four ways:

  1. Rally→Consolidation→Rally
  2. Rally→Consolidation→Drop
  3. Drop→Consolidation→Drop
  4. Drop→Consolidation→Rally

This doesn’t encompass every single move a stock makes, but rather describes the forms it creates.

Understanding Its Purpose

Karan Khanna sitting and smiling
Photo credit: Karan Khanna

Market structure helps to identify support and resistance levels as well as their importance.

You see, Karan looks for consolidation areas with heavy volume.

That’s where buyers and sellers fight it out.

Eventually, a stock moves out of the range.

However, that same area can act as support and resistance when revisited.

The key to identifying these spots is to think about the four types of market structure.

Here’s an example.

This is a 15-minute chart of Cosmos Holdings Inc. (NASDAQ: COSM).

Note: I would never short a stock below $1.00. This chart is just to demonstrate the point.

I drew a white box around the consolidation part of the market structure and then extended it to the right.

The reason I chose that specific area (1) is because it follows one of the basic market structures: rally→consolidation→rally.

You could argue that the spike earlier in the day was the consolidation, as it had more volume.

However, as Karan explained, market structure works when a stock leaves the consolidation in a quick, noticeable move.

So, knowing this is an important spot, it comes as no surprise the stock found support here the following day.

Here’s where the insight comes in.

Let’s say Karan at a short setup identified.

Before, he would simply play the short setup, ignoring the market structure.

Now, he considers where that market structure support or resistance levels exist and plans accordingly.

Once a stock breaks through important support, he’s got more confidence to push on the short side for lower prices.

It’s also worth noting that the more times a stock tests a support or resistance, the less likely it is to hold.

Here’s an example from FingerMotion Inc. (NASDAQ: FNGR).

I drew two boxes that I want to bring your attention to.

Let’s start off with the right blue filled box.

This identifies the last consolidation FNGR made before breaking out to new highs.

When it broke through that spot on volume, it signaled a nice short opportunity with a stop nearby.

But why wouldn’t the left box act as support?

Didn’t the stock consolidate there for a while?

It did and certainly could have acted as support.

However, I want to refer back to something I said earlier.

The more times a stock trades at and through a price level, the less important it becomes.

If the consolidation was tiger, then this might have been more important.

Yet, price traded above, below, back up to, and through that level on multiple occasions.

Think about it as if you were a long or short trader.

Would you still have a position after it bounced around so many times?

Probably not.

The choppiness tends to push most traders out.

Karan’s goal is to only use levels that trap longs or shorts as part of his analysis.

In a nutshell, all he wants is to take the same setups he normally plays and look at how close they are to important support and resistance points.

That’s it.

Finding those spots can take some practice.

But once you learn to incorporate them into your trading, it’ll make you even more effective.

—Tim


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Author card Timothy Sykes picture

Timothy Sykes

Tim Sykes is a penny stock trader and teacher who became a self-made millionaire by the age of 22 by trading $12,415 of bar mitzvah money. After becoming disenchanted with the hedge fund world, he established the Tim Sykes Trading Challenge to teach aspiring traders how to follow his trading strategies. He’s been featured in a variety of media outlets including CNN, Larry King, Steve Harvey, Forbes, Men’s Journal, and more. He’s also an active philanthropist and environmental activist, a co-founder of Karmagawa, and has donated millions of dollars to charity. Read More

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* Results are not typical and will vary from person to person. Making money trading stocks takes time, dedication, and hard work. There are inherent risks involved with investing in the stock market, including the loss of your investment. Past performance in the market is not indicative of future results. Any investment is at your own risk. See Terms of Service here

The available research on day trading suggests that most active traders lose money. Fees and overtrading are major contributors to these losses.

A 2000 study called “Trading is Hazardous to Your Wealth: The Common Stock Investment Performance of Individual Investors” evaluated 66,465 U.S. households that held stocks from 1991 to 1996. The households that traded most averaged an 11.4% annual return during a period where the overall market gained 17.9%. These lower returns were attributed to overconfidence.

A 2014 paper (revised 2019) titled “Learning Fast or Slow?” analyzed the complete transaction history of the Taiwan Stock Exchange between 1992 and 2006. It looked at the ongoing performance of day traders in this sample, and found that 97% of day traders can expect to lose money from trading, and more than 90% of all day trading volume can be traced to investors who predictably lose money. Additionally, it tied the behavior of gamblers and drivers who get more speeding tickets to overtrading, and cited studies showing that legalized gambling has an inverse effect on trading volume.

A 2019 research study (revised 2020) called “Day Trading for a Living?” observed 19,646 Brazilian futures contract traders who started day trading from 2013 to 2015, and recorded two years of their trading activity. The study authors found that 97% of traders with more than 300 days actively trading lost money, and only 1.1% earned more than the Brazilian minimum wage ($16 USD per day). They hypothesized that the greater returns shown in previous studies did not differentiate between frequent day traders and those who traded rarely, and that more frequent trading activity decreases the chance of profitability.

These studies show the wide variance of the available data on day trading profitability. One thing that seems clear from the research is that most day traders lose money .

Millionaire Media 66 W Flagler St. Ste. 900 Miami, FL 33130 United States (205) 851-0506 This is for information purposes only as Millionaire Media LLC nor Timothy Sykes is registered as a securities broker-dealer or an investment adviser. No information herein is intended as securities brokerage, investment, tax, accounting or legal advice, as an offer or solicitation of an offer to sell or buy, or as an endorsement, recommendation or sponsorship of any company, security or fund. Millionaire Media LLC and Timothy Sykes cannot and does not assess, verify or guarantee the adequacy, accuracy or completeness of any information, the suitability or profitability of any particular investment, or the potential value of any investment or informational source. The reader bears responsibility for his/her own investment research and decisions, should seek the advice of a qualified securities professional before making any investment, and investigate and fully understand any and all risks before investing. Millionaire Media LLC and Timothy Sykes in no way warrants the solvency, financial condition, or investment advisability of any of the securities mentioned in communications or websites. In addition, Millionaire Media LLC and Timothy Sykes accepts no liability whatsoever for any direct or consequential loss arising from any use of this information. This information is not intended to be used as the sole basis of any investment decision, nor should it be construed as advice designed to meet the investment needs of any particular investor. Past performance is not necessarily indicative of future returns.

Citations for Disclaimer

Barber, Brad M. and Odean, Terrance, Trading is Hazardous to Your Wealth: The Common Stock Investment Performance of Individual Investors. Available at SSRN: “Day Trading for a Living?”

Barber, Brad M. and Lee, Yi-Tsung and Liu, Yu-Jane and Odean, Terrance and Zhang, Ke, Learning Fast or Slow? (May 28, 2019). Forthcoming: Review of Asset Pricing Studies, Available at SSRN: “https://ssrn.com/abstract=2535636”

Chague, Fernando and De-Losso, Rodrigo and Giovannetti, Bruno, Day Trading for a Living? (June 11, 2020). Available at SSRN: “https://ssrn.com/abstract=3423101”