Lessons from a Full-Time Swing Trader: Insights from Manas Arora
How Manas Arora Trades Small-Cap Stocks for Big Gains
In this issue, I'm breaking down the most impactful lessons I learned from the Masters in One Podcast Between Manas Arora and Vijay Thakkar.
Many traders believe that futures and options are the only way to generate high returns. However, Manas Arora, a full-time swing trader, proves otherwise. In a recent podcast with Vijay Thakkar, he shared how he built a successful trading strategy purely through equity trading. His journey, insights, and methodology offer valuable lessons for traders at any level.
The Journey: From Broking to Trading
Manas entered the market in 2006 as a sub-broker but found the work monotonous.
His fascination with stock price movements led him to explore trading instead of just facilitating client orders.
Initially, he traded randomly without a structured strategy, buying and selling based on gut feelings.
A turning point came when he read Mark Minervini’s book, How to Trade Like a Stock Market Wizard, which provided him with a systematic approach.
Over time, he refined his methods, learning through trial and error before settling on a volatility-based approach to trading.
The Strategy: Volatility Contraction & Trend Trading
Inspired by Minervini’s Volatility Contraction Pattern (VCP), Manas adapted the concept with his refinements to suit Indian markets.
He focuses on stocks in strong uptrends that experience decreasing volatility before a breakout.
Rather than relying on futures or options, he trades only in cash markets, proving that consistent returns are possible without leverage.
He emphasises small-cap and mid-cap stocks, which tend to offer higher momentum and rapid price movements.
He prefers clean charts without unnecessary indicators, using only price action, volume, and a 20-day moving average for confirmation.
Case Studies: Real Trades & Key Learnings
Zentech Trade
Zentech had a history of rapid movements, rallying from ₹80 to ₹227 in just 15 days.
rallying from ₹80 to ₹227 After a correction, it formed a tight range near the 20-day moving average, signalling volatility contraction.
volatility contraction near 20 DMA Manas identified it as a potential trade and added it to his watchlist.
The stock opened strong the next day with a gap-up and sustained buying pressure, confirming the entry signal.
broke 227 levels after consolidation and saw sustained buying pressure Within weeks, it rallied more than 50%, showcasing the power of trend-following and volatility contraction.
rallied more than 50%
Epack Durables Trade
Epack displayed a textbook volatility contraction, where price movements shrank significantly before a breakout.
It was identified based on its recent 60-70% gain in two months and strong relative volume.
almost 70% gain with Good Volumes A sharp uptrend followed by a brief consolidation set up the perfect entry point.
Unlike Zentech, Epack exhibited a parabolic move—jumping 48% in just 10-12 days.
almost 48% in just 10-12 Days Recognizing the steep angle of ascent, Manas booked profits early instead of trailing stop losses, preserving gains before a pullback.
Other Notable Trades & Patterns
Stocks showing frequent 5%+ price swings (identified using the purple dot indicator) tend to be the best candidates.
Purple Dot Indicator Use the Purple dot Indicator by Manas Arora here: Trandingview Indicator
Breakouts with high relative volume are more reliable than those with average or low volume.
Entries placed before a major breakout can provide better risk-reward compared to late-stage momentum chasing.
Stock Selection Criteria
Look for stocks that have gained at least 30-40% in the last three months, indicating strong momentum.
You Can Use this Screen to filter such Stocks: Link to Screen
Prefers stocks that correct below the 20-day moving average before resuming their uptrend.
Uses a "purple dot indicator" to identify fast-moving stocks that frequently exhibit 5%+ daily price swings.
Purple Dot Indicator Prioritizes stocks with a history of rapid upward movements, increasing the probability of another breakout.
Avoids fundamentally weak stocks, even if they show good technical patterns.
Entry Strategy: The "Strong Start" Approach
Shortlists potential trades a day in advance based on chart setups.
Buys stocks only if they open strong and maintain momentum above the previous day’s close.
opened strong after the breakout and maintained momentum Waits for a strong start—meaning the stock opens at a gap-up or shows strong early buying interest.
Uses a simple rule: If the first few minutes show high relative volume and price strength, he enters the trade immediately.
high relative volumes Avoids trades where stocks show signs of weakness within the first few minutes of the trading session.
Exit Strategy: Knowing When to Sell
Swing trades usually cap at 40-70% gains before showing signs of correction.
If the stock moves up at a steep angle (parabolic move), he books profits early to avoid sudden pullbacks.
40-70% Move in a few weeks or parabolic move in a few days If the trend remains gradual and sustainable, he trails the stop-loss using moving averages.
Observe price action closely—if a stock struggles to move higher or shows heavy selling pressure, he exits.
Believes in scaling out of positions rather than selling everything at once, ensuring he locks in profits while giving the stock a chance to run further.
Adapts exit strategies based on market conditions—tightens stops in weak markets, allows more room in strong markets.
The Importance of Discipline & Psychology
Trading is a business of discipline, and success in trading often reflects discipline in other areas of life.
Many traders fail because they lack discipline and chase different strategies without mastering one.
Beginners should focus on learning and surviving the first year rather than making profits.
A good mentor can significantly shorten the learning curve, helping traders avoid costly mistakes.
Journaling trades and analyzing past performance is crucial to improving decision-making.
Managing emotions—especially fear and greed—is essential for long-term consistency.
Accepts that losses are part of the process and focuses on making well-calculated decisions instead of reacting impulsively.
Common Mistakes Traders Make & How to Avoid Them
Chasing trades: Many beginners buy stocks after they’ve already made a significant move, leading to poor entry points and increased risk.
Ignoring stop-losses: Holding onto losing positions in the hope of a turnaround often leads to bigger losses.
Overcomplicating strategy: Many traders rely on excessive indicators instead of focusing on price action and market structure.
Lack of patience: Successful trading requires waiting for high-probability setups rather than forcing trades.
Overtrading: Taking too many trades reduces focus and increases transaction costs, lowering overall profitability.
Ignoring market conditions: Every strategy doesn’t work in all market phases—traders should adapt to prevailing conditions.
Final Thoughts
Manas Arora’s trading journey highlights the power of consistency, discipline, and a structured approach. He proves that one doesn’t need to trade derivatives to make a living in the markets. Instead, a well-defined strategy, patience, and risk management are the real keys to success.
For beginners, the primary focus should be on survival and learning rather than immediate profitability. With time, experience, and the right approach, traders can refine their strategy and build a sustainable trading career.
What do you think of this approach? Share your thoughts in the comments!
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