Beginners Guide
- Thread starter rajputz
- Start date
hi,
i am attaching a snapshot of a news @money control.
one can explain me what is the premium of nifty future.
i am attaching a snapshot of a news @money control.
one can explain me what is the premium of nifty future.
The difference between futures price and spot price is called the premium/discount.
If futures are trading higher than spot price, it is said 'Futures are at a premium', else if futures are trading lower than spot price, its is said 'Futures are at a discount'.
Ex 1:
-----
Futures price = 5005
Spot price = 5000
Difference = +5 or premium of 5
Ex 2:
-----
Futures price = 4995
Spot price = 5000
Difference = -5 or discount of 5
Bollinger Bands
Developed by John Bollinger, Bollinger Bands allows users to compare volatility and relative price levels over a period time. Bollinger Bands are envelopes which surround the price bars on a chart. They are plotted two standard deviations away from a simple moving average. Because standard deviation is a measure of volatility, the bands adjust themselves to ongoing market conditions. They widen during volatile market periods and contract during less volatile periods. Bollinger Bands are, essentially, moving standard deviation bands.
Bollinger Bands are sometimes displayed with a third center line. This is the simple moving average line. Mr. Bollinger recommends using a 10 day moving average for short term trading, 20 days for intermediate term trading, and 50 days for longer term trading.
The standard deviation value may be varied. Increase the value from 2 standard deviations to 2-1/2 standard deviations away from the moving average when using a 50 day moving average. Conversely, lower the value from 2 to 1-1/2 standard deviations away from the moving average when using a 10 day moving average.
Bollinger Bands do not generate buy and sell signals alone. They should be used with another indicator such as Relative Strength (RSI). This is because when price touches one of the bands, it could indicate one of two things. It could indicate a continuation of the trend; or it could indicate a reaction the other way. By themselves they do not tell us when to buy and sell.
However, when combined with RSI, they become powerful. RSI is an excellent indicator with respect to overbought and oversold conditions. When price touches the upper band, and RSI is below 70, we have an indication that the trend will continue. When price touches the lower band, and RSI is above 30, we have an indication that the trend will continue.
If we run into a situation where price touches the upper band and RSI is above 70 approaching 80 we have an indication that the trend may reverse itself and move downward. On the other hand, if price touches the lower band and RSI is below 30 approaching 20 we have an indication that the trend may reverse itself and move upward.
While there are many ways to use Bollinger Bands, following are a few rules that serve as a good beginning point.
1. Bollinger Bands provide a relative definition of high and low.
2. The indicators used should not be directly related to one another. For example, you might use one momentum indicator and one volume indicator.
3. Bollinger Bands can also be used to clarify pure price patterns such as "M" tops and "W" bottoms, momentum shifts, etc.
Price can, and does, walk up the top Band and down the bottom Band.
4. Closes outside the Bollinger Bands are continuation signals, not reversal signals. This has been the basis for many successful breakout systems.
5. tags of the bands are just that, tags not signals. Touching the upper band is NOT in-and-of-itself a sell signal and touching the lower band is NOT in-and-of-itself a buy signal.
6. this indicator consists of three bands encompassing a security's price action. Defaults are:
A simple moving average in the middle, usually 20 days for intermediate investing.
An upper band ( 20 day SMA plus 2 standard deviations)
A lower band (20 day SMA minus 2 standard deviations)
Standard deviation is a statistical term that provides a good indication of volatility. Using it ensures the bands will react quickly to price movements and reflect periods of high and low volatility. Sharp price changes and hence volatility, will lead to a widening of the bands.
7. Double bottom buy (W): A double bottom buy signal is given when prices penetrate the lower band and remain above the lower band after a subsequent low forms. Either low can be higher or lower than the other. The important thing is that the second low remains above the lower band. The bullish setup is confirmed when the price moves above the middle simple moving average.
Double top sell (M): A sell signal is given when prices peak above the upper band and a subsequent peak fails to break above the upper band. The bearish setup is confirmed when prices decline below the middle band.
8. By themselves, Bollinger Bands serve two primary functions:
To identify periods of high and low volatility
To identify periods when prices are at extreme, and possibly unsustainable, levels.
9. Bollinger Bands are useful for determining whether current values of a data field are behaving normally or breaking out in a new direction. For example, when the closing price of a security increases above its upper Bollinger Band, it will typically increase in that direction.
10. Bollinger Bands can also be used for identifying when trend reversals may occur. New highs or lows outside of the bands
followed by another high/low inside of the bands typically indicates a reversal in the current trend.
This is how the bolliner bands applied to the price action.
There is lot more threads in Traderji on bollinger bands. Two i found best are one by Columbus sir dedicated to Bollinger bands. And other by linkin sir, in his DB BB system. Here are the links to the threads.
http://www.traderji.com/day-trading/27421-bollingerbands.html
http://www.traderji.com/day-trading/37079-linkons-db-bb-system.html
Developed by John Bollinger, Bollinger Bands allows users to compare volatility and relative price levels over a period time. Bollinger Bands are envelopes which surround the price bars on a chart. They are plotted two standard deviations away from a simple moving average. Because standard deviation is a measure of volatility, the bands adjust themselves to ongoing market conditions. They widen during volatile market periods and contract during less volatile periods. Bollinger Bands are, essentially, moving standard deviation bands.
Bollinger Bands are sometimes displayed with a third center line. This is the simple moving average line. Mr. Bollinger recommends using a 10 day moving average for short term trading, 20 days for intermediate term trading, and 50 days for longer term trading.
The standard deviation value may be varied. Increase the value from 2 standard deviations to 2-1/2 standard deviations away from the moving average when using a 50 day moving average. Conversely, lower the value from 2 to 1-1/2 standard deviations away from the moving average when using a 10 day moving average.
Bollinger Bands do not generate buy and sell signals alone. They should be used with another indicator such as Relative Strength (RSI). This is because when price touches one of the bands, it could indicate one of two things. It could indicate a continuation of the trend; or it could indicate a reaction the other way. By themselves they do not tell us when to buy and sell.
However, when combined with RSI, they become powerful. RSI is an excellent indicator with respect to overbought and oversold conditions. When price touches the upper band, and RSI is below 70, we have an indication that the trend will continue. When price touches the lower band, and RSI is above 30, we have an indication that the trend will continue.
If we run into a situation where price touches the upper band and RSI is above 70 approaching 80 we have an indication that the trend may reverse itself and move downward. On the other hand, if price touches the lower band and RSI is below 30 approaching 20 we have an indication that the trend may reverse itself and move upward.
While there are many ways to use Bollinger Bands, following are a few rules that serve as a good beginning point.
1. Bollinger Bands provide a relative definition of high and low.
2. The indicators used should not be directly related to one another. For example, you might use one momentum indicator and one volume indicator.
3. Bollinger Bands can also be used to clarify pure price patterns such as "M" tops and "W" bottoms, momentum shifts, etc.
Price can, and does, walk up the top Band and down the bottom Band.
4. Closes outside the Bollinger Bands are continuation signals, not reversal signals. This has been the basis for many successful breakout systems.
5. tags of the bands are just that, tags not signals. Touching the upper band is NOT in-and-of-itself a sell signal and touching the lower band is NOT in-and-of-itself a buy signal.
6. this indicator consists of three bands encompassing a security's price action. Defaults are:
A simple moving average in the middle, usually 20 days for intermediate investing.
An upper band ( 20 day SMA plus 2 standard deviations)
A lower band (20 day SMA minus 2 standard deviations)
Standard deviation is a statistical term that provides a good indication of volatility. Using it ensures the bands will react quickly to price movements and reflect periods of high and low volatility. Sharp price changes and hence volatility, will lead to a widening of the bands.
7. Double bottom buy (W): A double bottom buy signal is given when prices penetrate the lower band and remain above the lower band after a subsequent low forms. Either low can be higher or lower than the other. The important thing is that the second low remains above the lower band. The bullish setup is confirmed when the price moves above the middle simple moving average.
Double top sell (M): A sell signal is given when prices peak above the upper band and a subsequent peak fails to break above the upper band. The bearish setup is confirmed when prices decline below the middle band.
8. By themselves, Bollinger Bands serve two primary functions:
To identify periods of high and low volatility
To identify periods when prices are at extreme, and possibly unsustainable, levels.
9. Bollinger Bands are useful for determining whether current values of a data field are behaving normally or breaking out in a new direction. For example, when the closing price of a security increases above its upper Bollinger Band, it will typically increase in that direction.
10. Bollinger Bands can also be used for identifying when trend reversals may occur. New highs or lows outside of the bands
followed by another high/low inside of the bands typically indicates a reversal in the current trend.
This is how the bolliner bands applied to the price action.
There is lot more threads in Traderji on bollinger bands. Two i found best are one by Columbus sir dedicated to Bollinger bands. And other by linkin sir, in his DB BB system. Here are the links to the threads.
http://www.traderji.com/day-trading/27421-bollingerbands.html
http://www.traderji.com/day-trading/37079-linkons-db-bb-system.html
hi alroyraj,
PSAR is generally a trend following system only suitable for giving profit in a very trendy market. Once a market is sideways, the chances of hitting the stoploss increases. Also the Stoploss it provies is basically of swing purposes. What i mean by swing purposes is that, our system or timeframe may be of intraday or small profit measure, but the stoploss value it will keep will be much enough to wipe profits plus account. It is for those who follow the trend.
The Parabolic SAR is an effective stop loss placement tool for two reasons:
It acts as a trailing stop: - Rather than putting in one stop loss below where a trader entered a long position or above where the trader entered a short position, using the Parabolic SAR as a trader's guide, the stop loss is gradually raised for a long position and lowered in a short position, effectively locking in any profits.
It acts as a time stop: - Time stops are used by traders because they enter in buy or sell orders expecting a certain move to occur. If the expected move never occurs and the reason the trader initiated the trade is no longer relavent, then the trader should exit their trade. Similarly, the Parabolic SAR incorporates time into its calculation making sure a stock, future, or currency trade is working for the trader, if the trade is not moving in the desired direction, the Parabolic SAR will signal an exit.
As far as settings are concerned, I really cant help you with that. Cause as i already told that it provides a wide stoploss, so i dont use it. My preference is to keep the stoploss small, and the movement in the desired direction to occur once i take the trade. I prefer my pivot trading system more over PSAR. It is also a trend Following system, some what based on breaking of last 20 days pivot high or pivot low.
PSAR is generally a trend following system only suitable for giving profit in a very trendy market. Once a market is sideways, the chances of hitting the stoploss increases. Also the Stoploss it provies is basically of swing purposes. What i mean by swing purposes is that, our system or timeframe may be of intraday or small profit measure, but the stoploss value it will keep will be much enough to wipe profits plus account. It is for those who follow the trend.
The Parabolic SAR is an effective stop loss placement tool for two reasons:
It acts as a trailing stop: - Rather than putting in one stop loss below where a trader entered a long position or above where the trader entered a short position, using the Parabolic SAR as a trader's guide, the stop loss is gradually raised for a long position and lowered in a short position, effectively locking in any profits.
It acts as a time stop: - Time stops are used by traders because they enter in buy or sell orders expecting a certain move to occur. If the expected move never occurs and the reason the trader initiated the trade is no longer relavent, then the trader should exit their trade. Similarly, the Parabolic SAR incorporates time into its calculation making sure a stock, future, or currency trade is working for the trader, if the trade is not moving in the desired direction, the Parabolic SAR will signal an exit.
As far as settings are concerned, I really cant help you with that. Cause as i already told that it provides a wide stoploss, so i dont use it. My preference is to keep the stoploss small, and the movement in the desired direction to occur once i take the trade. I prefer my pivot trading system more over PSAR. It is also a trend Following system, some what based on breaking of last 20 days pivot high or pivot low.
Re: Buy and Sell Method For absolute Beginners
rajputz according to youif stock is in uptrend then let it grow more
and hit the stop loss
but the diagram i have just shown here clearly indicates you are in loss
isn't it . where we can use stop loss
did u place stop loss at both sides also is it possible to put stop loss at both sides . i think 1 stick means 1 stop loss which is quite true then again
according to figure stoploss must be of 2 . so where did u put the stop loss
the thing i can see is only loss
Stoploss: - In case the price doesnt get reversed then you should let your stoploss hit. and Move on to next scrip and follow the Same discipline.
In the above method, the target that can be achieved is the difference between previous top and second higher bottom. That should be your price target. you should exit immidiately if that happens or 75% of that is achieved. To make it more superior you should enter into the trade only when the least Difference between the top and bottom is more then 0.20% of the scrip price. out of which .08% is taken as brokerage in most cases and rest is your profit.
For Example for a scrip of 400 Rs.(400+0.20%) you should take entery only if the difference between the top and bottom is more then 80 Paisa. if the Volatility or fluctuation is more then 80 paisa then you should enter and exit. if price fluctuation is less then you shouldnt enter, the reason being that all your profit will be gone in brokerage only.
This is the least profit margin you should seek. you should Enter only if it gives you this much else dont. This doesnt mean that you should exit immidiately at that point. It is least. If it is going up then that then let it run and as it reverses you exit.
The above is little confusing so if you dont understand any thing then do ask me.....
In the above method, the target that can be achieved is the difference between previous top and second higher bottom. That should be your price target. you should exit immidiately if that happens or 75% of that is achieved. To make it more superior you should enter into the trade only when the least Difference between the top and bottom is more then 0.20% of the scrip price. out of which .08% is taken as brokerage in most cases and rest is your profit.
For Example for a scrip of 400 Rs.(400+0.20%) you should take entery only if the difference between the top and bottom is more then 80 Paisa. if the Volatility or fluctuation is more then 80 paisa then you should enter and exit. if price fluctuation is less then you shouldnt enter, the reason being that all your profit will be gone in brokerage only.
This is the least profit margin you should seek. you should Enter only if it gives you this much else dont. This doesnt mean that you should exit immidiately at that point. It is least. If it is going up then that then let it run and as it reverses you exit.
The above is little confusing so if you dont understand any thing then do ask me.....
rajputz according to youif stock is in uptrend then let it grow more
and hit the stop loss
but the diagram i have just shown here clearly indicates you are in loss
isn't it . where we can use stop loss
did u place stop loss at both sides also is it possible to put stop loss at both sides . i think 1 stick means 1 stop loss which is quite true then again
according to figure stoploss must be of 2 . so where did u put the stop loss
the thing i can see is only loss
Re: Buy and Sell Method For absolute Beginners
We take a position and we put a protective stoploss for our position. Now we wait for trade to go our way, and exit whn target is achieved. If trade reverses then also we wait for either target to hit or stoploss hit. cause someitmes trades after approaching the stoploss , reverts to ourside without hitting it. It is all about discipline.
We take a position and we put a protective stoploss for our position. Now we wait for trade to go our way, and exit whn target is achieved. If trade reverses then also we wait for either target to hit or stoploss hit. cause someitmes trades after approaching the stoploss , reverts to ourside without hitting it. It is all about discipline.
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