Some shocking facts on Trading

rgarg333 · #11 28th December 2007, 01:43 PM

But isnt this always true, use any two moving averages... for eg try with 23 EMA and 230EMA.
As markets rise, the two moving averages will diverge...
and only AFTER the markets fall, will they converge...

prabhjeetrana · #12 28th December 2007, 02:08 PM

Quote:

Originally Posted by pkjha30

Hi
I agree with prabhjeet. It is not the way to reply.I hope maramara understands this well.Second point is also well taken.

however I feel one should discuss the interpretation given by maramara rather than dismissing it outright.

there may be many ways to look at a chart.His interpretation is one. Others may share their point of view.

I am just attaching a chart with 50/200 EMA. of Nifty from 2003 till date and to my plain eye it looks like maramara is correct.
Nifty will have to play catching game sooner or later else...
may be others would help in coming to a conclusion.
pankaj

PK sir i myself have been bearish about market for quite sometime but it does not matter to market whether i am bearish or bullish it will and has always done what it wants to do, all i am trying to assert is that whatever our views may be we should be following the markets with our stoplosses or price targets in place, market is definetely in a overbought state, look at all time high- lows data and you will find that there is not even a single stock on NSE that is hitting 52 week lows which to me is a real danger sign. But the point is that we dont know till how long market can remain in overbought state, nobody knows.

I also agree with some of the points by Marmara but knowledge should be distributed with soberity always

Regards,
Prabhjeet

kkseal · #13 28th December 2007, 02:46 PM

Mean reversal is more common than 'shocking'

A 3 phase view (from a bull mkt perspective) can be taken where

Phase 1 : Buy for the intermediate term
Phase 2 : Book profits on intermediate term holdings & trade short-term
Phase 3 : Go short

I believe for now we're in Phase 2.

Regards,
Kalyan.

uasish · #14 28th December 2007, 04:12 PM

http://www.traderji.com/141132-post1526.html

Here is a study done,you can verify & post your findings on this study.

aca_trader · #15 28th December 2007, 05:38 PM

Quote:

Originally Posted by Marmara

For those who are feeling excited about the prospects of the stock market, here is a sobering fact:

If you look at the Sensex chart from 1998 onwards, every time that the 50 day EMA has diverged from the 200 day EMA by a large margin, the market had corrected sharply. The last time it happened was in August 2007. (Those who were smart or fortunate to enter the market in the 3rd week of August are sitting on 50% plus profits in 4 months!!)

We are faced with a similar situation now - with a wide gap between the 50 day and 200 day EMA. So there is every possibility of a sharp correction which can take the market all the way down to the 200 day EMA level of 16,500.

With the US market still reeling under the sub-prime mess, the chances of a global correction are also very high.

I would suggest extreme caution about entering the market at this point. Those who are sitting on good profits, should take some of it home and put it in a liquid fund or a savings account. Even if the market doesn't tank to the 16,500 levels, a fall to around 18000 level is very probable. That would be a good time to enter the market.

That is what MACD (Price Oscillator) is. A difference between two moving averages. Ofcourse, The price rise causes an upward move in MACD value and if prices continue to move parabolically, the difference will rise parabolically as well. However, we do not have any statistically measure which acts as a level from where market fall can be expected.
BTW, the reason for this huge GAP on chart is that unlike earlier occassions when a fall always went to 200 MA, since last two occassions, we had very good support at 50 MA level and price always moved up from there. Hence, 50 MA is still very much near to the price while 200 MA has to do the catching up. If price keeps moving up, the real change in 200 MA will start coming in only when the sharp rally of October is factored in by the Moving Average.

A price oscillator with 50-200 parameters plotted on Sensex is attached.
Interestingly, It shows that peak-to-peak we still have a divergence compared to 1992,1994 and 2004. We have been able to beat 2006 a few days back only

Jokes apart, the rounding off of Price Oscillator Top process appears to have started and should act as a warning sign. Of Course, it does not necessarily mean that market will start falling from tomorrow. Market may take their own time before starting the fall.IMHO,Time to keep focusing on Hourly Charts.

Regards,
--Ashish

aca_trader · #16 28th December 2007, 05:39 PM

Quote:

Originally Posted by kkseal

Mean reversal is more common than 'shocking'

Regards,
Kalyan.

The only problem is Mean keeps changing.

prabhjeetrana · #17 28th December 2007, 06:52 PM

The problem i have observed with traders like me is that we actually become too obsessed with trying to predict the market tops and bottoms, our job should be to focus on our stocks coz markets always give their warning signals before crashing but we people sometimes dont want to see those signals.

During May 2006 crash even if a person didnt know about any technicals he could have easily moved out of market after 1st pivot low was broken on NIFTY but many people hung on and lost their entire holdings, thats why we are called humans we wont sto making the same mistakes ever

jstraju · #18 5th February 2008, 11:02 AM

To ,Marmara,
Your observation was bang on target,
keep up the good work,
I just came across this thread, better late than never,

Raju.

CreditViolet · #19 5th February 2008, 02:26 PM

So where are the shocking facts?

AmoghG · #20 7th February 2008, 11:36 AM

CreditViolet==Moderator?

Since when? :P