Determining direction of Markets?

prasham

Active Member
#1
In a fantastic post by AW10, he has mentioned that the first step towards Option is deciding the direction in which the market is going to move in coming days (Short - medium term).

I would like to know what parameters, systems etc do you use to decide the direction of market in the coming days. I am sure everyone would be having some sort of system to predict the future (however wrong it may be :p).

Please help me.
 

AW10

Well-Known Member
#2
I am leaving you helpless here Prasham to find the answer of this fundamental question.
While searching for answer to you, I am pretty sure, you will find many approaches, that can be used for this. At the same time you will lot more approaches that doesn't help but confuses you.

All the best..
btw - have u googled on this ?

Happy Trading
 

prasham

Active Member
#3
While searching for answer to you, I am pretty sure, you will find many approaches, that can be used for this. At the same time you will lot more approaches that doesn't help but confuses you.

All the best..
btw - have u googled on this ?

Happy Trading
That's the exact reason why I have posted a separate thread on the matter. If experts can suggest a simple and effective way to predict the market direction novice traders like me would be greatly benefited.

Yes I have googled a bit and am reading about few things on investopedia and professorprofit. If I think its worth, I would surely post the links here to help others.
 

trader.trends

Well-Known Member
#5
Prasham

There really is no system to predict the direction of the mkt. At most you can find a system that gives the answer correctly more often than it gives wrong ones.

The most important thing to understand about the mkt is that the prices move in a random fashion. Amidst all randomness there will be areas of non-randomness. Much of the money gets made in this area of non randomness otherwise known as trend. Most often the better approach is to wait for the trend to form and then ride the trend.

So the next question is how do you know a trend has formed? You take the chance when ranges are broken. The mkt for a long time traded between 4830 and 4914 before the budget. You wait for the range to break. The moment 4914 is broken you go long with stops at 4830 or any other level as per your risk appetite. If mkt keeps making higher high and higher low then obviously it is trending up. As you can see now the mkt has stalled at 5100 levels. So it is possible that we may have made a short term top. You either take your profits and wait or book partially and carry the rest.

This does not mean that every time a range breaks you will get a trend. Whipsaws are very common. That is the reason to have a stop loss. The only known way to avoid whipsaws is to avoid trading.

There are many range break out systems available. IMO they offer the best way to identify the direction of the market.
 

prasham

Active Member
#7
Well guys thanks for the advice. I really appreciate and understand what all of you have mentioned in the above posts. But I think I was looking for a more specific kind of answer. I know that there isn't a system or indicator which give 100% accurate results.

All I want to know is that what kind of Indicators/systems do you use to decide the direction of the market. For example I am currently reading an article on PCR which according to the author is a great and simple tool to judge the market.

What do you guys use?
 

AW10

Well-Known Member
#9
chk out the thread by SAINT titled - "teach a man to fish...".. There is PDF also available of same thread.. It tell u an approach of identifying trend without any indicator.. but using only reliable and fastest indicator that u can get - that is PRICE.

Most of other indicators are derived from price and hence by nature they are lagging.

My view on PCR - it is not more reliable then 50-50% in telling u the trend.
I would rather flip a coin to tell me the trend, rather relying on PCR as only indicator for trend. It can help u as supporting tool but not as main tool.

Happy Trading
 

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