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  #1  
Old 6th August 2009, 09:20 AM
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Default my last thread

so i comeback to tell u ............a sort of compilation.
since i have seen enough around 10 yr of irregular trading in all sorts of market,with 5active platform ,a study on ta almost 6yr, a post graduate in finance +engg background,training on various coaching........like maia,angel,hitenvasudeo,otm,tradingmarket,instantp rofit,onlineacademy etc,article on journey of a trader.............all shall be reflected here in short.
Mostly i shall conclude my writing which is valid in present market context............
After which i go back in professional world.



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  #2  
Old 6th August 2009, 11:20 AM
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Default Re: my last thread

let me start of a trader
.............................................
AIM FIRST...

DESIRE TO LEARN
PATIENCE
OBSERVATION
...........................
never aim money...[greed will definitely ruin you]
a balance speed of 2hr a day..+3hr weekly analysis ..what i learn this week
discipline not only imp.. but to be followed..
you have to read..
you have to practice..
you have to analyse
yes its agame of hard work..

trading must be treated as business ..not hobby
its the dream .. supplier of new fool..
all mutualfund-fii r waiting../.
you must know how to handle business venture...dream vs. REALITY
MUST KNOW A/C...
PROFIT/LOSS..
WHAT MAKES A BUSINESS CLICK?
BREAK EVEN ANALYSIS
A-B-C ANALYSIS..
SWOT...[FOR YOU]
DETERMINATION & PERSEVERENCE..come back next day attitude

.......................................
long term view..
sector concept
YES ...ANALYSIS..VISUALISATION IS KEY
nobody suits in trading..its not natural...its WAR,..MUST KNOW ART OF SURVIVAL first..
best single book to learn ..phantom of pit...
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  #3  
Old 6th August 2009, 11:37 AM
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Default Re: my last thread

do fundamental analysis work?
yes its the FATHER..GIVES US NAME..
moneyflow...companys vision...balance sheet..
its postmortem of fundamental...
ORDER BOOK..IS KEY..
DO TA WORK??
YES DEFINITELY..ITS MOTHER...WITHOUT TA NO TRADER CAN BORN...
YES IN THE AGE TEST.TUBE...inside info trader r test tube baby..
company director buy in dummy reletive....
afinancier may back him...

SO A BABY TRADER IS BORN AFTER CONCEIVE[ TA+FA]
BABY'S GROWTH DEPENDS ON ENVIRONMENT[mastery over investment psychology...
money management is SCHOOLING'....
PROFIT'LOSS.... IN BOARD EXAM...IS SCORE..
let us join class..
a]fundamental
b]ta
c] trading psychology..
other extra curriculum...
software knowledge
time mangement
survival skill
view to stay neutral..
risk taking capacity
.............................................
1] STUDY MARKET...CONSIDER GLOBAL VILLAGE CONCEPT...
WHERE INDIA IS SUPERIOR...
EXPORT..OF SERVICE.. SOME CHEAP MEDICINE...

U IDENTIFY ..BEFORE..OTHERS...DEFINITELY MAKE MONEY...

2]MONEY FLOW CONCEPT..
WHETHER FURTHER MONEY SHALL COME INDIAN STOCK MARKEt
3]RISK OF FAILURE THIS PREMISES....
can indian product its cheapness..be maintained..
do fii money shall continue to pour....
failure of PREMISE must be checked,.
4]uncertain factor

global and local
IMPACT STUDY MUST BE READY ATLEAST IN MIND
this is i call visualisation..
so that u can act when it happen...
5]MICRO VIEW...
INDIVIDUAL STORY OF ANY COMPANY..
6] WHAT MAY HAPPEN TO MARKET...AS PER BIG ANALYSIST
MIND IT ITS AN OPINION , NEVER TRUE ...
A FAILED TRADER.. ANALYST IS BORN...
7] CHECK PRICE...ITS SUPREME...ALL IFS & BUTS COME LATER...
so ta is helpful isnt???
forget pattern , follow what price is telling...
it shall move up or down..
use ma..ma.x as hints..
depending upon.. your time frame.. uplimit...price target
down limit .. loss pt...
now observe PRICE...WHO IS WILLING BULL OR BEAR...
join the winner..
trend is nothing but strengh in direction..

yes the REVERSE CAN HAPPEN ANY TIME..
.
flexibility..calmness. puzzlesolving..direction orientation..natural]

7]now comes entry..here the puzzle starts..
breakout..
pullback
retracement..
oversold condition..
as per me...all of them given SUCCESS to me..at partcular time..
definitely failed in different market condition..
YES THE VARIABLE.. MARKET..CONDITION..STRATEGY CHANGE ACCORDINGLY..
STUDY NEWS FLOW,,ITS REACTION ..DEFINITELY ..U CAN TELL HOW
PRICE SHALL BEHAVE..
if wrong ..stoploss is there to safe guard

DIARY WRITING A MUST FOR ANY TRADER..HERE I LAGG
more than 30 stock system i personally tested..
std software../ can do it...
for conceptual development bil william MUST...
LISTEN TO RAKESH JUNJUNWALA...
ANY PRO CAN TEACH U..
provided u honestly know your strength and weakness..
hard part is TO MODIFY ..YOU..YOUR HABIT..
earlier u start is better..
............................................
trading plan..
recently.. many a teach it..
money management..u learn it..
when to pyramid ..when to fold..
PRACTICE THEM IN REAL TIME IS DIFFICULT..
IN WEEKLY SIGNAL BASE ENTRY..I DO OCCATIONAL RIGHT

NEWS STUDY..
by far capitalmarket.com..best..

equitymaster ok..
learn how they make opinion..its not the opinion BUT PROCESS OF MAKING IT..HERE LIES KEY..
last but not the least..
never feel stress..[in profit orl oss live as stoic]

SO NOW U R A TRADER
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  #4  
Old 6th August 2009, 11:48 AM
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Default Re: my last thread

Thank you for your opinion.your opinion is perfect for ever situation .
  #5  
Old 6th August 2009, 11:59 AM
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Default Re: my last thread

so in trading u require..good rm..[not a profit generator.but LOGICALLY WHO CAN THINK , MATURE..UNDERSTAND RISK..NOT A RUMOR SPREADER..unfortunately
its rare breed now..]

a good dealer..[understanding..of price..skill to execute..call back
customer..telling what client wants.. matter of factly]
SOFTWARE.../
i have seen omnitrader...its good..so for those who have emotional problem..
its a computer gen .. signal low risk idea..work metastock data format..
around 20 predefined.. callgen . are there..computor does every thing..
i use eod...albatrosoftware.com..calcutta..nirvana system originator..ed
its game mode is excellent...you move 1day price & play..
on actual price..it plays...show your euity curve..
takes atleast 6month to understand it..those who believe in control
emotinal entry/ exit..is must...
for game go iitm.com..it preach money management..
bill williams software..also.genarate..good chaos theory..
will discontinue soon[ based on chaos..i dont recommend
those who believe in pattern..its repeatative occurance..[which i am 2yr back ,nomore]...pattern plug-in murphy..ok...
but before you use..actual failure of pattern 52%..
CONTEXT..IS MORE IMP...
THIS SOFTWARE.EXPLORE & TELL ..STD TRIANGLE..DOUBLE TOP/BOTTOM
HEAD &SHOULDER...OUT OF NSE SCAN AND TELL U IN 2MIN..
in actual trading failure of pattern gives me more money...
wedge play and buy at pull back is safer
FORWARD TESTING FACILITY...AS IF PREDICTING WHAT MAY HAPPEN IF
SAME CONDITION EXISTS...
nice for an experimental trader...
now comes dt dynamic trading cncept...
yes i like..price-time-event..concept..
presently i am working....
it uses concept of elliot..+reversal..+ gann swing..
more over it has some buildin set up...scan report...

.may be..use ful in india...
fundamental analysis,,,
.............................
many excellent research report r available...
et.. research report good...
motilal excellent...
share khan..angel...ok
indiainfo...good..
hdfc/ilf&s..ok..
equitymaster..good...
MUST REMEMBER...ANALYST HAS LONG TERM VIEW..
MANY FUND HAS OWN REPORT..THEY R EXCELLENT..I AM NOT SEEN THEM
WITHIN 1MONTH OF PUBLICATION..
THEY BUY FIRST..THEN PUT BUY CALL..PUBLISH...
SAFE ...you doubt me...check fund buy report..
dt of publish of REPORT
dt of report..publish to newspaper..
public buying ..
ref use..nseindia.com..volume study of those day..
delivery%..
VISUALISE..A BLIND EVEN CAN SEE...

READ NEWS PAPER..PARTICULARLY..ORDER POSITION..
News Play
....................
Result Session...
See Last 1yr..4 Qu...compare..what Is Expected...av result..already Discounted..
Unexpected Good..buy...

Very Bad Result..but Price Not Falling
Buy Slowly...
All Other Case..use Result Publication To Get Out...
technical signal
,,,,,,,,,,,,,,,,,,,,,

hi....u like it...
ma.x....8/50...good
3ma.x...3x13x39..
3ma x...5x11x27...yes i play it..
a casestudy of.. stephen pierce...tactical trend...
high..green ...50 ema
low red 50 ema..
it is the BAND....
X WITH 20 EMA..INTERMEDIATE..MAIN ENTRY..
X WITH 7 EMA... TRIGGER SIGNAL...
FOR STOPLOSS SAR..IS BETTER...
[ hi i use..i am a member..hope i not violate any law]

swing trade... 3 day pull back now woking..
though i prefer 6-7daypullback with fibonacci..
some judgement is necessary..
dont do mechanically..

position trade ..ONLY BREAK OUT FROM BASE...+ VOLUME...
ENTRY..ABOVE 8% OF BASE..MEDIAN LINE..
STOP LOSS ..LOW OF BASE
ECONOMICTIMES..HIGH VOLUME..LIST..
FOR DAY TRADE ONLY..PLAY AGRESSIVELY IN MARKET ..1/2% PROFIT..
ONLY SUITABLE FOR DEALER..
FOR RM ONLY...AFTER RESULT OUT..PLAY IN DIRCTION OF PRICE,,
PROVIDED NEW ORDERS [VOLUME]..R COMING..
YOU PLAY MARKET..ITS AMOMENTUM PLAY..
XXX NOT SUITABLE FOR AMATEUR..........this actually brokers trap to take money from your pocket
......................
--------------------------------------------------------------------------------

what it tells
.........................

1] experience counts..
2] have patience...
3] in your effort if no gap exists..[strong base]......success must come back..
4]u have some +pt..use killing instinct...
5]no ifs & but in competition..
transfer one field success to another..
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  #6  
Old 6th August 2009, 12:08 PM
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Default Re: my last thread

for making money
............................
know who u r...
how much time u can spend on u..
can u learn to write to u...practice...

your short term plan your long view...they mustnot foul...
[here i see many failure]..

any pro who can help..search him/her..
or believe single solo journey like this fool
OR OTHERWISE
give money to mutual fund/ if big amount give pms..
theme...DAYTRADE VS SWINGTRADE VS POSITION TRADE
.................................................. ................................
DAYTRADE..i treat as gambling..
totally unsuitable for amateur...
pro...can do..suits DEALER..RM..as its their job to watch
call helps..provided u understand reason of call
personally u should know call giver....u execute ...
as per luck and survival skill u make money...
DAYTRADERS BIBLE..
DAY TRADING UNIVERSITY... HELP FUL

INVIDUAL SENSE .. OF BULLPOWER ..BEAR POWER..MUST..
PIVOT PT CALCULATION ..
ANOTHER IMP CONCEPT..JUDGE THE DAY..
UPDAY BUY FIRST,SELL LATER
DOWNDAY SELL FIRST, BUY LATER

NO TREND DAY OBSERVE..
VOLATILE DAY USE YESTERDAY MEDIAN VALUE..
BUY 2% BELOW
SELL 2% ABOVE..
STUDY NIFTY AND NIFTY FUTURE....ORDER POSITION
TO JUDGE WHAT WHAT DAY IT IS...

SWING TRADE.......
nobody join in thistype of trade...
with 3yr trade experience...guidance..by ..senior u can...

its not at all atrade...basically judicious use of day trade and position trade...
book loss early being ..daytrader..
hold the winner...like position trader...
y have to face highest level of stress during this style..
computerised signal helps..
min 2 time frame concept..useful
conflicting signal ..study ...
use..1hr breakout as entry...
any momentum tool ...helpful

VVONTERU, SWINGTRADER can help..

position trading
................................
its possible to learn ..if u have done investment before...
holding period is key..
stop..for save from rainy day..
trend concept...very useful//
fundamental idea help..
ma x..dual or band..sector strength useful..
weekly chart..good..
concept learning for free...www.ino.com
part time play..possible..
in metastock aroon helps..
for pro scan tool must...
by the way if u enjoy WINNING TRADE IN MIND...
AGGRESSIVELY DREAMER...

DONT JOIN IN ANY 3 VENTURE......observe other in brokers office
..........................................
VIEWS R OF TRADERJI, A 30 YR TRADE VETAREN


1] I had to undergo training in price movements with a number of professional traders where I learnt my first and most valuable lesson "The Trend is Your Friend".
2]I prefer trading the medium to long term trends although I do sometimes trade short term trends lasting a few days.
3]I personally prefer the conventional simple or exponential MA and MACD
Indicators are a personal choice and most indicators give reliable trading signal. However the trick is to use them often over a long period of time to understand how they behave under different market conditions. Then only will you get the desired results from that indicator.
__________________

4]About 30-40% of my trades are not profitable. The Maximum Loss I take on any single trade does not exceed 1% of my trading capital.

It does not take too long to cover up any loss as I trail profitable trades which enables me to capture a good 70-90 % of its trended move.
5]I do not do intra-day trading. I prefer positional trades where the holding period can be anywhere between weeks to months.

My method of selecting stocks to trade in are different. I do not use any technical indicators. I visually scan through the bar charts every day/week for consolidation/congestion patterns and trade breakouts of those patterns

I also always make sure that the difference between my entry price and stop loss level multiplied by the number of contracts does not exceed 1% of my trading capital.

Once in a trade I keep adding more positions (as soon as the current stoploss reaches break even level) in the direction of the profitable trend.
6]I prefer the ERS when compared to the RSC. The ERS is superior because it compares a single stock to all the other stocks in the market and ranks that stock from 1 to 99. The RSC drawback is that it only compares a single stock to another single stock or index.

I personally use the Trend Trading Newsletter for the daily ERS reading and trend signals.
__________________
7]If I go long I use the previous 3 bar low as my stoploss
.................................................. ........................

.................................................. ..................................
I search for stocks manually. I visually go through about 100-150 charts every day. This gives me a better feel of what patterns could be developing in every stock.
__________________
2]A new three month high confirms and indicates that the stock has begun an intermediate uptrend.

A three month high is 63 bars on the daily chart and not 90 bars. You can easily scan for stocks making a new 3 month high using the following formula in MetaStock:

c> ref(hhv(c,63),-1)
3]since I use a trailing stoploss which changes everyday I input stoploss orders on a daily basis.
4]The other things that I consider apart from price trends is volume ( I prefer to trade large & mid cap high volume stocks) and most important ERS.

I select sectors with the highest ERS and then stocks within that sector with the highest ERS. This helps me select the best performing stocks within the best performing sectors. Most amatuers make the mistake of selecting stocks that have fallen the most and are cheap. However to be successful in trading one should buy into stocks which have the HIGH ERS readings and short sell stocks with LOW ERS readings.

Volatility is important for intra-day traders and not for medium to long term position traders. In fact do you know that stocks in strong trends have low volatility
4] No warning signal just use a trailing stoploss which is the previous 3 day lowNo I do not trade in any other way. My current short trade on the NIFTY is still on with a trailing stoploss at the 3 day high (3045.35).
Since my trailing stoploss is at breakeven I will now initiate another short position on Monday. What this means that the risk on my previous short trade is nil and I will be adding another position in the direction of the profitable trend.
5]To go short you need to confirm a downtrend first. For this look for a new 3 month low and not 3 month high. So the formula for the scan would be

c<ref(llv(c,63),-1)
6]It does not matter if you trade stocks or stock or commodity futures. Your approach should vary depending on the time frame you would like to trade. If you a day trader you will have a strategy which will be different from a swing trader. A swing trading strategy will be different from a position trading strategy. So first you have to decide on the time frame you would like to trade in and then develop a trading strategy to suit that style
7]The 2% stoploss really depends on your trading capital. If you have a very large capital your stoploss could even be as low as 0.25% to 0.50%. If you have a very small trading capital then one has to trade with a larger stoploss of maybe 3-5% of you trading capital. I always keep my stoploss the same while taking positional trades - last 3 days low for long trades and last 3 days high for short trades. If you can use a system tester check out its profitibility.

If I find that the stoploss is to large (during highly volatile times) I normally reduce the position size to fit into my % rule of money management. Keep in mind that one should not change the stoploss to fit into your money management but rather the position size. If you find that the difference between the entry price and stoploss is too large and you cannot take the loss then do not take the trade.

I do not change my trading strategy during the first three days of the month or last three days of the month. The trading strategy remains the same
8]In highly volatile markets it is always better to swing trade. Your stoploss should be the swing low and if you do your analysis correctly the chance of your stoploss getting hit will be lower.

I use the previous 3 bar low or the swing low whichever is lower.

I would suggest you wait for a pullback and then BUY only after it closes/crosses above its previous bar's high.

If I entered a trade at this level I would use the previous 3 bar low or swing low whichever is lower as my stoploss.

Amaraja was a good swing trade. However it looks ready for a pullback/correction. Iwould suggest you to make a list of 50 stocks which you should visually scan daily for such setups. I am sure you will not be disappointed
9]It is generally recommended to use trend following indicators in the daily chart when the weekly ADX is rising and oscillators in the daily chart when the weekly ADX is falling.
The ADX indicates the strength of the trend whereas the MACD indicates the dierction of the trend.
10]You can enter the next day immediately after a breakout out of the pattern. Taking a trade is probably the most common heartache faced by market timers and all market traders, and is only compounded when it turns out that it would have been a profitable trade.

"Uncertainty is a powerful emotion that can weaken the resolve of even the best of market timers." You need to get rid of this.

Mark Douglas, an expert in trading psychology, says this about trading fears in his book "Trading in the Zone."
"Most investors believe they know what is going to happen next. This causes traders to put too much weight on the outcome of the current trade, while not assessing their performance as "a probability game" that they are playing over time. This manifests itself in investors getting too high and too low and causes them to react emotionally, with excessive fear or greed after a series of losses or wins.

As the importance of an individual trade increases in the trader's mind, the fear level tends to increase as well. A trader becomes more hesitant and cautious, seeking to avoid a mistake. The risk of choking under pressure increases as the trader feels the pressure build.

All traders have fear, but winning market timers manage their fear while losing timers (as well as all traders) are controlled by it. When faced with a potentially dangerous situation, the instinctive tendency is to revert to the "fight or flight" response. We can either prepare to do battle against the perceived threat, or we can flee from this danger.

When an investor interprets a state of arousal negatively as fear or stress, performance is likely to be impaired. A trader will tend to "freeze."

There are four major trading fears:
Fear Of Losing

The fear of losing when making a trade often has several consequences. Fear of loss tends to make a timer hesitant to execute his or her timing strategy. This can often lead to an inability to pull the trigger on new entries as well as on new exits.

Fear Of Missing Out

Every trend always has its doubters. As the trend progresses, skeptics will slowly become converts due to the fear of missing out on profits or the pain of losses in betting against that trend.

Fear of Missing Out on Profits

This fear is usually felt during runaway rallies. All your friends are talking about the incredible profits they are making every day. If you really look at this in the right perspective, it is a very dangerous kind of fear. It eventually causes you to buy in, and of course, when you and thousands of others who feel the same way react at the same time, the market is finally at its top.

Fear of Being Wrong

The desire to be "right" is in direct opposition to the ability to be successful.

The desire to be "right" is in direct opposition to the ability to make money.

A market timer's desire to be right, to be able to tell his friends how successful he or she is, can become so powerful, that a he or she winds up second guessing, the "strategy." Taking winners too quickly, or holding onto losers in the hopes that they will come back, or at least break even.
__________________
1]IMHO market Direction is most important as majority of stocks move in the same direction of the market. One should always trade in the direction of the market.

I do not BUY 100 Days HIGH. Please read the discussion again.

The reachable % profit yearly depends on your trading style and how the market behaves. One cannot exactly pin point this figure.
__________________
2]use the 3 month high to identify stocks that are in an uptrend. Once the stock is in an uptrend I transfer it to a separate folder and then watch it for consolidation patterns. The 3 month high/low can be used to identify stocks for swing or position trading.

When long I keep a stoploss at the previous 3 bar low. When I am short I keep a stoploss at the previous 3 bar high. I keep this stoploss irrespective of how the market or that stock behaves.
__________________
2]Thats probably because most analyst are not professional traders and are unable to decipher the disinformation of the markets.

I could not find disinformation in my dictionary, but it is a term coined in the intelligence community and now in broad use. In intelligence parlance it means false information designed to mislead and confuse the adversary.
The market behaves much like an opponent who is trying to teach you to trade poorly."

A common formulation of this phenomenon is the concept of random reinforcement. Traders are not rewarded with a profitable trade every time they do something right, nor are they penalized with a loss every time they do something wrong.This makes it exceptionally difficult to figure out what is right and what is wrong. Compare this to an electric fence. Every time you walk by and don't touch it, you feel fine. Every time you touch it, you receive a painful shock. It doesn't take a man or animal long to learn how to relate to an electric fence.

Think how much easier learning to trade would be if you automatically took a loss every time you failed to follow correct decision-making procedures. At the same time, what if you were always rewarded with a profit when you traded correctly? You would be able to learn the correct trading rules much more easily
3]The rounding bottom is a long-term reversal pattern that is best suited for weekly charts. It is also referred to as a saucer bottom, and represents a long consolidation period that turns from a bearish bias to a bullish bias.

4]Close crossing above previous 3 day high
cross(c,ref(hhv(h,3),-1))

Close crossing below previous 3 day low
cross(c,ref(llv(l,3),-1))

the risk of losing money is a part of trading process. You just have to prepared for it and take it in your stride.

I generally try and aviod trading or holding open positions on highly volatitile days when company results are declared or budget day, etc. This has saved me a number of times.
I generally wait for 30 minutes before entering the trade


HOPE YOU ALL LEARN FROM THIS GREAT MASTER
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  #7  
Old 6th August 2009, 12:26 PM
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Default Re: my last thread

NEXT I SHALL FOLLOW VVONTERU.............SWING TRADING
.................................................. ................................
The market in the hindsight will have a deeper correction (more than a pull back). So, be carefull and have stops

any slight downturn, can make people jittery and leave their positions. Result, deeper correction and heavy losses.

trading and investing is different. I am a trader using TA

you placed a stop at 450 (below the recent base and taking into consideration the volatility of the stock and below its 50 day EMA). Right now, the stock is at 650. so, you had more than the risk run. I would take 50% off, and move the stop to 530 (break even). So, now you can let the stock run on table's (read others) money. As the stock moves up, move the stop. Make sure you put the stop below 50 day EMA, around 100 rupees (volatility based on price of stock) less than current price and below a recent base.

In TA, when you select a stock, look at the chart considering data from all years. Then compare the chart with the sector and the market. The reason I like stock pick 1 than 2 is that, stock 1 mimics the market more than stock 2. I did not compare with the sector. Ideally, the sector should also be trending. We want the momentum. We want the wind to sail easily. Avoid the harder stocks. There are so many easy ones like the stock pick 1.

Remember the saying, Bulls make money, Bears make money, Pigs get Slauttered. Don't look at your paper money and be happy. Till you book your profits, you will see the money and then one day, you don't have it. Think stock trading as business. If you had profits in your business, will you continue to invest all the profits in the business?, or

you are picking good stocks and making right entries. Concentrate on the market, pick right sector and then the right stock. Take profits (always).

Again. Market, Sector, Stock, Clean Chart. I know the market is shooting. I didn't see which sector your stock is it in. I don't have to. The chart is all over the map. Its like a heart beep. beep! beep! beep!.... Like Sine curve. Avoid those stocks. Ask yourself a question. Is the market doing the same. Market is trending at an angle 40 to 70 degrees. Pick stocks like that. Take some from harmad's pick. You don't have to reinvent the wheel. I like Godrej Consumer Prod. Wait for a pull back around 2 to 4 days. Make sure the market has also pulled back (distinquish between pull back and sell off). Go long with a stop 10 rupees or X amount based on the volatility (determined based on the stock price and how much average it moves in a day) above previous high. If you are interested, here are suggested readings on swing trading.

1. Dave Landry's 10 Best Swing Trading Patterns and Strategies
2. Dave Landry on Swing Trading

To get basic ideas of stock trading, I would read
1. Come Into My Trading Room: A Complete Guide to Trading - Elder

More to read
1. Reminiscences of a Stock Operator - Edwin Lefèvre
2. Trading for a Living: Psychology, Trading Tactics, Money Management - Elder's 1st book

Buying high is a fool's game. When you buy high, what you are expecting is that another fool will come along and buy it from you at even higher. The guy who bought at pull back or at 50 day EMA will run all the way to the bank by sell the shares to you. You like that? So, next time, buy at pull backs or given the volatility of the current market, buy at 50 day EMA.
Positive: Having said the above, hopefully the bad times are over. 8 day EMA has crossed above 50 day EMA. MACD is showing bullish. There will be slight pull back before the stock takes off.
Negative: Trend line has been broken. It may depend also on the general market. Index is moving up. Stocks are not. See Advances versus Decliners chart comparision with Index chart.
So what we do. We put a stop. Conservative - 230. You want to give some room, 220. All depends on the market and the sector in which this stock is in. Frankly, there are no enough tools to see the sector chart.

Be careful of the 50 day EMA. In this kind of bull market, stocks always test 50 day EMA and have high volatility. 50 day EMA for this stock is 369. I would put a stop at 400. Hopefully, the stock comes out of the pull back. Based on your risk (hopefull you thought at some loss, you would come out of the stock), take partial profits. Lets say, when you entered at 412, your stop was at 380 (base below previous pull back), your risk was 32 rupees. So, at 444, you would take 50% of profits, and trail the stop on the remaining shares. Hope you got the idea.
You can Buy, Sell, Short & Cover stocks. But, there is time to Buy, time to Sell, time to Short and time to Cover. Trying to pick top is a loser's game. Many tried that and lost shirts. Always first allow selling to happing first (I forgot something, Profit Taking. Do you know profit taking is different from selling?). Then, depending on the percentage of % drop (above minimum 7%. Conservative 10%), how much the stock has recovered, and based on the volume of recovery (volume must be low for recovery versus sell off), you would decide to go short.
Ofcourse, there are other patterns (Double Top, Head & Shoulder's) under which you can decide to go short.

Stock selection is most important. In the previous email, I mentioned, one can Buy, Sell, Short, Cover and take Profits. I forgot to mention another thing you can do with a (lot of) stock(s). Just pass on. Don't pick a stock because you see something in future or something is going to happen. You should say to yourself, let it happen. Let the stock show why I should buy it. Its like playing cards. Who will show their cards first. If you buy now thinking something is going to happen 1 month from now, you already showed your cards. You should wait for the stock to show. Then, on a pull back, you will reward the stock by buying it.
The chart by itself was not interesting. Stuck in a trading range from the last 6 months. So, if you want to buy this stock, let it come out of the trading range, go beyond the previous high aroung 120 and then on pull back, you would buy it.
Rather, look at some stocks previously, I discussed in this thread. Compare those charts with this stock. You will understand what I am after. Need a clean chart. No mumbo jumbo Sino curvo heart beto.

You need to select stocks which
a. have high average volume ( high liquidity)
b. Move a lot - high beta ( you don't want something not going anywhere. They are waste of time)

2. You need to know where to enter and where to exit. These points should typically help you make money. Thats the hardest part. Since, there is lot of noise during the day.

3. However, in this market, for the most part, they always go up. Just avoid trading when they go down. I mean to say, avoid trading when the market is pulling back

4. Use good money management. When the stock moves on your side and crosses what you risked, take 50% profits. Then, move the stop where you bought to break even. This way, you make enough income to keep you going. During day trading, the stocks typically move up and down (noise). Don't expect to see chart like what you see in EOD chart. They don't just go up. So, if the stock goes towards you, take half off. There are high chances that those profits will also go if you don't make a move. That way, you will not last long enough
What were your reasons for entering (rewarding) this stock. Its below 50 day EMA (read Bearish). Could not take previous high (Aug vs Jan at 130). The market is pulling back. So, ask yourself why you entered this stock today
how much time we need to spend studying for the opportunities of endless wealth. You need to give yourself atleast 2 to 10 years. Everyday you learn something. Please read the books I mentioned before you put your money. Start with small amounts so that you will lose less amount while you learn your lessons.

I don't remember the exact definition of MACD. Please refer the books. But, the way it works: there are 2 EMAs. Short term EMA (9) and Long Term EMA (12,26). Short term EMA tells what is happening right now. Long Term EMA tells you what has been happening for some time. Difference between these EMAs will give you the divergence (Present - Past), shown by MACD histogram. MACD is a very powerfull indicator. It can tell you what is happening underneath the price movement. As with any indicator(s), MACD may not be usefull all the time. For instance, if the stock is any trading range, MACD is not useful. MACD Histogram above 0 will tell you bullishness and below bearishness. This is useful to compare how strong bullishness/bearishness between 2 points.
Nothing replaces the experience though. Continue to look at the charts. You might have seen earlier that I have just been trading for only last 2 years. So, you might wonder how I got so much knowledge. I almost spend each day looking at charts. I might have looked at thousands of them. Stock Market is my passion. I continue to read books along the way. This is important to not forget the basis in the midst of fear and greed.

As Elder says, in stock market, 3 Ms are important. Mind, Method and Money Management. Control your mind from fear and greed. Have a methodology (Tripple Screen, Swing Trading etc) and follow it in every trade, so that the probability works in your favour. Have a money management plan to allow the maximum risk (typically less than 2% of your principal amount) you want to take in each trade. Keep this risk constant and change the position size you are going to trade based on the stock price and loss stop.

Example, if you are following Tripple screen (I am not going to go through the methodoloy. Please refer online or book), decide on the risk. Lets say, your principal is 1,00,000 (1 lakh). You want to risk 1% on any trade. You would risk a maximum of (100000 * 0.01) Rs1000 per trade. If the stock price is 100, your determine stop at 90 (based on volatility/support), your risk is Rs10 per share. So, at max you can trade position (1000/(100-90)) 100 shares. If the stock price is 1000, stop is 900, your position is (1000/(1000-900)) 10. This way, the amount of money you risk is constant.

Basically, this technic of money management rewards you to trade more when you make money. Similarly, it would reduce your position when you are losing. Hope I made a point.

I am not a break out player. I am a kind who ask, let it breakout and then I will think about it. Playing breakouts is a risky game. There are a lot of false breakouts.

Not trading is most important part of trading stocks

Whoever reads this article, I want to stress on simplicity. Don't think there is always secret behind the price movements. Specially, there is none when the market is so strong. Don't go after all those indicators (DMI, RSI etc etc). What is most important is Price and Volume. Price tells whether there is demand for it or not. Volume gives us the value for that demand. Every thing else is a potpourii of this data.

I use Price, EMA(8), EMA(50), EMA(200), Volume on top. In the middle, I use MACD. Last box, I use Williams or Slow Stocastic (if I don't have Williams). I am using EMA to get a feel for the average price. MACD is used for divergence (I already explained in this thread). Williams, I use it for overbought and oversold condition (Try not to buy where this indicator is above 80%. Don't sell (short) when this indicator is below 20%).

EMA(200) is for fund managers buy point. Anything below that are the fallen ones (dogs, don't touch them in this market). EMA(50) is a buy point for lot of fundamental stock investors. Avoid shorting at this point (wait for it go below this point and pull up). Stocks display elastic band effect over here. EMA(8) is the short one, which gives us the heart beat check of the current price.

Volume can help us for confirmation. If you are buying, look at the volume. For example, if the price is going up, volume is drying, we don't want to buy that stock. This is also divergence (secret underneath the price )

Stock selection:
When you look at a chart, if you spend more than couple of seconds, then its not worth it. Skip it. Chart should not be complicated. It should be simple. Take a look at NIFTY chart. It should be simple as that. There were couple of stocks (SATYAMCOMP) mentioned in this thread. Look at them. Simplicity is the key.

It all depends on your methodology. If you are person buying at 200 day EMA (always), why not. Look at the stock. If fundamentals (thats what fund managers look at 200 EMA) are good, but the stock is down for some temporary reason, they go in.

MACD is slightly turning positive, which in itself is not a big thing. The big thing over here is that this stock has lost lot of points and is at 200 day EMA. I looked at ROC indicator. It is going up. So what. I don't think you want to go just based on that. As I said, you have to be careful in using the indicators. You have to know their applicability, given the price movements.

Don't use indicators only to justify your entry in to the market. When I say that I mean, be consistent in using indicators. If you are using ROC for entry, use that always. Don't use ROC one time and the next stock use RSI. On the other hand, you can see lot of indicators for confirmation of information your regular indicator has given. (I always use MACD and Williams. Thats it).

For this stock, I will go for it (if someone is forcing me with a gun) based on the following reasons:

1. If my methodology warrants me to buy. Most important. Don't change your methodology in order to trade different stocks. Overall results will be skewed. I discussed this before in this thread.

2. Fundamentals look good at the long term. I admit I am bad (nor interested) at looking at fundamentals.

3. This stock technically uses 200 day support. Look at the chart on 2005 April and 2005 Nov. Both the cases, the stock jumped after trying 200 day ema. Hopefully, it does that this time too.

4. Draw a trend line joining 3 points (2005 April, 2005 Nov and current price). Trend line is not breached.

Negatives (I would not buy this stock for the following reasons):

1. This stock does not follow the regular market. Compare this stock's chart with nifty. No comparison! Nifty is above 8, 50 and 200 EMA. This stock is not. Select stocks that mimic the market (haven't I repeated myself enough already). Are you asking why? Because, you need stronger wind to sail. If nifty is the wind, the sector is the breeze. You need these to sail fast to reach your destination (money ). You don't want to stay in the middle of sea all by yourself right? (how do you feel if the market moved 100 points and your stock didn't even move 5 rupees. Even worse, it goes down).

2. For me, I am not a 200 day EMA player (Unless the market i.e., nifty is also at 200 day ema). I am a kind looking for stocks above 50, 200 ema. Need to mimic nifty. Simply said, my stock filter would be,
52 Week High and minimum 2 day Pull back.
I will go long above the 2nd day pull back.


Hope this helps.

Pull back,

Look for a pull back for atleast 2 days. You can be conservative and wait for more than 2 days. I know people who enter after 1 day pull back. I don't.

Is 2 day pull back enough? How do I know if it is a pull back versus sell off versus no change. It all depends. Read further.

1. The whole idea of pull back is that somebody is taking profits after a good run (Wouldn't You ). This will lead to stock losing some points. How much, depends on the stock price. Based on the experience, you will figure it out.

2. If the stock has more than 7 days of pull back, its more than a pull back. Some times, stocks do 2 to 4 days pull back. Trigger your stop. Then don't take off, but don't go down either. This happens when market conditions are not right. That doesn't mean you should quit your position. Don't micromanage. Once you are in the stock, give it a chance. Think before you go in. Not after.

3. If a stock loses 7 to 10% in the last 10 days, its may be a sell off. Atleast you would think before you go in.

Would I just use pull back to enter. Not true.
1. I am selecting the stock which made 52 week high (just like nifty). That tells me the stock is strong.
2. I look for clean chart. Not lot of gaps. Looking for trending stocks.
3. I look at MACD for convergence and no divergence.
4. I look at Volume to make sure it is not drying up.
5. I look at the sector of the stock to also have made 52 week high and has pulled back. If this is not true, I don't take the bite.

Thats it. Is that easy or what. Thats what I mean about simplicity.
You observe something from the above. Its not the problem with the stocks. Its a problem with you. Please stop trading. Go back to basis. Read books. Come back later. You can always make money. But, at least do your homework. Know what you are doing. Winning or Losing is not the question. They are part of the risk of trading. But, if you follow certain methodology, mentally prepared, follow specific money management, you have chance of reducing losses versus winnings. Even if you lose, at least you can take home that you gave your best shot. What I mean to say is, You Will Not Feel Like a Loser.

I suggested not to enter before it comes out of the trading range. You see couple of stocks discussed above. They have been stuck in trading range for 6 months to 1 year. What a waste of money's time. Rather, in this bull market, you need to find stocks like Pidilite which are nicely trending just like the market.

You might be wondering why I want all data chart. Before I trade a stock, I like to know its history. I always look at all the data. If there is noise in daily data, I look at weekly chart to get feel for the stock. Each stock is different like each of us. They display different patterns. By looking previous data, you can rationalize how they acted before. So, you can decide how its going to doing now.
You can take 3 approaches.
1) Don't predetermine the market. Let the market determine by its movement. This is what I mean

a. If the index is going up, the stocks are not doing the same, you should find less no of entries. Obviously, you will be trading less.
b. If the index is going up, the stocks are going down and you are getting stopped out. Isn't market telling you something.

2. If you are not confortable with the market (indicators are telling you or for whatever reasons), reduce the position size. Lets say your money management formula requires you to trade 200 shares. You would only trade 50% (or whatever) of the position, i.e., 100 shares. You can take this approach if you feel the market conditions are not ideal.

3. Your idea is not bad either. Nobody would penalize you for not trading. Atleast we know that for sure, you would not lose money by not trading.

But, just because something is going up doesn't mean it is going to come down pretty soon. I want to stress on "pretty soon". Thats the issue with the stock market. Anybody can predict whether some xyz stock will go up or down. The question is when? Time is the question. That is why peers suggest not to try to pick top or bottom of the stock. Trail your stops and let the market tell by its movement whether you need to be there or not.

Disclaimer: My suggestions are based on Trading versus Investing. Please take them at your own risk. Above all, as anything else, I feel trading is common sense. If you can make sense out of what I say, use my advise. If not, avoid
Read all charts....
I don't understand your question. Let me do the best I can.
When you start looking at these charts, it looks foreign at first. You read books. Understand various terms. Continue to read charts. You will go through several phases. That is the reason, I suggested it would take 2 to 10 years to be really good. All along, you will learn something every day.

Each day, you will become better trader. But, the question is, do you have interest. There are several ways to make money. Some do job, business etc etc. We can opt for the one which gives us lot of money. But, if that line is not of interest, can you continue year after year. So, I suggest you to ask yourself if stocks are of interest to you. If it is, then spend time and eventually you will get it.

Its like byke/car driving. At first, it is so hard. You tend to observe everything. Once you get a hang of it, you don't even think about it. Some part of brain automatically takes care of it. Same thing with charts.

But, reading charts is just the beginning. I don't think you want me to go through the whole process now. You will find more info in the earlier part of this thread.
Read all charts....
I don't understand your question. Let me do the best I can.
When you start looking at these charts, it looks foreign at first. You read books. Understand various terms. Continue to read charts. You will go through several phases. That is the reason, I suggested it would take 2 to 10 years to be really good. All along, you will learn something every day.

Each day, you will become better trader. But, the question is, do you have interest. There are several ways to make money. Some do job, business etc etc. We can opt for the one which gives us lot of money. But, if that line is not of interest, can you continue year after year. So, I suggest you to ask yourself if stocks are of interest to you. If it is, then spend time and eventually you will get it.

Its like byke/car driving. At first, it is so hard. You tend to observe everything. Once you get a hang of it, you don't even think about it. Some part of brain automatically takes care of it. Same thing with charts.

But, reading charts is just the beginning. I don't think you want me to go through the whole process now. You will find more info in the earlier part of this thread.
Read all charts....
I don't understand your question. Let me do the best I can.
When you start looking at these charts, it looks foreign at first. You read books. Understand various terms. Continue to read charts. You will go through several phases. That is the reason, I suggested it would take 2 to 10 years to be really good. All along, you will learn something every day.

Each day, you will become better trader. But, the question is, do you have interest. There are several ways to make money. Some do job, business etc etc. We can opt for the one which gives us lot of money. But, if that line is not of interest, can you continue year after year. So, I suggest you to ask yourself if stocks are of interest to you. If it is, then spend time and eventually you will get it.

Its like byke/car driving. At first, it is so hard. You tend to observe everything. Once you get a hang of it, you don't even think about it. Some part of brain automatically takes care of it. Same thing with charts.

But, reading charts is just the beginning. I don't think you want me to go through the whole process now. You will find more info in the earlier part of this thread.
.................................................. .....
Pattern: Acceleration and Persistent Pullback
previous movement was 5 to 10). This means, the stock is accelerating.
2. The new trend is parabolic. I some how feel it is not sustainable. You know, feelings and hope have no value in stock market.
3. The new trend is giving only 1 day pull back. But, don't use Friday's pull back to enter. Let another day pass by to have at least high of the day below previous high. See for example, on March 28. Enter with a buy stop above high (stop = today's high + 4).
4. What I like about this stock is, when going down, its volume was low. Going up, volume is high. It picked up good volume on the new trend.
5. Please check the sector. I couldn't find it. Once you know the sector, check the chart of the index (in BSE) to be trending and this stock is comparable to the sector. I gave the link to look at the sector and index charts in the
People who read my thread might be considering me crazy when I ask them to wait for pullback. This is the reason. When you buy at top, you feel uneasy when the stock is below your mark. Its like going to the market and buying something at high price, when you know you can wait for day or two and get it at low price. Please practice to wait. Sooner or later we need this behaviour.
Right now, don't panic. I don't know how much did you calculate for stop loss. I suggest you put sell stop under previous base, which is 200. Hopefully, it will continue with the new up trend.

For All
I want you guys to look at the nifty chart. Look at the volume when going down versus going up. Just an observation

what price you entered. That way, my analysis would be to the point and useful to you. If not, I am shooting in the dark.

All I can tell you is the probability of stock going up or down. We just trail the stop. If the stock goes up, our stop goes up. We do that as far as stock goes. We don't care how far up the stock goes. In the mean time, we do take partial profits to generate income to our account

like to be counted in the short term to intermediate trader group. My hold can be from 1 day to a week to a month to a year(s). At the same time, I don't believe in buy and hold philosophy. I don't buy a stock and think, ok, let me wake up after 1/2/3/4/5 years, the stock is waiting for you to take profits.

My Methodology?
Basic underlying pattern is pullback. The question is after what scenario the pullback is of interest to me? I can give you one scenario which is useful in the current market. 52 week high and pullback. Ofcourse, clean chart with a trending stock.
When I enter, I never enter directly in to stock. I enter with a buy stop above the yesterday's high (given that there was a pullback). The value above the high depends on the stock price and volatility. Once I enter, I determine my risk and initial profit target. I keep them same amount value. The risk depends on the stock price or chart pattern.

Once the profit hits, I sell 50% and move the risk stop to where I bought. At this point, I am breakeven and will be playing with table's (read other's) money. As the stock goes up, I move the stop. When, I do this, I don't move the stop close to the current price. I use bases to move the stop up, giving lot of room to the stock. This should be ok since we are already in the profit. Our goal should be to get the max out of the stock. Therefore, you choose not to micromanage at this point. So, thats the reason, I am more of a intermediate player.

Book the profits ...
In most cases, I don't sell all the shares directly. I sell in chunks when there is huge movement in the stock. For example, from the above you know I will sell 50% when the initial profit hits. Then, on further movement, if I decide that the stock has run good enough, I may sell 10 to 20%. I trail the remaining 30% with a stop. This may continue.

Another question ---- it is a bull market. Will we get such clean charts at bear market?
In a bear market (why do you think about it? Really!! Are you missing it already), you will have to go by sectors. What I mean is, there will still be some sectors which will trend. So, you will choose those (At this point, you would also short). In the worst case scenario (Lets say, if the market is in trading range, which is no no for us who believe in trend is your friend philosophy), you will choose sectors that trade independent of the market. For example, metals and oils. I hope bear market is long way to go.

Voltas
I do like the chart. But, looks like it is going through some minor correction due to change in gears, which....
however one can be assured of the underlying fact that a clean chart with good volumes fairly indicates strong fundamentals-----

Thats the whole point. A price of the stock already contains the fundamental information (somebody has done the homework for us. Remember, we want to make money easy way.) + what people speculate its future value is. Since there is speculation for future and future is not predictable, stock's price is adjusted once the future is known ( + again the future speculation). This goes on.

In the book, Market Wizards : Interviews with Top Traders (Paperback)
by Jack D. Schwager, famous trader, Ed Seykota says, "Fundamentals are Fun For Mentals". I woudn't go so far. No matter what methodology you use, as long as you follow it in all your trades (no exceptions) and use sound money management, you can make money. Simply put, do the following for success:
1. Control Your Mind (don't feel left out and jump into a trade. Think before you trade).
2. Select a methodology that suits you and you believe in. Use it for all the trades.
3. Have a sound money management so that you are in the game in spite of loses. No one loss should take you out of the market.
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Old 6th August 2009, 12:33 PM
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Default Re: my last thread

Before we delve into anything below, I want to touch on the market in general. Please avoid new positions for now. We will have to adopt wait and see approach with the market. Stick to the stops you have (for traders). Don't move them as the market approaches your stops. Elder calls them losers, who move stops down.

can u tell me how to use volume. i am actually stuck on this.
what is "overhead supply", good volumes(relative to what), iilquid stocks etc.
is volume also subjective to the time frame v are seeing
--- As I mentioned before, price and volume are the most important elements to look for in the market. Everything else (indicators) are there to remove the daily noise and see clearly what is happening (with crowd behaviour). For example, SMAs, EMAs, MACD etc.

Overhead Supply
--- Lets pick a stock that is beaten down (say its current price is 50% of its high). Some part of the crowd thinks this stock is at value. They think this stock was 100 3 months back, now its 50. They say its cheap. What they are forgetting is a group of people who bought all the way from 50 to 100 3 months back. This group is called Overhead Supply. This group is just waiting badly for the stock to go up so that they can dump (sell) theirs. Elder gives a perfect common sense example for these kind of stocks. Think about 2 scenarios.
Scenario 1: Falling down 3 stairs. U just wipe your butt off and there you go.
Sceanrio 2: Falling down 10 stairs. U will first check whether you can breath. Then check whether hands and legs are fine. Then look for people to help you (sector action). Then try to get up. You will fall down. This repeats couple of times. Finally (assuming that you didn't end up in hospital with broken hands/legs/ribs), you will get up.

From our perspective, these kind of stocks have a lesser probability to make you money (from Buying point of view) than a stock which has just made 52 week high and has no overhead resistance. Just like water, stocks go the path of least/no resistance.

good volumes(relative to what), iilquid stocks etc.
is volume also subjective to
volume also subjective to the time frame v are seeing
--- When you see a chart of a stock (picked for more review. Please look at my previous reply), you look at the complete data (for all years and different time frames). You will look what happened to the price of the stock. Similarly, u will look at the volume and indicator Average Volume (to remove noise/sudden spikes in a day). When they say "good volumes", what them mean is price action supported by increase/decrease in volume (average volume). That there is really a demand/no demand for this stock.
--- Average volume can help to filter low volume stocks. Low volume stocks are hard to liquidate (sell) your positions. U will put a sell order and no one is there to buy. This means, you will have to reduce your price and then try again. This results in high volatility of the stock and lot of gaps. U need to pick stocks that have good (based on Ur confortability) average volume. That do not have lot of gaps (they result in lot of difference in buy vs. ask price). Stock elimination is as important as stock selection. When in doubt, leave it.
--- Volume Time Frame: Definitly. Lets say a stock's volume has gone up last 2 days. When we see that, our immeadiate thought is, something is going on. Why are people interested? How about 5 days volume spike. There is really something going on. How about 3 weeks. 3 months? 6 months? As the time frame increases, your confidence on the price action supported by volume data increases. You will trust the price action better.

may I buy Facor alloy now at 2.60/?
No. Don't go after low priced stocks. They can be easily played by market makers. They suck you in.

Also give some word about National steel and agro.
I don't like the charts for new entry. Are U are already in? If you are, trail the stop below previous base.
If the market goes down, individual stocks are nothing. Doesn't mean you should reliquish your position. Because, we don't know whether the market is going to continue the downward path tomorrow. Stick with the stops. Let the market determine its next step

No matter what I say below, I suggest No Entry to any of stocks. Wait for the market to show the direction. It is still in the break down mode.

JPAssociates
-- Pullback has stretched into the short term trading range below. Let this condition improve. I think this is true for most of the stocks (look at Wipro). These conditions will improve when the market improves.

Day Trading (Volume, MA, Medium Liquid Stocks, Price Movement Manipulation)
-- Please read my earlier reply(s) on day trading. In day trading you need the following to excel:

1. Avoid looking at too many things. You will have very less reaction time and attention span. More on this in the next few points.

2. Have a tool which can execute orders fast. Don't have some thing which takes you to another page for confirmation and then executes the order. Those are good for End of day trading.

3. Bargain for low commissions on day trading. You need low commissions because U will be trading a lot as U will get lot more signals in day trading.

4. Determine before hand (before sesson starts) what stocks you will day trade. Use volume, beta (volatility) of the stocks as the criteria as the selection. You need high volume, medium price, medium to high beta stocks. Further, determine what direction these stocks have chance of trading. U do that looking at EOD data on a daily chart using EMAs. I talked about it in previous emails. Also, look at the charts I am attaching. U will have an idea. Basically, what I am saying is, U need to decide whether to go long or short before hand for a stock.

5. Restrict to only 2 stocks for watch list. If you don't see any movement for couple of hours, then start looking at another 2 stocks. Not at any point of time you will be looking at more than 2 stocks. Try to restrict looking at 10 stocks in general. That way, Ur mind will get tuned with their price movements. After a while, U will know them more and your actions will get aligned with their movements.

6. Avoid looking at 1 minute chart in a day chart. Its close to imposible to make decisions on 1 minute chart because of noise.

. Now, coming to what indicators you will be using.

a. Look at 5 day chart. I don't know whether you have the tool which shows 5 days of data. In this, use 1 minute time frame. I know U are confused at this point based on what I said on point 6. But, here we are looking at 5 day chart. Read next how this makes a difference.

b. U will be using EMA(8) min and EMA(50) min. Since we are using 5 day chart instead of 1 day chart, this effects the EMA calculation. They will take out the noise.

c. U will be using MACD with line and Histogram (atleast histogram). Again, hopefully Ur tool has these.

8. Methodology (I tried to avoid revealing this info. in earlier replies. I was tempted though). My friend will kill me if he knows I am revealing this info. But, its ok. I am not doing it any more.
Hope, you will make money of it. Hey, atleast can you keep this a secret? (Ya right!!! ).

a. As in EOD trading, we need enter and exit points that make you money. But, unline EOD trading, you have less time to make decisions and there is lot of volatility. So, you need clarity.

b. We will be using crossovers for this. When 8 min EMA crosses above 50 min EMA, you buy. Similarly, if 8 min EMA crosses down 50 min EMA, you will sell short. When the ema crosses over, wait for pull back (pull up in case of short). Patience!Patience! Patience! before triggering. It is better to avoid then do it wrong. Crossover is Ur ultimate test

. If you want to be 80 % correct, then U will confirm the crossover using 5 min timeframe on 5 day chart. Remember, it will take some time for the crossover to appear on 5 minute chart after it appears on 1 minute chart. What this may mean is that you will enter at higher (lower for short) point than you would do using 1 minute chart. But, it will avoid false crossovers. So, you might make less money, but U will make consistently. 1 minute chart can be used to help you get ready for upcoming crossover.

d. MACD histogram is also helpfull for confirmation. Lines above the 0 bar means bullish. Below bearish (I know U know). So, when 8 crosses above 50, we are going from bear to bull. See whether it is happening in MACD for confirmation.

e. So, I have talked above about entry. How about exit. As in my EOD trading, U need adopt immediate 50% profit booking methodology. When U enter, U immediatly decide at what price the reverse crossover is going to happen (approximatly). This is your stop point.

f. If the stock moves in your direction, U should take 50% profits and move the stop where U entered for break even. Without this U will not survive. Because, in a day, the stocks show lot of noise. What goes up in the morning, comes down in the evening. U will be left withnothing on your plate, inspite of your hardword. U need income to continue for next day, just like people working in office do. Final exit will come when the reverse crossover happens.

9. In order to make money in day trading, U have to be a perfect person. U should not have fear or greed (applies to EOD too). You have to follow methodology to the core. No exceptions. Believe me, this is going to be hard. U will get greedy once U start seeing the money flowing.

10. Never trade when U are tired. Day trading will suck lot of your energy. If you are tired, take a break. Further, if you have lost a lot of money (% of capital), don't trade for couple of weeks.

Price Manipulation
-- This is a given thing. We can restrict it by picking stocks that have good average volume, medium price and no gaps in price movement. If you want to know price manipulation, read The stock operator book, biography of Jesse Livermore.
I have mentioned to use only Price, EMA, Volume, MACD, Williams indicators. Just read them on line in investopedia.com.

sudden increase in vol at particular price ,intraday.
--- Stocks behave like us. Why? because WE operate them. An WE are made up of same stuff and think a like for most of the cases. So, when we put a stop, WE all tend to put it at same point. Same for buy, sell decisions. As a result, there are lot of orders waiting to be executed at a same point. As a result, you will see lot of volatility with high volume at some price points. For EOD traders, when you put a stop, place couple of points high/low than what you think should be to avoid being stopped out.
--- Other scenario is, when you place stops, the market makers can see them. For low volume stocks, then can manipulate for a moment and hit your stop and come back (it will if there is no demand at the point). That is the reason you will see this huge bars in daily charts.
--- Another scenario is gapping down at the beginning of the day. If you carry stops overnight to next day, the market makers in the early morning gap the stock down, hit your stop. Since, there is no demand at the stop point, the stock goes back to previous day's trading region.
--- Having said the above, don't get paranoid from EOD trading stand point of view. It would be great if you don't carry stops overnight. Specially, if the stop is close to the current price. If the stop is far, it will be hard to manipulate. If you don't have time to do it, that should be fine too. The chances of occuring are low that you can disregard.
--- For day trading perspective, disregard volume info. You cannot do anything with volume in a day. Understand this. With all the TA, we are trying to read crowd behaviour on an average basis. You cannot make a valid judgement based on spike in volume in intraday. So, leave the volume info.

Also, yr comments reg Bse stocks,ICSA(531524) & Ankur drugs,both from investment point of view & intra day trading.
---ICSA, couldn't take out previous resistance at 750. So, should wait for it move up above this point.
---Ankur drugs, its been trading range between 120 and 160 for more than a year. Avoid.
---For
will pass for now. Look for stocks having min. average volumes 3,00,000. More the volume the better.

stopped out of ITC, Hindalco, GE Shipping, SSI, ICICI Bank, Rolta, and Wockhardt.......At what levels do you suggest that I should re-enter?
---We have to wait for the market to improve. Individual stocks improvement will come automatically. Right now all the stocks are breaking down. I will attach ITC chart.

For Day Traders:
--- Practice acquiring high Will Power. The crowd pull will be very high. The magnetic force is 100 times more than for EOD traders.
--- Don't count the money. Count the no. of times you used the methodology (crossover) to enter. Try to get this 100%. Money will flow as an after thought.
what do you think about Infosys now that the results are out and bonus announced? What are the probable scenarios?...
---Our basis is TA. So, disregard the news for all purposes. Are U saying why?
1. The news is already discounted in most cases. We are at the end of the food chain. Before we know, so many people already know about it. The rupee value of the news at the point we know is negligible.
2. Have you ever observed the stock movement opposite to the news. The stock goes down inspite of good news. The stock goes up when the news is bad. This is because of expectations or for unknown reasons. But, observe this. The movement in most cases happen in the direction of the trend.

So, the lesson is, don't use news as the reason for trading signals. You signals should be entirely based on your methodology. No exceptions. Even if you know U can make money easily if U can make 1 time exception. U should not.

Money (greed) should not drive your signals. Your methodology should. This is required for your long term survival. U should come into this market thinking that U will be there for long time to come. You should accumulate money slowly. Do you know how many get busted in the 1st year? Do you know why? Greed!!!!!
you can't define cheap in stock prices. Wait for the market to become better. We will have lot of entries. Wait!!. Waiting is the most importing part of trading in stocks. You have to wait like cheetah waits for its prey. It doesn't pounce until it is certain. We have to do the same.
Picture speaks thousand words. Wait till we see better picture. If you are already in and not stopped out, I will give it a chance
don't want to short this market.
---I don't think any body should. Its long way for us. But, for somebody who don't know what shorting is or is sceptic on the whole idea of shorting (oh they say, there is no limit on the upside before covering), I recommend looking into it.

I wait till 3200, start looking for picks and make the positions by 3100-3070, i.e if i get the prices. At this level what will be the stop loss?, on Nifty or Sensex.
-- I personally feel that should be it. 3200 is 50 day support. 3200 is the previous pullback support after the gap on March 9th or 10th. But, as I said in earlier posts, feelings have no value. Our attitude should be, 'let the market make the next step. I will look at it and place my next step. I would not reveal my step before the market's'. Having said that, it is a nice idea to think through the various support and resistance levels and what U are going to do. Isn't this like a chess game!!

Ideally, you want the market to test the support successfully. "Successfully" is the key. We want the market to test the support, pull up and pull back but not go below the support. When it pullsback, thats when you would enter above the pullback. Ofcourse, I am talking about my methodology.

I think on the upper side i can do the same if markets sustain 3425 on closing. plz gide me if 3425 is the correct level

---Looks like you are expecting it to go above 8 or 10 day EMA. That would be nice too. But, I will wait for "Successful" test to happen. This will eliminate false breakouts and daily noise. My methodology doesn't trust breakouts. Too much money is lost in false breakouts.

1. Is it suitable for a beginner like me to get into this book?
---Oh Ya. I am your example. Why are wasting time. Just delve into it. You will never stop.
gain. Give the methodology a chance. If it works in a time span, you keep it. From time to time, U can tune it to suit Urself or based on market changes. More important, U should like it, should make sense to you and therefore U believe in it.

What about balance of Reliance? Shall i sell these as well 'cos market is going down or shall I place a Stop Loss? Is s/loss of 829 suitable?
---As we don't know whether the market is going down, we don't know whether the market is not going up. We just know that the conditions are not ideal for new stock entries. So, the existing entries should be dealt with stop loss. Let the market determine its next move. If it goes down, it will hit your stop loss. If it goes up, do we have a problem?

I would keep the stop at 783 (where U bought. Now U have booked 50% profits and have no loss no gain on the remaining shares i.e., breakeven). Let the next base clear up. When the stock moves up from this base, I will move the stop to 815. This is how I do on every stock. If you put the stop at 829, U are just asking for it. A daily noise can take it out. If you are unconfortable or feel you are going to lose money, take more partial profits. Its all about how you feel about the position. But, don't change how U put the stops.
Market: It was a nice come back. Lets wait for the follow through.


So can we say that the Key here is an unsuccessful attempt to breach the support levels, after a breakout?
--- Ya. We are looking for a pull back. We want to make sure that pull back does not go back to previous point from where the breakout has happened. If it does, they call it a false breakout.

Print the 6 month chart (if you can), put it on the floor. Standing, look at the chart and see where is safer to put the stop. Thats the test. Don't go into details. If we micromanage, we will lose the longer play. Our objective is to get the max out of the trade.

I have said earlier, we shouldn't prejudge the market. Thats the reason, we shouldn't come out of existing positions. The reason is, there is always be noise. That shouldn't change our existing plans. But, for new plans (entries), we definitly want to see better conditions.

With 1 day upside, the market has changed the charts. I now feel, probably, the previous downside was a deeper pullback. This can happen intermediate to several smaller pullbacks. From our perspective, can we take new entries considering the market was a pullback
for short and longer term ...
Please explain what U mean by these terms. If you are losing badly would U keep in long term case? Or if you are making money, U will sell because U thought it was short term!! I don't believe in short term or long term. I look at a stock's chart. If its good and has an entry point I enter. I give it a chance with a stop loss. If it hits, I come out. I can't take the pain thinking this is long term. Similarly, if its winning, I ain't stupid to come out.
Tracking 5 to 10 stocks:
For beginners that should be it. Just track them. Wait for pullback and enter. Don't go around 100s of them. U go around and comeback, these 10 are gone (Isn't there a saying One rabbit in your hand is better than 10 around the bush). Once U get hang of it, I suggest use a scanner to program patterns U like the stocks to exhibit. Once U get the result of the scanner, U should be able to judge based on the charts.
don't remember changing much. I modified the EMAs to use 8, 50, 200. Added another window (Shift + F12) to use MACD. Added another Window to use Williams. Added Volume as overlay to Price (Unfortunately, it doesn't show up in the zoomed version). If U want, you can play with the color settings using Indicator Settings menu.

Formula: 3 month high and pull back
highest_close[5] = highest_close[65] AND M_PriceFalls
>=2 and Close > 100 and MAVOL > 100000

U can tweek the nos to include/exclude subset of stocks.
Considering the market (All sectors except Metals and Oils) putting up Double top, try not to take new positions for a day or 2, till we have a better idea.
Sensex 12000, Nifty 3573 ... what now? What do the charts tell?
--- Nothing definite. Sometimes thats what it is. We definitly don't want to take new positions. The indexes have been rallying straight 4 days (+ Friday even though it was a down day, indexes did not give much back). The parobolic move suggests, there might be some pull back pretty soon.

Looks like too many people are expecting a correction. Too much bearishness makes the market bullish. If it doesn't come down pretty soon, all the people who got stopped out recently and sitting in the sidelines waiting for the correction will jump back. This may lead to even more parabolic move in the indexes.

Sectors:
MIDCAP & SMLCAP & AUTO : Still have double top
IT : came down from double top ( WIPRO, SATYAMCOMP, TCS, INFOSYSTCH )
OILGAS: 1 day pull back after acceleration. Hopefully, we will find entries in this pretty soon.
METALS: we need it to come down more.
BANKS: forget this sector till it comes out of the trading range

Maintain your existing positions inspite of people advocating correction. That talk should only deter U from entering into new positions. In not ideal conditions, if you want to go in, reduce Ur position size to 50% or 25%. Some of the good runs what we discussed recently are Reliance, Morarealty. ITC is looking more like a double top. Mcdowell-N was stopped out and was set yesterday for a short (I did/will not advise though at this time).
Lesson: Stocks give you at least 1 chance to get out (in my observation). Lets say you did not honour Ur stop (I don't want U to do that). The stock will give you another chance to get out. But, in most cases, we don't get out. We get greedy and think there will be follow through. My suggestion to you guys is, when in doubt, execute 25% or 50% of position, either on the sell side or buy side. Atleast U will not be 100% wrong. Don't try to get every thing right. Don't be hard on Urself. Accept the fact that there will be mistakes made (even if U are a pro) and we will learn from them.
My suggestion to U is, if at any time a position makes U tense from being Urself, that means the position size was not right with respect to the stop loss (this comes under money management issue). So, ask yourself what position size would make you confortable if a loss happens. Once U know, reduce the position.
U could have shorted using MACD divergence. Look at MACD histogram bullishness for each of the peaks. At the last peak, MACD went negative. That shows that as new each new high was being made, the stock had lesser strength. An short entry point over here has higher risk as well as higher reward.

A higher probability trade would be using First Thrust Pattern. After making a new high, the stock falls down more than 10% and pulls up. Right now, its still falling down after making 52 week high. Wait for it to pull up. Also, note the 50day EMA. Many people buy at 50 day EMA. So, it would be nice if the stock goes below 50 EMA and then pulls up.
About shorting, at this time, understand the general market momentum is upside. In this kind of market even cats and dogs jump. Shorts have less probability of making U money compared to Longs. So, avoid going shorting at this time
.................................................. ................................
It has good chart. I came out from major trading range and has momentum. It is testing 50 day EMA. Stocks do that after a run up. I don't know how U want to play this. Normally, I would wait for it successfully test 50 day, pull up and pull back. I would enter above pull back. When I say Normally, in those cases, stocks take around 10 days to touch the 50 day EMA. In this case, its just 4 days. U can consider it just a pull back and enter at 93. Have stop below 50 EMA around 83.

Stock Entry: Above previous day's high (high + x) where x is based on stock price and volatility
U should always enter into a trade above previous day's high. Why, just look at all the stocks suggested yesterday. Look at Bajaj Auto. I suggested entry at 3000 above previous day's high (2989). Since, there was no up tick, our entry was not triggered. Using this technique, U can avoid some good trades that turn into bad ones. They call it, No Ticky No Tacky.

The downside to this is that U may enter high of the day. But, going so far, taking out previous day's high, the stock showed its potential of turning back from pull back.

Count the no. of day's its been down continuously. Total 10 days. In the last 11 days, only 1 day was an up day. I remember recently reviewing this stock for a short. At that time, the stock was still in the trend. In the last 2 days, the trend line has been broken. Today was the nail in the coffin. All the guys on the upside are caught now. They never had a chance to get out. They are waiting to get out. What they need is couple of updays. That is when we enter for short. They will give us the impetus for the next leg down.

I currently do not scan for the stocks under this pattern (First Thrust). The market does not support the shorts. The only way we can make an exception is if the sector would setup as short. Lets follow this stock and Siemens

Market:
Considering that it still is a pull back, lets look at some stocks. In case the market goes down another day, we have to reconsider. It might be in trading range or correction (I doubt).

This is a good scanner U can use. Lets see what we want based on the market.

1. 52 Week high
2. 3 days lower
3. Price between(User specified, in Indian Rupees(Rs.)) 100 - 5000
4. 10 day simple moving average above 20 day sma Yes
5. 20 day simple moving average above 50 day sma Yes
6. 50 day simple moving average above 200 day sma Yes
7. Volume between(User specified, in 10000 multiples) 10 - 100000

Other Indicators I would Play with:
1. Price Changes
2. Price closed above 10/20 day moving averag (instead of crossovers)
3. Volume changes
4. MACD
5. Support Resistance levels
Siemens ended above the neck line. When I say test the neck line, I am expecting a pull up. U don't want to short when it is going down. It is already down. Whom are going to sell (short) it too? So, we need couple of up days. Right now, it is above neck line. Lets wait for another day to see if it is just noise. But, why are U bent upon shorting. The market is shooting up. Why don't U go Long. I will recommend some.
Hopefully, you are not asking this question for argument sake. Because, I am not interested. We are here to make money. My trading philosophy (as I stressed in most of my replies) is that no methodology is wrong or right. You test it in the real market and you make money, then use it. Thats your edge. Every body should find their own edge (what they can do their best) and use it repeatedly (this is the key).

What I meant about the statement is, make trading simple. When you start trading initially, we come to the market with some pre-concieved notions. That you can easily make money and fast (read greedy). When you don't, you think people who are making money know something you don't know. They are using indicators and waves etc etc which you are not using. Thats the reason you are losing money. If you didn't have this thought, thats fine. I am talking in general.

Then you go after reading books, using new indicator for every new trade, change methodology etc etc. In the mean while, your portfolio still doesn't improve. I have done this like anybody else. Ultimatly, what I found is that, trading is just common sense. It is using probability to make your chances of winning high. Accepting the fact that there will be losses and it is the business risk. That winnings are going to compensate your losses and make you profits.

In essence, don't try hard. When you see the chart, it gives most (80%, to give a value) of the information. The remaining 20% may not relevant in most cases. So, why work hard going after that 20%. Since, you are leaving 20% (or whatever info) you may get some losses. But, assuming that you are following your methodology to the core, the losses may be minimal compared the effort you are not putting. Just make life easier. Don't spend more than couple of seconds (max 1 min) looking at a chart. Within that time, if you like it, study more like
1. Look at all the data (Ofcource, 1st thing you want to make sure is the overall index is doing good). Check it fits your methodology (this was the reason you picked this stock for detailed review)
2. Look at the sector
3. Check whether your position in this stock fits your money manangement plan
4. Make a go or not go decision.

Having said the above, nobody is stopping you from researching. You can continue to do that. I decided I am not going to do it. Its just personal. I found my edge and my final truth ( I spent my time before). I will just stick to it.

hi...do not get paranoid...that question was asked to have insight into your mindset............i request u not to be judgemental....................................... .......as book of ELDER was recommended by u,I asked the question to know whether that idea had any application,it can not be called "research".....don't u think that u should have answered it in straight forward way


NO NEW ENTRY means, I am suggesting to all readers that I do not approve these stocks for new positions. Based on my analysis, I don't want somebody to think (based on stops) I am suggesting to buy them. Now, if U have already took positions in these stocks, there are couple of options.
1. Exit for profit if the stock chart is really bad.
2. Gracefully exit for no loss no profit.
3. Give a stop for last chance for the stock to make it.

U know, it is easier to read charts that are good than the bad ones. All these charts, I wouldn't spare a millisecond (infact thats the test). Now, trying to understand them and make meaning out of them is hard.

About my suggestions, right now, I am not recommending any new entries because of market and sector conditions
NO NEW ENTRY means, I am suggesting to all readers that I do not approve these stocks for new positions. Based on my analysis, I don't want somebody to think (based on stops) I am suggesting to buy them. Now, if U have already took positions in these stocks, there are couple of options.
1. Exit for profit if the stock chart is really bad.
2. Gracefully exit for no loss no profit.
3. Give a stop for last chance for the stock to make it.

My expertise is not with low priced stocks. Please see the chart attached. A triangle has formed. A decision soon will come, up or down. We can keep this stock if it goes up (no brainer). If it goes down, how far will it go down (already 35). The stock has to be evaluated based on fundamentals more than technicals. How about asking the guy who suggested you this stock
The time has come. It broke out. Wait for pull back, which will not go back to the trading range. What I don't like is the volume using which the breakout has happened. I couldn't find the sector. It is considered in sector All. I also don't like the general market condition to suggest a new entry. But, U asked for the RCVL. Here it
start with how stock prices go up or down. This is due to the demand for buy or sell. Lets take an example of RCVL. This has broken out of the trading range recently and closed at 320.60. If no demand exists for buying above 320.60 (no buy orders above 320.60) and sell orders exist below 320.60, the stock price will come down. I think so far U already know.

Now imagine some good news comes for RCVL. There are lots of traders who buy on news. They jump on news and put in buy orders. Most of them give market orders (they don't want to miss the action). The market makers (MM, who execute all the buy and sell orders in our behalf) see so many buy orders for RCVL and increase the buy price. Since these are market orders, they get executed no matter what the price is. Lets say more buy orders come in. MM see this as an opportunity and increase the price (On the intra day chart, U will observe a long open and close tick). They will push it so high till a point where no demand exists. Once U have this scenario, open a daily chart. The tick on that will have huge high (tail) low range. What we should read from the tick is that there is no demand at this high point and go for a short next day. Elder talks about the levels and stops for doing this. Similar is the case when the stock goes down.

Now, identifying the Kangaroo Tail is tricky (infact, I used to argue with my friend all the time. He used to look at some volatility on a day and say, there goes the kangaroo), just like using any indicators. Huge range can be there on any day. But, Kangaroo tail only applies on extremes. For example, when stock on a bad news is going down. After several days of sell of, U see a huge down bar, now thats a Kangaroo Tail. Why, because, the stock has been going down so low and at some point the MM tried to sell the last bit and found no orders to sell below that point. Similar is the case of upside.

I don't think that applies in this scenario (ofcourse its my opinion). The stock should have been going down or up for lot of days. This should typically happen because of an event (which will determine this sharp break up or down). If the stock has been going flat, I don't know how much this applies. The pattern is more based on
Any way, I don't trade on this pattern. Not that U can't make money on it. It doesn't fit into my methodology of pull backs.

Market is still in trading range. Avoid new entries for now till the market successfully comes out of the trading range

This stock is below 50 day EMA. 200 day EMA acted as support. Let it cross above 50 day EMA and then pull back. A safer bet would be after crossing 950 Resistance
did not look at all the indexes before. Here is the good news on other indexes. Most of the indexes broke out of the trading ranges. Lets see what are those.

BSE100
BSE200
BSE500 (This is better index to trust than SENSEX, which has just 30 stocks)
BSEHC
AUTO
BANKEX
OILGAS
METALS (Was not in trading range. But, really going good)
MIDCAP
SMLCAP

Still in bad condition
IT

Now what? Ideally, we would want the indexes to go up and pull back (not going back to trading range). Thats when we enter. However, if U are a aggressive player and want to go in now, consider stocks that are already in pull back and check if U can safely enter those without a wider stop loss.
did not look at all the indexes before. Here is the good news on other indexes. Most of the indexes broke out of the trading ranges. Lets see what are those.

BSE100
BSE200
BSE500 (This is better index to trust than SENSEX, which has just 30 stocks)
BSEHC
AUTO
BANKEX
OILGAS
METALS (Was not in trading range. But, really going good)
MIDCAP
SMLCAP

Still in bad condition
IT

Now what? Ideally, we would want the indexes to go up and pull back (not going back to trading range). Thats when we enter. However, if U are a aggressive player and want to go in now, consider stocks that are already in pull back and check if U can safely enter those without a wider stop loss.
U know what, I thought the same when I saw that. The question is how do we take advantage of that. We need to scan for that pattern. But, as I said earlier, I don't whether this is a high probability trade. What is the chance the sector of the stock doing the same. And what about the market in general. We need to have criteria for stock selection that mimics the General Market. The general market is all time high. Pick stocks that are comparable to the market. Be in a sector that is going along with the market. If not, U will end up with lot of stocks to trade. Which one do U take.

Stock selection (elimination) is the greatest challenge, once U gain knowledge of TA. Because, once U run a scan, U will get lot stocks in result. Which one U go for finally?
That is the reason, I suggested for it come below 5500 for a short. Now a new pattern is emerging. Wait for MACD crossover and then look for pull back to enter long.
previously mentioned negative about banks. They are breaking out decisively. Since they were in trading range for some time, hopefully, this is going to be good rally. Lets watch couple of bank stocks that are going along with the Index.
got a lot of stocks in the scan. I like most of them for entries. I am not suggesting any. I am waiting for the market to pull back. But, if U want to take it, here is the list. I like the metals. The index has been down .
Trend line is OK. Is it a buy based on MACD crossover? It depends. If you always buy on MACD crossover, then probably OK. For buying, MACD crossover itself is not enough. The cross over happens so many times. However, in this case, the signal applies.

For me, MACD cross over and histogram gives information about the goodness of a stock trend. After that, I wait for pull back. Pull back is the ultimate pattern for me to enter. Reason, I don't want to enter when the stock is going up. If I do, my stop loss will be far. And when people start taking profits, I will feel uncertain, unconfortable the stock getting close to my stop.
When U say entry after pull back,is it a different method other than trading the channels?
Also when we consider stop loss, Elder indicates a formula,considering Average down side penetrations.Can we adopt it as a main method of placing stops?
Again for taking profits,in Ur earlier charts U indicated booking 50% profits almost the same way towards the treand as to the stop loss.
Please give some details on these
FYI
In general, market goes in 3 stages.
1. Value of market < Fundamentals. At this point, nobody really cares about the stock market.
2. Value of market = Fundamentals. People start observing. Still no talk.
3. Value of market > Fundamentals. Speculation Stage. Everybody knows. Wherever U go, there is a talk. Any one U talk is in the market. Every body is dreaming of lots of money.

If U think something is over valued and not participate, U will miss lot of action. My philosophy is, not to prejudge the market. Let the market tell by its price action. That is the reason, stick with Ur stops. If cement stocks are going down, Ur stop will hit.

Currently, how many people predicted correction in the market (I was effected by that talk too). Every Tom Dick and Harry was expecting correction. I was talking to my brother-in-law who doesn't know ABCD of stocks. He was talking about correction. What happened? No correction. It is so much better not to heed to the news. Just observe the price action. If the price action gives the signal (based on Ur methodology) to buy, go ahead.

from you. Earlier, correction would occur or stay during 1-2 or 2-3 months period, where the sensex would go down by say 200-300 points. Now, these few days we have seen lot of volatility. Somedays the sensex would go down by 100-200-300-490 points. Till here I am right. Isnt it?

Then cant we say that this was a correction? Is it necessary for Correction to usually take a period of 1-2 or 2-3 months? Cant it occur during a single day?

Correction:
A loss of 7 to 10% can be regarded as correction. This can happen in 5 to 10 days. There after, the market or stock can continue to lose points or start a new trend. From our point of view, we need to avoid new positions, take profits and trail stops for existing positions. We just need to differentiate between normal profit taking verses sell off.

Good analysis. Thats what my objective was. To provide a list. Then, we all analyze it. Come up with the best, that we agree upon. If we don't agree, we have a choice. Either go for it or skip it, feeling there is a reason not to. As I said always, when in doubt (even an iota), leave it. Its like leaving a ball while batting in cricket. Just choose the best one to hit. Leave the bad balls.

On Ur analysis, I see about the jump. It made almost doubled in the matter of a month. Can it sustain. Probably not. Will it be in a trading range? Based on the pattern, looks like it has more chances for it to be in a trading range. The current pattern looks different. It has lot more momentum then previously. It made 100% jump. However, as I said before, can it sustain? May not. So, lets skip it.
The chart looks good. The stock is in overbought condition. Wait for pull back to enter.
Stock Entries:
The market has been up 7 days in a row. Still waiting for a pull back. If we go in, we will be entering at overbought condition. If we don't go in, we might miss the move. Do we? I was looking at my previous scans. Most of them are still in pull back mode. Thats the surprising part. Stocks are pulling back. But, the indexes are up. Only Metal index is in kind of pull back mode. Banking index is 1 day down. On further pull back, we can look at couple of bank stocks identified before. I have 2 metal stocks for entry. To be on conservative side, U can avoid entries in other sector stocks.

Hindustan Zinc Lmtd - I like this better. I am putting the stop Rs170 more. I don't want the noise to get it. I would get out on a loss of Rs 100 (Rs970). But, there should be atleast 2 decisive ticks. Use discretion on the stop based on Ur confortability
purposely did that. Yesterday's tick did not have a lower low. So, I wanted it to test day before yesterday's tick. U can go with yesterday' low. There is no right or wrong. It is just that if U think nothing has happening (no profit taking effect) with the current day's tick, U buy above previous day's tick.

I didn't get the data feed for current day. I see on the web that it has lost some points. We need to take a look at it as well as the index. I will have another post on it.

Others
-- I will get back to U.

Quickly on some stocks I already know/was looking at them in the scan.
RCVL - This is good stock to enter. I was looking for it to pull back a little more for entry. So, far no, just like the market. But, if it does pull back, I will strongly recommend this stock. About long term (if that means, U don't care what it does in the next 30 days), I will recommend this stock to enter. I am getting interested in new issues. Ofcourse, those have to be trending. I remember see some in my scan. I will look at it again.

Market moved a little bit. Based on its action, it looks close to its pull back. Can never predict though. Again, we have an option to sit out and manage existing positions. If U want to trade, metals are still in pull back mode. Banks appear as pull back. If U want to enter any stocks, I have a list.

Previous day's entry on Hindustan Zinc still holds good. Adjust the entry point. I was look at some stocks which are cheap. Below Rs100. I got 1, attaching the chart. I advise caution when U buy cheap stocks. They are prone to manipulation. Why I like Litaka Pharamacy?
1. It has good volume, which will make manipulation hard.
2. It has a nice trend with a pull back.
3. It had a opening gap reversal today.
I was waiting for pull back. It happened. I am expecting at least another day, given the upside we had. Whether we have it or not, its another question. We will adopt having an entry buy above yesterday's high. If the market goes up, we are in. If not, on a further pull back, we reduce our entry point. Thats what we are going to do with RCVL.

3) Let me know whether the Stock Entries I suggest are useful and U are taking them. If not, I am wasting time. I will rather spend time answer the questions about stocks. Let me know.

4) On stocks I am following
--RCVL pulled back further. I wanted it happen. Its prime for entry. I will be happy if we have another day of pull back in RCVL
................................. know something, I thought U were asking for buying now. I just saw U are asking for hold or exit. I don't know why U want to exit. When U enter new issues, U should like the company and its business. I don't think anything has changed in the last 2 weeks that U should exit. I don't know where U entered. Logically, I would suggest to put a stop at 16. But, rather, I would put a stop at 10, to avoid the stop getting hit in the noise. In fact, I suggest not to put stops for these low price stocks. If U do, U are asking for them to get hit. Moving a cheap stock down is not hard for market makers.
It is in the first day of pull back. There may be 1 or more pull backs. U have to sit tight. This should be a lesson for U not to catch something which is going up. Wait for pull back. I know it is hard to see something flying and U are not part of it. The waiting is hard part. But, what is other option. U buy at high point, see the stock going down and U are very uneasy about it. Ur stop will be too far now. U are looking at 1000 or to be safe at 950
numeric power system
-- Crossed previous resistance of 420. It is pulling back mode now. After another day of pull back (hopefully today), U can buy it above day's high + x.
BILT is Ballarpur Industries and its NSE code is BILT.
---This goes in a channel. The low end of the channel is the 50 day ema. When it touches 50 day ema, buy it. Upper end of the channel is the upper bollinger band. If U choose, U should sell it over here.
some order/pattern in the chart. Why? The chart shows data about thinking of people. U want to put Ur money on a stock which attracts like minded orderly people. So that we can predict some event (stock going up/down) with a degree of confidence (Do U remember probability in Math). For example, lets look at 2 charts:
1. Jai Prakash Associates
2. elgi thread
Let me know what U think. Where would U put Ur money. Which one will U trust more. Which one U can say confidently its going to go up or down.

Normally, U will look at a chart on an average couple of seconds. If U like it, write it down for further analysis. Don't force a position on a stock. If the chart is not good or chart is good but it is in over bought condition, skip the stock
It is a bull market with high valuations. There is lot of volatility. Combined with it, there are Market Makers who look at your close stops. They move the stock, touch your stop and go back (since there is no demand to sell further or there is high demand to buy at that point). So, when you put Ur stops, U have to consider:
1. Volatility of the stock. How much it can go down in a day. High - Low.
2. Whether the risk will fit your money management plan or Ur confirtability. The stock may be good for entry. But, if the stop has to be far, move on to the next one.

The reason I have the stop far than it should be is to avoid getting hit due to daily volatility. When I say 2 ticks, I am trying say, the stock should really go down. Not thru manipulation. However, if U can't look at the stock in day time, i.e., hands of approach, give actual stop. In this case, something below 500.

Triangle Pattern
--- I already have it in the chart. By, explosive, I mean, the base is not formed. Normally, the base is formed and tip is not formed. At the end of the tip, the stock has to make a decision to go up or down. In this case, the end of the current pattern comes when the stock no longer is forming the base of the triange.
Can you please tell me if TFCILTD has formed a double bottom?. Is it safe to enter now?.
Scrip - Tourism finance corporation of india
Code - TFCILTD.NS
-- Avoid the stock. Still in downtrend. Draw a line joining points 24, 20, 17. Further, avoid cherry picking in the current market. I don't know whether U read about my anology of falling from steps. If U have not, here it is.

Imagine U have fallen from 10 steps. U are trying to recover. U are about to get up. But, U see this gush of wind in the proportion of cyclone. Can U guess what will happen to U. Will U get up or fall down. If U do fall down, how long will it take to get up again after that hit.

The reason I gave U that analogy is, the market had a bad hit today. It has come back to the previous trading range. This is bad. When market loses so many points, these beaten down stocks get killed more. At this point, its just not this stock, avoid entries to all stocks. I will cover this further below.


Market Commentary:
When it had 2 days pull back, I thought, this is what I wanted on Friday night. But, looking at world markets, I had a bad feeling on Sunday evening. But, I did give benefit of doubt to Indian Bull Market. I can't say I was not surprised the way it happened. At this point, lets adopt wait and see approach for couple of days to get better understanding what today's price action means. Hopefully, 50 day EMA will act as support for Nifty and Sensex. If U have existing positions, take partial profits or/and trail Ur stops to make Urself comfortable. Avoid new entries for now.

About the positions I suggested with entries and stops:
RCVL, Reliance, Hindustan Zinc and fedder Llyod did not hit the buy point. So, we are saved by the bell. This stresses the importance of not buying directly into a stock. Try to buy at a point where U feel the stock really has scope for turning back. This is called, 'No Ticky, No Tacky'. Its like saying to the stock, 'If U don't perform, U will not get rewarded with my money'. Ofcourse, there will be times, where Ur buy point will be hit and then the stock comes down. Didn't I say in my previous reply that there is no full (fool) proof method. We just do the best.

Originally Posted by rahulg77
Hi VV,

Agreed our buy point did not hit so we will reduce our buy point. now our buy point will be if tomm it goes above todays hi. If the correction continues will we keep reducing our buy point like this? what if the indicators turn negative or it goes below previous pivot low...do we wait for it to make an uptrend again or we still buy knowing that the pull back was cause of overall market and not stock specific. also we buy above the previous high during same trading day or it should close above the previous high.

Rgds
Rahul

When U decide to buy a stock (based on a tip or scan), Ur analysis starts with the market indexes. U will do the following.
1. Look at BSE500 (Look at others too: BSE200, BSE100, BSE30-sensex)
2. Look at Nifty
3. Identify industry and sector of the stock. Sometimes, U will not be able to get the charts for these. There are BSE indexes for some sectors. Look at chart of the sector.

Our objective in looking at overall indexes and sector is to get a feel for the market conditions. We are trying to understand how all the traders are thinking.

Based on the above reading, if U feel the conditions are good, then compare the stock U want to buy with the sector. The stock should be comparable to the sector. Then U will make a buy or no buy decision.

I know the process feels long. But, thats what I call principles/methodology. It should be a repeatable process. Then, U can evaluate the results with some certainty. Try to take out degree of guessing, affected by greed and fear. Avoid gambling.
we still buy knowing that the pull back was cause of overall market and not stock specific.

When a Tree (market) falls down, what happens to the branches (sectors) and the leaves (stocks)? Hope I answered Ur question.


Quote:
also we buy above the previous high during same trading day or it should close above the previous high.

Looking at the pull back in the evening, determine Ur entry point based on our strategy. On the trading day (next day), if the buy point is reached, enter. The buying point does not have to be previous day's high + x. If U look at the charts I have given previously, U will notice that in some cases, it was couple of days back high + x. It all depends on the change happened in a day and the volatility of the stock. U will get that with experience.

So, looking at the current market conditions, I am adopting a wait and see approach for next few days. If the market indexes improve from these current levels, we will look at new setups. For tomorrow, I suggest no entries
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Default Re: my last thread

Please use discretion on stops based on confirmation and money management plan.

--------------------------------------------------------------------------------For All:
Remember, We can always make money. But, never make adjustments on how We do business. What I mean is, never move stops. If we do and lose money, we are not just losing money. we will lose confidence. This will affect the outcome of decisions on other positions.
Here I am writing
…………………….
Trade element…….

1] you…..swot …..time to learn..your natural patience…time u have..
BELIVE IN REALITY ,NO WISHFUL THINKING
2] market…your believe on market…
your ta tool mastery
your fa tool mastery
info network

3] fund to learn and experiment..
play less analysis more..use diary..
many help available @traderji.com

4] PSYCHOLOGY
read…book of dr elder..
market wizard series
mark doglous
ari kiev
Livermore

5] personality……& trade analysis

dr van tharp
dr bill William
larry William
Linda
Mark boucher
Dave landy
RAKESH JUNJUNWALA

6] trade system design
………………………..
Bernstein
Kaufman
Tusher chande..
Martin pring
Technical trade system
Instant profit

7] individual choice
bird watching in lions country
phantom of pit
personal software…metastock & omnitrader

8] trading style…its an individual choice

9] recent experiment….

Dynamic trading..and trend dynamics

10] encyclopedia of chart pattern
candle stick chart study

11] most useful concept
……………………………..
money management
risk control

12] yet to learn
……………………
volatility
optimum stop….

FUTURE DREAM
……………………..
A PROFESSIONAL TRADER AFTER 3 YR


EXPERIMENTAL TA..

1] TREND AND NON TREND BOTH EXIST IN MARKET

2] RANDOM NESS HAS ITS ROLE…
ITS AFTER BREAKING OF RANDOMNESS TREND STARTS

WHEN TREND TERMINATES…ITS DIFFICULT TO PREDICT…

3] PRICE PREDICTION AND STOP GIVES OBJECTIVITY
HOWEVER.. BASED ON WHAT PRICE TELLING U MUST EXECUTE

CONTROL OVER MIND MOST IMP.

4] SCANNING TOOL…PORTFOLIO CONCEPT HELPFUL

.........................again try to learn from VVONTERU P40
.................................................. ..............
Give it a stop of 150. Today, it gained 6 points. It may have 1 or 2 more updays. When it does, please take your partial profits. This thing is going down. Its a matter of time. And others too. Please book partial profits. When in doubt (at this point in market, I have few doubts), do it partially. This will help U to get partially right or wrong rather than the whole position.


Market Commentary:
What I didn't want to happen, it happened. The markets trend line is broken. We are in for correction. I will hold this view, till it comes back to the trend line or forms another trend. But, I sincerely suspect. Market is going to setup for First Thrust pattern. Meaning, selling follows by more selling. At some point, it will be in oversold condition. Then, there may be couple of days of buying, which will be followed by more selling (by those who missed selling now). Given this view, I suggest avoid buying till we see better conditions in market.
What happened today is very good. Market went down by 400 points. Could find buyers to end up positive. This is really good. The trend is intact. Going in tomorrow, it is one of those days, as a buyer we have an edge. As a buyer, U can say, 'I have a high probability of making money tomorrow'. So, we will have a list for buying. In that, the best will be RCVL (Reliance Communication). I will put up a chart. In the mean time, here is the entry for U to look at.

FYI: Just like the market, RCVL had a reversal too. It tested previous trading range and closed at high. This is really bullish.
The books I have read and with the foundation I have in stock market, there is no term called 'Long Term' in my dictionary. I don't think it is wrong to think in terms of 'Long Term' investment. But, I can't do it. I have tuned my mind not to do it. It is very hard for me to go back. It is very hard for me to see the stock going down beyond my stop point thinking, 'this is for long term'. The stocks I am suggesting are short to intermediate plays.

When U say long term, look for fundamental analysis and research.
1. Personally, I think its good that U lost money. At this point U might be cursing me. Let me explain.

Think in terms of TIME. Today, U have just lost Rs5000 (50 shares * 100 points). How about this. What if U made money now. U rejoice and make a similar GAMBLE (Yes, what U did is Gambling, not Trading, not Investing). This time, U put 200 shares (U think, it easy to make money). U lose 200 points (U think, didn't it go up after losing 100 points. So lets wait. So U end up with 200 points). So, now Ur loss is Rs.40000. Do U think U will let go here. U will not. Because, U tasted success 1st time. It got to work again. So U try again. U lose again.

2. Do not use money that is necessary for livelihood. What I mean to say is, use money that is after U had enough savings. That way, U will not be desperate.

3. If this is going to add solace to U, I too lost money on my first stock. Many lost just like U. U are not alone
Market Analysis:
I know its too late know. U guys already know what to do. Still, for some, who are ever optimistic, some words. PLEASE DON'T OPEN NEW POSITIONS. On existing positions, if U are short to intermediate player, take partial profits/losses (Ya, taking loses is making profits) and trail the stop. About, long term, I don't think I .........
Do not put any more money into the market. U are not ready for it. If U are serious, read a book (there are online links to books on this thread. Use search menu item) first. Do some paper trading on the stocks I suggest. Read Saint thread on TA.

First make paper money. There are paper trading sites like Moneycontrol.com. There is a section for this in this group. Give Urself minimum 6 months. Market will be there for U. And don't forget that U are competing against best minds on the other side. They are there to grab Ur hard earned money. This ain't lottery ticket to free money. If it is, everybody will leave their jobs and start trading.

If U insist in participation in the current market, I will suggest using Funds. Put money on a monthly basis. In that, U will not care if the market goes down or up. This is what I called a long term strategy. Because, U are doing cost averaging. Once U make enough money over here, in this time, U will also be prepared. Then U can start trading.

Existing Position:
I searched for comments from Chidambaram. I could not find the link. Give me the link. I don't believe in news. I believe in price action. Lets see tomorrow what is in storage for U. If U feel optimistic about recovery, I suggest do the following.

1. Take partial losses at the current price. Hey no pain no gain. How much U want to take out its up to U. I suggest 50%, around 20 shares
When market falls, there are no reasons why individual stocks fall. Its the sentiment. Don't reason with the tape. Just follow the price action.

Isn't that hard. U know why? We are brought up in life to reason things. We are human beings with emotions and try to find reasons whether good or bad. I have learnt in the stock market to not find reasons (disregard the financial papers' reasons. They will find anything to write). Thats hard.
1. How good is this company? Is the company going down in business?

3. Market is in oversold condition. That doesn't mean it is not going down Monday. It just means, it has faily good chance it may experience slight rebound. If it does, Ur stock improves (don't wait for break even), get out. Get out on the second day of rebound. To be catious, take partial out on the 1st day of rebound.

4. Finally, understand the main reason why this market is going down. Its because of METALS and OILS. Thats the correction. They had a huge run. Gold, Silver, Steel, Aluminium etc had huge run up globally. Gold is all time high, seen earlier in 1980s. Right now, it is (was a week back) in speculation stage and had get corrected. However, they are not going down. It is just a correction till they come close to 50day EMA.

5. Why did I point 4? because, yours is a steel stock too.

Based on 1 to 5 points, decide on the stock. Biggest thing we learn in stock market is decision making against time. Whether we lose or make money. We make decisions. Those who make better decisions (which may not necessarily make money all the time, but are made on set of principles) win the race.
might be wondering why every stock is setting up for a short. Look at BSE500 or nifty. The market itself is setting up for a short. There are still no indications of stop in downtrend. Answer to the question of adding or holding, it depends on your strategy. If U are a long term investor, I will not suggest U what to do. Because, I don't believe in such thing called long term. If U are not a long term player, why are U still having positions? About adding new positions, no for short to intermediate term, considering the current market conditions.
Looks like Ur confusion is, U did not make a determination of what kind of a player U are (long term, short/intermediate). Its high time U did that before the confusion costs U. If U (or All) want suggestion, go for short to intermediate term. For long term approach, use Funds to that.

Research on the funds. Even in the funds case, there is an exit strategy. On the weekly chart, if 8 Week EMA is crossing down 200 Week EMA, then exit out of the fund (if this happens, market should be in worst condition). Look for a good company holding the funds with long history. Look for funds that give 10 to 30 percent or more consistently year after year. Invest in funds on a monthly basis to leverage cost averaging. Thats what I call a long term approach, where U don't care these market corrections.

Now, coming to the stocks, its very hard to say what is the right thing to do. U will be damned if U do it, U will be damned if U don't do it. For short term approach, in this condition, I resort to taking partial positions of the table. Atleast, U are partial correct or wrong. If further drawdown occurs, take more of the table. For long term, they say, keep it and hope it corrects. I feel the market comes back too. But, I just don't like to hope. We may escape now. But, one (dooms) day, there will be a final trap.

When do U know the market is going to come back? One pulse to check is, people start recommending stocks to buy in this thread . Other would be the market makes a double bottom or has MACD divergence and goes up with considerable volume.
was expecting some more updays. Can't imagine how negative things have turn out. Hopefully, things will be better.

With the expectation of updays, people will try to bail out. If there are no updays sooner or later, the reaction will be more severe. I don't believe in that case right now. About shorting, I do trading in Geogit. They don't offer shorting , keeping the stock more than a day. The only other option is to do options. I am not in options at. U can (should) use this line of thinking in day trading. Because, we want to use the direction of easy path to sail our boat. In market conditions like these, avoid taking long signals when market pulls up in day trading. Rather take shorting signals when the market is set for shorting.
think the more upside dint happen because the natural fall was stopped & the market is being artificially propped by auth. This could I believe make matters worst...

have not read it. My gurus are Elder and Dave Landry. Elder goes through basics. Thats the foundation. Dave lays out the different rooms of the building on the foundation. He gives various patterns that are realistic. For day trading, use Marcel Link's book - High Probability Trading.

I see that U have started a new thread on day trading. No matter which book U go, no body will layout the methodology and money management techniques (I think Elder talks about a little bit, different from mine though). What I gave U is the one I followed. It is practical and U will not find it anywhere in any book.

For day trading, U don't need TA. U don't have time for TA. What U need is identifying sleek entry and exit points. U only need EMAs and MACD (again based on EMAs). Don't see double bottom, trending lines, divergence etc etc in a daily chart. They don't work. They work on lot of data. More data, more effective these indicators and Ur analysis. In a day, there is too less data for them to work.

That is the issue with these indicators. Beginners struggle with them. They look at all these indicators and consider them as toys or candies. They don't know what to do with them. They don't understand that the complexity is not with the indicator but, in its application. U got to know where and when to use them. More importantly, be consistent with their use, in getting Ur signals to trade. When a signal is not given for a day, don't go for a new indicator to get signal.
Yes. U are right. But, most of them struggle to make money in day trading. Leave alone getting greedy. For my friend with whom I developed this methodology, he has problem with greed. Our methodology worked fine. But, he would never get happy with the money he was making. Lets say he makes Rs5000 on a day, he wouldn't quit on that day. He would continue to trade and end up with Rs500 at the end of the day.

He had also problem with position sizing. They were giving unrealistic losses when stops get hit. And sometimes he moved the stops hoping the stock would come back. The biggest problem he had was that he was applying EOD TA to day trading. He would confused with both. The reason I point these is, these are common issues U come across in day trading.

I don't know when U started day trading. If U are starting, my advise is to reduce position size. Smaller position eliminates fear and provides objective thinking. U will stop thinking about money and think what is right thing to do. Money should flow as an after thought. Slowly, U will see things clearly and develop Ur own method for trading (lets say fine tuning existing method). Thats what I call Ur edge. Till then, do it small. So, that Ur loses are minimal.
Yes. Look for only shorting while the market is in downtrend. Avoid long signals as they fetch less reward versus high risk. But, follow my methodology of crossover. That way, when the market is pulling up (short covering), U will not get shorting signal. When the 8 min ema crosses down 50min ema, then short. Cover when 8 crosses up over 50. Please read my methodology in my thread. Search the thread on day trading
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Looks like Ur confusion is, U did not make a determination of what kind of a player U are (long term, short/intermediate). Its high time U did that before the confusion costs U. If U (or All) want suggestion, go for short to intermediate term. For long term approach, use Funds to that.

Research on the funds. Even in the funds case, there is an exit strategy. On the weekly chart, if 8 Week EMA is crossing down 200 Week EMA, then exit out of the fund (if this happens, market should be in worst condition). Look for a good company holding the funds with long history. Look for funds that give 10 to 30 percent or more consistently year after year. Invest in funds on a monthly basis to leverage cost averaging. Thats what I call a long term approach, where U don't care these market corrections.

Now, coming to the stocks, its very hard to say what is the right thing to do. U will be damned if U do it, U will be damned if U don't do it. For short term approach, in this condition, I resort to taking partial positions of the table. Atleast, U are partial correct or wrong. If further drawdown occurs, take more of the table. For long term, they say, keep it and hope it corrects. I feel the market comes back too. But, I just don't like to hope. We may escape now. But, one (dooms) day, there will be a final trap.

When do U know the market is going to come back? One pulse to check is, people start recommending stocks to buy in this thread . Other would be the market makes a double bottom or has MACD divergence and goes up with considerable volume
didn't understand what you have meant by "Frst Thrust Pattern". Can you explain in detail for me.

regards
chachi

These patterns are explained in Dave Landry's (my current Guru) book. According to this pattern, the stock makes a new high and then collapses more than 10 percent. The way the stock makes high and collapses should be dramatic. Dramatic in the sense, fast and shocking, so that the longs are caught in the trap. When the pull back happens, the longs should look to exit in herds.

So, far, the index (and tons of stocks as listed from my scan) is set as in the text book. I would have liked to see the index losing more points today in confirming the outcome of the pattern. But, sometimes, it just takes time for the pattern to complete. Longs might have thought, the market will continue to go up. Seeing it go down today, lets see their reaction tomorrow.

About Head and Shoulder (H & S) pattern in day trades:

I believe for any pattern to work/trust, U need more data. Why? We need to read group behaviour over a period of time. Group behaviour over a day or two is not trustable. Just use EMAs for day trading. That too, not for reading group behaviour. What I mean is, if 8 min ema is going up in a day, does not mean is stock is doing good. I use 8 and 50 min ema to take out noise. To have points (when they cross) as entry and exit points. If not, these emas can turn up or down in 5 minutes.
They are looking good. Bucking the market trend. If U want, I can give U such list to too. But, don't buy now. Give respect to the market. It is in downtrend. If U just buy stocks, step aside. If U can short, go ahead. But, don't buy it now. What U can do is, keep the list of these stocks and come back to them once the market bottoms out. I saw couple of articles from Fund managers saying the market should bottom out now. They are really feeling the pain. They will say anything to save their _ss. Disregard the news and just look at the chart. Bottom! NOT AT!!
Different people follow different strategies in the market.

What most of the traders using technical analysis would want to do is follow a trend. Currently the trend is definitely not up. May be side ways or down as VV has indicated. So if you want to follow the trend, you will not be thinking about buying now, If one would not or cannot short at least one can stay on the side lines, waiting for a uptrend to show itself.

Bottom picking is some thing trend followers will always miss out, but that is because they strongly believe that it is not easy to predict tops or bottom for the market.

Using fundamental analysis one may try to do value investments but this is not a thread about that.

I think most get confused with methodology versus making money. Its just as in life. U can make money money several ways. But, do U do that? Or do you stick to your priniciples?

Other confusion is about a stock being cheap versus expensive. Most don't understand that neither a stock is cheap nor expensive. It is above when you buy versus when you sell. The difference is all that matters. The question is how do you choose those points. What are your guiding principles that let you choose those points. Can you make exceptions to those principles? (Can you make an exception in life's principles and take bribe to make money)

These are some thought provoking questions one need to answer. One can experience. Buy 5 shares of a stock. Feel the experience. How do you feel when you make an exception to your principles and buy shares. How do you feel when you follow principles and buy stock. Even though people say its all about money, seriously its not. As in real life, its about how you make it. How you make it consistently. It has to be a repeatable process. If not, you can make a 1000 today, lose 5000 tomorrow. Consistency and Repeatability are the key.

I think I took it far. Most of the people don't have set of principles to trade. What they are after is making quick money. They don't understand that trading stocks is the most challenging art in the world. Its about snatching money from the other guy. If you are not smart, somebody else will grab the money from you. Until they lose, they don't realize. Experience is everything!!
You are right that not everyone can be wise and prudent. Hence, there is money gained or lost. It is also due to the fact that each person looks at the data and analyzes differently. Then, you have money from Funds that make the large chunk of the market. Their reasons are different.

Coming back to the question of nifty. Hopefully we see some signs of bottoming out. Till then, we all wait.
Right now, the market is in oversold condition. Its testing 200 day EMA. It may bounse. If it goes below 200 day EMA, thats more bearish. It all depends on how it does, rather than just noise.

If you are short, you had enough downside that you should take partial profits. And on the remaining shares, trail the stop down. But, are you not day trading when shorting?
In this bearish market situation,

1. Stay away from the market if you are a trader ( Go by technicals than
fundamentals).
2. Buy good stocks if you are an investor (Go by strong fundamentals rather
than technicals)

Value/valuation is relative, today we are back to the index levels that we scaled in Feb 2006. Its just 4 months is't it?

If a scrip is 30% below its all time high but 60% above its 52 weeks low, how do decide the fair value?

The Gr8 WB said "The investor should be happy to get lower prices on browses, are we happy to find lower prices.., to quote him again

"Markets are the place to transfer wealth from the impatient to the patient
As I said yesterday, market bounced. U can attribute this to oversold condition or double bottom or support at 200 day EMA. U will see lot of stocks in this pattern. For ideally conditions, the market will continue to go up from here. For me, I will wait for a pull back after it goes up. Obviously, I will be looking for change in trend.
Market Analysis:
Market is at a point of reflection. It can take it from here and move on up. Can go sideways there on, before going up. Given the double bottom and MACD divergence, U can trade if U want. But, have a tight stop below the double bottom. And be sure to take profits as it comes. Don't wait for the whole thing to happen.

There will be lot of stocks in this pattern. I don't have any scan right now for double bottom. But, most of the stocks display this pattern. So, I pass on writing any code to do the scan at this time.


use 8, 50, 200 EMAs, Bollinger bands, MACD and Slow stocastic. I used to use Williams before instead of stocastic for overbought and oversold conditions information. I replaced that with Stocastic before, it does that as well as gives you buy or sell information based on the crossover.

What U can do is, start from these indicators. Change them according to your analysis. For example, 8 day short term EMA may not be right in all cases. If you look at sensex, it is more based on 10 or 15 day ema. So, play with the indicators. But, once you decide on them, have for some time before making a change. Don't change them every day to get buy or signals
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Market Analysis
--- Those of U who have taken the buy signal based on double bottom, have a tight stop. Don't make an exception and release the stop. Trying to pick a bottom is high risk and high reward play. When it goes against U, be ruthless in taking out the position swiftly.
Double bottom buy signal goes awry. That is the reason I stopped taking this signal. Even though it is high reward, there is high risk attached to it. Initially, when I read Elder's book, I got so excited about this pattern. Latter, through experience, I started avoiding double bottom and double top. There are prone to high risk. If U do take them, if U to be very strict with the stop. If U smell any thing against, run!!! Don't wait for confirmation.

General Market...
Stay Out. Let the dust settle. Wait for the storm to be over. Then join in reconstruction.

What makes it worse is, the global market going down. Stock market is more of sentiment. Sentiment right now is bearish.
I would not do that. Did you see my BSE500 chart? Until the arrow points up, I am not buying. Even if I want to buy, my methodology requires either MACD divergence (I don't trust this in all cases) and/or stock being above 50 day EMA. If there are not, I don't know what to do with the stocks. Leave alone telling U what to do.

U should be posing this question to Long Term Investors. My take on this rally is, it is just a correction. Use this correction to take out partial/full loses. Do not buy stocks. Give it couple of days. It will start coming down soon. But, I wish I am wrong.
Just an experiment to all those who want to buy now. Throw up a knife. While the knife is falling down, try to pick it. Let me know the result. Just kidding. Don't do it. At least answer to yourself, what is the probability that U will injure yourself versus catching safely? Didn't I say in the beginning of my thread, 'Trading in stock market is Common Sense'.
This note is directed to short to intermediate traders. But, long term investors, U should read too.

Most of U have a question in your mind. If I don't buy now, when do I buy. Will I miss the move. Some stock XYZ was 150 a couple of weeks back and now it is 50. It is so cheap. So, why can't I buy it. I have couple of examples explaining why not and indicator(s) when U should.

Before I delve into the (real) examples, I just want to make a statement. Any thing can happen in the market. All options are open. They just have different probabilities.

Examples (from US market):
1. This example is from US 2000 bull market. Nasdaq was around 5000. It dropped to 3500. People thought all the stocks were cheap. So, bought more. Then it dropped further. People thought, the market was doing similar things as before. It drops and comes back. Till date, it never did. Nasdaq is around 2000 now.

2. During that bull market period, people bought a stock JDSU for $160. Now it is $3.00. After so much selling, JDSU was known more for Just Don't Sell Us. Here is the link if U want to check out the stock. Like JDSU, there are several US stocks that are no where the price near 2000 year.
http://bigcharts.marketwatch.com/int....x=59&draw.y=9

3. Here is a mutual fund from the bull market era. Was around 100 during that time. Now under 20.
http://bigcharts.marketwatch.com/int....x=59&draw.y=9

4. How about Japanese market. What a slump. Just recently, it started picI can give U more examples. But, I guess U guys got the point. Now the question is, when is the right time to enter. Just as doctors use stethoscope to check heart beat of a sick patient, we have EMAs to check our falling markets (Its a patient now). So, lets see how the market (BSE500 or Sensex or Nifty) is doing using 8 (short), 50 (intermediate) and 200 (long term) day EMAs.
1. Below 8 day EMA. Bearish for short term
2. Below 50 day EMA. Bearish for Intermediate term.
3. Below 200 day EMA. Bearish for Long term.
4. 8 day EMA crossed down 50 day EMA. I use this for shorting.
5. 8 day EMA has not crossed down 200 day EMA. So, there is still hope for the market.
6. 50 day EMA has not crossed down 200 day EMA. This comes after step 5. This is the worst case. At this point 200 day EMA is sitting above 8 and 50. We don't want this to happen.

From the above, if you scale from -5 (bearish) to 0 to 5 (bullish), the market is around -3. So, what do we want to see if the market has to become better.

1. Market must come above 200 EMA.
2. 8 day EMA must cross above 50 day EMA.

Let the above 2 happen. Then, I will put tons of stocks for U to buy. Until, then keep the powder dry. Have the cash.

Common Sense Note: Don't feed a sick patient who has lost weight. Let the patient recover from sickness. Then we feed.
king up.Then we feed.

For all the people who are investing for long term. Don't think long term means, buying and holding. Long term means, buying and doing home work at each and every step. Home work on the stocks fundamentals. Did the fundamentals change? Did the fundamentals change in the market conditions. Did U consider interest rates that are rising globally? U have to consider not only stocks fundamentals but also underlying economic conditions
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....Currently, there is nothing to write on the market. It is in oversold condition. Just as in bull market it can stay in overbought condition for long spells, in bear market it can stay oversold condition for some time. What it means to a trader:

1. Can't buy
2. Can't sell short either. I am not talking about day trading. In day trading, U can do either based on the signals. Bad thing in India is, you can't short and keep it more than a day.
3. So, the only option is keep quiet and stay out.

Therefore, coming to daily input, there is nothing to analyze. U could analyze the the levels the market will hold. But, U can do that out of interest. Other reason could be trying to determing the turn in the market. I try not to catch bottom or top. Too many traders got burnt trying to do that. I will leave that to pros. So, just relax and read books in this gloomy time.
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tool available in India, if you want to short. So, no options but, to use OPTIONS. So, I recently got 2 books to read on them.

Options are different ball game. You need to consider time. I cannot give you suggestions on them, given my recent beginnings. But, here are some pointers that can give you some perspective.

1. Market(s) has been beaten down a lot. Whenever the price deviates away from the EMAs, there will be correction to get them close (to test), specially to the 50 and 200 EMA. Again, the question you might want to know is when? Thats hard to tell.

2. In U.S., summer is bad time. Summer involves less average volume and lower prices. This also increases volatility (good for options). As U know how the indexes all over the world are dancing together.

3. When the markets are oversold, do not sell short into them for long term. Be patient. Sell into the minor rallies.

4. At the same time, whenever the prices get extended below the bollinger bands, use those to cover.

I will get back to you more after I go through the readings
1. Come Into My Trading Room: A Complete Guide to Trading - Elder
2. Trade Your way to Financial Freedom - Van Tharp (current reading. Its good)
3. Trading for a Living: Psychology, Trading Tactics, Money Management - Elder's 1st book

Swing Trading/ Patterns for entries
1. Dave Landry's 10 Best Swing Trading Patterns and Strategies
2. Dave Landry on Swing Trading

More to read
1. Reminiscences of a Stock Operator - Edwin Lefèvre (Mother of all)

Derivatives
Down Trend line has been broken. That does not mean, down trend has over. What it means is, the current trend of sharp break down has stopped.

2. Crossed above 200 day EMA.

3. MACD divergence. Again, what this is telling is, the current downtrend is not as severe as beginning of the down trend. So, there might be a bump up as there is no pressure for selling. This no way means the overall down trend is over.

MACD divergence signal works better when a stock/index has been down for long time. In that case, a long divergence can make the stock go up. But, EMA resistances are still snakes, waiting to bite the stock and send it down.

Against:

1. So far, Sensex crossed 10000 2 times. But, never ended above 10,000. Some seller made it a point to make Sensex close at 9997 at the end of the trading day, when it slightly breached 10,000.

2. 20 Day EMA (Yes 20 day EMA works better for Sensex) is acting as resistance.

3. Do U see the red down trend arrow. It is still pointing down!!! So, no buying.

So, what I see happening right now is a transition from existing sharp down trend pattern. That may mean trading range or slower trend downwards. In any case, the index is ready to go down now to test previous lows.
Attached Images BSE30.JPG (52.9 KB, 55 views)
I am in sitting on cash since the downtrend started. U could use Monthly, Weekly to determine the trend. But, follow that methodology always. So, Ur reaction to the market will be slower. This downtrend may provide you an opportunity to buy.

I did not look at these time frames. I will look at them and get back.
, what I see happening right now is a transition from existing sharp down trend pattern. That may mean trading range or slower trend downwards. In any case, the index is ready to go down now to test previous lows.
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don't know about H & S pattern forming in these cases. But, I do see macd divergence (go by case by case basis) and histogram popping up positive with lines crossover. Avoiding shorting to be on safe side or use discretion in position size. That no way means, buy signal. There are some times in the market where U just stay aside. This might qualify as one, till a decisive market direction emerges.

Before I delve into it, you should know that I suggest how I will do it. May not be right for you. Use your judgement. I will suggest you to get out of all right now as best a possible. Use this jump in market to do that.

Most of them don't realize. Markets will always be there. Traders experience a feeling of missing out. They go on buying spree when market is in downtrend. You have to play that trade differently. You have to be quick in taking profits on that trade. Do not make this short term play a long term. Markets didn't fall for no reason, if they have to go back up so fast. On the other side, you can choose to stay out of the market and come back when 8 EMA crosses up 50 day EMA or using BOW TIE pattern (crossover of 10, 20, 30 EMAs).
As you realize from above response, its very hard to say when things are so bad. I am used to seeing things in the right way. I choose when to get in and when to get out. There are no doubts in that. When presented with a chart that is different, it is very hard to say. From my methodology, you were not supposed to be in these stocks. If you are, then you need to get out with as little damage as possible. Use approach of taking partial loses and trail on the remaining ones using the low of last 10 to 20 days.

--------------------------------------------------------------------------------Ability to give up a chance even though you know you can make money is a trait you need when trading. You want to do that if the winning trade is against your methodology. Even though in short span, you might make money on a trade or two of this sort, but, overall you stand to lose more.

Don't concentrate on the money. Concentrate on doing it right. You should make money as an after thought. Overview of my methodology says,

1. Trade along the market direction.
2. Trade along the sector direction.
3. Trade the stock that follows the sector direction.

Since market direction is down, you have 2 options: Short, Stay aside. That does not mean you short a stock that is going up. In case of Tata Tea, it is setting up for a short. But, wait for the market to do that too. Lets see after Monday. Nifty is going to test 50 day EMA.

For us to go Long on the stocks, there is some more time. If the indexes continue to rise, it may require atleast 1 to 2 weeks.
As always your explanation is simply great. What you said is very true, sometimes if you really dont know what can happen, its better to sit out and watch than loosing money.

If you don't want to short, just stay aside like me. If the market is so good like every one is saying, we will join them too. Just a little late. Our risk is less than theirs, so are our profits.
Money Management
I always used to follow percentage risk methodology for position size calculator. This was based on Elders suggestion. After reading Van Tharps book, Volatility did make sense for consideration.

No matter what methodology you use or even random entry, you need position size calculator for money management. I am attaching a file to do the same. Feel free to modify.
1. You can change parameters identifying % risk, % volatility, % total risk etc.
2. Add more conditions, like money limit per trade, in addition to % risk and % volatility.

ATR stands for Average True Range, which gives the volatility of the stock.

Market:

I was looking at some leaders. I am seeing positive things about them. I like Reliance Industries. We need to wait for pull back for entry. Hopefully, we will get that next week
recommend you to read Van Tharp's book, 'Trade Your Way to Financial Freedom'. This book has various systems to choose from. Or you can use Elder's Tripple Screen system. Any system you develop should give you:

1. Setup Criteria
2. Once the setup is there, Entry Criteria
3. Stop Exit
4. Profit Exit
5. Position Size Strategy (You could use the Excel spreadsheet attached in the previous reply)

You could have several other exits (like Time Exit) as outlined in Van Tharp's book. Search in this forum if you can find a link for soft copy.

My current setup criteria are based on Dave Landry's patterns. Entry criteria is always pull back. For example,

N_MonthHigh setup :
1. Market is trending up
2. Sector is trending up. Stock follows sector.
3. 3/6/9/12 month high + 8 day EMA above 50 day EMA above 200 day EMA
4. Volume > 1,00,000 + Price > 100
First Thrust setup
1. Stock makes a 3/6/9/12 month high and loses 10% in the last 10 days
2. Market has turned direction
3. Sector has turned direction. Stock follows sector.
4. Volume > 1,00,000 + Price > 100

For Stops: I used to use Dave's strategy based on value of the stock. After reading Van's book, I am planning to use 3 * ATR (Volatility of the Stock). I am also looking at Chandelier's exit stop loss.

For Profits: I used Dave's reverse position sizing strategy for taking profits. i.e., once risk is reached, take 50% position off. Set the remaining = buy point. I am considering of changing it based on my reading of Van's book. I want to test the strategy of trailing stop with multiple of ATR, reducing the multiple as more profits are reached. I am looking at several things right now and I may test them to see how they work.

So, there is no direct answer to your question. Only direct thing that you can use is the Position Sizing Calculator. No matter what strategy you use, you need this to be successful.

You can start with Tripple Screen system. Google it. And don't look at the history of a stock and think what you missed. Thats the enigma with these stocks. History looks so easy. Once you step in, things are different. So, train yourself not to think about history. If you were not there, thats not yours.
Interest Rate increase is due this Thursday. I think this is already adjusted in the market. SP500 is testing 200 day EMA. I don't think anything will happen till Thursday afternoon 2:30 PM. I was sceptical last week. But, now my bias is upwards. But, you never know till 200 day EMA is taken out.

Indian markets so far are doing good. Looking at the charts, there should be a pull back this week. MACD has nice divergence and it worked. Hopefully, the markets will pickup after the pullback and cross above 50 day EMA.
visual soft:

Use http://www.icharts.in/charts.html to see chart from year 2000 to current date. The chart has 4 peaks. Now it is at the base of the 4the peak. Until 100 is taken, I would not enter this stock. Why 100? Draw a line touching all the bases. This line will end up close to 100. Incidentally, 100 is also 50 day EMA point, which is resistance right now. In the short term, MACD histogram is positive. Hopefully, in the next 2 weeks, depending on the market, the stock crosses 100. But, expect drawdown in the mean time.

How do you know it is overbought or oversold. Use oscilators like Williams or Slow/Fast Stocastics or RSI etc. Or, something has been up for 3 or more days, avoid buying. Wait for 2 or more down days (< 7) to buy. Similar for shorting in the opposite way.
did not like the reversal today with high volume. This might be attributed to the stake sale news. Lets wait for couple of days more to see whether it will recover from the reversal. You could use the slow stochastic crossover to enter.
It does not matter if you use MA or EMA. What matters is you using the indicators consistently to get buy or sell signals. When you make 10 trades, each trade signal should have been taken based on same indicators. For this, define how and when you buy/sell a stock. What conditions should exist before you consider a stock. What should happen there after for you to buy. How will you determine the risk you are going to take. How will you take profits. Here is the example, why SAIL has come to your consideration.

A. Lets say you had this Buy Criteria written down (This is called SETUP):
1. Market is trending up or turning with MACD divergence
2. Sector is trending up or turning. Stock is following sector.
3. 8 day EMA crosses up 50 day EMA
4. Volume is above 1,00,000
5. Stock price is above 50

B. When will you pull the trigger? From the above, the stock is identified based on your setup criteria. Here is what you wrote down should happen for you to pull the trigger.
1. Stock should pull back a minimum of 2 days and less than 7 days.
2. Enter above yesterday's high + x. If today's close is close to yesterday's high, then day before yesterday's high + x.

C. What is the risk?
1. You will be using 3 * ATR (Average True Range equivalent to average of High-Low for last 10 days, baring gaps)


D. How much position size should you use. You use the Excel I attached in previous reply.
1. You will be using 1% risk of your Principal.
2. Max 3% risk open positions
3. You willing to take volatility of Principal per day for a stock = 0.5% of Principal

[i]E. How will you take profits.
1. Will trail stop at 3 * ATR from price. Once 1R (R - Risk) is reached, stop will be trailed to 2 * R.

This is an example on how you take trades. Take out guess work. Even if you make 3 positive trades out of 10 trades, you will make money. Concentrate more on Position Size and Exits (Risk and Profits) than the setup and entry. Most traders do the other way. They are more worried about setup than the exits. They think about exit after an entry. Sometimes, they never have an exit strategy. Abimanyu Style!!

It does not matter you lose on 1 stock. 1 stock does not verify your strategy. You have to look statistics of 10 or 20 trades which have been made consistently. Then you can determine your strategy is working.

Sail is looking good. Buy above yesterday's + x. Don't forget to think about exits.
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So, indexes did go up. There are very few instances in the market, where you can say it will go in a direction with some confidence. In fact, one of the objective in trading is to stay in the market. i.e., play small, risk less and focus on accumulation. This will help you stay longer in the market to take advantage these easy moments. If you risk more, you will get busted. And you will bust anyone who mentions STOCK word thereafter (you might have come across people who are anemic to STOCK word by now).

I was following Reliance Industries and wanted to recommend. I forgot. Recently, I did not recommend any stocks because, the market has still not reached a point of confirmed trend. I am looking for 8 day EMA crossing up 50 day EMA for indexes. When I recommend some stock in this thread, I am cautious and want to make sure there is high certainty. I did not scan recently. I will do that and put up a list if you want to choose.

EMA check
-- There is a reply if you go back 4 or 5 pages on checking health of the market. I use 3 EMAs. Short term EMA (8), Intermediate term EMA (50) and Long term EMA (200). Uptrend is confirmed when EMA 8 > EMA 50 > EMA 200. In other case:
EMA 8 < (crossed down) 50 - Bad (Down Trend started)
EMA 8 < (crossed down) 200 - Worse (Down Trend Confirmed)
EMA 50 < (crossed down) 200 - Bear Market Confirmed

I use the above criteria to look for trends. I like Reliance Industries for
1. EMA 8 > EMA 50 > EMA 200.
2. It is in Oil & Gas sector which trades independently of the market.
3. Had a nice pull back for entry couple of days back.
stock can be overbought or oversold condition for long time. Normally, stocks move in waves (like waves in ocean). You buy when the wave is down (pull back). When there is strong demand, the stock continues to stay in overbought condition. But, eventually, there will be profit taking and the stock pulls back.
you buy when EMA 8 > EMA 50 > EMA 200, you can avoid lot of false signals. What this may mean, you are not catching the trend early. You are not catching the bottom. Risk is less. I don't know about reward. You can make money when you follow this technique too, instead of catching bottom. Now you are asking why people buy at bottom. People who do that fall into different category players.
1. So called Long Term players. They look at P/E ratio of a stock and buy some shares.
2. Short term traders who look at the oversold market and make short term trade.
3. Amateurs/Gamblers who look at a price of a stock and compare before the stock has fallen and think it is cheap and buy it. But, they don't have an exit plan.

When do you sell/profit. This has to be defined by you. Stop/Profit exits must be based on your risk level and comfortability. For example, I could use risk based ATR, support, % risk, loss amount etc. Similarly, profits can be taken by trailing stop and let the market hit your stop. Or using % profits. Please read Van Tharp's book on 'Trade Your way to Financial Freedom' on Exits.

8 EMA crossing down 50 day EMA is an absolute sell condition. Most people buy at 50 day EMA. If that buying did not salvage that stock, then it is going down. Holding that stock doesn't make sense. Think about it. If people used this simple technique, they would have been saved in last months downslide. 200 day EMA is a buy for funds. They might help. But, you should wait for the stock to come back with 8 crossing above 50 for buying again.

RIL cannot be said to have overbought codition, as there was a pull back recently. Overbought condition can be seen using oscillators liek Williams, Stocastics, RSI. If the stock remains above 80 for some duration, it can be considered overbought
You can determine the market strength based on the no. of stocks that come up in the scan. A month back, I used to get tons of stocks ready for entry. I had to look on how to eliminate the stocks from the list to display the best. Now, I only got 7 stocks as setup, not even ready for entry. This explains the strength of the market.
Elder is different. I just pointed what is missing in his Tripple Screen Methodology. He does not consider market and sector into consideration in this methodology. Not that he does not look at them when he actually trades. But, if some one followed the methodology based on his previous books, they would not know to look first for market and sector direction. Neither he talks about how to put stops and take profits. So, Elder's first 2 books are a good start. You should read Dave Landry's books for Setups and Van Tharps book for Money Management and Exits.

I didn't understand your question about 'HOW TO HANDLE LOSS'. What do yo u mean by that. When you enter a stock, you know how much you are risking. You are accepting that risk. If you are not accepting that risk, then you shouldn't be in that stock. You should accept loss or gain as same. Remember, just because you made gain in a stock doesn't mean you are running away with the money to the bank and never coming back. You are still in the game and playing again. For example:

Lets say in a span of 6 months you made 20 trades. To make it simple, lets say you made 15 wins and 5 loses (this is hard to achieve). You might be happy when you made those 15 wins. But, if you do not have good trading strategy, money management and mental strength to stick with your defined methodology, you might give back what you gained in the 5 loses. The example is to show you how the result of not 1 trade matters but over multiple trades.

So, strive to achieve consistent results, risking less and focus on accumulation. In the initial stages, defining and streamlining the process is more important than making money. Don't gamble. Use smaller positions

Dabur's ATR is Rs9. RIL ATR is Rs47. Each stock has different volatility. You need to choose a stock that you are comfortable with its volatility. That is were position sizing will come into play. Volatility based position sizing for Dabur will give you more size than RIL. For example, if you are comfortable with a swing of Rs500 per stock in your portfolio, your position size for Dabur is 500/9 = 55 shares. For RIL, 500/47 = 10 shares. Further, you may choose to filter your selection based on volatility. You may choose not to trade stocks that have ATR < 20 and > 100. Thats up to you. Everyone has to customize the system based upon themselves. You need to understand who you are to do this. Are you a low/medium/high risk taking person?

There is nothing in ITC or RIL that makes me think they are going to pull back. In general, a stock has to pull back. It cannot go up forever. Somebody has to take profits. RIL 2 days earlier was in pull back. There is no way to tell when they will do it (other than if they cross Bollinger Bands). Just follow the market. If it pulls back, then identify stocks that also pulled back. Then enter.

About RIL. You should understand one thing about trailing stop and profit exit. If you want to make money, you need leave money on the table. When you trail stop, you are leaving some profits. But, this is essential if you want to make more. So, trail the stop = 3 * ATR = 3 * 47 = 141. So, your stop = 1079 - 141 = 938. Or you could put a stop below previous base at 970. Its up to you. As the stock goes up, raise your stop to capture profits. If it goes down, do not change the stop.
You need enough capital to withstand drawdown. This is more important if your timeframe is long term. You will not have the luxury of taking out the trade when it goes bad like the short term players. If you are long term, if the trades goes down, you might consider buying in more rather than taking out. So, you need more money. Minimum 5,00,000. More is better
Do not buy any of these stocks. The bull market is no to fly these dogs along with. Wait the market to pass the transition. If the bull market continues, then consider these low priced stocks. Until then, if you can't keep your hands off, consider below leaders.

1. Reliance (Wait for pull back)
2. ITC (I don't like the V pattern with a narray channel. How long this pattern can continue?)
3. Dabur (Nice Pull back. Ready for entry.)
4. RelCapital (Enter above last 8 days high)
5. Wipro (Nice pull back. Ready for entry)
6. SatyamComp (Wait for 1 more day before entering)
7. Infosys (Wait for 1 or 2 days before entering)
8. Amarajabat (Enter about 6 days high).
9. Colgate ( I would have liked for it pull back more. But, still ok to enter).

These are the stocks I have been following. I did not run the scan recently. If I get more, I will add to
Normally (in a ideal situation), everyone (should) start(s) with mutual funds. Put your hard earned money in the funds. Contribute monthly. When enough money accumulates, use that money to buy stocks. If you lose, atleast you will be losing what you made in mutual funds, not your hard earned money.

Research on mutual funds that return > 15%. Pick company (that manages mutual fund) with reputation and history. Given India's growth story, select funds that give you exposure from high to medium risk. Distribute the percentage based on your comfortability.

The key is not putting all the money in the fund at a time. You have to add monthly. You will be using Cost Averaging advantage. So, do not add 25,000 at a time. Split the money to add on a monthly basis. Once 25,000 is over, continue to add more money monthly.
Technically, you could buy this stock if
1. It takes out 2 days high. or
2. If the Slow Stochastic crosses up and MACD does not cross down

I will look to sell the stock if
1. Takes out my stop based on 3 * ATR, if I used point 1 to buy.
2. If MACD crosses down, if I used point 2 above to buy.

See, when you enter a stock, you need an exit strategy. An entry will never determine whether you make a loss or profit. An exit will!!!. Inspite of this information, most of us only concentrate on Entry than Exit.

Having said the above, I will take this trade based on positive MACD, coming out of divergence. From here on, it depends on the general market condition. If the market continues to go up, you could see this stock going up from pull back
See the attached charts.
Sectors that are doing good:
1. IT (Leaders - Satyam, Infosys, Wipro, TCS)
2. OILGAS (Reliance)

Sectors that are OK:
3. Metals

Sectors that are still lying down:
All the others including
1. BANKS
2. AUTO
3. Consumer Durables
4. Capital Goods
5. Health Care
6. MIDCAP
7. SMALLCAP

Overall, market is still in transition stage. Except some leaders, most of the stocks are down. This can be seen through MIDCAP and SMALLCAP index. Only exception has been IT and Oil sectors. So, trade cautiously in sectors that are performing better.
None of the stocks are interesting. Some are in transition stage, like the general overall market. Wait for couple of weeks more to see the actual market trend before jumping in any of the transition stocks.
Pull Back for entry:
As you might have read already, there are 2 levels you need consider before you open a position in a stock.
* Setup
* Entry

Setup
Setup tells you the scenario under which you will consider that stock for opening a position.

eg:
1. If you are trend follower, you will select a stock only if it is trending up or down. You will avoid stocks if they are in trading range.
2. If you are a break out player, you will only consider a stock if it has been in trading range for some time.
3. Various Patters: Double bottom, Double top, First Thrust, Head & Shoulders.

Entry
Specifically tells you how you will open the position (buy/short) in a stock.

eg:
1. If a stock is trending, you will buy at pivot point.
2. If a stock is trending, you will buy after a pullback and above today's/yesterday's high + x.
3. If a stock is in trading range, you will buy 1 day after breakout.
4. Each pattern has a way to enter a position after the pattern is complete. For example, in Head and Shoulder's patter, after the right shoulder forms, a line is drawn touching the lower shoulder, neck and right shoulder. You need to enter when this neck line is tested.
Determine what suits you and what makes sense.

One of my criteria for entry is Pullback. Pullback makes sense to me because,
1. I don't want to buy at high.
2. I am ok with missing action in the mean while.
3. I am not ok knowing that somebody is making profits by selling to me at high price.
4. According to Elder: Buying at recent high is believing in fools theory. Because, when you buy, you plan to sell to somebody at even high price. So, if you buy at high price, you are believing some other fool will buy from you at even high price.

After a pullback, Second criteria for my entry is buying above today's or yesterday's high + x. I use this criteria because,
1. I want to make sure there is still upward movement in the stock.
2. I want to buy when the stock is going up and not down.
3. You can never determine the end of downward pull. As the stock goes down, you reduce your buy point.

No criteria is full proof. There are downsides to the above Entry criteria.

1. Inspite of today's/yesterday's high + x, the stock might trigger and reverse.
-----One way to avoid some of these wrong take offs, is not enter position if the open price of a stock is greater that your entry price on that day. So, at the beginning of the day, make sure the stock does not have a open price more than your entry price.

2. Pull back may continue. You should consider based on the stock/market pattern whether it is still pull back based on profit taking or sell off. It is prudent to avoid pull backs that are more than 5 days.

Most important as I was say (preach) is, select a way to do things repetitively. Try out on atleast 10 trades and see how it works. Modify to suit yourself. Don't make changes for each trade.

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I don't understand what you mean by bottom testing. The pull back is to enter as a buy or short, depending on whether the stock is in uptrend or downtrend.
Can be seen that way. If we do believe downtrend is going to start, what is our condition for shorting and when will we exit?

Shorting Condition
8 day EMA is testing 50 day EMA for nifty and sensex.

OR MACD crossing down (this will come little late)

Exit Condition
If 8 day EMA will cross up 50 day EMA, will get out.

OR if you use MACD crossing, then getout if crosses back up.

Profit Target
Previous Low will be your first target. Obviously, if it did reach there, I am sure it is going down more.

I must admit, this is low risk and high reward play. But, make sure you do exit if indexes cross or some other criteria as set by you before you take position. Remember when trying to determine turning points. Run on the first sign of trouble. Don't wait and hope.

On another Note based on U.S markets crashing:
Be careful on the long side. Its ok to miss an entry. If the market continues to go up, we will find lots of entries. Its better to be wrong than lose money. Or you could play with smaller position
That was huge pull back. RIL volatility is 47. On friday, High - Low = 68, with a reversal, opening at high and ending close to low. It took 5 days to go from 1020 to 1100. It took 1 day to come back from 1100 to 1020. This tells you the balance of power between upside and downside. Sometimes, this may be in the heat of over all market and just fade off next day. So, in these conditions, we wait for next day or two to see if the stock recovers and is in pull back mode rather than sell mode. All this text is for new entry. If you are already there, your stop is in place. If the stock hits the stop in the next couple of days, you are out. Let the market hit the stop rather than you take it off. Why, because, no body knows it is going down until it goes down. Daily noise should not make you change previous plans.

Dabur
--It had reversal too. But, not bad like RIL. Today I was looking at the volume. On the upside, volume is low, compared to the May month's downslide. Thats something to take note off. Even though there have been 7 days of pull back, there has been not much downside in the last 3 days. An entry above the high of last 3 days + x is still valid
Given the drawdown in RIL on Friday, it is prudent to wait for 1 more day. If it recovers on Monday, we will revisit it.
How much pullback? I currently do not follow %. I just eye ball the chart. Looking at a chart, I can tell if it is just a pull back or sell off or can go either way. When it can go either way, like RIL, I wait next trading day for more light.

I agree with you that Dabur is not suitable for day trading.

My suggestions are not for day trading. They are for short term trading, holding for couple of days to weeks.
See, when you enter a stock, you need an exit strategy. An entry will never determine whether you make a loss or profit. An exit will!!!. Inspite of this information, most of us only concentrate on Entry than Exit.

Having said the above, I will take this trade based on positive MACD, coming out of divergence. From here on, it depends on the general market condition. If the market continues to go up, you could see this stock going up from pull back.[/quote]

--Look at the chart. I was not confortable with the narrow channel. That doesn't mean it will not go up in that channel. Observe there is an outlier channel. Friday draw down was due to market in general. If it goes down below Friday's low, I would be little concerned. If it does, may be it is changing the narrow channel trend or it is going down. That only time is going to tell. As long as 8 day EMA is above 50 day EMA, our bias should be upwards. Try the chandelier stop 159. ITC ATR (Average High - Low) is 9. At stop of (range between 2 to 3) * ATR should be OK. Chandelier uses 3 * ATR.


1. Look at the volume from May 1st to June 26th. This was the time of its drawdown. Compare this volume to period June 27th to today. Volume during drawdown was low compared to specially high volume during recent updays.

2. Belongs to Oil Sector, which is one of the 2 best performing sectors (the other being IT sector).

3. It does not have the V like pattern. I am looking slower transformation from the recent downtrend. This stock has it.

4. 8 day EMA crossed up 50 day EMA. This is my condition for going long.

5. Its setup as First Thrust pattern to go long.

Suzlon has ATR around 70. Lets use stop = 3 * 70 = 210. So,

Setup: First Thrust Pattern
Entry: 1100 (above today's high + 25)
Stop: 890 (1100 - 210)
Initial Profit: 1310 (1 * Risk = 1100 + 210 = 1310. 1310 is close to May's highs. Ofcourse, we will be looking for multiple of Risk. I will follow on with an update to the stop as the stock moves.)
Position Size: Please use my calculator Excel Spreadsheet. It takes into consideration stocks Volatility. Don't use fixed position for each stock.

Note: If the stocks gaps up above 1100, wait for first 15 minutes to allow the stock to form recent high. Buy above the recent high formed in the 15 minutes. If the stock does not go above the recent high, avoid buying. It might be a reversal.

I will update the stop info after I get the update for my database. I will also add more am still sceptic about the market. Except some leaders, other stocks have been low. You can read it as not so great market (unlike the bull we have seen before) where only the best/blue chips do good. Others stay low. So, continue to concentrate on the best sectors and stocks in those sectors. Avoid others. Hopefully, these leaders pull the others overtime.
entries for other stocks I am following

am still sceptic about the market. Except some leaders, other stocks have been low. You can read it as not so great market (unlike the bull we have seen before) where only the best/blue chips do good. Others stay low. So, continue to concentrate on the best sectors and stocks in those sectors. Avoid others. Hopefully, these leaders pull the others overtime.
I don't enter directly into a stock. I want the stock to go up enough to trigger my entry point. This triggering point's objective is to make sure the stock is continuing the upward move after the pullback. This way, you can avoid those pullbacks that lend themselves into sell off. This triggering point can be either of the following:

1. today's high + x. If the stock's today's volatility comparable to its ATR (average volatility over 10 days) and ends up close to Low of the day, you can use. Choose x so that High + x - Close = (70% to 90%) of ATR.

2. If today's high + x is close to previous day's high, use Previous day's high + x. Here x should be below 25% of ATR. Look at Colgate. Friday's high + x provides better proof net than today's high + x.

3. N day's high + x. Use this if there was a failed attempt on Nth previous day to go up. Buying above this failed attempt gives you a sense of security of the stock going up. Again, choose x to below 25% of ATR. Look at RelCapital. Going above June 27 high is better option. Look also at amarajabat. Using this techinique would have avoided you in buying these stocks.

x is more of an approximation to assure yourself that the stock has enough will to go up. Consider stock's ATR in calculating x.
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The Position Sizing Price Graph Bar allows one to automatically view ATR, 3* ATR Stop Loss how many shares should be purchased based upon a 1% or 2% Risk Management Rule while using Average True Range as a basis for stop losses

copy paste of VVONTERU P68
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Either way, I don't trade breakouts. It requires different method of trading. There tends to be lot of false breakouts. Requires trying multiple times with low stops. You may have lot of small losses (consider also commissions for buying and selling) and may do good once in a while. Don't get me wrong. Trading breakouts still can make you money. It just needs different approach.

Rather, what I look for is, after the breakout, the stock pulls back and does not go back in to the trading range or triange in this case
Couple of things:

1. I know some of the stocks have been mentioned by other members for buy. If you are comparing with my take on then, you will be confused. Each of us have different trading methodologies. Each will produce different results. For example, my way of trading may produce 3 winners out of 10. But, when they do, they may erase the money you lost. Other trading methodologies may produce 7 winners out of 10. But, they may result in less profits then mine. So, each of us have different way of looking at things.

2. Like stock selection, stock elimination is as important. We have so many stocks. How do you pick the right one. What constraints do you use for eliminating those stocks that have less probability of making you money. Following constraints help me focus on few:

a. One of the constraint I use for going long is short term EMA (8) cross up Intermediate EMA (50) day EMA. This condition will virtually eliminate lot of down stocks. It also makes you buy close to 50 day EMA (when the stock pullsback), which is a sweet spot for many traders.

b. Other condition you can use is to pick a stock in the strong sector. In effect, you are eliminating all the other sector stocks.
It all depends on where you entered. If you just bought, use 350 (below previous base). ATR (Volatility of Sterlite) = 37. Consider trailing stop 3 * ATR. As you make profits, consider locking profits by trailing stop by varying (reducing) the multiple of ATR.

Avoid dogs for now. Consider only leaders in IT sector for now. If you can't afford them, may be you are undercapitalized. Undercapitalization will fail you, inspite of good system.

i really need to erase some loses!
-- Trading is a mind game. Try to forget the past. Don't trade to regain loses. If you do, your analysis will be skewed. Trade objectively, with no emotions. Trade because a stock gives you a signal based on set of conditions set forth by you. Ofcourse, this applies to every body (including me. I slip into that trap now and then).
If a stock opens higher then the previous close and then thats the high of the day, its called reversal (not exact def'n). If you want to buy a stock tomorrow, and a stock gaps up open and does reversal, you should avoid the stock. How can we do that. Wait for first 15 minutes to see if the gap is bullish gap. If the stock continues to go up above the opening price, then it is ok to buy.

Why does the reversal occur? Mostly done by the market makers. If they see lot of buy orders at a point, they open the stock up high and get everything. If there is no demand, the stock eventually falls down. But, can't explain why there are so many in this stock. Might be played out daily.
wonder how you guys get ideas about these stocks. For a change, why don't you guys give me explanation why you even consider this stock. If I have seen this stock's chart, I wouldn't have spent a split second. So, why are you drawn to this stock? I want to know your view point.
like Indian Hotels. There was a pull back recently. You could have bought into that.
NTPC looks like going sideways. We can consider it later.

Lack of follow through is a concern in the Market right now. This may be due to geopolitical reasons, U.S market, increase in interest rates etc. Trade minimally.
But, I am worried about the market in general. Lets consider couple of scenarios.

1. Market goes down south from here. Lets use Nifty index for sell condition. If Nifty goes below July 7th sell the stock.
2. 100 is close to previous base of GujAmbCement. Put the stop for break even.

.................................................. .................My bias is downwards. Nothing in the indexes is telling me that. I am looking at U.S. markets to come to the judgement. They are really doing worse. Couple of observations.

1. Nasdaq is at worst levels. 200 EMA long gone. 50 day EMA crossed down 200 EMA long ago. Recent support level of 2100 (1 month support) broken.
2. Health and Utility stocks are rising. These sectors only rise in recession time.
3. Geopolitical suddenly changing to worse. Iran, Korea and now Gulf war.

Now, this may not happen to Indian markets. But, since there is not follow through to Wednesday rally, chart is not rosy either. Hopefully, Indian markets show resilience. That time will only tell. So, I am adopting wait and see attitude on Indian markets scenario.

I have to get back to you on Reliance Communication. But, Reliance and Dabur are still doing good. You are in the best stocks in the market. I would tighten the stops below the latest bases. As in my previuos reply, set points based on Indexes where you will come out. Again, my judgement is biased with no data support from Indian stock indexes
Until the market makes the move, lets not take short position. However, we can identify at what point the downward move will be confirmed. Notice the low volume the recent uptrend of Sensex and Nifty. Please confirm the validity of data.

We will use the following to identify the start of downtrend. Since, we are determining the turning point, our stop will be close to exit otherwise.

1. If Sensex goes below July 7th. This is the low of the recent base and also the high of previous pull back on June 26th.
2. If MACD crosses down. After June 19th crossing up, it never crossed down.
3. If 8 day EMA crosses down 50 day EMA.
4. Depending what signal we use, we will use the opposite to exit. In case of signal 1, we will use 11000 to exit.

Same can be pointed in case of Nifty.
Market turned. Point 1 came true. This will be followed by Point 2 and Point 3. Major support is at June 14th. At that point, it will be double bottom. If that doesn't save, then the market is doomed. However, there are intermediate smaller supports. If the market stops at these levels, we may for trading range.

Can you short? Market is not yet oversold (RSI = 50). Lets see if we can find stocks that already made a move. Our stops will be far, since we missed the moved today. Or else, we can wait for next pull back. By that time, we will have a better picture. Consider the following for short:

When market goes down south, nothing holds, except Health Care, Utilities and commodity related stocks (Oil & Metals). Cements are doing good. Can they resist the storm? Also, consider 8 day EMA crossing down 50 day EMA to get out.

Based on oscillators (RSI, Williams, Stocastics ....), still it is not oversold. Around 45 for RSI. Still worse is MACD crossing down with histogram negative. There is a chance to attempt to go up after 5 days down. But, thats daily noise. Overall, the trend down is confirmed. Lets consider Down as long as MACD is negative.

Do not open new short positions now. You shouldn't have covered shorts either. The downside just started. However, it depends on your trading strategy. My strategy is to get lot of gains with less number of trades taken and higher risk. Another strategy may be to get lot of winning trades with small gains and smaller risk. Either is fine as long as U fine tune it with no. of trades taken and consistency with risk.
Here is my suggestion for you to consider. There are two steps you need to think about before taking a position. They are:

1. Setup
2. Entry

Does not matter if you are using Technical Analysis or Fundamental Analysis. Lets take Fundamental Analysis, since I know you use it. You look at a company's fundamentals and find that company provides multiplied growth quarter after quarter and year after year. You like the management of the company. Its P/E ratio is low compared to stocks within that sector. So, you determine that it is a well run company and available at low cost. You determine that you want to invest in it. So far, you just have a SETUP.

Now you need determine the condition when you will enter a position in the stock. You don't want to enter when the stock and its sector is tanking. When the market itself is tanking. At that point, it does not matter how good the stock is, how cheap the stock is etc. The conditions have to be right. I will get back to you with some examples if there are any entry conditions from Fundamentals perspective. I know from technicals point of view if you want to consider.

1. Buy only at 50 day EMA. 50 day EMA is the heart beat of the stock.
2. Buy only when 8 day EMA crossing above 50 day EMA. This is more stringent than 1.
3. Buy when some stocks in the selected sector are also having condition 1 or 2 satisfying. Using this condition, you are making sure your stock is part of the group. More safety net.
4. Buy when Market Indexes are satisfying 1 or 2. More safety net in addition to 3.

I like to follow conditions 4, 3 and 2. But, you could choose to be lax only select one of the above conditions. Thats fine.

I like to give example of farming. Farmer determines to use a particular seed because of its high growth and higher output (SETUP). But, the farmer chooses conditions of season and weather to finally plant the seed (ENTRY). He doesn't do it in summer when there is no rain. If he does, inspite of the seeds higher output, he may get lower result or nothing. Why, conditions have to be right!!!

Enough said. TVS Motors has been in continuos downtrend. Draw a trend line from peak of 170 to current price. The stock is below the trend line. Until it crosses this trend line, there is no hope. If it does, we can see some change in trend. May not be up. What is different in this downtrend versus other stocks is, the downtrend is slower along 50 day EMA. That means, less chances of correction. More the stock goes away from 50 day EMA, high chances of correction.

Aftek:
Read above about Setup and Entry.
Draw a trend line between 140, 120 and 100. If that line is broken, then consider for Entry. For your current position, get out if the stock comes down from current trading range between 50 and 60. If it goes up, consider point around 70, where the trend line touches. That may act as resistance. If it goes beyond 70, then you got your multibagger. If not, it comes back to trading range of 50 to 60, I would come out of the stock.

For condition 3, IT index. Be sure to check stocks that are part of IT index. Recently, I bungled with OILGAS index. Index was showing good only because of 1 stock, i.e., Reliance. Thats no good. You can get information on the stocks in a index from BSE or from NDTV site. Search in this thread on NDTV.

For condition 4, follow BSE500. Sensex only tracks 50 stocks. Thats no barometer to check the entire market. Infact, I got side tracked and started following Sensex. However, since Sensex and Nifty are followed through in general, be watchful of important levels. Like 10,000 for Sensex.


Quote:
You have explained BUY in a great way. Can you please explain the SELL consideration in similar manner.

Stops and taking Profits are something I am still struggling with. I have come along and learnt the following:

1. There can be multiple SELL conditions to get out of a position. Consider the following:
1.1 STOP gets hit for loss or profit.
1.2 TIME STOP gets hit. You give a stock certain time frame to move. If it doesn't you take out the position.
1.3 At each end of day, you look at a stock chart. If its not behaving the way you want it to, you take it out. Or should we?

2. STOP has to be a minimum 2 * ATR. ATR is the average true range which captures the daily volatility of a stock. Think about it. You have choosen a stock from SETUP. Don't you want to give benefit of doubt. You don't want it to be taken by daily noise. You STOP's first objective is to not be taken by daily noise. Secondly, your STOP has to be at a point where you feel the SETUP doesn't exist anymore. Using this theory, I like to use STOP below previous base.

3. I found Chandelier logic of STOP. It does well with handling STOPS but not so good with capturing profits. It is based on 3 * ATR.

4. Profit taking: I used to follow 50% profit taking when initial risk is met. You would read this at the beginning of my thread. Recently, I read Van Tharp's book (One of the best book I read so far. Setup and Entry are clearly explained). I stopped taking 50% profit. I am experimenting with moving the stop with 100% position. Once the profit target is reached, I reduce the STOP to capture the profits.

..WE R CONTINUE OUR LEARNING FROM GREAT VVONTERU
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Stop below previous Support (thats what I call base) is a good approach. Not previous low. I used to use previous low in the beginning. Used to get stopped out a lot. Then the stock would go in the direction I intended leaving me with bad taste in my mouth. If you don't have at least 2 * ATR for stop, you are not giving any room to the stock for noise.
Thanks for encouraging. Stock for short.

Stock: Bank of India (BankIndia)
Sector: Banks (They are the weakest to go after)
Market: Pointing down. MACD crossed down. 8 day EMA crossed down 50 EMA
Setup: 8 day EMA crossed down 50 day EMA. Below recent major support 95, now major resistance.
Entry: 2 days of pull back. ATR 6. Recent low 85.25. Previous low 82. Lets make an entry at 81 below previous low.
Stop: minimum 2 * ATR = 12. But above resistance 95. 95 - 81 = 14. Lets make it 100, around 3 * ATR. However, closing above 95 desively should give us hint to get out.
Profit: There is a major resistance at 80, thats were the stock recently found support. After that, it has minor supports at 60s and 50s.

If you have taken SAIL for short, its close to profit target of 60-65. Other stocks too moved, except Classic. Cements are not doing good. Neither do other stocks like reliance, ITC, tech stocks. I don't lose hope over here. Until the market indexes break major resistances, they can still recover. But, if your Stop gets hit, get out.
ATR
-- I use 20 EMA of ATR(15). It does not have to be exact. The idea is to understand how much the stock swings in a day. So that your stop doesn't get hit before you test your strategy for atleast 2 days. Thats why I suggest a minimum 2 * ATR.
Broadly, a system consists of Trading Strategy and Money Management (Position Size Calculation). Trading Strategy consists of
1. Setup Criteria
2. Entry Criteria
3. Risk Criteria
4. Profit Taking Strategy

There are hundreds of stocks. As a trader, initially you will ask, which one stock should I buy? Setup should tell you that. A simple example would be Channel Setup. In this setup, you consider a channel of N no. of days. You will consider a stock if it goes above that channel. Lets say you are conservative buyer. You will only consider to buy a stock if it breaks out of 52 week channel.

Once you select that stock, now you have to decide at what point/price you will enter. You can just enter as the stock breaks out of the channel. There are numerous false breakouts. Either you are willing to attempt numerous times these breakouts or use other strategy to buy into the stock. I use pullbacks after breakout to avoid false breakouts.

Most important whether you will make it or not is decided by Position Size calculation and Exit strategy. If you don't have a sound exit strategy, you can make a winning position, losing position. Or a losing position into a more losing position. If you don't have Position Size strategy, you can succeed 11 months and lose all of it in 1 month because you took high risk trades in that 1 month and used same position.
Minimum Stop = 2 * ATR
Maximum Stop = 3 * ATR
Actual Stop = Use previous support/resistance

So, your stop will be between 2 * ATR and 3 * ATR.

ATR(14) is ok.If waiting/holding for 1 year will help stocks popup, then everybody will do that. Buy and Hold is a pre-2000 thinking. By 1 year span, if you are trying to convey to me that you are a long term player, you should know what the stock must be doing within the 1 year. How low or high can the stock go. What fundamentals will help the stock go up in a year. You need to validate these along the 1 year. Just holding and hoping will not help!!!

I am a short term player. I don't have the expertise to tell you where the stock will be in a year. I can only tell you in the next couple of weeks. You should ask some other member who depends on fundamentals.
Each of us wish the stocks trend. But, after a huge fall, stocks take their time to form a trend. Until then, they just move in trading range. If you are a trend follower, it is safe to be out during this time. If not, you will get burnt during the choppy trade.
Looks like that. In any case, it is just a setup so far. Entry condition is that, SENSEX goes above the neck line and pulls back to test the neck line successfully.

I would suggest you guys look at all the banks. Something sure is going on with all the banks with high volumes breaking out of the trading range.

Set Up 8 dma Crossing 50 dma : All the stocks except Ranbaxy have crossed this set up 12 to 14 days ago and started pull back with in 2-3 days for 6 to 7 days. Then they have started moving up again for 5 to 6 days and have gained around 8 to 12 % from their lows. Now we need to wait for pullback to take a position.

Was the set up favourable to take a position 4 days ago during the pullback or the sector analysis did not favour it. Or it went unnoticed.
I think you use dma. I use EMA. For CIPLA, 8 day crossed 50 day 2 days back. If you are following dma, thats fine. You could enter the stocks if you get signal based on DMA as long you use it all the time, like I do EMA.

Looking at the action in indexes, I was not comfortable in recommending a buy. Indexes are still churning. A move above or below the trading range of the last month is desirable, unless the stocks can trade independently of the general market.
Having 8 day EMA crossing 50 day EMA satisfies the SETUP condition. That includes the sector action. Wait for Entry i.e., pull back. Lets also wait for the market indexes to cross the recent trading range. There might be slight pull back tomorrow. But, overall indexes are taking time and resisting downfall.

slope of 50 day EMA vs. crossing
-- U can use any strategy as long as you follow it all through for signals. Any setup + entry condition should give more than 50% probability when you test. Because, we don't need to even think to get 50% success. It is either Buy or Short like heads or tails when you flip a coin.
Decision Time. Up or Down ?

Sectors Up:
-- Banks (Good Volume. We have 1 day pull back after almost 10 day's of upside)
-- Cement
-- Pharma

Others:
Trading Range like BSE500
Initial leaders like IT are stuck in trading range now.
The fact that the indexes were up inspite of US stocks downward path is encouraging. However, the indexes are still range bound, just stopping at the top of the range. Tomorrow's upward movement will get them out of the range.

So, you have couple of choices. Sit out till the indexes come out of the range. Or, if you don't want to miss in case indexes come out of the range tomorrow, buy stocks at CLOSE + 75% of their ATR (ATR is available in iCharts.in). Logic is, if indexes move up, your stop gets hit and you buy into the stock. If the indexes move downwards, you will not buy into the stock. Stocks in pull back mode:

Note on Selection Of Stocks:

One of the problem facing traders is selection of stocks. Rather I would say elimination of stocks to remain with a few for consideration. That is the reason I have strict setup criteria. Why do we need few for consideration. Because, currently my position sizing algorithm lets me have only 3 open positions. So, how do I select 3 stocks from so many. Not that others don't go up. But, I can only expose my capital so much, unless I increase my capital or risk criteria. But, I am only comfortable with the risk I have for the current capital.

The reason I am providing so much verbiage is, you need to customize position sizing algorithm to suit yourself. Some are willing to risk 2% on a trade. I can only do 1%. Some are confortable with swing of 1% capital per day. I am only comfortable with 0.75%. With the variables I have in the Excel sheet, determine how many trades you can have open. Then, have a setup criteria to select the best. If you can trade 10 stocks, your selection criteria must be lenient than mine. Because, a setup criteria must suit the system you have. A setup criteria must end up giving you enough trades to fit your risk criteria. Finally, the amount of profit depends on the frequency and no. of trades with the system you developed.

Can you give me the best 5 of those to comment on. Add to your setup criteria to limit them to 5. Or if you have to trade, which 5 will you trade.

Market,

.........................................
52 week high or 3 month high means you are selecting the channel length. You want to consider stocks above/below the channel. Higher the channel length, stronger/weaker the filtered stocks. Stock market consists of tons of data. There are alway attempts to filter the price and volume data. All the indicators are just filters of price and volume data. 52 week high or 3 month high is another attempt to filter out those stocks that fall with in the channel.

You have picked good momentum stocks overall. I have ranked them. Always restrict to 1 stock per sector. Concentrate on Banks, Cements and Pharma. Wait for the indexes (BSE500, SENSEX, NIFTY) to come out of the trading range. If they don't go above the trading range next week, do not go long on stocks.

Dave is suggesting minimum channel length as 2 month for filter. If you start from stocks that made high compared to yesterday, 1 week high, 2 week high .... 1 month high .... 2 month high, Dave is asking to consider 2 month high. Channel length depends on your descretion and the market in general. After the recent downfall in May and June, if you have asked for 2 month high in July, you might get nothing. In that case you have to try 1 month.

Channel is not some concept, but just a name for setup criteria. Think channel as 2 parallel lines, 1 top and 1 bottom determined by the period (2 month or 12 month etc). There are stocks that fall between the 2 parallel lines and those fall above and below. From the 90s, they has been general understanding that buy stocks that make new highs and short stocks that make new lows. So, those stocks that appear above the top of the channel are considered for buying. Similar is the case for short for stocks that fall below the bottom channel line.


Quote:
also does "bollinger bands" comes under the channel length concept,
for acco. to elder in "come into..", buy stocks on the SMA of Boll B., sell at the upper channel or when it is going below the upp.channel, and buyback when it again reaches the SMA. how is it related to volatality?

Bollinger bands are drawn considering the volatility of the stock. I use it to avoid buying (rather sell) when a stock goes above the bollinger band
Elder likes to buy stocks when they come between two short term sma/ema. For example, if a stock comes between 10 and 20 ema. He calls it sweet zone. Stock always go up and test the emas now and then.


Quote:
also, how do we know that the trading range is over, does it means that it breaks above the resistence level?

kindly oblidge as u always do.

regards,
sonu m.

Yes. However, there are false break outs. Dave suggests to wait for pull back after the break out. Currently, the indexes are hovering around the top of the trading range. Same with U.S indexes. All are waiting for Tuesday's Federal Resever Interest Rate Hike. If there is no hike, you can expect a big rally. So, I advise wait for Wednesday. You will get hint from tuesday's U.S market.
Based on overbought condition. No body can say what market can do in the next day or week or month. It is just the probability of pull back after an overbought condition increases. With stock market, we are just dealing with probability. If you have not read probability in Math, it is time for you to revisit.

Sometimes you can predict based on fundamental or news. For example, look at how indexes are just dancing around the top of the trading range. If you go and put money now, you will scratch your head as they go up and down ... It is common sense that they (big money) are waiting for something to happen before making decision either way. Closest event is the Fed increase of interest rates on Tuesday.

In affect, when trading, think at high level. Look at market indexes. Look at what sectors are doing good and bad. Look at economics of the market, like interest rates, inflation etc. I know it is lot of work. But, thats what it takes
RSI, Williams, Mommentum, MACD, Stocastics etc are categorised as Oscillators. EMA is a Trend Indicator. Anything which as boundaries (eg: 0 - 100) is an Oscillator. You can use 10 or 15 period for oscillator. Normally, anything above 80 is considered overbought and below 20 is oversold. Now, these numbers depend on period you choose and stock/index you are looking at. Look at the history to get the number suitable for overbought and oversold indicator. Recently, I found another way to look at overbought and oversold indicator. If you have data, find out Percentage of Stocks Above Moving Average 20, 50, 100, 200 etc for Today, Yesterday, Last Week, Last Month. If these percentages go above 80, then considered it overbought. If the percentage of stocks go below 20, then consider it oversold.


Quote:
3. dave says, that even though that market is falling, go for sectors that
are strong, and then strong stocks in that sector, what is
ur view on this?

sorry for posting such long questions, plz guide as u always do

regards,
sonu m.

If you can only go long, ya why not
I guess you are far away from what Trading means. You are more into investing mind frame. Stops doesn't make sense anymore. Talk to someone who knows fundamental analysis. Ask them what to keep and what to drop.
-10 Oscillator is a price oscillator of 3 day and 10 moving average similar to MACD. You can construct it by using OSCP function or change the parameters of MACD from 12,26 to 3,10. Oscillates above and below the Zero line.
I understand your frustration. I couldn't give you any suggestion. Because, if I were in your place, I wouldn't know what to do either. Best I would do is take the major loses. Take 6 month break. During the break, read books, develop a methodogy with money management. Do some paper trading. Then come back. But, I couldn't give that advise as it requires complete overhaul.

Every major player in today's market has gone through what you are going now. Its like Jesus (was it Jesus?) asking, show me anyone who has not erred in their life.

However, good news for you. Market indexes are showing positive. They have crossed the trading range. We are going up to tackle 2 more resistances. If they can do it, you can regain the money. So, watch the indexes.

Sectors Up
Banks
Cement
Pharma
Consumer Goods (came out of the trading range recently)
Health Care (came out of the trading range recently)
IT
BSEPSU (came out of the trading range recently and tested the top of trading range successfully)
Sectors Still in Trading Range
Consumer Durables
MIDCAP
SMALLCAP
AUTO
METAL
OILGAS (ONGC is doing good
Rolta
-- Can't argue with what happened today on high volume. Hope there will be follow through. When you add more to a position, here are my suggestions.

1. Never add more than 50% of your existing position.
2. Consider adding after multiple of Risk is reached. If you have risked 20 points, wait at least the stock has gained 20 or 40 or 60 points above your buy point.
3. Add only on pull backs. So, don't add now. Stock went above its normal volatility (above upper bollinger band) and may slightly fix in the coming days. Look at LUMAXIND for idea.

The idea is, never make a winning position a losing position.

Aftekinfo
-- You are right. The stock lacks momentum right now. You should have entered after the stock cleared the trading range. One of the reason I go after the sector is for momentum. Look at Banks sector. How they are flying. For short term traders, momentum is everything.

Don't you think good, a consistent (or sudden) above average volume in a stock is a sign of something immenent---a sign of some dramatic change in the price movement---upwards or downwards movement in the stock price. I want to buy into stocks before they make a upward correction in the stock price, not just find a good trading range.

I agree buying into stocks that get above average volume.
Everyone wants to buy into a stock before they make a upward correction. There is underlying risk of picking the bottom. Today the market has recovered and may make you feel that way. What if the market went down. Rather, have a consistent approach that defines when you will buy, that gives you an edge. That way, you might have failures. But, overall, the success should override failures.

Guys, look at the stock CLASSIC (Gems sector). Its amazing how it is flying. It doesn't it even give chance to enter. Still, I wouldn't enter until it has a correction.

Currently, we don't have tools that can display sector charts. Only website that offers sector data is http://www.ndtvprofit.com/bb/default.asp?Pass=Indices. I had to go through so much strain in getting sector data. I wrote java code to scrape sector info from websites. Every day, after I load data, I run AmiBroker code to generate sector charts. When I talk about sector performance, I am not talking about 1 day. I am looking at the sector just like a stock.

use ADX for scanning. For volatility of a stock, I use ATR. U can get ATR of a chart from icharts.in.

The idea is, never make a winning position a losing position.
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I took position in this stock because of the following reasons:

a) Its quarterly and yearly results was expected on the 8th Aug. Around 1-2nd Aug. The trading volume had started increasing in the anticipation.

B) Low valuation: It was in the range of 220 to 280 for many months.; and the fundamentals have seemed to have improved. Like all good stocks it had corrected.

c) IT companies had reported good results: trong dollar.

I'll keep in mind your advice about re-entry and adding more
agree buying into stocks that get above average volume.
Everyone wants to buy into a stock before they make a upward correction. There is underlying risk of picking the bottom. Today the market has recovered and may make you feel that way. What if the market went down. Rather, have a consistent approach that defines when you will buy, that gives you an edge. That way, you might have failures. But, overall, the success should override failures.

Thanks for ur encouragement. whatever i have learned is from u, the books u have suggested are real gems

the site i visit is twonahalf.com, i suggest u to visit that site. it provides basic information of which stocks are in uptrend, candelstick bullish/bearish patterns
52 week high/low, speed of trend,etc. register urself first, they send u an activation number, activate ur account, and get started.

although i do not entirely follow their recommendations, i do go to icharts.in
and do my own discretional analysis. i think some member in traderji has started that site, i got the site info from here itself, so for more information,
visit http://www.traderji.com/equities/762...ight=twonahalf

what is ur opinion on "historical volatility" that dave suggests, do u use it?
u said u use ATR, from what i have learned, u use 3*ATR as ur initial risk R.
This i think u use it for stop loss, however i dont' know how do u use it to
measure volatility of stocks? what range tells u it is highly volatile?

2. does the 3/10 oscillator that dave suggests, is MACD value of FAST 3 EMA,
SLOW 10 EMA, smoothed by 1 EMA, i.e 3,10,1. If this calculation is right,
can u suggest any indicator similar to "HISTORICAL VOLATILITY" and its
values?
Market has come out of the trading range. It is up 3 days. Will pull back pretty soon. At that time, consider these stocks for entry.

Day Trading Info
-- http://www.traderji.com/44907-post62.html
Its been a while I read it. Historical volatility can be calculated using EMAs of ATR. You know stock's volatility by comparison to another stock. A stock that has ATR = 100 is more volatile than a stock that has ATR=10. Volalitility is about how much swing (High - Low) in a day. You need this to place a stop and also to calculate position sizing.

Lets say you are buying a stock that that has ATR=20 and close = 100. If you are putting a stop between 80 and 100, you are basically asking for the stop to be hit. U are not giving the stock a chance to test your methodology. 3 * ATR is used to give the stock atleast 3 days to prove U are wrong. You could reduce it to be between 2*ATR and 3*ATR based on previous support.

U need stock's volatility for position sizing. If you buy 100 shares of a stock that has ATR 100, you should expect a swing of Rs 10,000 per day. U need to ask yourself the question, are U comfortable with that kind of change to your porfolio. If not, how much swing can you take in principal per stock per day.


Quote:
2. does the 3/10 oscillator that dave suggests, is MACD value of FAST 3 EMA,
SLOW 10 EMA, smoothed by 1 EMA, i.e 3,10,1. If this calculation is right,
can u suggest any indicator similar to "HISTORICAL VOLATILITY" and its
values
A stock can be bought or short. Only 2 options. So, flip a coin before you buy or short. Heads or Tails. That gives you 50% probability to win or lose. Most setup and entry algorithms have less than 50% chance of making you money. What makes your trading success or failure is the Position Sizing (money management) and Stop Exit (risk) and Profit Exits (trailing stop mechanism). Do not evaluate your strategy over 1 or 2 trades. Evaluate over 10, 20 or 30 trades. The key is making trades using the same strategy over and over again. Thats really hard. Thats called high probability trading. Read book, 'Trading in the Zone' by Mark Douglas. The book is little bit boring, but does help in this perspective. The author challenges readers to make 10 trades consistently based on a predeveloped setup and entry criteria
thing is, it does not matter. Think about. If you got 90% success trades over a span of 1 year with 10% failure. The success made Rs 10,000 profit. 10% Failure made 8,000 loss. How will you evaluate this system. How about this. A system produced 70% failure and 30% success. Profits are 10,000 and loss is 5,000. Did the percentage success matter.

So, success or failure are just outcomes of a trade where you don't have control over. Market is dynamic environment which is constantly changing. By selecting a setup and entry criteria, you try to give more than 50% probability of success. If it fails, so fine. Your position sizing algorithm already gives you how much you are constantly risking. If its a success, you want to make profit more than the risk. U only have control over what loss you can take when the trade fails and what profits you can make when trade succedes.
No. Most of what I write are my understanding of the market and my readings. I constantly read books along with my trading. They keep me in the loop. If not, as you trade, there is a tendency to move away into the greed/gambling stuff.


Quote:
Also, Should I buy only if there is a buy signal on the previous day or is it fine if I buy if buy signal is generated say 3-4 days back also?

As long as U are not trying to catch up. Feeling of missing out is always there. U should try to get out of the feeling as there will always be opportunities. If you do take it, don't forget to change the entry and exit points in the Position Sizing Calculator to use the new position size.
Market is kind of overbought. But, different sectors are having different timing. Pharma has been down for some time. Look at Ranbaxy. I know from some of you that it is fundamentally a good stock (if it helps setup, why not). It has nice crossover with pull back. What I am not liking about the pharma and cement stocks is low volatility. But, sometimes that is good too. Low volatility compared to its historical volatility leads to higher prices. During the low volatility, consolidation may take place
have 5 updays. I wouldn't buy it now until crossover and pullback. If U already have it, hold on. Market's new uptrend is confirmed. What that means is, most of the stocks will come up.

In the recent days, MIDCAP and SMALLCAP have come out of the trading range. As U see (if you have followed me), we started with couple of sectors in July in uptrend with now, most of them in the uptrend. I am seeing lot of stocks in setup. If market pulls back couple of days, there will be tons of them for entry.

can give you tons of stocks showing this pattern. No doubt because most of the sectors are up. This is the good time to put your money as it is the start of new uptrend and your entry will be closer to 50 day EMA
Nice break out with good volume. Right now above the bollinger band. Let it pull back before entry.
whenever u buy stoaks, first and foremost consideration has to management quality
Market:
I would have liked pullback. Are they not going to give us??? Alright, lets look at some of the stocks.

Ranbaxy nicely went off but, came back. Amarajabat did ok. Its not like in text book isn't it!!! As far of now, I am very positive in the market. As long as you pick stocks in right sector (didn't they all come up?) and with good tradeability/trending you should make money.
Here are my reasons for me being positive about the market.

1) Look at all the sectors. They are all up except Metals.
http://charting.bseindia.com/charting/index.asp
2) My scans are giving high no. of stocks.
3) Most of the stocks are showing above the 50 day EMA with good volumes with few exceptions.
4) Indexes are up more than straight 5 days.
5) Look at Advances versus Decliners and other charts at http://www.icharts.in/breadth-charts.html

You are right that market is overbought. It might pull back. I would have agreed with U that this market would go down if the sector action wasn't good. Or if the advancers vs decliners showed divergence. Or volume in the stocks is low in the uptrend. But, they do not. So, till I see any negative price or volume action in BSE500 and sectors, I will remain positive.

In the end, it is always about what methodology U follow. Simple put, what criteria U are looking for before U take a position. My setup criteria is:

1) Market Indexes (BSE500) should have at a minimum 8 EMA cross up 50 EMA
2) Sector of the stock should have at a minimum 8 EMA cross up 50 EMA
3) The stock has at a minimum 8 EMA cross up 50 EMA.
Criteria 1 is satisfied. Criteria 2 is satisifed for all except Metals. Criteria 3 will depend on the stock. If my methodology gives me a buy, I buy. It does not matter even if I feel I will lose money. Similarly, I will not buy a stock if my methodology doesn't give me a buy, inspite of my feelings of making money.

I (or Neither U) do/should not fear losing. Loss and Gain are just outcomes of trading a stock, which I or U do not have control over. However, we do have control over how we manage loss or gain. We limit loss by constant risk, increase gain with muliple of risk. Difference of this is going to make U winner.
What is this Swing trading? Will it be helpful in trading Nifty futures?
-- Swing trading is synonymous for short term trading with a span of 1 day to couple of weeks. I have never been into futures. Probably U could.

1. If A Particular Sector Has 20 Stocks, Out Of Which 10 Stocks Are
"top Gainers" And 2-3 Stocks Are "top Losers" For The Last 63 Days,
And For The Last 7 Days , If The Proprtion Of "top Gainers" Has Increased, Does That Mean The Sector Is At Intermediate Uptrend?
-- U ask tough questions. May be. I normally look at an index of the sector or the aggregate chart of sector. I peak into some of the stocks in the sector to see the trend. Normally, U would want the chart of the stock coincide with the sector chart. Look at BANKINDIA and BANKNIFTY for example.

2. Or, If A Stock Is At 63 Days High, Does That Mean The Sector Is Also In An Intermediate Uptrend? If Yes, Then Why Is It Necessary To See A Sector If The Stock Is Trending?
-- A sector is important because of the crowd behaviour. U are trying to do the best in selecting a stock. Sometimes, it acts as a limiting agent. If not, U will have so many stocks to consider for entry. At that point, U want to pick a stock which is part of the crowd that is going up/down. It gives the stock legitimacy. That does not mean a stock that does not follow a sector will not go up or down. As I said earlier, U are trying to do the best.
There is resistance at 85. If not, it is prime for new entry. If it is going up, why would you want to take it out. Trail stop at 70 (2 * ATR). Once the current base clears i.e., goes above 80, move it to 74. Let the winners run!!! And remember, in order to make profits, you need to put some money on the table. Like business. U can't make money out of nothing!!!

Market:
Indexes are nicely consolidating the recent gains. Thats good for the next leg up.

Here are some links I follow. They pertain to US stocks. But, methodology isn't different.

Elder Website: www.elder.com
Dave Website: http://www.tradingmarkets.com/.site/...y/dlstoutlook/
Kirk Website: http://www.thekirkreport.com/
Other: http://financialsense.com/Market/wrapup.htm
Nice Article on Stop Loss:
http://www.traderji.com/trading-psyc...s-my-boss.html

Market:
My feelings (fear) tell me it is going Czar way. But, until 3200 of Nifty is taken out, lets be positive. If you have taken a position recently, honor your stop loss.
Not so easy!!! I am bearish on U.S markets due to thin volume and sector action. They are going up to be shorted. But it is different in case of Indian Markets. Good sector action and good volumes in stocks in the recent uptrend. But, I admit anything can happen till it happens.

Look at some stocks in OIL sector.

BPCL
HINDPETRO

As usual, pick only 1 as they both belong to OIL sector. Look at those volumes in these stocks in the recent uptrend.

Hi VV,
Thanks for ur reply. I am not after the "Holy Grail", as i know, no such thing exist in the market. As u have mentioned earlier, when we enter, our probability to win is 50%, no matter how perfect is our system. I find ur system simple, scientific and effective. That is why all of us are hooked to this thread, because ur response is not biased, u encourage to learn ,and finetune our trading system.That is what i tried to do.This was just another way to look at ur system. I hope it works and is benficial to other members.

For stop loss, i liked ur "volatility based stop system". i.e.,
3*ATR = R (initial risk), as it eliminates the risk of market noise to hit ur stop, if we place stop at 5% below ur entry price, as DAVE LANDRY suggests. But i would like to add, "Always put ur stop,below the recent
pivot low or "3*atr or 2*atr", whichever is lower" and check the pivot low in "weekly chart", which gives a strong support area.

For position management, I use "percent risk model". Divide % risk u will take on the stock by 3*ATR, which gives u total no. of shares. For example, i want to risk 2% of my trading capital of 1 lac. 2% = 2000.Suppose 3*atr = 10
Then , 2000/10 = 200 is the no. of shares i will purchase.

On trailing stop loss, I think Traderji's method to put stop at previous 3 bar low, if u r long and previous 3 bar high, if ur short, is very effective. Still i am researching new methods and will update u with my findings.
Lets be frank with ourselves. This stock has good momentum. It pains to be not in it. So, why question whether its too late to enter. Because, it is not the point when we (I) enter a stock.

You might make money if you enter now. But, is it consistent in the way you trade. Definitely it is a qualified candidate that satisfies any trader's setup condition. But, does it satisfy entry condition at this point. Or do you feel you missed the entry couple of days back.

As I said earlier, be consistent in the way you trade. You might make money in the short term by trading arbitrarily. But, you will lose on the long run. Have conditions written down for
1. Setup: When U will consider a stock for buy
2. Entry: When U will actually enter that stock
3. Stop Loss: How U will determine stop loss
4. Profit: How U will sell to make profit


Repeat trades with these conditions without emotions. Once you are comfortable with these conditions, don't change them until U apply for 10 to 20 trades and U can assess the results.
this case, it did work. I understand the reasoning behind what you are getting at. What U are looking for is, if difference between short term ema (8) and intermediate term ema (50) is reducing compared to difference between 50 day ema and 200 ema, then a correction can be expected.

But, if go and look at the chart earlier to May, there were several times MACD(8,50,1) went below MACD(50,200,1). This did result in correction, but not a lot like in May.

MACD(3,10,1) also looks good. Good work.
If you are not using or entering trades in the position size excel, you are not serious as a trader. One of the hard and boring part of trading is book keeping. But, if you don't, how do you analyze your profits and loses. Can you do business without book keeping
. Look also ATR of nifty and sensex. From high of mid May to present, ATR of the indexes and the stocks have been falling. Ideally, a breakout from lows should be with high volume with higher ATR. Lower ATR might mean 2 things. Either its consolidation followed by higher volatility or we are going down. How and when do we know this? Future price action. Lets not predetermine change in market direction
It is worth to look at what Timtomlee has come up with. MACD(3, 10, 1) is good. It does very good in buy signals when line crosses 0. It also gives sell when line crosses back. But, the sell signal may not make you money all the time. It works very good when the stock is trending.

For example, look at Sensex with this indicator. From 2005 Nov to 2006 May, there were only 2 cross downs below 0. One time was in Jan'06 when there was a deeper pull back. The other one in May when sensex came down heavy. So, look at for each stock whether it makes sense. I think it does very well in providing entry point. It provides signal earlier to crossover. Look at how the signal would have worked for:
1. Reliance.
Why do you feel that? Having feelings is ok. But, don't act on those feelings until you see some positive happening for the stock in the direction of your feelings. TA says nothing great about the stock. Why bother about this stock. Why don't U select better trending stocks.
TA: Stock still looks good, even though I admit last 2 days have been bad. Not because of price action, but because of Negative Volume. Remember, buy before news, sell after news. That is the reason it went down after the news. I don't trade based on news. Because, by the time we get the news, its tradable value is reduced. We are at the end of the food chain for news.

This is more of a MIND question rather than a TA question.

Think hard before U get in. Not after!!!.

One of the reason you need to track trades is to specify buy and sell conditions. When you make a buy, write down the reason why you are buying and what will make you sell. Once you hold the position, continue to see whether conditions have changed.

So, I ask you why you bought the stock. If the answer is NEWS, then did that change in the last 2 days. Or is the downturn in the last 2 days has made you fearful of loss. If you get swayed by a tick up or tick down, it will be hard to trade. Do not have emotions for failure or success. One trade will not matter. Even if you make a success in this trade, what guarantee is that you will be positive at the end of the year.
Use the points below in changing how you trade.

1. An outcome of 1 trade does not matter.

2. If you make 40 trades a year, think how your portfolio can be positive after those 40 trades.
U could have 20 loses straight. But, you could also have 5 gains straight that make up 20 loses. What is the point in pondering about 1 trade loss.

Let me give an example. Let say you have 15 gains and 25 loses in an year. Lets use marbles of 2 colors, green and red for this example. Green, win, red a loss. Put these marbles in a bag. Draw each marble out of the bag.

Q) What are the chances of drawing a red or green marble. If the probability of drawing a red marble is more, then did that change the portfolio amount at the end of the year.
Q) Is it possible to draw 10 red marbles out of the bag straight.
Q) Similarly, is it possible to draw 10 green marbles straight.
A) Yes, it is possible, probably both with a lower probability.

The key in this example is, the marbles are constant, the action of drawing (trading) is constant and the risk (stop loss) is constant for either green or red marble. Can we do that with stocks? Stop Loss! yes with position size management. No matter what stock trade we lose, our loss should be constant. Position size should only change. Trading methodology should be constant. Don't trade arbitrarily. If not, results will be skewed.
3. Before you put a trade, assess the loss using Stop. If you can't take the loss, pass the trade. Because, once you put a trade, nobody can determine its outcome.

4. If you can't think in terms of total trades in a year, probably you are trying to gamble. Remember, there is no easy money in stock market. U might have realized this already in the last couple of months
. I look at price chart. Question: Is it in trading range or trending?
2. Answer: trending, then go to 3. Trading Range, avoid the stock.
3. I look at the volume chart. Question: Does the the recent uptrend has good volume?
4. Answer: yes, then go to 5. No, avoid the stock.
5. Look at MACD. Question: Is there divergence against the trend?
6. Answer: No, then go to 7. Yes, avoid the stock.
7. Look at Williams oscillator. Question: Is the stock in overbought condition?
8. Answer: No, then stock is selected for setup. Yes, avoid the stock temporarily.

At each of the step above, I am constantly asking myself why I should (not) trade this stock. Once a stock is selected based on setup condition, I look for my entry condition to satisfy to put a trade. Hope the steps will help you.

Why would any one buy above the bollinger band. Either way, if you have chosen to trade intraday, why did you keep beyond that. It tells me you just gambled. You thought you can just make a profit. You were not prepared for the loss. You never had a exit plan. Please read my earlier comments on Mind game.

TA: I am not worried about the price action today. I am more worried about the red volume. There were many trades that took profits. And why not after gaining 40 points in one day. There may be another down day to make it come below bollinger band. Other than that, chart still looks good.
Stock looks good by price and volume action. 180/190 is resistance. Should you hold it? You should have thought about that before you bought it. CMP is 173, exactly where you bought. What changed?

Now, it all depends on how you trade, what your expectations are etc etc.
Couple of options based on your trading methodologies profit taking:

1. Take half after 1 * ATR is reached and set the stop to break even. If you adopt this method, when a stock makes a high bar, continue to take % of shares for profit. This is the reverse of buying in small lots.

2. After 1 * ATR is reached, continue to trail the stop to 2 * ATR to capture profits. Here you are not taking partial. You are holding on to 100% of the position.
Ofcourse, there are variations to this. You can rate your profit trade based on 1 * ATR - C, 2 * ATR - B, 3 * ATR - A. If 3 * ATR is reached, you can completly take out the position since you have attained A rating for your trade.

3. And there may be other way to do it based on your objectives.

Before I used to follow Option 1. Recently, I changed to Option 2. Whatever option you choose, stick with it. Do not chose option 1 for a trade and use option 2 for another trade. If you are using Option 1, then you should have taken profit for ExideInd.

Stock Tips:
I did not run through the scan due to boring index action. I am just looking at some stocks I am following. Look at CLASSIC for entry. Refer to previous post
This stock is lagging the general market (majority of stocks). If the market was also at this position, I would say, yes, this stock has real scope. But, as U know the market has passed this phase. For this stock (or any for that matter) to move up, the market has to continue to go up. For U, it does it matter. Just trail the stop. If U are considering adding more, I would advise to not do that. At this point, there is more risk of making your winning position a losing one. U should let this winner run for this moment. Lets consider it again after couple of weeks
Ranbaxy
-- If any has taken a position in this stock, don't forget to trail the stop higher to 380. This is a perfect example why U need a minimum of 2 * ATR stop. Stock patterns have less and less becoming what they are shown in text book. After your entry, they may take their own time and swing against you. If U don't give them enough space, they hit your stop and then go in your direction Just like the indexes, its going slow, looking sideways more than upside. Its got a major resistance at 1000. Volume has been drying up in the last couple of weeks. My personal opinion is, stay away. The low volatility in the indexes and stocks is looking more like a puzzle to me. I am stopping short of saying, there is something fishy going on. Is this lull before the storm or just business as usual. This accompanied by low volume in some stocks.

Now, that doesn't mean we go around and short. If we don't learn any thing from our history, lets get this one right. DO NOT TRY TO DETERMINE THE TOP AND BOTTOM. Too many people have lost their shirts from 1900. This is straight from the mouth of Jesse Livermore (so they say. Book was not written by him).

leaving U frustrated

That depends on how U normally go long. Here are some of the options for buying on pullback. These do not apply if you are a breakout player.

1. Long at pivot point. Low of the pullback.
2. Long after stock takes out pivot successfully. On Friday, SIEMENS took out the pivot point successfully.
3. Long between two short term EMAs. Choose either 10 and 15 or 8 and 13. Whenever the stock pullsback to between EMAs, buy. Probably on Thursday. U should note that some stocks have different pattern and may not pull down rather than create a base. SIEMENS is a perfect example. It created more of a base than a pull back.

Depending on what option you choose, results will vary. As I always say, stick with one option for all trades. Don't change between trades.

I want U guys to think the other side of the trade and ask why not. Thats how we together improve our trading.
We need different opinions, with a basis. Thats how we learn. As a trader, we need to think like a lawyer. We need to think other side of the argument (trade) and check if we have an edge
see the difference between mine and theirs. They are going in detail. I just eye ball the chart. I am looking for easy ones. How about this. Look at the stock chart I recently suggested: Godrej Industries. Compare that chart to these charts. Reading their analysis looks convincing. But, I think the charts (ICSA) are not. Ankur is good as long as the stock clears the pull back.

My criteria for stock is based on KISS methodology. Keep It Simple Stupid. Why? because U want to repeat the process. If U can't repeat the process, probability will not work for U. Having such a detailed analysis will make it hard to repeat the process.

Another thing I noted from their analysis is they use Weekly charts. That kind of takes out the noise in daily charts. Its good and bad based on what time frame U base your decisions on. So far, how did they work out for U. Do they give help on position and stop loss management
observed that stocks kind of go in 3 stages. Most of the time, at the 3rd stage, they cannot keep up the previous momentum (buyers don't want to buy so high and sellers had enough profit) and either correct or go sideways before they continue up. Thats what is happening to CLASSIC and so many stocks. What are our options if we are already in the stock.

1. Stay in the stock till its corrected.
2. Use MACD cross down to get out of the stock. Get back in after MACD cross up.

I don't need to tell U that the options will have different results. Try to follow only 1 option all the time.

I am positive about the stock. Compare the volume in July when it reached 200 versus now. Stock has prospects.

U are picking good stocks. Thanks for sharing. Let us know how U are coming up with these stocks to help others
don't know if its the right time to short. Indexes had a good day on Monday. So far they are going up, why really short. Unless U want to use overbought conditions in indexes and short them. At this point of time, resist shorting individual stocks. U should have plenty of stocks to fill your portfolio on the long side. Pick one from each sector.

Reading indicators is tricky as they don't work all the time. MACD does not work if the stock is going sideways. It shows negative histogram and crosses down. Nothing bad at that point. Can go bad or the stock may resume the trend. Don't make a decision using just MACD if the stock is going sideways. MACD is a trend following indicator.

Some stocks are joining the party late. Buying at the beginning of the trend is the low risk high reward play. Ofcourse, determining the beginning is the key. I use crossover to determine the beginning. There may be other ways U could explore.
There is no mystery: I look for good fundamentals, good financial results (past records); more importantly---as far as imminent share price appreciation is concerned---consistent above average volumes and good technicals (this I've started to learn recently); of course, one also needs to consider the market sentiments and the its current trend.
I've picked these things from here and there---thanks to you, Saint, Amitbe, and others!

Short Term (I used daily time frame for 6 months duration)
-- Looks good. Today, it came out of the pull back decisively with good volume.

Long Term (I used Weelky time frame for 1 year duration)
-- Came out of the pull back on weekly too. MACD crossed up and histogram is showing positive indicating up trend. One thing that worried me is the volume. Last 5 weeks, volume has been decreasing.

I am a short term player. I am not good at saying some stock will be there at X position in 3/6 months. I believe any stock can go anywhere as long as good environment exists. U trail the stop. If it goes up, move your stop up

Thanks. I will take this opportunity to recap what I have given and where we want to take this thread in future. Here are the most important aspects I think I have given.

1. Be consistent in whatever U do. Have a trading plan.

Trading is a small cycle. Write down the trading plan and following it consistently. Do not be swayed by the market. Market always lures into taking different paths. Do not get swayed by it. Your trading plan is the Tree which you use it as support in the cyclone of the market.
Do you know about Odysseus and Sirens story. See the attached image. The mast is your plan. Sirens are the market. You drowning in the sea represents loses.

2. Use Position Size for Money Management.

Use the calculator I attached earlier. Without using this, there is no hope for your success. Remember, with one Win you are not going to the bank and taking your money. With one loss, you are not going bankrupt. If you are serious, you are there day in day out for many years. Position sizing with constant risk is the key to winning on Long Term.

3. Stop Loss and Profit Taking

Devise a strategy for exits. Exits are the key to your winning. If you look around on Traderji, most people are bothered about entries. We are looking at the wrong place.

4. Continue to read.

Give yourself many years. Accompany trading with reading. Continue to experiment and improve.

As I suggested in the recent replies, from now on, I want this thread to have your viewpoint. Specially, I like to hear contrary view points. This is what I want to know.

1. I like to know views on pull back methodology.

2. New techniques for Stop Loss, Profit Taking methodologies.

3. When I suggest a stock, I want your pros and cons of taking the trade.

Basically, I want to avoid TUNNEL view. Lets share and improve our trading.


Consider EXIDEIND for entry.



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Looks good. Look at the weekly chart for entry and stop due to the sideways action in daily. I think entry should be CMP.

Other way for entry based on daily is to use MACD crossup. We need this if a pull back turns into short term sideways action.
Entry into Exide Ind should be ok. Do not compromise on Stop Loss. Reduce position size instead.

Pros: Good trending stock with better price action.

Cons: U can see from the chart that it is overextended. It might get corrected to test 50 day EMA.

If U have questions on what approach to take, just choose one. Stick with that approach when similar situations arise.
woudn't lose hope at. Once U put a position, stick with it using a stop loss. Unless U have preset conditions that will tell you to take out the position prematurely. And U follow these preset conditions always.

To start with, I have to admit I am not good at Long Term analysis. Whatever I know is for short term, only using TA. Poor (lazy) in doing Fundamental Analysis. Its not practical for me to check fundamentals for so many stocks either
think we discussed about what options we have for profit taking. If U are a partial profit taker, go ahead and take out partial position profits. If U carry 100% position, trail the stop. When trailing stop, make sure U have atleast 2* ATR. If U grade yourself based on multiples of R and they have reached, then take out the position. As U might have observed, results will vary.

Lets take EXIDEIND for example. Lets say Ur trading plan says U will carry 100% position. But, U saw on August 29th, EXIDEIND hit 375. U got tempted and took out 50% profit at 375. Today EXIDEIND is 385. And hit yourself hard because you don't have the 50% position as the stock still has momentum. So, my friend, do what Ur plan says inspite of how market is behaving. On the long run, you can atleast look at your trades diary and see what is working and what is not.
Great. Thats the mark of a serious and successful trader. Elder stresses so much on keeping trading diary. Not many traders realize this. In addition, you should do a monthly checkup on your trades. Check why a trade successfully worked while the other didn't work. See how you could have done differently. Beware that the market can be a bad teacher. It can award you for bad trades and punish you for good trades. Keep that in mind when you change your trading plan. Avoid frequent changes.
See chart with settings

1. Weekly
2. Year duration.

You will see the downtrend is intact. May be its starting a new trend. But look at BANKNIFTY and compare. This stock has been lagging like YESBANK. Right now banks are as high as there were in May before the fall. Watch BANKINDIA, PNB, ICICIBANK, SBIN.

hi vv, some little birdie told me that stocks which hit 52 week high are more attracted to go higher. And same is case with 52 week low, they tend to go lower. How far is this true????

Isn't that true. A stock will hit 52 week high because its got demand. Every one wants to own it. That is the reason its going up. Similarly, a stock is 52 week low because no one wants to have it. All of them are selling it. Ofcourse, this understanding is at high level.

That is one reason you see websites recording stocks that hit 52 week high and 52 week low. Sometimes, there is speculation that can drive the stocks up. Once that speculation is over, stock drops like a thud.
If U think about it, it works both ways. Lets do the 52 week low again.

Everybody is selling. Stock has been falling for long time. After some time, a stock is worth something that reflects the companies value: its cash flow, technology, real estate etc. So, at that point, is it worth going and shorting. Why do we want to sell a stock when its value is equal or less to that of the company.

Similarly, a value of stock as it goes up happens in 3 stages. In the 1st stage, the value is less than the fundamentals of the company. At this point only few people know about this fact. In the 2nd stage, value is equal to the company's fundamentals. In the final stage, value is greater than the company's fundamentals. The final stage is called the speculation stage. Everybody knows about. Like the stock CLASSIC. Recent example is also GOLD prices.

http://bigcharts.marketwatch.com/int...x=32&draw.y=10

Speculation stage is a good and bad. Good because the stock price increases faster as many people know about. Bad because, sooner or later, there will be correction as the prices get too out of hand. Those people who join late will be hurt. How do you know this stage. From TA point of view, the momentum should tell. From fundamentals, Trailing and Forward P/E of the stock compared to industry and other stocks in the industry.

As I said in earlier posts, its very hard and risky to catch bottom and top. U may forsee stock or market is going to fall. Timing it is very hard. Rather approach it based on your objectives. Be it either entry or profit taking.
Even though 52 week high is good for buying, the risk to reward is much better if you buy close to 50 day EMA. This also depends on the general market. Before May downfall, if you were waiting for a stock to buy at 50 day EMA, you would have been waiting for ever. Right now, most of them are trading close to 50 day EMA. So, there is no straight answer.

This market has been going up. Inspite of that, there are some elements that need improvement. Specially, VOLUME. Also, I see stocks rolling off or going sideways. Rolling off in IT sector: WIPRO, SATYAMCOMP, INFOSYSTCH. Sidways in most of the stocks. Is it consolidation or leg down. Only future can tell. Lets wait for the signs
As U might have realized it by now, day trading is hard. Trading itself is a hard game. Day Trading multiplies that. I have a reply in my thread about day trading techniques using cross over, stop loss and profit taking. % profit taking method makes more sense in day trading due to lot of volatility in a day.

Is there a correlation between open, high,.... Sometimes there is. For example, when reversal (open=high, close is near low of day) occurs, U can predict next day stock to go down. I rather suggest you to use crossover technique. It works in all cases. Gives you concentration. Let me know if U have any questions.
Speculation stage is a good and bad. Good because the stock price increases faster as many people know about. Bad because, sooner or later, there will be correction as the prices get too out of hand. Those people who join late will be hurt. How do you know this stage. From TA point of view, the momentum should tell. From fundamentals, Trailing and Forward P/E of the stock compared to industry and other stocks in the industry.

As I said in earlier posts, its very hard and risky to catch bottom and top. U may forsee stock or market is going to fall. Timing it is very hard. Rather approach it based on your objectives. Be it either entry or profit taking.

Even though 52 week high is good for buying, the risk to reward is much better if you buy close to 50 day EMA. This also depends on the general market. Before May downfall, if you were waiting for a stock to buy at 50 day EMA, you would have been waiting for ever. Right now, most of them are trading close to 50 day EMA. So, there is no straight answer.

This market has been going up. Inspite of that, there are some elements that need improvement. Specially, VOLUME. Also, I see stocks rolling off or going sideways. Rolling off in IT sector: WIPRO, SATYAMCOMP, INFOSYSTCH. Sidways in most of the stocks. Is it consolidation or leg down. Only future can tell. Lets wait for the signs
got the sign. Avoid longs for now. Don't compromise on stops and profit taking.

Cut your loses!!!. But how? This is one area I am currently working. In many books you read, 'Cut your loses and let your winners run'. But, they don't tell how you cut your loses. I sent a mail to Dave Landry once about how we can cut loses. His opinion was that it is hard to cut loses due the recent stock price action. Stocks are not going up immediatly after a pull back as they used to. They take their own time, going sideways before going up. So, here are some questions that we need to answer. And we should be able to use the answers consistently without guesswork.

* how do you differentiate between a stock going up versus going sideways versus going down?
* When can we lose trust in a stock before it hits your stop
* Should we continue to hold a stock when you see a clear signal from the indexes like we saw today

I recently was toggling with MACD cross down as a signal to take out the position. MACD cross down occurs due to stock being not able to keep up with earlier momentum. After the crossover, the stock can trade sideways and go up or go down. We have 2 options.

Option 1:
Cut loss when MACD cross down and avoid that stock until next pull back.


Option 2:
Cut loss when MACD cross down. Get back in when MACD crosses up. This happens if a stock is going sidways and then goes up.

Downside using MACD:
If using Option 2, U might have multiple crossovers if stock is going sideways. However, you could use last N day high to enter again.

Application:
Choose a particular option. Don't change them between stocks.

Your Comments?

Look at Sensex and Nifty. See MACD(12,26,9) and MACD(3,10,1). See Anything? Any difference between MACD(12,26,9) versus MACD(3,10,1) in how they provide information?

......................
1. Be consistent in whatever U do. Have a trading plan.

Trading is a small cycle. Write down the trading plan and following it consistently. Do not be swayed by the market. Market always lures into taking different paths. Do not get swayed by it. Your trading plan is the Tree which you use it as support in the cyclone of the market.
Do you know about Odysseus and Sirens story. See the attached image. The mast is your plan. Sirens are the market. You drowning in the sea represents loses.

2. Use Position Size for Money Management.

Use the calculator I attached earlier. Without using this, there is no hope for your success. Remember, with one Win you are not going to the bank and taking your money. With one loss, you are not going bankrupt. If you are serious, you are there day in day out for many years. Position sizing with constant risk is the key to winning on Long Term.

3. Stop Loss and Profit Taking

Devise a strategy for exits. Exits are the key to your winning. If you look around on Traderji, most people are bothered about entries. We are looking at the wrong place.

Continue to read.

Give yourself many years. Accompany trading with reading. Continue to experiment and improve.

As I suggested in the recent replies, from now on, I want this thread to have your viewpoint. Specially, I like to hear contrary view points. This is what I want to know.

1. I like to know views on pull back methodology.

2. New techniques for Stop Loss, Profit Taking methodologies.

3. When I suggest a stock, I want your pros and cons of taking the trade.

Basically, I want to avoid TUNNEL view. Lets share and improve our trading.
Cut your loses!!!. But how? This is one area I am currently working. In many books you read, 'Cut your loses and let your winners run'. But, they don't tell how you cut your loses. I sent a mail to Dave Landry once about how we can cut loses. His opinion was that it is hard to cut loses due the recent stock price action. Stocks are not going up immediatly after a pull back as they used to. They take their own time, going sideways before going up. So, here are some questions that we need to answer. And we should be able to use the answers consistently without guesswork.

* how do you differentiate between a stock going up versus going sideways versus going down?
* When can we lose trust in a stock before it hits your stop
* Should we continue to hold a stock when you see a clear signal from the indexes like we saw today

I recently was toggling with MACD cross down as a signal to take out the position. MACD cross down occurs due to stock being not able to keep up with earlier momentum. After the crossover, the stock can trade sideways and go up or go down. We have 2 options.
Option 2:
Cut loss when MACD cross down. Get back in when MACD crosses up. This happens if a stock is going sidways and then goes up.

Downside using MACD:
If using Option 2, U might have multiple crossovers if stock is going sideways. However, you could use last N day high to enter again.

Application:
Choose a particular option. Don't change them between stocks.

Your Comments?

Look at Sensex and Nifty. See MACD(12,26,9) and MACD(3,10,1). See Anything? Any difference between MACD(12,26,9) versus MACD(3,10,1) in how they provide information?

Can we use MACD(3,10,1) for cutting loses?

Hi! I am the new kid on the block! I must tell ya one thing that ur tips & obsevasion regarding stocks are simpy Gr8! I have just started trading couple of months back. Sir! could you plz help me by giving me info abt "srf 'and "indiacement'. Ihave bought srf @ 232 and indiaceme @ 193. what is the best time to book profit and their support and resistance.is there any tip regarding any good share.Thanks
Please Tell Me The Parametres Of The Indicators To Be Used As U Have Given For Macd.please Give Values For All The Indicators With Their Implications I.e Whether To Buy Or Sell As Per That Indicatior.please Explain It As A One Time Explanation For The Benefit For All.i Positively Want A Feed Back On Said Issue From U And Please Dont Refer To A Link.regards

EMAs: 8, 50, 200
MACD: 12,26,9 (currently I do look at MACD(3,10,1))
Slow Stocastics: standard settings
Minimum Volume: 100,000
Price: > 100

Setup: Trend Trading
Entry: Pullback

Objective: Select a stock that has liquidity, is tradable and is trending. Liquidity is defined by the average volume and the ease with which you can buy and sell stock. Tradability can be ensured by avoiding stocks that have lot of gaps or have huge bars. A trend can be identified using EMA crossovers or just looking at a chart.
Its a different story with the trend in this stock. It has been going up. But, look at the volume. Its been going down for last 2 months. I have been saying this for last few weeks about the low volume. We were waiting for the price action. We got from indexes today. So, this confirms the low volume. Again, its up to you to pull the trigger.

One hint I will give U though. Survival in the market is more important than making money. Survival is all about preservation of capital
Thats a very broad question. Here is my take. Planning, Consistency, Will Power, Knowledge of Probability theory and be the best person in real life. Trading is all about what you are made off. It shows all your weakness once U enter a trade. Trading requires U to be the best person U can be.


Quote:
Hi vv, When u speak about MACD cross down/up which do u mean specfically..
MACD(12,26,9) or MACD(3,10,1).?? And Crossover 0(zero) or any other value?

for MACD(12,26,9) - cross of signal line over EMA(9) line
for MACD(3,10,1) - cross of 0 line


Quote:
can you help me by explaining me how to read the future trends in chating?

Broad question. U could use trend lines, EMAs (& other tools) to read the future direction of a stock with certain confidence level. U have to understand that if there is 70% chance of stock going up, there is still 30% chance the stock going down. We can't achieve 100%.

Even though I suggested a chart is good or bad, I don't want you to take my word in exiting the stock. Each trader's objective in exiting a trade is different. When U entered the trade, what was your exit strategy. Please follow your plan. Here is one of the trading rule that fits what I am saying. http://hellotrader.com/2006/07/15/to...rules-5-of-12/

Some Interesting Links from www.kirkreport.com

1. http://hellotrader.com/category/top-12-trading-rules/
2. Rob Hanna on Admitting Trader's mistakes: http://www.tradingmarkets.com/.site/...-Rob-Hanna.cfm
Market:
Its impressive how the indexes came back. Even better is the action in banks (BANKNIFTY). Will there be a follow on to this? Will the volume and volatility be better this time? Lets wait and see.

Link on Keeping Ego Out of Your Trades:
http://us.rd.yahoo.com/finance/exter...mp;cm_ ite=NA

This tenet was told by my friend before I started trading. When you have big paper loss, you are not only losing money on that stock. But, more importantly, it will affect your current and future trades till you close the paper loss trade. So, take the loss and move on.

Here is the example of daytrading using EMA crossovers. Use % profit taking method to take profits. For example, by looking at a chart if you feel the EMA cross down will happen in Rs10, thats were your stop will be. If the stock goes in your favour, then you take profits as multiple of R is reached.

R = 10

1st R = 50%
2nd R = 25%
3rd R = 15%
4th R = 10%

Ofcourse, change the % to your convinience.

U need some improvisations to fine tune the no. of trades. U need to use 10 min, 15 min and hourly for selecting the direction of the trade.

Entry:
After crossover, try to enter when the price touches 8 EMA. Better if U enter when price touches 50 day EMA. Thats the low risk high reward play.

Exit:
Use bollinger bands. Don't forget to take % profits when price moves above the bollinger band. And never enter when price is above bollinger band.
Split V in the middle. U have left \ and then right /. Left represents stock going down. Where they meet is the low point. Right represents stock going up. I am saying, buy low, but don't buy when stock is going down. Buy when stock is going up from low. See the attached image.

can't help you in terms of setting your portfolio. I can give you following advice though.
1. Have only 1 stock per sector.
2. Limit to 5 stocks. No. of stocks depends on your capital amount. But, 5 should be good enough to manage.
3. Try choosing momentum sector stocks. Look at banks. I don't see a bank stock in your portfolio.
Long bars. Careful with stops. Weekly chart looks better than daily. On daily, there was an extended pull back. It will take couple of days to week to see better chart. So, if U say long term, lets apply weekly time frame. I think it looks good with MACD cross up, histogram positive and with nice pull back for entry. Volume is not so great during period June to Sep compared to earlier times.
RSI is an oscillator, used in Trading Range. Use that for entry condition. For setup, ema1 (8 days) > ema2 (22 days) > ema3 (200 days) + MACDSignal, you should get plenty. Recently, due to steeper index action, there might some going of the net due to MACD cross down. I suggest taking MACDSignal out of setup criteria when scanning. But, when U are looking at the chart, then apply. MACD works best when the stock is nicely trending. When the stock is consolidating, MACD doesn't work. Let me attach what I got from Amibroker. You should find more of these files in my thread.
I would advise U to read some books. Play with low amounts. More time U spend learning to trade, better Ur results will be. Good Luck.

Very nice chart. Perspective for next week. Market indices (Sensex & Nifty) have been up for a 4 days with good volumes. They are in overbought condition with some price resistance. Ideally, I would like them to go past the resistance and then pull back. Still nothing is lost. I am still bullish on the market.years back I realized I loved trading. Trading is something I never get bored. I can take a trading book and read several chapters in a row. I look at charts of stocks one after another. I can and I am doing this day in and day out. Still I am not bored. So, that keeps me going. Everyone should find in their life some kind of interest. I think I found that interest in trading. I will see how long it will last. Having said that, I am taking a break from this thread for next couple of weeks. See U later. Good Luck with your trading.
Entry:

Your one of the filter criterian for the entry in the stock:
stock having 8EMA > 50 EMA. ( I am not saying it is right or wrong.)

- 8 trading days means apprx 2 weeks. 50 trading days means apprx 2 months. What is the relation of price and volume during these 50 days and last 2 weeks?
- Does chart talk to you?

You can find many of filters. e.g. 2 months high, 20 day breakout, 10-20-30 set up etc etc.

In software terminology, these filters are nothing but wrappers over P/V relation.
A relation between price and volume is the most important factor.

If one uses filters ignoring P/V then it is just like driving a car without understanding how the car works.

Only thing where filters can help in is to provide a psychological check.

Initial Stop:

Volatility based stops work better in trend following system. Volatility based stops are prone to drawdown. During the drawdown, the equity at risk has to be adjusted.

Most of the time stock/market is not trending. If one wants to succeed in trend following then one needs to look at multiple markets. To do all this, it needs tremendous descipline. That is what famous TURTLES did.

Do you sense something? Are you drifting away from swing trading to trend following?

Exit:

What if stock is trending?

What if stock is ranged?

What if there is a stiff resistance on higher time frame?
Position size:

Let us say R is a initial risk.
If one is already having a postion in the stock then,

if profit reaches to 1R,
should we add another pie of position?
should we book half of the profit?

Expectancy:

E = % of win * avg money win - % of loose * avg money loose.

How E can be greater?

These thoughts are just like fuel to propell you further
As long as you have a plan for them and take those trades as part of your trading. For example, your trade plan for this trade can be:

Setup Condition:
Stock goes outside the bollinger band. You can make this more stringent condition if you get many stocks. Stock Open is above the bollinger band.

Entry Condition:
Days close of the tick which is above the bollinger band.

Exit Condition:
Days high + X

Profit Condition:
Trail the stop above previous day's tick high + x or 10% profit met.

The above is just an example and change according based on your liking and experience. This kind of trade is a CONTRA Trade. Going against the trend. You should be quick in either getting stopped out or taking profit. You will make lot more trades and will have lower loss and lower profits. Time frame for most of these trades can be 1 day to a week. Hope you are getting the point. Each kind of trade has a character to it. No trade is wrong or right as long as you have a plan as above. And you execute that plan to take those trades when you get them.
from oilman5...THIS IS GIFT OF VVONTERU...
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Default Re: my last thread

what may work in indian stock market
.................................................. ...
1] tipstars days r over..stock stars DAYS r coming
2] definitely VOLATILITY play [prepare a tool/plan to use it...i try to learn now,till date failed]
3] result play...try to know estimate before hand....compare its surprise factor
4] rumor play...who is sponsoring...operator..behind any game...
mind is its RUMOR..
5]buy at pullback
6]longterm contrarian view...what goes up must come down..
7]fund flow...fii..rbi policy
8]YOUR CONFIDENCE..FLEXIBILITY..EXECUTION SKILL
What is Fundamental Analysis

Fundamental analysis is the process of looking at a business at the basic or fundamental financial level. This type of analysis examines key ratios of a business to determine its financial health and gives you an idea of the value its stock.

Many investors use fundamental analysis alone or in combination with other tools to evaluate stocks for investment purposes. The goal is to determine the current worth and, more importantly, how the market values the stock.

Earnings
It’s all about earnings. When you come to the bottom line, that’s what investors want to know. How much money is the company making and how much is it going to make in the future.

Earnings are profits. It may be complicated to calculate, but that’s what buying a company is about. Increasing earnings generally leads to a higher stock price and, in some cases, a regular dividend.

When earnings fall short, the market may hammer the stock. Every quarter, companies report earnings. Analysts follow major companies closely and if they fall short of projected earnings, sound the alarm.


While earnings are important, by themselves they don’t tell you anything about how the market values the stock. To begin building a picture of how the stock is valued you need to use some fundamental analysis tools.

Fundamental Analysis Tools
These are the most popular tools of fundamental analysis. They focus on earnings, growth, and value in the market.

Earnings per Share – EPS
Price to Earnings Ratio – P/E
Projected Earning Growth – PEG
Price to Sales – P/S
Price to Book – P/B
Dividend Payout Ratio
Dividend Yield
Book Value
Return on Equity

No single number from this list is a magic bullet that will give you a buy or sell recommendation by itself, however as you begin developing a picture of what you want in a stock, these numbers will become benchmarks to measure the worth of potential investments.
Mohan,

One has to observe all the ratios over a 3-5 year period and observe how they are increasing/decreasing.

One should also compare all with different companies of the same industry to get a good relative idea. For example the P/E ratio can be compared to the p/e ratios of other companies and p/e ratio of industry.

Another parameter is capital:Free reserves which makes the company a suitable bonus candiadate. Free reserves are out the the earnings of the company and not revaluation of assets.

Stock prices are determined in the marketplace, where seller supply meets buyer demand. There is no clean equation that tells us exactly how a stock price will behave, but we do know a few things about the forces that move a stock up or down. These forces fall into three categories: fundamental factors, technical factors, and market sentiment.

Fundamental Factors
In an efficient market, stock prices would be determined primarily by fundamentals, which, at the basic level, refer to a combination of two things: 1) An earnings base (EPS, for example) and 2) a valuation multiple (a P/E ratio, for example).



An owner of a common stock has a claim on earnings, and earnings per share (EPS) is the owner's return on his or her investment. So, when you buy a stock you are purchasing a proportional share of an entire future stream of earnings. That's the reason for the valuation multiple: it is the price you are willing to pay for the future stream of earnings.

Part of these earnings may be distributed as a dividend, while the remainder will be retained by the company (on your behalf) for reinvestment. We can think of the future earnings stream as a function of both the current level of earnings and the expected growth in this earnings base.

As shown in the diagram, the valuation multiple (P/E), or the stock price as some multiple of EPS, is a way of representing the discounted present value of the anticipated future earnings stream.

Although we are using EPS, an accounting measure, to illustrate the concept of earnings base, there are other measures of earnings power. Many argue that cash-flow based measures are superior. For example, free cash flow per share is used as an alternative measure of earnings power.

The way earnings power is measured may also depend on the type of company. Many industries have their own tailored metrics. Real estate investment trusts (REITs), for example, use a special measure of earnings power called funds from operations (FFO). Relatively mature companies are often measured by dividends per share, which represents what the shareholder actually receives.

About the Valuation Multiple
The valuation multiple expresses expectations about the future. As we already explained, it is fundamentally based on the discounted present value of the future earnings stream. Therefore, the two key factors here are 1) the expected growth in the earnings base, and 2) the discount rate, which is used to calculate the present value of the future stream of earnings. A higher growth rate will earn the stock a higher multiple, but a higher discount rate will earn a lower multiple.

What determines the discount rate? First, it is a function of perceived risk. A riskier stock earns a higher discount rate, which in turn earns a lower multiple. Second, it is a function of inflation (or interest rates, arguably). Higher inflation earns a higher discount rate, which earns a lower multiple (meaning the future earnings are worth less in inflationary environments).

In summary, the key fundamental factors are the following: the level of the earnings base (represented by measures such as EPS, cash flow per share, dividends per share); the expected growth in the earnings base; and the discount rate--which is itself a function of inflation and the perceived risk of the stock.

Forces That Move Stock PricesOctober 8, 2004 | By David Harper, (Contributing Editor - Investopedia Advisor) Email this Article Print this Article Comments Add to del.icio.us
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Stock prices are determined in the marketplace, where seller supply meets buyer demand. There is no clean equation that tells us exactly how a stock price will behave, but we do know a few things about the forces that move a stock up or down. These forces fall into three categories: fundamental factors, technical factors, and market sentiment.Fundamental FactorsIn an efficient market, stock prices would be determined primarily by fundamentals, which, at the basic level, refer to a combination of two things: 1) An earnings base (EPS, for example) and 2) a valuation multiple (a P/E ratio, for example).
An owner of a common stock has a claim on earnings, and earnings per share (EPS) is the owner's return on his or her investment. So, when you buy a stock you are purchasing a proportional share of an entire future stream of earnings. That's the reason for the valuation multiple: it is the price you are willing to pay for the future stream of earnings.Part of these earnings may be distributed as a dividend, while the remainder will be retained by the company (on your behalf) for reinvestment. We can think of the future earnings stream as a function of both the current level of earnings and the expected growth in this earnings base.As shown in the diagram, the valuation multiple (P/E), or the stock price as some multiple of EPS, is a way of representing the discounted present value of the anticipated future earnings stream. (To learn about present value, see "Understanding the Time Value of Money.") About the Earnings BaseAlthough we are using EPS, an accounting measure, to illustrate the concept of earnings base, there are other measures of earnings power. Many argue that cash-flow based measures are superior. For example, free cash flow per share is used as an alternative measure of earnings power.The way earnings power is measured may also depend on the type of company. Many industries have their own tailored metrics. Real estate investment trusts (REITs), for example, use a special measure of earnings power called funds from operations (FFO). Relatively mature companies are often measured by dividends per share, which represents what the shareholder actually receives.About the Valuation MultipleThe valuation multiple expresses expectations about the future. As we already explained, it is fundamentally based on the discounted present value of the future earnings stream. Therefore, the two key factors here are 1) the expected growth in the earnings base, and 2) the discount rate, which is used to calculate the present value of the future stream of earnings. A higher growth rate will earn the stock a higher multiple, but a higher discount rate will earn a lower multiple.What determines the discount rate? First, it is a function of perceived risk. A riskier stock earns a higher discount rate, which in turn earns a lower multiple. Second, it is a function of inflation (or interest rates, arguably). Higher inflation earns a higher discount rate, which earns a lower multiple (meaning the future earnings are worth less in inflationary environments).In summary, the key fundamental factors are the following: the level of the earnings base (represented by measures such as EPS, cash flow per share, dividends per share); the expected growth in the earnings base; and the discount rate--which is itself a function of inflation and the perceived risk of the stock.ADVERTISEMENTGet your choice of several FREE Investing Education kits mailed Today!
Learn to trade the markets like a Pro! Explore our wide range of FREE offers including CD-ROMs, Books, Home Study Courses, Software, and even Trade Recommendations. Click Here to see the FREE Offers.

Technical FactorsThings would be easier if only fundamental factors set stock prices! Technical factors are the mix of external conditions that alters the supply of and demand for a company's stock. Some of these indirectly affect fundamentals. (For example, economic growth indirectly contributes to earnings growth.) Technical factors include the following:• Inflation - We mentioned inflation as an input into the valuation multiple. But inflation is a huge driver from a technical perspective as well. Historically, low inflation has had a strong inverse correlation with valuations (low inflation drives high multiples, and high inflation drives low multiples). Deflation, on the other hand, is generally bad for stocks because it signifies a loss in pricing power for companies.• Economic strength of market and peers - Company stocks tend to track with the market and with their sector or industry peers. Some prominent investment firms argue that the combination of overall market and sector movements--as opposed to a company's individual performance--determines a majority of a stock's movement. (There has been research cited that suggests the economic/market factors account for 90%!) For example, a suddenly negative outlook for one retail stock often hurts other retail stocks as "guilt by association" drags down demand for the whole sector.• Substitutes - Companies compete for investment dollars with other asset classes on a global stage. These include corporate bonds, government bonds, commodities, real estate, and foreign equities. The relation between demand for U.S. equities and their substitutes is hard to figure, but it plays an important role.• Incidental transactions - Incidental transactions are purchases or sales of a stock that are motivated by something other than belief in the intrinsic value of the stock. These transactions include executive insider transactions, which are often pre-scheduled or driven by portfolio objectives. Another example is an institution buying or shorting a stock to hedge some other investment. Although these transactions may not represent official "votes cast" for or against the stock, they do impact supply and demand and therefore can move the price.

these two dynamics: 1) middle-aged investors are peak earners who tend to invest in the stock market, while 2) older investors tend to pull out of the market in order to meet the demands of retirement. The hypothesis is that the greater the proportion of middle-aged investors among the investing population, the greater the demand for equities and the higher the valuation multiples.

• Trends - Often a stock simply moves according to a short-term trend. On the one hand, a stock that is moving up can gather momentum, as "success breeds success" and popularity buoys the stock higher. On the other hand, a stock sometimes behaves the opposite way in a trend and does what is called "reverting to the mean." Unfortunately, because trends cut both ways and are more obvious in hindsight, knowing that stocks are "trendy" does not help us predict the future. (Note: trends could also be classified under market sentiment.)

• Liquidity - Liquidity is an important and sometimes under-appreciated factor. It refers to how much investor interest and attention a specific stock has. Wal-Mart's stock is highly liquid and therefore highly responsive to material news; the average small-cap company is less so. Trading volume is one proxy for liquidity. But it is also a function of corporate communications (that is, the degree to which the company is getting attention from the investor community). Large-cap stocks have high liquidity: they are well followed and heavily transacted. Many small-cap stocks suffer from an almost permanent "liquidity discount" because they simply are not on investors' radar screens.

Market Sentiment
Market sentiment refers to the psychology of market participants, individually and collectively. This is perhaps the most vexing category because we know it matters critically, but we are only beginning to understand it. Market sentiment is often subjective, biased, and obstinate. For example, you can make a solid judgment about a stock's future growth prospects, and the future may even confirm your projections, but in the meantime the market may myopically dwell on a single piece of news that keeps the stock artificially high or low. And you can sometimes wait a long time in the hopes that other investors will notice the fundamentals.

Market sentiment is being explored by the relatively new field of behavioral finance. It starts with the assumption that markets are apparently not efficient much of the time, and this inefficiency can be explained by psychology and other social sciences. The idea of applying social science to finance was fully legitimized when Daniel Kahneman, a psychologist, won the 2002 Nobel Prize in Economics. (He was the first psychologist to do so.) Many of the ideas in behavioral finance confirm observable suspicions: that investors tend to overemphasize data that come easily to mind; that many investors react with greater pain to losses than with pleasure to equivalent gains; and that investors tend to persist in a mistake.

Some investors claim to be able to capitalize on the theory of behavioral finance. For the majority, however, the field is new enough to serve as the "catch-all" category: everything we cannot explain is deposited into this inexplicable category.

Summary If one could work out a formula to give you a concrete answer on a stock, the markets wouldnt exist and money wouldnt change hands. Bottomline is recognition and understanding comes via experience and after years of trading. Beyond the figures and the analysis one has to trust one s gut, and take calculated risks. That in my opinion is the only way to understand the share pr movements.

lower p/e ratio coupled with high book value is very good for LONG term investments. Whereas if the scrip is a FANCIED scrip, even with high p/e, it may quote more. those scrips may be good for short term. hence, companies with low p/e ratio which are not fancied may take a long time to appreciate. but they are worth investing for long term
The Little Book That Beats the Market - Joel Greenblatt

Contrary to efficient-market naysayers, this engaging investment primer contends that ordinary stock-market investors can indeed get better-than-market returns over the long haul. Greenblatt (You Can Be a Stock Market Genius), a Columbia Business School adjunct professor, touts a "value-oriented" approach that looks for bargain stocks whose share price is cheap relative to the company's profitability. His version is a "magic formula" that ranks stocks on the basis of two variables—the earnings yield and the business's return on capital. His Web site, magicformulainvesting.com, virtually automates the procedure for novices. Greenblatt offers lots of statistical proof of the formula's success, but emphasizes the importance of faith in seeing the investor through inevitable short-term downturns: "It will be your belief in the overwhelming logic of the magic formula that will make the formula work for you in the long run." He conveys his ideas through a lucid if rudimentary and rather corny explanation of basic investment concepts about risk, return, interest and business valuation. Although the fabulous returns he touts seem too good to be true, Greenblatt's formula is a reasonable variant of mainstream value-investing methods. Investors seeking a little more hands-on excitement than the average mutual fund offers won't go too far wrong following his advice. (Jan.)
Hallo,
I accept the importance of TA in trading, but Funda is Funda, cannot be ignored.
When mkt goes up up & up i.e. because of Fii,s Dealings also & same thing in case of Downnnn

So i think FII net purchse & sale trend should also be considered.

I salute to all my investor friends, and i wonder is you know something about CANSLIM strategy by William O'Neil and his book "How to make money in stocks" if you got a copy of that book in a pdf format. I really appreciate

PEG is the ratio of the Price Earnings Ratio to the expected Growth of the companies earnings per share.
PEG < 1 is a great Buy
A very high PEG means the stock is overvalued.
A PEG=1 implies fair valuation
Try 'Investment Valuation' and 'Damodaran on Valuation' by Aswath Damodaran. Here is a link of the second edition of 'Investment

It's an unfortunate fact that few investors can consistently beat the market. That's because it often takes one or more of the following rare traits...

1)The vision to identify breakthrough products, leaders, and brands

2)The knowledge to spot an undervalued gem in a sea of glass

3)The courage to buy and hold when others are running scared

Occasionally, you'll come across an investor with one of these valuable characteristics. And it's likely that person does quite well. But almost no one I know of can offer all three. That would take two very different – possibly even fiercely competitive – approaches...

4) The courage to not get depressed when everyone around him is making money and he is not (the investor is not envious).
What underlies every chart, every quote? - A COMPANY. Buy into that company my friend, where you find some value, not just some figures & pictures.
Warren Buffet doesn't ever needs charts he buy & holds onto a stock as long as he finds value in it. (And finding value is not bereft of arithmetic but it's a different kind of arithmetic

Try www.indiaearnings.com. Registration required
The best things in life are said to be free and the same holds true for cash flow! Investors love companies that produce plenty of free cash flow (FCF). It signals a company's ability to repay debt, pay dividends, buy back stock and facilitate the growth of business – all important undertakings from an investor's point of view. In the past we have given our readers a perspective on valuation parameters like price to earnings (P/E) and price to book value (P/BV). While both these valuation parameters reflect the present earning capabilities, they do not signal the ‘future’ prospects.
How and what of FCF
The formula for calculating Free Cash Flow (FCF) is as:
Net Profit + Depreciation – Capital expenditure – Changes in working capital – Dividend
FCF takes into account not only the earnings of the company but also the past (depreciation) and present capital expenditures, capital inflows and investment in working capital. Growing free cash flows are frequently a prelude to increased earnings. Companies that experience surging FCF due to revenue growth, efficiency improvements, cost reductions, share buy backs, dividend distribution (from subsidiaries) or debt elimination can reward investors in the future. Better free cash flows are therefore a reason for the investment community to cherish. On the other hand, an insufficient FCF for earnings growth can force a company to boost its debt levels. Even worse, a company without enough FCF may not have the liquidity to stay in business
From a company’s point
better FCF definitely indicates better efficiency on the part of the company. But what is pertinent for investors to note is that simply assessing the FCF on the basis of its absolute value is not prudent. It is imperative to also assess as to what components have contributed to the same.
Let us take a hypothetical example of two companies, A and B, both of which have garnered the same FCF for the current financial year.
Estimated free cash flow
(Rs) Company A Company B
Net profit 75 120
Add: depreciation / amortisation 20 5
Less: Capital expenditure 5 15
Add/ (Less): Decrease /(Increase)in wkg capital 10 (10)
Less: Dividend 20 20
Free cash flow 80 80
Prima facie although appearing similar, if you delve a little deeper there is a stark difference in their performances. While company ‘A’, despite having lower earnings has benefited by adding back depreciation and decrease in working capital, company ‘B’ has invested in capex and working capital. This indicates that while company ‘B’ is investing for future growth, company ‘A’ is not sufficiently geared up for the impending challenges. This also means that investors in company ‘B’ can expect ‘rewards’ in
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OUTLOOK ARENA >> VIEWS ON NEWS >> MAY 13, 2005

Free cash flow: Is it free after all?
MYSTOCKS | FREE NEWSLETTER

The best things in life are said to be free and the same holds true for cash flow! Investors love companies that produce plenty of free cash flow (FCF). It signals a company's ability to repay debt, pay dividends, buy back stock and facilitate the growth of business – all important undertakings from an investor's point of view. In the past we have given our readers a perspective on valuation parameters like price to earnings (P/E) and price to book value (P/BV). While both these valuation parameters reflect the present earning capabilities, they do not signal the ‘future’ prospects.
How and what of FCF
The formula for calculating Free Cash Flow (FCF) is as:
Net Profit + Depreciation – Capital expenditure – Changes in working capital – Dividend
FCF takes into account not only the earnings of the company but also the past (depreciation) and present capital expenditures, capital inflows and investment in working capital. Growing free cash flows are frequently a prelude to increased earnings. Companies that experience surging FCF due to revenue growth, efficiency improvements, cost reductions, share buy backs, dividend distribution (from subsidiaries) or debt elimination can reward investors in the future. Better free cash flows are therefore a reason for the investment community to cherish. On the other hand, an insufficient FCF for earnings growth can force a company to boost its debt levels. Even worse, a company without enough FCF may not have the liquidity to stay in business
From a company’s point of view
A better FCF definitely indicates better efficiency on the part of the company. But what is pertinent for investors to note is that simply assessing the FCF on the basis of its absolute value is not prudent. It is imperative to also assess as to what components have contributed to the same.
Let us take a hypothetical example of two companies, A and B, both of which have garnered the same FCF for the current financial year.
Estimated free cash flow
(Rs) Company A Company B
Net profit 75 120
Add: depreciation / amortisation 20 5
Less: Capital expenditure 5 15
Add/ (Less): Decrease /(Increase)in wkg capital 10 (10)
Less: Dividend 20 20
Free cash flow 80 80
Prima facie although appearing similar, if you delve a little deeper there is a stark difference in their performances. While company ‘A’, despite having lower earnings has benefited by adding back depreciation and decrease in working capital, company ‘B’ has invested in capex and working capital. This indicates that while company ‘B’ is investing for future growth, company ‘A’ is not sufficiently geared up for the impending challenges. This also means that investors in company ‘B’ can expect ‘rewards’ in future while those in company ‘A’ should sit up and take notice of what is ailing it.

FY06E Price FCF P/FCF
SBI 612 203.9 3.0
ONGC 874 131.3 6.7
Tisco 354 26.2 13.5
BHEL 831 31.6 26.3
Infosys 2039 51 40.0
Ranbaxy 965 19.6 49.2
HLL 132 1.9 69.5

From a sector’s point of view
As explained earlier, cash flows are dependant on the capital expenditure and working capital liabilities borne by the company. This however, differs as per the dynamics of the sector in which the company is operating and should be seen in that light. While sectors like banking require minimum expenditure on capex (as a % of their turnover) those in pharma, engineering, FMCG or commodity sectors require to invest a substantial amount in R&D and capacity expansions. Thus, you would find SBI trading at a very attractive price to free cash flow valuation of 3 times, while an equally competitive Infosys is trading at 40 times (due to lower cash flows).
To conclude...
FCF is not only a mirror image of the present but also a sneak preview into the future. The implications of the components of cash flow may not be explained in the annual reports, but is left to the investor’s prudence to diligently scrutinize the same and try to read between the lines. The legendry investor Benjamin Graham once said, “The individual investor should act consistently as an investor and not as a speculator. This means that he should be able to justify every purchase he makes and each price he pays by impersonal, objective reasoning that satisfies him that he is getting more than worth his purchase

What Is Free Cash Flow?
By establishing how much cash a company has after paying its bills for ongoing activities and growth, FCF is a measure that aims to cut through the arbitrariness and "guesstimations" involved in reported earnings. Regardless of whether a cash outlay is counted as an expense in the calculation of income or turned into an asset on the balance sheet, free cash flow tracks the money.

To calculate FCF, make a beeline for the company's cash flow statement and balance sheet. There you will find the item cash flow from operations (also referred to as "operating cash"). From this number subtract estimated capital expenditure required for current operations:
Cash Flow From Operations (Operating Cash) - Capital Expenditure ---------------------------= Free Cash Flow

To do it another way, grab the income statement and balance sheet. Start with net income and add back charges for depreciation and amortization. Make an additional adjustment for changes in working capital, which is done by subtracting current liabilities from current assets. Then subtract capital expenditure, or spending on plants and equipment
By establishing how much cash a company has after paying its bills for ongoing activities and growth, FCF is a measure that aims to cut through the arbitrariness and "guesstimations" involved in reported earnings. Regardless of whether a cash outlay is counted as an expense in the calculation of income or turned into an asset on the balance sheet, free cash flow tracks the money.

To calculate FCF, make a beeline for the company's cash flow statement and balance sheet. There you will find the item cash flow from operations (also referred to as "operating cash"). From this number subtract estimated capital expenditure required for current operations:
Cash Flow From Operations (Operating Cash) - Capital Expenditure ---------------------------= Free Cash Flow

To do it another way, grab the income statement and balance sheet. Start with net income and add back charges for depreciation and amortization. Make an additional adjustment for changes in working capital, which is done by subtracting current liabilities from current assets. Then subtract capital expenditure, or spending on plants and equipment
Net income + Depreciation/Amortization - Change in Working Capital - Capital Expenditure ---------------------------- = Free Cash Flow


It might seem odd to add back depreciation/amortization since it accounts for capital spending. The reasoning behind the adjustment, however, is that free cash flow is meant to measure money being spent right now, not transactions that happened in the past. This makes FCF a useful instrument for identifying growing companies with high up-front costs, which may eat into earnings now but have the potential to pay off later.

What Does Free Cash Flow Indicate?
Growing free cash flows are frequently a prelude to increased earnings. Companies that experience surging FCF - due to revenue growth, efficiency improvements, cost reductions, share buy backs, dividend distributions or debt elimination - can reward investors tomorrow. That is why many in the investment community cherish FCF as a measure of value. When a firm's share price is low and free cash flow is on the rise, the odds are good that earnings and share value will soon be on the up.

By contrast, shrinking FCF signals trouble ahead. In the absence of decent free cash flow, companies are unable to sustain earnings growth. An insufficient FCF for earnings growth can force a company to boost its debt levels. Even worse, a company without enough FCF may not have the liquidity to stay in business.

Free Cash Flow: Free, But Not Always EasySeptember 17, 2003 | By Ben McClure, Contributor - Investopedia Advisor Email this Article Print this Article Comments Add to del.icio.us
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The best things in life are free, and the same holds true for cash flow. Smart investors love companies that produce plenty of free cash flow (FCF). It signals a company's ability to pay debt, pay dividends, buy back stock and facilitate the growth of business - all important undertakings from an investor's perspective. However, while free cash flow is a great gauge of corporate health, it does have its limits and is not immune to accounting trickery. What Is Free Cash Flow? By establishing how much cash a company has after paying its bills for ongoing activities and growth, FCF is a measure that aims to cut through the arbitrariness and "guesstimations" involved in reported earnings. Regardless of whether a cash outlay is counted as an expense in the calculation of income or turned into an asset on the balance sheet, free cash flow tracks the money. To calculate FCF, make a beeline for the company's cash flow statement and balance sheet. There you will find the item cash flow from operations (also referred to as "operating cash"). From this number subtract estimated capital expenditure required for current operations: Cash Flow From Operations (Operating Cash) - Capital Expenditure ---------------------------= Free Cash Flow
To do it another way, grab the income statement and balance sheet. Start with net income and add back charges for depreciation and amortization. Make an additional adjustment for changes in working capital, which is done by subtracting current liabilities from current assets. Then subtract capital expenditure, or spending on plants and equipment: Net income + Depreciation/Amortization - Change in Working Capital - Capital Expenditure ---------------------------- = Free Cash Flow
It might seem odd to add back depreciation/amortization since it accounts for capital spending. The reasoning behind the adjustment, however, is that free cash flow is meant to measure money being spent right now, not transactions that happened in the past. This makes FCF a useful instrument for identifying growing companies with high up-front costs, which may eat into earnings now but have the potential to pay off later. What Does Free Cash Flow Indicate? Growing free cash flows are frequently a prelude to increased earnings. Companies that experience surging FCF - due to revenue growth, efficiency improvements, cost reductions, share buy backs, dividend distributions or debt elimination - can reward investors tomorrow. That is why many in the investment community cherish FCF as a measure of value. When a firm's share price is low and free cash flow is on the rise, the odds are good that earnings and share value will soon be on the up. By contrast, shrinking FCF signals trouble ahead. In the absence of decent free cash flow, companies are unable to sustain earnings growth. An insufficient FCF for earnings growth can force a company to boost its debt levels. Even worse, a company without enough FCF may not have the liquidity to stay in business. Is Free Cash Flow Foolproof? Although it provides a wealth of valuable information that investors really appreciate, FCF is not infallible. Crafty companies still have leeway when it comes to accounting sleight of hand. Without a regulatory standard for determining FCF, investors often disagree on exactly which items should and should not be treated as capital expenditures. Investors must therefore keep an eye on companies with high levels of FCF to see if these companies are under-reporting capital expenditure and R&D. Companies can also temporarily boost FCF by stretching out their payments, tightening payment collection policies and depleting inventories. These activities diminish current liabilities and changes to working capital. But the impacts are likely to be temporary. The Trick of Hiding Receivables Let's look at yet another example of FCF tomfoolery, which involves specious calculations of the current accounts receivable. When a company reports revenue, it records an account receivable, which represents cash that is yet to be received. The revenues then increase net income and cash from operations, but that increase is typically offset by an increase in current accounts receivable, which are then subtracted from cash from operations. When companies record their revenues as such, the net impact on cash from operations and free cash flow should be zero since no cash has been received.
Secondly, Cash Flow Statement can give an idea about cash-generation capability of the business. Thus, it's helpful for those who are interested in knowing the liquidity position of the organization like creditors or those shareholders who are interested in Dividends. However, it's not really a tool of detecting fraud. We must remember that both Enron & Worldcom used to provide Cash Flow Statement.



The gap between Cash Flow and Earnings has to be seen in light with that during the previous financial years as well as the average for the industry. Besides, year end window-dressing will certainly not generate any cash flow for the year but current year's Cash Flow will certainly include cash generated as a result of window dressing which took place at the end of the previous year.

A wide gap between cash flow and earnings may indicate that all is not well for the company but one can't jump to the conclusion only on the basis of this gap that the accounts have been manipulated.

try on icicidirect.com in research "multex global"

Most traders ignore reward/risk ratios, hoping that luck will save them when things start to go bad.

This is probably the main reason so many of them are destined to fail. It's really dumb when you think about it, because reward/risk is the easiest way to get a definable edge on the market house.

The reward/risk equation builds a safety net around your open positions. It's designed to tell you how much can be won, or lost, on each trade you take. The secondary purpose is to remove emotion so you can focus squarely on the cold, hard numbers.

Let's look at 15 ways that reward/risk will improve your trading performance.

1. Every setup carries a directional probability that reflects a specific pattern. Always execute positions in the highest-odds direction. Exit your trades when a price fails to respond according to your expectations.

2. Every setup has a price level that violates the pattern. Only take trades where price needs to move a short distance to hit this "risk target." Look the other way and find the "reward target" at the next support or resistance level. Trade positions with the highest reward target to risk target ratios.

3. Markets move in trend and countertrend waves. Many traders panic during countertrends and exit good positions out of fear. After every trend in your favor, decide how much you're willing to give back when things turn against you.

4. What you don't see will hurt you. Back up and look for past highs and lows your trade must pass through to get to the reward target. Each price level will present an obstacle that must be overcome.

5. Time impacts reward/risk as efficiently as price. Choose a holding period based on the distance from your entry to the reward target. Then use price and time for stop-loss management. Also use time to exit trades even when price stops haven't been hit.

6. Forgo marginal positions and wait for the best opportunities. Prepare to experience long periods of boredom between frantic surges of concentration. Expect to stand aside, wait and watch when the markets have nothing to offer.

7. Good setups come in various shades of gray. Analyze conflicting information and jump in when enough ducks line up in a row. Often the best thing to do is calculate how much you'll lose if you're wrong, and then take the trade.

8. Careful stock selection controls risk better than any stop-loss system. Realize that standing aside requires as much deliberation as an entry or an exit, and must be considered on every setup.

9. Every trader has a different risk tolerance. Follow your natural tendencies rather than chasing the crowd. If you can't sleep at night, you're trading over your head and need to cut your risk. Lot of talk the past few months regarding these three....especially on stagflation.Few interesting reads.........

http://www.investopedia.com/universi...inflation1.asp

http://www.investopedia.com/terms/d/deflation.asp

http://www.investopedia.com/ask/answers/202.asp

http://www.investopedia.com/terms/s/stagflation.asp

http://www.indiadaily.com/editorial/2119.asp

http://www.safehaven.com/article-2829.htm


10. Never enter a position without knowing the exit. Trading is never a buy-and-hold exercise. Define your exit price in advance, and then stick to it when the stock gets there.

11. Information doesn't equal profit. Charts evolve slowly from one setup to the next. In between, they emit noise in which elements of risk and reward conflict with each other.

12. Don't be fooled by beginner's luck. Trading longevity requires strict self-discipline. It's easy to make money for short periods of time. The markets will take back every penny until you develop a sound risk-management plan.

13. Enter positions at low risk and exit them at high risk. This often parallels to buying at support and selling at resistance, but it can also be used to trade momentum with safety and precision.

14. Look to exit in wild times in order to increase your reward. Wait for price acceleration and feed your position into the hungry hands of other traders just as the price pushes into a high-risk zone.

15. Manage risk on both sides of the trade. Focus on optimizing entry and exit points and specialize in single, direct price waves. Remember that the execution of low-risk entries into bad positions allows more flexibility than high-risk entries into good positions.

Do some research on the basis of EPS, PE and their competitors in the sector also company future plans and past growth. You will get fair idea about your query.
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The Following User Says Thank You to oilman5 For This Useful Post:
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