Random thoughts on technical analysis

By alex_laxya

Before everything read above again and again.We here talking about various trading ideas and technical analysis but it doesnt mean we clouding our mind while trading.Once you ready with your tools parameters and money management rules there is no jumping.
I am starting this thread for sharing and discussing thoughts on Technical Analysis as a concept ,concept of hedging by ta tools,trading options by using TA tools such as boilinger bands,stop loss technique and while doing so how to apply safe zone principal so your stoploss would not get triggered falsely,making targets using Fibonacci ,TA of a sector as a hole ,ta of crude oil,and also technical analysis of dollar-rupee pair(as i heard its launching on friday,i am not sure whether its tradable for retail traders or not)but dollar is imp for i.t.stocks and also for crude oil.
Here is one thing i am believer of simple trading tools,no complex things,although we may discuss here various things that doesn't necessarily means we must apply all things same time at same stock and take a trade.It means considering different setups according to different market condition.
I remember once long ago ,our finance teacher told one thing while he was covering the subject of technical analysis is.."OK guys now u learned, this is Dow theory,this is up trend & that is downtrend, this is head & shoulder & this is peanut formation n u think u beat the street then u mistaking most important objective of technical analysis. TA is not identifying the trend,as my 11 year son will tell, now market is going up by only seeing higher highs ON CHART,but technical analysis's one of major objective is predicting when the trend is reversing".
For Indian market sometimes global market is important and some time domestic conditions important,so we must adjust trading strategy according to changing market conditions.Your trading tools are as good as the MARKET CONDITIONS.Also i personally don't believe in state of the art softwares can change your financial life.They are as good as you.They are helpful for ease the hassle only.So welcome to everyone to share there ideas with others and help each other.

let me shoot a simple question at u???
how do u know tht the stock is trending or oscillating....pls dont tell me to luk at past data on the chart to explain it...i want sumthing for the right hand side of my chart, not the left hand side.

Random Walk on Technical Analysis would have been an apt title

s s

U HAVE TO SEE PAST DATA ..ALL THINGS STARTS FROM LEFT SIDE IN TECHNICAL ANALYSIS U SHOULD START READING BOOKS ON TECHNICALS THEN U WILL FIND HOW IT ACUTALLY WORKS

well i would not give the answer like " according to dow theory stock is trending when there are higher highs and lower lows and trend line is tilted upward" that only we can tell by past data.But i assume you asking how we can tell beforehand that stock now in trend or oscillating or consolidating? well as all know there two types of indicators leading and lagging.macd,moving averages all lagging and rsi,stochestic leading indicators.i wll try how to post chart here might b other members help me. but in oscillating market all indicators leading and lagging moving in wave.rsi getting over brought and oversold zone,in consolidating market they usually remains on neutral line ( central line for oscillator indicators lke rsi).todays nifty is good ex.upto 2.30 it was consolidating .....
"WHEN RELATIVE STRENGTH INDEX TEND TO REMAIN IN OVERBROUGHT OR OVERSOLD ZONE FOR QUITE SOME TIME WE CAN TELL MARKET IS IN TREND" i use rsi for my analysis u can use stochastic, %kor other oscillators.for intra day make rsi value 7 and for long term make rsi value 14 no roule just experiment wt suits u.also i like fast stochastic for merely intraday . regards ..alex
P.s. there is a indicator called ADX (average directional index).if adx reading is below 20 means weak trend and above 40 is strong trend,and imp thing about it,strong trend might be bullish or bearish.

yahoo intra.png
example of a consolidating market and standard rsi movement on neutral(center line).
on some other thread( i guess going by 60 min. flow) i post in morning time market seems dull so i m not taking position if it came to 4260 i will think about long

in fact i am thinking about this title " eternal shadow of a spotless trader " as i like the ket winslet and jim karry starer movie " eternal sunshine of a spotless mind "..but thoght name would confuse traders and they mis judge as intellectual thread haha

PAIR TRADING
Well today i am posting on pair trading and how to benifit by help of technical analysis( TA)
1) Pair trading as name suggest taking to apposite positions at two different stocks at the same time.That means one position will be buy(long) on one stock and sell (short)on another stock.
2)I will simplified by giving example

2)CONT. FROM LAST POST ...Well we take ex. of Maruti & Tata Motors.both stocks are from one single sector that is automobile.Now we have to short one stock and buy one.We then spend our time on both charts ...here i explain my trade ..on 16th jully As shown in fig.tata motors chart is comparatively weak and maruti's chart is strong.Now its entirely different subject why this strong and that weak,in short words i will tell,in marutis chart stochastic just bottomed up,rsi nicely made two higher highs and lower lows at bottom at 16th jully,so i brought at 548 on close as it was clearly making doji ,whereas tata motors stochastic and rsi wasnt of my liking(when rsi made big base i never go on long).i short the stock tata motor at 16th jully at 406rs.
3)if xample seems bit difficult to understand as i am new to this posting kind of stuff then you jut consider that we are long on maruti and short on tata.
4)So nearly after one month( i will skeep how to role over ur contract with less 'cost of carry' part )you have a position in your hand like this ..
5)as shown in chart at 14 th augst. tata motor is at 450 and maruti at 705rs.u have 50 rs loss( approx.12 to 14 %)on tatas short position and profit on marutis long position150rs(apprx.24 to 26%), so you have nearly 10% profit in hand
6)Now you might ask why such a fuss just add 10 contracts long on maruti n reap off the profit,instead of adding 5 contracts long n 5 short? well as a trader we must accept a fact that we play with the probability.our aim is by any means and tools add the math of probability in our favor.If one is novice in trading his probability of loosing is nearly 100%,then we learn fundamentals,study micro and macro economical factors,learn complex credit reserve ration n so many fundamental things like P.E.,yield,beta n all then we make probability of winning bit higher,then learn technical analysis and made probability of winning bit higher,more sophisticated you become and learn your probability of winning gets higher ,still..still n still we cant make winning probability 100% no one ever done and no one ever could.PAIR STRATEGY GIVES CUSHION TO YOUR PROBABILITY .
7)suppose overnight you learned R.B.I.hiked the interest rate by 50bps then next day all interest rate sensitives tumble,including our very own automobile sector,then our short position in tata motors gives us cushion to our loss making maruti long position.as tata motor is weak in sector will fall more than strong maruti
8)And suppose in overnight rbi slash interest rates then there will be rally in auto sector n maruti long gives cushion to tata short.
9)Also many times stocks fluctuate in tendom with market we say it beta,so we minimize that fluctuation. In other way we can say grossly we holding very low beta stock so ur risk or probability of wiped out is less
other examples of pair trading -
.now u can see hedge funds operate somewhat same way,they long on s&p500 and dowjones and short on nifty since 6 month...also you can short RIL and buy crude oil future..so many examples

Attached Images

	my tata motors.JPG (61.4 KB, 42 views)
	my maruti.JPG (61.6 KB, 29 views)

WHICH IS THE HIGHEST MANIPULATIVE MARKET IN WORLD ?
ANY ANSWERS .........??
ANSWER IS CRUDE OIL.why? because FED ( US RESERVE BANK)IS DEPENDENT ON IT,OPEC(oil & petrol exporting countries)dependent on it,wall street dependent on it,banks dependent on it ( banks rely on gold as collateral and gold directly proportional to crude oil )... well there was a interesting story of late 90s when crude was hovering around 60$/barrel one hedge fund was manupilating the oil,with the help of opec of course ,and he manage to suck in other speculators as prises going higher and he manage to make up to 70$,( volume spread analysis ppl call it marking up...so be it).Then few u.s. banks had got wind of it they got to knew one perticular group is active behind cornering the oil,so few banks came together and started shorting the crude, such was power that crude tumble up to 45$ and that hedge fund gone bankrupt.
what is myth of the story?
when fundamentals are against or in TA big trend is against you never corner market or never take apposite position,'trend is your friend until it bend!'