Q & A with Traderji

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.

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.

Here is an anatomy of my recent trade!

If you look at the attached daily chart of the NSE Nifty below you will notice that the Nifty after retracing 50% of this previous fall went into a period of consolidation for about 2 weeks. Since the underlying trend was bearish all I did was to put in a sell stop order 10 points below the low of 3056.00.

As we all know the market triggered the sell stop order on the 17th and I was short on the Nifty. Once short in the trade I put in a trailing stop order at the previous 3 bar high. 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.

1)I use two of the top three stockbrokers. I will not endorse any names.

2) I primarly use MetaStock

3) I do not use any indicators. You can read the anatomy of my recent trade at http://www.traderji.com/51818-post12.html

4) I primarly trade equities in both cash and futures. I find the equities market more profitable and easier to trade.

traderji, excellent posting!!!!!!
can your your analysis and views be edited, to update in a book form?
would you write a book sir?
since you use METASTOCK, you COMMENT ON RSC AND ITS USEFULNESS ON INDIAN CONTEXT
YOURS ADMIRER
OILMAN5

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.

Can you tell us what are the methods of using stop loss at the time of buying and the methods of identifying a potential buy in the scrip!

If I go long I use the previous 3 bar low as my stoploss.

I personally use chart patterns as mentioned in my earlier post. If you are seriously interested in chart patters I would suggest you get Encyclopedia of Chart Patterns by Thomas N. Bulkowski

Do you swing trade..? If yes what is your trading setup..??

I swing trade breakouts of chart patterns like pennants and flags.

For exampe after a stock has made a new three month high on the daily chart (this confirms an uptrend) I wait for a consolidation of at least a week (during which time that chart could form a pennant or flag)

I then go long only on a close above the previous 5 day high and ride the trend with a trailing stop below the previous days low.

Dear Traderji,

If know about patterns but want to learn how to trade using patterns and breakouts then which book do u suggest. Is there a book that teaches us how to trade and have setups, entry points and exit points using patterns.

Also do u search all stocks manually or use any software to identify patterns and then study them in greater detail.

Regards

Rahul