WHY price ALWAYS goes down AFTER you bought the stock?

WHY price ALWAYS goes down AFTER you bought the stock?

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1)It HAPPENS so because you entered at a wrong and inappropriate price.
2)Because you choose to enter at a resistance level,where you are supposed to get off the train.
3)Because you entered at a time when all players are waiting to exit.
4)It happens because you enter at that critical fibonacci level where
everybody is expecting big bang down.

How to avoid this trap?


Is this the problem you face always?

Buying

you buy a stock and after that you find the stock price goes down.
what is the way out for this problem?

selling

You sell and immediately the price rises. you feel bad.

Three solutions
1. ENTRY
ALWAYS BUY AT SUPPORT.
WHERE IS THE SUPPORT? WATCH THE TRENDLINE.IT IS THE SUPPORT.
Dont know trendline? Learn it.
2. EXIT
In case of profits, you got two options

Exit at a preplanned target price ,stay as long as price is above trendline.
OR
Exit, for major gains, when price breaks below trendline by 2 to 5%
3. STOP LOSS
Exit when price falls below trendline.
EXIT AT 2 TO 5% BELOW SUPPORT TRENDLINE OR YOUR BUYING PRICE

LEARN TO LISTEN TO MARKET.
If the price went down against you, the market is telling you that you made a wrong decision. listen, accept loss, exit with minimum loss
It is better to have small losses.
Big wins are must

Remember when you buy at support level, you can run away with minimum loss if a problem of market going against you happens.
But if you buy far away from support but close to resistance,then no escape.
Happy trading!

Hi,

Thanks for the advice . But pl guide me how to calculate support/resistance/entry/exit ..Do you have solid formulaes .I tried using one but it did not help me.

Thanks in advance.

Hi,

Please mail me or send me any link which you feel is the best for such calculation.

Thanks,
Raju

hi ,

i posted my query in saints thread ..
hope u can solve my doubt

i am not able to distinguish between a pull back and trend reversal...
im committing the same mistake as u said... pls do help me in this..

1. do we tell that trnd reversal only if it breaks the trand line? does volume gives some indication about this.. im confused pls help

2.we should buy at support or on pull back , but how to determine pull back is complete. is it when it touches or nears trend line?

please help me to get over this confusion

thanx in advance

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Retracement? or Reversal? Difference is---

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gENTS,
Reversal
WHEN TREND BREAKS REVERSAL HAPPENS.
Retracement
A TEMPORARY CHANGE,DURING SAME TREND,IS RETRACEMENT.

WE OFTEN have wondered, whether a decline in the price of a stock we're holding is long term or a mere market hiccup. WE have sold stock in such situation, only to see it rise to new highs just days AFTER. This is a frustrating. It can be avoided if you know how to identify and trade retracements properly.

What IS Retracement?
Retracements are temporary price reversals, WHICH take place within a larger trend.

The key POINT here is that these price reversals are temporary, and do not indicate a change in the larger trend. timeframe is one diffrence.

rvlv

Hi Raju,

see my posts of today.about support and resistance,i will post separately.
THere are formulae.
please read

http://www.incrediblecharts.com/technical/support_resistance.htm

Support
A support level is the price at which buyers are expected to enter the market in sufficient numbers to take control from sellers.

The market has a memory. When price falls to a new Low and then rallies, buyers who missed out on the first trough will be inclined to buy if price returns to that level. Afraid of missing out for a second time, they may enter the market in sufficient numbers to take control from sellers. The result is a rally, reinforcing perceptions that price is unlikely to fall further and creating a support level.



Resistance
A resistance level is the price level at which sellers are expected to enter the market in sufficient numbers to take control from buyers.

When price makes a new High and then retreats, sellers who missed the previous peak will be inclined to sell when price returns to that level. Afraid of missing out a second time, they may enter the market in numbers sufficient to overwhelm buyers. The resulting correction will reinforce market perceptions that price is unlikely to move higher and establish a resistance level.



Point and figure charts are useful for identifying support and resistance levels.
read also
http://www.investopedia.com/articles/trading/06/PBVChart.asp
Pivot points and fibonacci levels form support and resistance.
read about them.
end of story.


rvlv

Hi Raju

Are you into daytrading? wHICH BROKER?

First thing
In a realtime mkt,everybody is in emotion-hurry.

Second thing
In a real time mkt,people dont feed stoploss.
This makes things worse if power fails or net or pc crashes out.
If mkt is falling you need to feed critical stoploss,as soon as entry is executed.
If mkt is rising you need to feed trailing stop to protect profits. it is not easy to do.
Last thing

KEEP A TRADING DIARY
try to note at exact minute what you thought or fed what order etc.
Trade ,if daytrading,with a broker that has auto squareup like indiabulls,icicidirect,sharekhan.and have a telephone contact to call and squareup.
most brokers give you the record of orders fed etc
you have chart of the day
match up both find out what went wrong.then comes how to prevent it.
This is preparation.
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To analyse what happened and what went wrong
you need to record data
1.At what time you did what?
example
bought maruti at 1122hrs at 821
you bought but you did not place stoploss,you bought at resistance not at support

so please remember step by step what happened what you did, record it
then analyse it. This is called trading diary.
THE DIARY IS THE TOOL to change your deep rooted thinking if at all it is in a
wrong direction. question is you want to use it or not.

If u analyse understand then you can handle it next time and prevent heavy loss
by the way
who is your broker?
do you have ups power back up?
do u have cyber cafe near by?
can u get another internet connection?

LIVE chart can tell you if you are at support or resistance.
for example
see maruti yesterday
link

http://www.nseindia.com/marketinfo/charting/OnlineStockChart.jsp?symbol=MARUTI&series=EQ&mkttype=N

810 and 815 are supports lowest prices
822 819 823 828 are resistances
If you draw a line passing through most points(MINIMUM 3) on lowside that is support line it must have more than 3 points on it,if it has 20 points strong support.
Resistance also try to draw a line passing thru(minimum 3 points).or more points better
Once u get support and resistance lines try buying at support and selling at resistance
not easy but needed

Remember Take care of losses. then profits will take care of themselves.
prority ORDER
LOSS CONTROL, NEXT BREAKEVEN NO LOSS NO GAIN-NEXT PROFITS
You need to pass thru these three stages,each stage needs lot of time.

I can trade myself without loss.
about making profits,yes I do, but limited gains only.

HAPPY TRADING from now
rvlv

Hi Rvlv,

I am thanful to you for the wonderful advice.

I had bought Dabur India Ltd @ 141.10 at a specific time.Price increased till 141.90 within few minutes and then decreased again, so i bought again at same price.As the increase/decrease were very fast,I thought it would atleast increase to 142.25.
When I bought the second time, it again decreased till 140.50, I was optimistic , so again bought @140.50.

But it started decreasing and it went to 139.And bad luck came there.Power cut.

I searched for a cafe for 2 hrs .I got one but as UPS of that cafe was already in critical stage, I sold all of share @139/139.10/139.35

I have promised myself that I would never trade again on Thursdays.As I have broadband connection from Hathway(Cable Modem).If Power failure occurs,Cable also goes off and thus no net even if I have UPS.

I am in Pune and whole of Pune had a Power problem.And being new in Trading didn't knew of auto-squareoff.Though I have started trading with less amount , this has been a learning experience.(Expensive).

I am trying to learn with experience of myself and others.I have not attended any course.Have not read much books also.Just directly started trading.


Chart for Dabur India Limited.(Link)

http://www.nseindia.com/marketinfo/charting/OnlineStockChart.jsp?symbol=DABUR&series=EQ&mkttype=N

Forum and it’s people are superb.

Thanks for all the time and advice.

Re: POST MORTEM OF A SUPER?TRADE-LEARN NOW

POSTMORTEM OF A DAYTRADE.

see link
http://www.nseindia.com/marketinfo/charting/OnlineStockChart.jsp?symbol=MARUTI&series=EQ&mkttype=N

Trading diary
what the daytrader actually did on 17august2006?

at 1142hours bought maruti 365 shares at 821 rupees-thought good price to buy
at 1353 hrs he sold at 818 rupees as he thought he is in big danger.
no pending position

at 1410 hrs he sold at 823 rupees as he thought mkt will fall soon
at1445 hrs he bought at 826 rupees as he is scared now and confused where mkt is heading.
no pending position

at 1455 bought at 822 rupees
at 1500 hrs he sold at 823 rupees-thinking now guarantee as tv says fall is sure
There are pending positions now,he has yet to buy 365 shares.

Our guy trying to square off. our man,JamesBond is in hurry.

He cannot find the squareoff button. Searching.searching.
oH GOD aLMIGHTY!!!!!!!!!! PRAYING. WISHING things go well.Hoping FOR THE BEST.
HOPE-WISH-PRAY no use. nothing comes to his rescue

Indiabulls site design is so good he cannot find his squareoff point. They hide it so well-wow-excellento-they are sure to make more money.
and they do it so well.
THAT YOU NEED TO DIG A MOUNTAIN TO FIND squareoff button..

At 1500 plus few seconds, INDIABULLS promptly SHUTS OFF DAYTRADING,to proceed for autosquareup of pending positions.

Our man cannt square off-gives control to INDIABULLS.
aT 1500 HRS AND TILL FEW MINUTES,PRICE WAS AT 823.

AT 1512 HRS, INDIABULLS BUYS SHARES AT 822,and partly at 822.5 etc
pending positions closed. No auction.
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But if you were trading with 5paisa.com

This is what happens.
1.Their servers go off.(They loose power themselves-so server never can go online) It asks for relog in. you enter in.SERVER KICKS OUT AGAIN.RELOGIN.
You try to squareoff. you feed order. server crashes. you think net failed. yahoo opens when you try to check net-net ok
you try logging in. it opens. time is 1529 and few seconds.
You feed order fast.
reply comes NEAT SERVER NOT AVAILABLE SERVER CLOSED FOR TODAY.
you call on phone. 5paisa replies we will try in off mkt-but they never try-they never get the shares you want-you call after 30 minutes-sorry sir-we cannt help-no shares available to buy for you-your pending shares go for auction- instead of 2 rupees loss you end up with 21 rupees loss.
Fantastic.
The best part is 5paisa,com has no auto squareup so that they can profit at the cost of heavy losses of their clients. WONDERFUL INDEED!!!!!!!!!!!!!!!
THE person daytrading with 5paisa thinks-"I am a novice-i dont know how to trade-i should stop daytrading-his wife asks him what happened? he tells the truth-she bangs him-"you always sit there in front of pc whole day andmake heavy losses-give the money to me I will invest in real estate".tHE GUY BECOMES SILENT.NO ANSWER.
The reality is he is using a bad broker,and may be he needs a bit of trading education from a mentor-that is all nothing much wrong.
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He made just a rupee at 1500 hrs. The losses for other trades,He is not ready to think of, you calculate.

His broker Indiabulls charges him rupees 0.4510 per share to buy. to sell add another 0.4510(taxes included) it means broker gets 0.9020 as brokerage plus taxes.

HE MADE 1 RUPEE and paid 0.9020 to broker ,he gets 0.0980 to hand.

Now look at real scenario of mkt
at 1142 mkt is at resistance=time to sell(but our man bought)
at 1353 mkt is up halfway to resistance= time to buy(but our guy sold)
at 1410 mkt is at resistance =time to sell= he sold=good job buddy!!!!
at 1445 mkt is at resistance=time to sell=he bought at 826=mistake
at 1455 mkt is at resistance=time to sell=but our boss bought at 822
at 1500 mkt is at resistance=time to sell=he sold at 823=good job

See now the gap between the need of the hour and what the guy actually did.
Market makes you do all these wrong things.Because it is the smartest thing.

Now figure out where he could use a trailing stop(upwards) and where he could have exited with minor loss.

I think that is the lesson of this week

Learning through experiments!!!!!!!!!!





RVLV
Practice using trading diary and you can be on the way to 97% perfection if not 100%.

Hi Raju

Thanks for being open and ready to share your loss making experience.
This can help others. Sorry if I pushed you to share your bad experience.
It is the best way to learn from.
Patience is a virtue,except when it comes to getting out of loss making positions.
I saw your chart.

141 is a resistance, draw a line and it easily goes thru 3 points at least.
140.3 and 138.95 were intermediate supports. ok to buy there.
solid support however is 138.95 lots of points thru which support line goes thru.
From 1456 hrs till 1517hrs price was above 140 till 142 good resistance zone
at 141.65 you know a solid resistance exists. youcan exit there if you wait.
there was a dip at 1448,then it shot up.

Solution for your problems.
1.have a better internet and a second internet connection thru vsnl .
2.look for cybercafe before problem comes,far away more problem
3.Use broker with autosquareup
4.better use of stoploss
5.more dependence on live chart,using support and resistance zones
6.if possible feed an early order to buy/sell (after you entered),ata predefined profit level,
say at 3 times brokerage above entry price or price arrived at maximum profit level

MAXIMUM GAIN PRICE TO SELL= 5*ATR(5)+20DMA

ATR(5)= AVERAGE TRUE RANGE OVER 5 DAY PERIOD

WHERE TO GET ATR?
use www.icharts.in
rvlv