start of a equity trader in indian market

now i shall put view from traderji.......his time tested concept
.....Identifying the entry point

After identifying the trend, we now come to the interesting part of a trade. Knowing when to enter!

There are certain conditions that need to be fulfilled to identify an entry point for long trades.

The 20 EMA should be above the 50 EMA


The security should be above the 50 EMA


The security should be trading(consolidating) between the 20 EMA and 50 EMA

Once the above conditions have been fulfilled, we need to visually look at the charts to identify the following chart patterns:

Flag, Pennant


Symmetrical Triangle


Ascending Triangle


Descending Triangle


Rectangle

And finally, after identifying any of the chart patterns mentioned above, one needs to look for a bullish (upside) breakout out of these patterns for a BUY(long) trade!
.................................................. ................................
After identifying which stocks to trade in you now should have a basket of50-100 stocks in your watch list.

Your next step as a trader is to now identify the trend of the market and the individual stocks in your wish list. Trend can be different for
different time frames. So as a trader you now have to decide on the time frame you would like to trade in!

After you decide on the time frame you would like to trade in you then work on identifying the trend in that time frame. For example if you would trade short term trends you can watch the hourly intra-day charts and/or daily charts. If you trade medium term trends then you look and daily and/or weekly charts.

Once you decide on the time frame you like to trade, your next step would be to identify the trend.

One quick and easy way to identify trends would be to use moving averages.
Rules for Identifying Trend and Consolidation/Correction
If a security is above both its moving average and the 20EMA is greater than or above its 50EMA then the security is in a strong uptrend.


If the security is between the two moving averages and the 20EMA is above (greater than) the 50 EMA, then the security is in a consolidation/correction in its uptrend.
One of the key concepts in trading is the gap between price and value. I first became aware of this decades ago, during a brief lecture by J. Peter Steidlmayer, a noted Chicago trader. Little did I know how many years I would spend looking for a way to implement it in my trading.

It makes sense to buy below value and sell above value. Everybody knows about price - you read numbers on a price tag or look up a stock quote on the screen. At the same time, very few people know how to define value and track its changes. If you can do that, you no longer need to base your buy or sell decisions on price alone. You can buy when value is rising or sell short when price rises too far above value.

Price can be below value, above it, or equal to it. The distance between price and value may be large or small, increasing or decreasing. Few technical traders ever think about the difference between price and value. Fundamental analysts are much more attuned to the idea, but they do not own it - technicians can use it as well.

A trader needs to answer three questions - how to define value, how to track its changes, and how to measure the distance from price to value.

Fundamental analysts search for value in their spreadsheets and earnings reports. The problem with fundamental analysis is that values change slowly but prices keep fluctuating. As one of my students once said: "Prices are connected to values by a mile-long rubber band."

Technicians can use several simple tools to identify value in any market. My favorite method is to use an -exponential moving average - two moving averages, to be exact.

Moving averages identify those levels at which most market participants agree on value. A rising moving average shows that value is increasing, and a falling moving average tells us that value is decreasing.

A faster moving average represents a short-term consensus (20 EMA in this case). A slower moving average represents a long-term consensus (50 EMA is this case). I call the area between the two lines 'the value zone.'

Traders driven by their emotions tend to buy when prices are high and sell when they are low. Once you learn that the zone between the moving averages identifies value, you can aim to buy at or below value, and sell above value
When securities rise too far away from its moving averages it indicates that the particular sercurity is overvalued and is most likely to pull back to area of value which in this case is the moving average.

.................................................. .. find upside breakouts after a period of consolidation a more relaibe BUY signal as this confirms a continuation of the uptrend.

Buying upside breakouts after a pullback in a strong trend is also fairly reliable. This method of trading is called swing trading.

However in both cases you need a robust and reliable money management strategy to be successful.
One of the first steps a trader has to take is identify which stocks to keep a watch on. This is called his/hers watchlist. This watchlist will be the stocks that a trader will analyze on a daily basis.

So which stocks would you like to keep in your watchlist?

Ideally one should always trade stocks that have a sponsor. A sponsor is actually a large Mutual Fund, FII, etc or in other words Market Movers. No matter how good a stock is fundamentally, the stock will not perform until it does not have a sponsor.

So how do we know which stocks have a sponsor?

One simple way is to keep a watch on the following:

NSE - Equities - Most Active Securities

NSE - Equities - Most Active Securities

NSE - Equities - Top Gainers & Losers

NSE - Equities - Top Gainers & Losers

NSE - Equities - Top Gainers & Losers

NSE - Equities - Top Gainers & Losers
...............................Go through the links above every single day and add the stocks to your WatchList. Ideally a watchlist should have at least 50-100 stocks for your daily analysis
....................
so u get the touch of traderji!!
with regards this great trader from mumbai

.Observe the relative performance of various sectorial indices for couple
of trading sessions
2.Stocks that fall the least during correction tend to bounce back fast,
so keep an eye on those stocks and the sectors to which they belong
3.If you watch cnbc for 1/2-1 hour everyday before market opens, they
generally discuss stocks/sectors gaining momentum
4.keep a watch on list of gainers everyday, that gives you a feel
of the winners
5.i have also subscribed to trend trading newsletter, that tells me the
relative strength after I select few sectors
.................................Trading the markets is an extremely simple job. If you can control the emotional devils of FEAR & GREED which generally clouds your mind and prevents you from thinking straight you can easily be a successful trader.

PLAN
Stocks can be bought by using this plan only at early stages of an intermediate upward trend
When markets crash and then bottom out and then again start an intermediate uptrend
Buy stock futures of stocks that belong to the strongest sectors and have a high Relative strength.
some other factors also count like,
Quality of management is important. example - you can always bet on reliance
Need to understand general economic environment. example - IT companies who were earnings 40+ % margin are bound to be hit hard by rupee appreciation so avoid IT
mass consumption theme is playing the round - get into sector like telecom
big plans of govt for power sector - buy power equipment/utility provider
after filtering the stock through numerous such criteria, BUY the Stock future
keep a SL at the lowest point the stock had hit during the preceding downtrend
trail the position with wider SL to catch the maximum trend
Strictly no MID CAP position in this plan. Only Large Cap.
since you buy stock future, with small margin and capturing large trend
profits are very high
limitation of this plan is that you need to have a deep pocket
.........I would prefer to buy on strength (upmove]
.................................................. ....................Every trader has to make a judgemental decision wheather or not to close a trade if a stoploss is breached.

If you plan to close positions intra-day if a stoploss is triggered you have to stick with this plan for all your trades. Alternatively if you plan to close your position if a stoploss is triggered on a closing basis then you should stick to this for all your trades.

In the long run the rewards of sticking to a FIXED set of rules will far outweigh the risks.
I generally prefer to trade using charts with raw prices (bar charts) rather than use oscillators (which I consider as lagging indicators since they are derived from the bar charts or prices).

I like to trade charts which have made new highs which can be one month (for short term trend) or three months (for interrmediate trends).

Yes, I love to trade breakouts of consolidations as I have found them to be very profitable with a favourable risk:reward ratio.

I use a database of 100 stocks which I filter out based on volume or value. I then filter the databse for stocks making NEW one month
.............one of the prerequisites of a swing trade is that the stock should be in a strong uptrend.
Three main criteria to pinpoint potential Stock Picks

A history of consistently strong sales and earnings growth


A reasonable price


Strong price action relative to the market
...........................stock picking is an art...an experience hand can do it.
fundamental data gives the potential of future betterment.for a different industry ballgame is different...futuristic business up has to be seen in light of profitability.
so some idea...on a sector.
hospitality and tourism ....on hotel.
theme of cram...export
banking...rate of interest...npa
............
next comes ta...its the reflection of price......what present traders r doing..
how far they r bullish?
here most traders make mistake........they presuppose to guess..[hoping accurately...forgetting its a probalistic model]
its only DIRECTION CAN BE PREDICTED. not the target...
judgement must be for continuation[trend]..or reversal[mean reversion]
various tool r used to do same...some of them has superior guessing value.
hence for target...sar is better.
initial plan must be based on low risk strategy...and what works on present market condition.
risk analysis must be done...before entry.
ur news letter ...tradersedgeindia very helpful...
as a trader ur plan is short with trend bias ...hence relative strength plays imp role in stock scanning...
as price reflects all known event....we should spend money to get unknown news...which may affect price
think one of the best indicator for any trader or investor to help him/her select stocks to go long in the market is the External Relative Strength

This indicator can help any investor/trader pick the best performing stocks (or stocks that have corrected the least compared to the other stocks in the market) in any correction.

So the stocks .......I too prefer to wait for pullbacks in the above high ERS stocks. One can use a simple indicator like Stockastics<30 or RSI(5)<30
............
Since this correction is induced(forced) than natural I think it is best to see how the market behaves for a few days before making a call on the direction of the market.
............
THIS R SOME GEMS OF TRADERJI

recntly i read a book on professional trader.........pitbull.
some pt i think useful as suggested by him
.................................................. ...................
1.routine
2.checklist........70stock
3.prepare for tomorrow.........big picture,inflection pt.channel zone and spotting trend
............
his theory on natural /acquired quality

1.gambling feeling
2. good with number
3.how to think and what to think about
4. how to perform under fire
5.money management
....................
trading methodology to suit personality
ur strength............................
.dedication and hard work
hate to lose attitude




.........................ur weak pt
fear of loss
constant praise is reqd
mentally someone must give comfort
..................................................
accuracy factor in guessing
understand to make money learn to cut loss quickly
exactly know u shall fight in own terms
market analysis........how price try to move
10ema as a trend
feel on support /resistance and oscillator base signal
gap play
imp of cash in hand
money flow of fii,mf
3day rule........1..2..3 day up then reverse play
how market react to news.............-news,shrugged off by market..........bullish ...............take position
new high
probability calculation ........trading signal on half hr basis
nontrade day..............watch top for reverse
..................................
ego is worst enemy,divorce from trade decision..........trade only to make money
CONCEPT
.................
1.TRADE OR FADE
2. PLAN IN DETAIL
3. HONOUR STOP
4. WHEN TO PLAY BIG
5.HAVE A MENTOR........HAVE SOMEONE..TO SOOTHE NERVE
6.DEVELOP A METHODOLOGY THAT FIT U.......TRADE FIRST TO PROVE UR ABILITY.
TO BE WINNER............FIRST BE IN LINE OF FIRE AND PULL THE TRIGGER RIGHT
PREPARATION PAYS......ITS ESSENTIAL TO KNOW MORE THAN OTHERS
7.WHERE U R GOING THAT COUNTS..........ie. what u shall be
8.never gamble for large amount........never gamble if u have other priority.....never lack selfdiscipline.......stick to ur money earning plan,good gambler not only keep bet low,but led a rational life also[stressfree within limit]
9.ASSUMPTION OF PRICE RISE IMP.NOTHING CAN BEAT KNOWING WHAT MAY HAPPEN,BEFORE IT HAPPEN .........EXCEPT WHEN IT IS WRONG.
10.KEEP UR PRIORITY STRAIGHT,MANAGE UR MONEY........CHANGE U.
11. TRADER MUST UNDERSTAND GAMEPLAN VS. GAMBLING........WITHOUT IT NOTHING POSSIBLE,DIVORCE EGO FROM TRADING.......FIND UR EDGE AND STICK TO IT
12. value of info..............[inside one]
13.u must change direction of bad trading by first.....neutral.......must stop.......then reevaluate.....where and why wrong
14.dont go for killing trade,........u shall be killed first then,instead learn to take small profit
15.exiting a losing trade cleans head and bring back objectivity
16.trading is a full time commitment,personality fitment........plan first with worst case scenario...then improve at what condition with alternate scenario,go detail....in problem get out.........fight another day attitude.auction game .....helps
17. fibonacci,wave theory helpful. read uncertainity well.......it may be oppurtunity
18.never let.......friendship,family relationship get into way of sound decision making about money.......follow written rule, be ready for all eventuality
......................
a view of market wizard...champ

Wonderful thread, but just one request... could you please frame your points properly it's quite confusing sometimes and we can't get the meaning of it. Thanks.

By now you must be accoustomed with his flow,remember Renu who used to spell opposite,it is one's natural flow.

oilman,

Very good thread learnt many things from this write ups.

Asish

dear amolhg , as u have asked......on pitbull , .....i am explaining.
its gist of book........as interpreted for development of new trader.
1.routine
2.checklist........70stock
3.prepare for tomorrow.........big picture,inflection pt.channel zone and spotting trend
............
he believes in routine,70 stock....watchlist.inflection pt.......probable swing pt.
.........................
next 5pt......must he believes......to be a trader
1.gambling feeling
2. good with number
3.how to think and what to think about
4. how to perform under fire
5.money management
....................
how he gave up his 9yr+ fundamental background........
and way he transforms
.........................ur weak pt
fear of loss
constant praise is reqd
mentally someone must give comfort
..................................................
accuracy factor in guessing
understand to make money learn to cut loss quickly
exactly know u shall fight in own terms
market analysis........how price try to move
10ema as a trend
feel on support /resistance and oscillator base signal
gap play
imp of cash in hand
money flow of fii,mf
3day rule........1..2..3 day up then reverse play
how market react to news.............-news,shrugged off by market..........bullish ...............take position
new high
probability calculation ........trading signal on half hr basis
nontrade day..............watch top for reverse
..................................
ego is worst enemy,divorce from trade decision..........trade only to make money
CONCEPT
.........................
next his direct suggestion and between line concept .....expressed as pt........
1.TRADE OR FADE
2. PLAN IN DETAIL
3. HONOUR STOP
4. WHEN TO PLAY BIG
5.HAVE A MENTOR........HAVE SOMEONE..TO SOOTHE NERVE
6.DEVELOP A METHODOLOGY THAT FIT U.......TRADE FIRST TO PROVE UR ABILITY.
TO BE WINNER............FIRST BE IN LINE OF FIRE AND PULL THE TRIGGER RIGHT
PREPARATION PAYS......ITS ESSENTIAL TO KNOW MORE THAN OTHERS
7.WHERE U R GOING THAT COUNTS..........ie. what u shall be
8.never gamble for large amount........never gamble if u have other priority.....never lack selfdiscipline.......stick to ur money earning plan,good gambler not only keep bet low,but led a rational life also[stressfree within limit]
9.ASSUMPTION OF PRICE RISE IMP.NOTHING CAN BEAT KNOWING WHAT MAY HAPPEN,BEFORE IT HAPPEN .........EXCEPT WHEN IT IS WRONG.
10.KEEP UR PRIORITY STRAIGHT,MANAGE UR MONEY........CHANGE U.
11. TRADER MUST UNDERSTAND GAMEPLAN VS. GAMBLING........WITHOUT IT NOTHING POSSIBLE,DIVORCE EGO FROM TRADING.......FIND UR EDGE AND STICK TO IT
12. value of info..............[inside one]
13.u must change direction of bad trading by first.....neutral.......must stop.......then reevaluate.....where and why wrong
14.dont go for killing trade,........u shall be killed first then,instead learn to take small profit
15.exiting a losing trade cleans head and bring back objectivity
15.exiting a losing trade cleans head and bring back objectivity
16.trading is a full time commitment,personality fitment........plan first with worst case scenario...then improve at what condition with alternate scenario,go detail....in problem get out.........fight another day attitude.auction game .....helps
17. fibonacci,wave theory helpful. read uncertainity well.......it may be oppurtunity
18.never let.......friendship,family relationship get into way of sound decision making about money.......follow written rule, be ready for all eventuality
......................
note....he is known best scalper.
since people loves easy money.......no hard work....not even ready to read good books,forget to buy and learn.i try to gist.............of that 'pitbull'
personally i believe..............all thing u want to become a successful trader........
r expressed in 5 thread........i have writen.
journey....
quality....
maturity...
method.......
system....
adept and adapt.......
..................................
fitting of jigsaw and u into system ........ur part i left for u [any buddying trader]
however gen caution...........trading is injurious to HEALTH AND MONEY

ASISHDA, THANKS AGAIN.........
HOPE U R IN GOOD HEALTH AND HIGH SPIRIT AS USUAL
[is ur ph. no changed...........pm if possible]

yes amolgh,
i plan to write .......brief on my first thread
.................................................. ..............................
sl. no represent the post........then utility........'journey of a trader'
.................................................. .....................................
1. can trading be learned?.....yes
2. what reqd to learn it
3. some reference
4. background of u

Good morning oilman ... ltns...what's up...

ss ... ...