I can help you with stock chart reading

[shantanu10]

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.



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.

Hello vvonteru,

I am great fan of you. The way you explain the things is simply great.

I observed you style of keeping stop. You are using 3*ATR stop.

Actually, I feel, keeping stop at support or previous low seems to be very practical. (Ofcourse it is personal choice). Because these points (support or previous low) reflects crowd psychology. If one feels that the stop is too far, then he can adjust his position size accordingly. This is just my approach. Your comments or suggestions please.

 

[vvonteru]

Hello vvonteru,

I am great fan of you. The way you explain the things is simply great.

I observed you style of keeping stop. You are using 3*ATR stop.

Actually, I feel, keeping stop at support or previous low seems to be very practical. (Ofcourse it is personal choice). Because these points (support or previous low) reflects crowd psychology. If one feels that the stop is too far, then he can adjust his position size accordingly. This is just my approach. Your comments or suggestions please.

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.

 

[kareem_manji]

hi,

Can you help me in reading Simple, Weighted and Exponential Moving Average on the graphs on http://www.icharts.in/home/..... Mail me with description in simple language as I am new in this market on [email protected]..

Looking forward for your assistance..

Kareem

 

[huineng]

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.

Thank you very much for clarifying my doubt. You are doing a very great work. Keep it up. Much appreciate your clarity

 

[vvonteru]

Thank you very much for clarifying my doubt. You are doing a very great work. Keep it up. Much appreciate your clarity

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.

 

[soumya_b]

hi vvonteru,

which period of ATR should i consider for calculating a stoploss?

thanks,
soumya

 

[rajesh.sadhanala]

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.

Hi Vvonteru,

Nice Analysis, really appreciated. I have a small doubt. Normally pull backs comes with a shorter volume. Here the pull back have medium volume that shows it is news driven move (just a mere guess). Please correct me If I am wrong.

Regards
Raj

 

[vvonteru]

Hi Vvonteru,

Nice Analysis, really appreciated. I have a small doubt. Normally pull backs comes with a shorter volume. Here the pull back have medium volume that shows it is news driven move (just a mere guess). Please correct me If I am wrong.

Regards
Raj

Thanks for pointing. I think we should avoid the stock for now due to high unusual volume. Lets consider it after 1 more day.

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.

 

[Roshanna]

hi VV
just some clarifications:
a) what is a Setup (i understand it meansdeciding which stocks to enter)
b) what is a system
how r both related

 

[vvonteru]

hi VV
just some clarifications:
a) what is a Setup (i understand it meansdeciding which stocks to enter)
b) what is a system
how r both related

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.