Learning to Fish

[Fishserman]

Notes from Saint sir thread.

Successful Trader :

1. He has an Edge.
2. He knows When to get in.
3. He Knows when to stay out
4. He knows when to accept a mistake
5. He Uses Charts and Knowledge and how to use it.

Conclusion: Successful Trader is a male

Day Trader- Uses 5m and 10m charts for trading with 15 and 60 m as Backdrop

Swing Trader- Uses 60m for entry and Daily Charts as backdrop

Positional Trader- Trades Weekly Charts, Holds trades from weeks to months.

Trend Types:

UT- HH and HL
DT - LH and LL
Sideways - Relatively Equal Highs and Low

Trendlines:

Acts as an S/R, Price blast off and pulls back to this trendline
In a UTL 2nd Point is always higher then first , 3rd point is always higher then 2nd, vice versa for DTL

 

[Fishserman]

Break of TL signals a possible change of trend. Consider price in DT and UTL is forming, here UTL might indicate a short term buy but break of UTL is a sell Signal.

Rules for Pivots- 2nd candle break makes the other point PL or PH


Question: How to define trend on a chart? How to decide what trend market is currently in? How to read the structure of market?
Ans: We define trend of market by looking at that particular time frame.

Question: Define UT and DT
Ans: In UT if we have a new HPL and HPH breaks then we have HPH and HPL then it confirms UT, VICE versa for DT

Question: Define S/R areas
Ans: to be used as entry points or book profit areas

Method: Never cross the trend, We short rallies in DT and but declines in UT

Entry: 2 checks to be done when pull back is not deep and wait for pull back to finish, let 1st instance of buying come we buy above that candle

CT trades: After break of TL we wait for rally decline towards the last drawn TL thats an area to enter ( these should be sniper attacks and to be performed in intraday

WARNING: IF PULL BACK IS TO DEEP DO NOT ENTER

PPB and EXIT: Half position to be exited on break of TL, rest at PL OR PH, no need to wait for close below TL to exit.

Note: If price breaks TL and we exit, and it goes above TL we can always re enter. Also do entry with 50% qty and rest when price gives us a move in same direction with above stated criteria of trend


MACD: Positive divergence of MACD is the most reliable signal and leads to biggest move.

 

[Fishserman]

Chart Patterns:

Double Top and Double Bottom: M

* Volume is higher on first peak and lesser on 2nd peak and starts picking on breakdown, 3 months difference required if looking at daily charts.

Breaking of Trough between 2 peaks is a confirmation of change in trend to down.

Target: The distance from the peak to trough of M is the target once trough is broken

Head and Shoulders

LFT SHLD: Strong Vols
Head: Light Volumes
RT SHLD: Same or lighter then head
Increase in volume as neckline breaks to downside

Inverted:
LFT SHLD: Strong Vols
Head: Light Volumes
*Increase in volume sometimes higher then before the formation of LT SHLD
RT SHLD: Dip in Volumes from the rally
Increase in volume as neckline breaks to upside


Important Note: Once the neckline is broken, expect a return move but at all cost price should not break the neckline upwards, if that happens its a failed H&S Pattern and act as a trap, get out if the neckline gets broken


Cup and Handle

Looks like a coffee cup with handle
Accumulation, then breakout followed by a pullback ( the handle)
Breakout from the top of cup is confirmation of change in trend

Notes:
Cup should be more rounded then a V
The handle should be on the top part of the cup not too deep
Cup pattern should take atleast 7 weeks to form
Volumes should contract in the handle and expand on breakout

 

[Fishserman]

Entry: Break of cup and SL handle low Target low of cup to breakout measure and draw

Breakout Patterns:

Triangle: two lines converge ( think of a railway track)
Note: Volumes decrease withing the pattern

Broadening formation:
Diverging Lines from left to right ( think of Y)
Volume Expands with wider price swings

Is a Bearish Pattern

High 1 is taken by High 3 and then high 2 by high 3
Low 1 is taken by Low 2

3 H and 2 L Complete this pattern, confirmation is when Low 2 is taken out as prices start making new low.

 

[Fishserman]

MACD: Positive divergence of MACD is the most reliable signal and leads to biggest move.

A "positive divergence" or "bullish divergence" occurs when the price makes a new low but the MACD does not confirm with a new low of its own. A "negative divergence" or "bearish divergence" occurs when the price makes a new high but the MACD does not confirm with a new high of its own. A divergence with respect to price may occur on the MACD line and/or the MACD Histogram

 

[Fishserman]

Rules for drawing Trend Lines: Trend Lines should connect 2 or more lows or highs in a chart.

The general rule in technical analysis is that it takes two points to draw a trend line and the third point confirms the validity.

Example : Nifty Daily

Example Nifty Hourly

 

[Fishserman]

Daily is in UT, 15 is in Pullback and a possible sell but break of TL is technical buy.

 

[Fishserman]

How do we Identify Trends on chart, go with what is visible to the eye

Note: All charts below here are spot charts

Examples: Nifty Daily

 

[Fishserman]

Marking S/R on a chart Example

Weekly Chart Nifty

 

[Fishserman]

Quote: "we only BUY in an uptrend.So long the uptrend is held,we do NOT think of shorting"

Examples with explanations:

We should not take CT trades
We can exit our existing positions at major S/R
We can take trade again indirection of same trend
If price moves above major S/R and we are proven wrong, then we can always re enter above the break

Live Example:
Spot closes below 70 would be a good exit.
Spot closes above 70 longs can be attempted again if setup comes
Spot pullback from 70 and maintains last low or makes a HL we can think of long too
No shorts. Period