Please use discretion on stops based on confirmation and money management plan.
--------------------------------------------------------------------------------For All:
Remember, We can always make money. But, never make adjustments on how We do business. What I mean is, never move stops. If we do and lose money, we are not just losing money. we will lose confidence. This will affect the outcome of decisions on other positions.
Here I am writing
.
Trade element.
1] you..swot ..time to learn..your natural patiencetime u have..
BELIVE IN REALITY ,NO WISHFUL THINKING
2] marketyour believe on market
your ta tool mastery
your fa tool mastery
info network
3] fund to learn and experiment..
play less analysis more..use diary..
many help available @traderji.com
4] PSYCHOLOGY
readbook of dr elder..
market wizard series
mark doglous
ari kiev
Livermore
5] personality& trade analysis
dr van tharp
dr bill William
larry William
Linda
Mark boucher
Dave landy
RAKESH JUNJUNWALA
6] trade system design
..
Bernstein
Kaufman
Tusher chande..
Martin pring
Technical trade system
Instant profit
7] individual choice
bird watching in lions country
phantom of pit
personal softwaremetastock & omnitrader
8] trading styleits an individual choice
9] recent experiment.
Dynamic trading..and trend dynamics
10] encyclopedia of chart pattern
candle stick chart study
11] most useful concept
..
money management
risk control
12] yet to learn
volatility
optimum stop.
FUTURE DREAM
..
A PROFESSIONAL TRADER AFTER 3 YR
EXPERIMENTAL TA..
1] TREND AND NON TREND BOTH EXIST IN MARKET
2] RANDOM NESS HAS ITS ROLE
ITS AFTER BREAKING OF RANDOMNESS TREND STARTS
WHEN TREND TERMINATESITS DIFFICULT TO PREDICT
3] PRICE PREDICTION AND STOP GIVES OBJECTIVITY
HOWEVER.. BASED ON WHAT PRICE TELLING U MUST EXECUTE
CONTROL OVER MIND MOST IMP.
4] SCANNING TOOLPORTFOLIO CONCEPT HELPFUL
.........................again try to learn from VVONTERU P40
.................................................. ..............
Give it a stop of 150. Today, it gained 6 points. It may have 1 or 2 more updays. When it does, please take your partial profits. This thing is going down. Its a matter of time. And others too. Please book partial profits. When in doubt (at this point in market, I have few doubts), do it partially. This will help U to get partially right or wrong rather than the whole position.
Market Commentary:
What I didn't want to happen, it happened. The markets trend line is broken. We are in for correction. I will hold this view, till it comes back to the trend line or forms another trend. But, I sincerely suspect. Market is going to setup for First Thrust pattern. Meaning, selling follows by more selling. At some point, it will be in oversold condition. Then, there may be couple of days of buying, which will be followed by more selling (by those who missed selling now). Given this view, I suggest avoid buying till we see better conditions in market.
What happened today is very good. Market went down by 400 points. Could find buyers to end up positive. This is really good. The trend is intact. Going in tomorrow, it is one of those days, as a buyer we have an edge. As a buyer, U can say, 'I have a high probability of making money tomorrow'. So, we will have a list for buying. In that, the best will be RCVL (Reliance Communication). I will put up a chart. In the mean time, here is the entry for U to look at.
FYI: Just like the market, RCVL had a reversal too. It tested previous trading range and closed at high. This is really bullish.
The books I have read and with the foundation I have in stock market, there is no term called 'Long Term' in my dictionary. I don't think it is wrong to think in terms of 'Long Term' investment. But, I can't do it. I have tuned my mind not to do it. It is very hard for me to go back. It is very hard for me to see the stock going down beyond my stop point thinking, 'this is for long term'. The stocks I am suggesting are short to intermediate plays.
When U say long term, look for fundamental analysis and research.
1. Personally, I think its good that U lost money. At this point U might be cursing me. Let me explain.
Think in terms of TIME. Today, U have just lost Rs5000 (50 shares * 100 points). How about this. What if U made money now. U rejoice and make a similar GAMBLE (Yes, what U did is Gambling, not Trading, not Investing). This time, U put 200 shares (U think, it easy to make money). U lose 200 points (U think, didn't it go up after losing 100 points. So lets wait. So U end up with 200 points). So, now Ur loss is Rs.40000. Do U think U will let go here. U will not. Because, U tasted success 1st time. It got to work again. So U try again. U lose again.
2. Do not use money that is necessary for livelihood. What I mean to say is, use money that is after U had enough savings. That way, U will not be desperate.
3. If this is going to add solace to U, I too lost money on my first stock. Many lost just like U. U are not alone
Market Analysis:
I know its too late know. U guys already know what to do. Still, for some, who are ever optimistic, some words. PLEASE DON'T OPEN NEW POSITIONS. On existing positions, if U are short to intermediate player, take partial profits/losses (Ya, taking loses is making profits) and trail the stop. About, long term, I don't think I .........
Do not put any more money into the market. U are not ready for it. If U are serious, read a book (there are online links to books on this thread. Use search menu item) first. Do some paper trading on the stocks I suggest. Read Saint thread on TA.
First make paper money. There are paper trading sites like Moneycontrol.com. There is a section for this in this group. Give Urself minimum 6 months. Market will be there for U. And don't forget that U are competing against best minds on the other side. They are there to grab Ur hard earned money. This ain't lottery ticket to free money. If it is, everybody will leave their jobs and start trading.
If U insist in participation in the current market, I will suggest using Funds. Put money on a monthly basis. In that, U will not care if the market goes down or up. This is what I called a long term strategy. Because, U are doing cost averaging. Once U make enough money over here, in this time, U will also be prepared. Then U can start trading.
Existing Position:
I searched for comments from Chidambaram. I could not find the link. Give me the link. I don't believe in news. I believe in price action. Lets see tomorrow what is in storage for U. If U feel optimistic about recovery, I suggest do the following.
1. Take partial losses at the current price. Hey no pain no gain. How much U want to take out its up to U. I suggest 50%, around 20 shares
When market falls, there are no reasons why individual stocks fall. Its the sentiment. Don't reason with the tape. Just follow the price action.
Isn't that hard. U know why? We are brought up in life to reason things. We are human beings with emotions and try to find reasons whether good or bad. I have learnt in the stock market to not find reasons (disregard the financial papers' reasons. They will find anything to write). Thats hard.
1. How good is this company? Is the company going down in business?
3. Market is in oversold condition. That doesn't mean it is not going down Monday. It just means, it has faily good chance it may experience slight rebound. If it does, Ur stock improves (don't wait for break even), get out. Get out on the second day of rebound. To be catious, take partial out on the 1st day of rebound.
4. Finally, understand the main reason why this market is going down. Its because of METALS and OILS. Thats the correction. They had a huge run. Gold, Silver, Steel, Aluminium etc had huge run up globally. Gold is all time high, seen earlier in 1980s. Right now, it is (was a week back) in speculation stage and had get corrected. However, they are not going down. It is just a correction till they come close to 50day EMA.
5. Why did I point 4? because, yours is a steel stock too.
Based on 1 to 5 points, decide on the stock. Biggest thing we learn in stock market is decision making against time. Whether we lose or make money. We make decisions. Those who make better decisions (which may not necessarily make money all the time, but are made on set of principles) win the race.
might be wondering why every stock is setting up for a short. Look at BSE500 or nifty. The market itself is setting up for a short. There are still no indications of stop in downtrend. Answer to the question of adding or holding, it depends on your strategy. If U are a long term investor, I will not suggest U what to do. Because, I don't believe in such thing called long term. If U are not a long term player, why are U still having positions? About adding new positions, no for short to intermediate term, considering the current market conditions.
Looks like Ur confusion is, U did not make a determination of what kind of a player U are (long term, short/intermediate). Its high time U did that before the confusion costs U. If U (or All) want suggestion, go for short to intermediate term. For long term approach, use Funds to that.
Research on the funds. Even in the funds case, there is an exit strategy. On the weekly chart, if 8 Week EMA is crossing down 200 Week EMA, then exit out of the fund (if this happens, market should be in worst condition). Look for a good company holding the funds with long history. Look for funds that give 10 to 30 percent or more consistently year after year. Invest in funds on a monthly basis to leverage cost averaging. Thats what I call a long term approach, where U don't care these market corrections.
Now, coming to the stocks, its very hard to say what is the right thing to do. U will be damned if U do it, U will be damned if U don't do it. For short term approach, in this condition, I resort to taking partial positions of the table. Atleast, U are partial correct or wrong. If further drawdown occurs, take more of the table. For long term, they say, keep it and hope it corrects. I feel the market comes back too. But, I just don't like to hope. We may escape now. But, one (dooms) day, there will be a final trap.
When do U know the market is going to come back? One pulse to check is, people start recommending stocks to buy in this thread . Other would be the market makes a double bottom or has MACD divergence and goes up with considerable volume.
was expecting some more updays. Can't imagine how negative things have turn out. Hopefully, things will be better.
With the expectation of updays, people will try to bail out. If there are no updays sooner or later, the reaction will be more severe. I don't believe in that case right now. About shorting, I do trading in Geogit. They don't offer shorting , keeping the stock more than a day. The only other option is to do options. I am not in options at. U can (should) use this line of thinking in day trading. Because, we want to use the direction of easy path to sail our boat. In market conditions like these, avoid taking long signals when market pulls up in day trading. Rather take shorting signals when the market is set for shorting.
think the more upside dint happen because the natural fall was stopped & the market is being artificially propped by auth. This could I believe make matters worst...
have not read it. My gurus are Elder and Dave Landry. Elder goes through basics. Thats the foundation. Dave lays out the different rooms of the building on the foundation. He gives various patterns that are realistic. For day trading, use Marcel Link's book - High Probability Trading.
I see that U have started a new thread on day trading. No matter which book U go, no body will layout the methodology and money management techniques (I think Elder talks about a little bit, different from mine though). What I gave U is the one I followed. It is practical and U will not find it anywhere in any book.
For day trading, U don't need TA. U don't have time for TA. What U need is identifying sleek entry and exit points. U only need EMAs and MACD (again based on EMAs). Don't see double bottom, trending lines, divergence etc etc in a daily chart. They don't work. They work on lot of data. More data, more effective these indicators and Ur analysis. In a day, there is too less data for them to work.
That is the issue with these indicators. Beginners struggle with them. They look at all these indicators and consider them as toys or candies. They don't know what to do with them. They don't understand that the complexity is not with the indicator but, in its application. U got to know where and when to use them. More importantly, be consistent with their use, in getting Ur signals to trade. When a signal is not given for a day, don't go for a new indicator to get signal.
Yes. U are right. But, most of them struggle to make money in day trading. Leave alone getting greedy. For my friend with whom I developed this methodology, he has problem with greed. Our methodology worked fine. But, he would never get happy with the money he was making. Lets say he makes Rs5000 on a day, he wouldn't quit on that day. He would continue to trade and end up with Rs500 at the end of the day.
He had also problem with position sizing. They were giving unrealistic losses when stops get hit. And sometimes he moved the stops hoping the stock would come back. The biggest problem he had was that he was applying EOD TA to day trading. He would confused with both. The reason I point these is, these are common issues U come across in day trading.
I don't know when U started day trading. If U are starting, my advise is to reduce position size. Smaller position eliminates fear and provides objective thinking. U will stop thinking about money and think what is right thing to do. Money should flow as an after thought. Slowly, U will see things clearly and develop Ur own method for trading (lets say fine tuning existing method). Thats what I call Ur edge. Till then, do it small. So, that Ur loses are minimal.
Yes. Look for only shorting while the market is in downtrend. Avoid long signals as they fetch less reward versus high risk. But, follow my methodology of crossover. That way, when the market is pulling up (short covering), U will not get shorting signal. When the 8 min ema crosses down 50min ema, then short. Cover when 8 crosses up over 50. Please read my methodology in my thread. Search the thread on day trading
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Looks like Ur confusion is, U did not make a determination of what kind of a player U are (long term, short/intermediate). Its high time U did that before the confusion costs U. If U (or All) want suggestion, go for short to intermediate term. For long term approach, use Funds to that.
Research on the funds. Even in the funds case, there is an exit strategy. On the weekly chart, if 8 Week EMA is crossing down 200 Week EMA, then exit out of the fund (if this happens, market should be in worst condition). Look for a good company holding the funds with long history. Look for funds that give 10 to 30 percent or more consistently year after year. Invest in funds on a monthly basis to leverage cost averaging. Thats what I call a long term approach, where U don't care these market corrections.
Now, coming to the stocks, its very hard to say what is the right thing to do. U will be damned if U do it, U will be damned if U don't do it. For short term approach, in this condition, I resort to taking partial positions of the table. Atleast, U are partial correct or wrong. If further drawdown occurs, take more of the table. For long term, they say, keep it and hope it corrects. I feel the market comes back too. But, I just don't like to hope. We may escape now. But, one (dooms) day, there will be a final trap.
When do U know the market is going to come back? One pulse to check is, people start recommending stocks to buy in this thread . Other would be the market makes a double bottom or has MACD divergence and goes up with considerable volume
didn't understand what you have meant by "Frst Thrust Pattern". Can you explain in detail for me.
regards
chachi
These patterns are explained in Dave Landry's (my current Guru) book. According to this pattern, the stock makes a new high and then collapses more than 10 percent. The way the stock makes high and collapses should be dramatic. Dramatic in the sense, fast and shocking, so that the longs are caught in the trap. When the pull back happens, the longs should look to exit in herds.
So, far, the index (and tons of stocks as listed from my scan) is set as in the text book. I would have liked to see the index losing more points today in confirming the outcome of the pattern. But, sometimes, it just takes time for the pattern to complete. Longs might have thought, the market will continue to go up. Seeing it go down today, lets see their reaction tomorrow.
About Head and Shoulder (H & S) pattern in day trades:
I believe for any pattern to work/trust, U need more data. Why? We need to read group behaviour over a period of time. Group behaviour over a day or two is not trustable. Just use EMAs for day trading. That too, not for reading group behaviour. What I mean is, if 8 min ema is going up in a day, does not mean is stock is doing good. I use 8 and 50 min ema to take out noise. To have points (when they cross) as entry and exit points. If not, these emas can turn up or down in 5 minutes.
They are looking good. Bucking the market trend. If U want, I can give U such list to too. But, don't buy now. Give respect to the market. It is in downtrend. If U just buy stocks, step aside. If U can short, go ahead. But, don't buy it now. What U can do is, keep the list of these stocks and come back to them once the market bottoms out. I saw couple of articles from Fund managers saying the market should bottom out now. They are really feeling the pain. They will say anything to save their _ss. Disregard the news and just look at the chart. Bottom! NOT AT!!
Different people follow different strategies in the market.
What most of the traders using technical analysis would want to do is follow a trend. Currently the trend is definitely not up. May be side ways or down as VV has indicated. So if you want to follow the trend, you will not be thinking about buying now, If one would not or cannot short at least one can stay on the side lines, waiting for a uptrend to show itself.
Bottom picking is some thing trend followers will always miss out, but that is because they strongly believe that it is not easy to predict tops or bottom for the market.
Using fundamental analysis one may try to do value investments but this is not a thread about that.
I think most get confused with methodology versus making money. Its just as in life. U can make money money several ways. But, do U do that? Or do you stick to your priniciples?
Other confusion is about a stock being cheap versus expensive. Most don't understand that neither a stock is cheap nor expensive. It is above when you buy versus when you sell. The difference is all that matters. The question is how do you choose those points. What are your guiding principles that let you choose those points. Can you make exceptions to those principles? (Can you make an exception in life's principles and take bribe to make money)
These are some thought provoking questions one need to answer. One can experience. Buy 5 shares of a stock. Feel the experience. How do you feel when you make an exception to your principles and buy shares. How do you feel when you follow principles and buy stock. Even though people say its all about money, seriously its not. As in real life, its about how you make it. How you make it consistently. It has to be a repeatable process. If not, you can make a 1000 today, lose 5000 tomorrow. Consistency and Repeatability are the key.
I think I took it far. Most of the people don't have set of principles to trade. What they are after is making quick money. They don't understand that trading stocks is the most challenging art in the world. Its about snatching money from the other guy. If you are not smart, somebody else will grab the money from you. Until they lose, they don't realize. Experience is everything!!
You are right that not everyone can be wise and prudent. Hence, there is money gained or lost. It is also due to the fact that each person looks at the data and analyzes differently. Then, you have money from Funds that make the large chunk of the market. Their reasons are different.
Coming back to the question of nifty. Hopefully we see some signs of bottoming out. Till then, we all wait.
Right now, the market is in oversold condition. Its testing 200 day EMA. It may bounse. If it goes below 200 day EMA, thats more bearish. It all depends on how it does, rather than just noise.
If you are short, you had enough downside that you should take partial profits. And on the remaining shares, trail the stop down. But, are you not day trading when shorting?
In this bearish market situation,
1. Stay away from the market if you are a trader ( Go by technicals than
fundamentals).
2. Buy good stocks if you are an investor (Go by strong fundamentals rather
than technicals)
Value/valuation is relative, today we are back to the index levels that we scaled in Feb 2006. Its just 4 months is't it?
If a scrip is 30% below its all time high but 60% above its 52 weeks low, how do decide the fair value?
The Gr8 WB said "The investor should be happy to get lower prices on browses, are we happy to find lower prices.., to quote him again
"Markets are the place to transfer wealth from the impatient to the patient
As I said yesterday, market bounced. U can attribute this to oversold condition or double bottom or support at 200 day EMA. U will see lot of stocks in this pattern. For ideally conditions, the market will continue to go up from here. For me, I will wait for a pull back after it goes up. Obviously, I will be looking for change in trend.
Market Analysis:
Market is at a point of reflection. It can take it from here and move on up. Can go sideways there on, before going up. Given the double bottom and MACD divergence, U can trade if U want. But, have a tight stop below the double bottom. And be sure to take profits as it comes. Don't wait for the whole thing to happen.
There will be lot of stocks in this pattern. I don't have any scan right now for double bottom. But, most of the stocks display this pattern. So, I pass on writing any code to do the scan at this time.
use 8, 50, 200 EMAs, Bollinger bands, MACD and Slow stocastic. I used to use Williams before instead of stocastic for overbought and oversold conditions information. I replaced that with Stocastic before, it does that as well as gives you buy or sell information based on the crossover.
What U can do is, start from these indicators. Change them according to your analysis. For example, 8 day short term EMA may not be right in all cases. If you look at sensex, it is more based on 10 or 15 day ema. So, play with the indicators. But, once you decide on them, have for some time before making a change. Don't change them every day to get buy or signals
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Market Analysis
--- Those of U who have taken the buy signal based on double bottom, have a tight stop. Don't make an exception and release the stop. Trying to pick a bottom is high risk and high reward play. When it goes against U, be ruthless in taking out the position swiftly.
Double bottom buy signal goes awry. That is the reason I stopped taking this signal. Even though it is high reward, there is high risk attached to it. Initially, when I read Elder's book, I got so excited about this pattern. Latter, through experience, I started avoiding double bottom and double top. There are prone to high risk. If U do take them, if U to be very strict with the stop. If U smell any thing against, run!!! Don't wait for confirmation.
General Market...
Stay Out. Let the dust settle. Wait for the storm to be over. Then join in reconstruction.
What makes it worse is, the global market going down. Stock market is more of sentiment. Sentiment right now is bearish.
I would not do that. Did you see my BSE500 chart? Until the arrow points up, I am not buying. Even if I want to buy, my methodology requires either MACD divergence (I don't trust this in all cases) and/or stock being above 50 day EMA. If there are not, I don't know what to do with the stocks. Leave alone telling U what to do.
U should be posing this question to Long Term Investors. My take on this rally is, it is just a correction. Use this correction to take out partial/full loses. Do not buy stocks. Give it couple of days. It will start coming down soon. But, I wish I am wrong.
Just an experiment to all those who want to buy now. Throw up a knife. While the knife is falling down, try to pick it. Let me know the result. Just kidding. Don't do it. At least answer to yourself, what is the probability that U will injure yourself versus catching safely? Didn't I say in the beginning of my thread, 'Trading in stock market is Common Sense'.
This note is directed to short to intermediate traders. But, long term investors, U should read too.
Most of U have a question in your mind. If I don't buy now, when do I buy. Will I miss the move. Some stock XYZ was 150 a couple of weeks back and now it is 50. It is so cheap. So, why can't I buy it. I have couple of examples explaining why not and indicator(s) when U should.
Before I delve into the (real) examples, I just want to make a statement. Any thing can happen in the market. All options are open. They just have different probabilities.
Examples (from US market):
1. This example is from US 2000 bull market. Nasdaq was around 5000. It dropped to 3500. People thought all the stocks were cheap. So, bought more. Then it dropped further. People thought, the market was doing similar things as before. It drops and comes back. Till date, it never did. Nasdaq is around 2000 now.
2. During that bull market period, people bought a stock JDSU for $160. Now it is $3.00. After so much selling, JDSU was known more for Just Don't Sell Us. Here is the link if U want to check out the stock. Like JDSU, there are several US stocks that are no where the price near 2000 year.
http://bigcharts.marketwatch.com/int....x=59&draw.y=9
3. Here is a mutual fund from the bull market era. Was around 100 during that time. Now under 20.
http://bigcharts.marketwatch.com/int....x=59&draw.y=9
4. How about Japanese market. What a slump. Just recently, it started picI can give U more examples. But, I guess U guys got the point. Now the question is, when is the right time to enter. Just as doctors use stethoscope to check heart beat of a sick patient, we have EMAs to check our falling markets (Its a patient now). So, lets see how the market (BSE500 or Sensex or Nifty) is doing using 8 (short), 50 (intermediate) and 200 (long term) day EMAs.
1. Below 8 day EMA. Bearish for short term
2. Below 50 day EMA. Bearish for Intermediate term.
3. Below 200 day EMA. Bearish for Long term.
4. 8 day EMA crossed down 50 day EMA. I use this for shorting.
5. 8 day EMA has not crossed down 200 day EMA. So, there is still hope for the market.
6. 50 day EMA has not crossed down 200 day EMA. This comes after step 5. This is the worst case. At this point 200 day EMA is sitting above 8 and 50. We don't want this to happen.
From the above, if you scale from -5 (bearish) to 0 to 5 (bullish), the market is around -3. So, what do we want to see if the market has to become better.
1. Market must come above 200 EMA.
2. 8 day EMA must cross above 50 day EMA.
Let the above 2 happen. Then, I will put tons of stocks for U to buy. Until, then keep the powder dry. Have the cash.
Common Sense Note: Don't feed a sick patient who has lost weight. Let the patient recover from sickness. Then we feed.
king up.Then we feed.
For all the people who are investing for long term. Don't think long term means, buying and holding. Long term means, buying and doing home work at each and every step. Home work on the stocks fundamentals. Did the fundamentals change? Did the fundamentals change in the market conditions. Did U consider interest rates that are rising globally? U have to consider not only stocks fundamentals but also underlying economic conditions
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....Currently, there is nothing to write on the market. It is in oversold condition. Just as in bull market it can stay in overbought condition for long spells, in bear market it can stay oversold condition for some time. What it means to a trader:
1. Can't buy
2. Can't sell short either. I am not talking about day trading. In day trading, U can do either based on the signals. Bad thing in India is, you can't short and keep it more than a day.
3. So, the only option is keep quiet and stay out.
Therefore, coming to daily input, there is nothing to analyze. U could analyze the the levels the market will hold. But, U can do that out of interest. Other reason could be trying to determing the turn in the market. I try not to catch bottom or top. Too many traders got burnt trying to do that. I will leave that to pros. So, just relax and read books in this gloomy time.
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tool available in India, if you want to short. So, no options but, to use OPTIONS. So, I recently got 2 books to read on them.
Options are different ball game. You need to consider time. I cannot give you suggestions on them, given my recent beginnings. But, here are some pointers that can give you some perspective.
1. Market(s) has been beaten down a lot. Whenever the price deviates away from the EMAs, there will be correction to get them close (to test), specially to the 50 and 200 EMA. Again, the question you might want to know is when? Thats hard to tell.
2. In U.S., summer is bad time. Summer involves less average volume and lower prices. This also increases volatility (good for options). As U know how the indexes all over the world are dancing together.
3. When the markets are oversold, do not sell short into them for long term. Be patient. Sell into the minor rallies.
4. At the same time, whenever the prices get extended below the bollinger bands, use those to cover.
I will get back to you more after I go through the readings
1. Come Into My Trading Room: A Complete Guide to Trading - Elder
2. Trade Your way to Financial Freedom - Van Tharp (current reading. Its good)
3. Trading for a Living: Psychology, Trading Tactics, Money Management - Elder's 1st book
Swing Trading/ Patterns for entries
1. Dave Landry's 10 Best Swing Trading Patterns and Strategies
2. Dave Landry on Swing Trading
More to read
1. Reminiscences of a Stock Operator - Edwin Lefvre (Mother of all)
Derivatives
Down Trend line has been broken. That does not mean, down trend has over. What it means is, the current trend of sharp break down has stopped.
2. Crossed above 200 day EMA.
3. MACD divergence. Again, what this is telling is, the current downtrend is not as severe as beginning of the down trend. So, there might be a bump up as there is no pressure for selling. This no way means the overall down trend is over.
MACD divergence signal works better when a stock/index has been down for long time. In that case, a long divergence can make the stock go up. But, EMA resistances are still snakes, waiting to bite the stock and send it down.
Against:
1. So far, Sensex crossed 10000 2 times. But, never ended above 10,000. Some seller made it a point to make Sensex close at 9997 at the end of the trading day, when it slightly breached 10,000.
2. 20 Day EMA (Yes 20 day EMA works better for Sensex) is acting as resistance.
3. Do U see the red down trend arrow. It is still pointing down!!! So, no buying.
So, what I see happening right now is a transition from existing sharp down trend pattern. That may mean trading range or slower trend downwards. In any case, the index is ready to go down now to test previous lows.
Attached Images BSE30.JPG (52.9 KB, 55 views)
I am in sitting on cash since the downtrend started. U could use Monthly, Weekly to determine the trend. But, follow that methodology always. So, Ur reaction to the market will be slower. This downtrend may provide you an opportunity to buy.
I did not look at these time frames. I will look at them and get back.
, what I see happening right now is a transition from existing sharp down trend pattern. That may mean trading range or slower trend downwards. In any case, the index is ready to go down now to test previous lows.
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don't know about H & S pattern forming in these cases. But, I do see macd divergence (go by case by case basis) and histogram popping up positive with lines crossover. Avoiding shorting to be on safe side or use discretion in position size. That no way means, buy signal. There are some times in the market where U just stay aside. This might qualify as one, till a decisive market direction emerges.
Before I delve into it, you should know that I suggest how I will do it. May not be right for you. Use your judgement. I will suggest you to get out of all right now as best a possible. Use this jump in market to do that.
Most of them don't realize. Markets will always be there. Traders experience a feeling of missing out. They go on buying spree when market is in downtrend. You have to play that trade differently. You have to be quick in taking profits on that trade. Do not make this short term play a long term. Markets didn't fall for no reason, if they have to go back up so fast. On the other side, you can choose to stay out of the market and come back when 8 EMA crosses up 50 day EMA or using BOW TIE pattern (crossover of 10, 20, 30 EMAs).
As you realize from above response, its very hard to say when things are so bad. I am used to seeing things in the right way. I choose when to get in and when to get out. There are no doubts in that. When presented with a chart that is different, it is very hard to say. From my methodology, you were not supposed to be in these stocks. If you are, then you need to get out with as little damage as possible. Use approach of taking partial loses and trail on the remaining ones using the low of last 10 to 20 days.
--------------------------------------------------------------------------------Ability to give up a chance even though you know you can make money is a trait you need when trading. You want to do that if the winning trade is against your methodology. Even though in short span, you might make money on a trade or two of this sort, but, overall you stand to lose more.
Don't concentrate on the money. Concentrate on doing it right. You should make money as an after thought. Overview of my methodology says,
1. Trade along the market direction.
2. Trade along the sector direction.
3. Trade the stock that follows the sector direction.
Since market direction is down, you have 2 options: Short, Stay aside. That does not mean you short a stock that is going up. In case of Tata Tea, it is setting up for a short. But, wait for the market to do that too. Lets see after Monday. Nifty is going to test 50 day EMA.
For us to go Long on the stocks, there is some more time. If the indexes continue to rise, it may require atleast 1 to 2 weeks.
As always your explanation is simply great. What you said is very true, sometimes if you really dont know what can happen, its better to sit out and watch than loosing money.
If you don't want to short, just stay aside like me. If the market is so good like every one is saying, we will join them too. Just a little late. Our risk is less than theirs, so are our profits.
Money Management
I always used to follow percentage risk methodology for position size calculator. This was based on Elders suggestion. After reading Van Tharps book, Volatility did make sense for consideration.
No matter what methodology you use or even random entry, you need position size calculator for money management. I am attaching a file to do the same. Feel free to modify.
1. You can change parameters identifying % risk, % volatility, % total risk etc.
2. Add more conditions, like money limit per trade, in addition to % risk and % volatility.
ATR stands for Average True Range, which gives the volatility of the stock.
Market:
I was looking at some leaders. I am seeing positive things about them. I like Reliance Industries. We need to wait for pull back for entry. Hopefully, we will get that next week
recommend you to read Van Tharp's book, 'Trade Your Way to Financial Freedom'. This book has various systems to choose from. Or you can use Elder's Tripple Screen system. Any system you develop should give you:
1. Setup Criteria
2. Once the setup is there, Entry Criteria
3. Stop Exit
4. Profit Exit
5. Position Size Strategy (You could use the Excel spreadsheet attached in the previous reply)
You could have several other exits (like Time Exit) as outlined in Van Tharp's book. Search in this forum if you can find a link for soft copy.
My current setup criteria are based on Dave Landry's patterns. Entry criteria is always pull back. For example,
N_MonthHigh setup :
1. Market is trending up
2. Sector is trending up. Stock follows sector.
3. 3/6/9/12 month high + 8 day EMA above 50 day EMA above 200 day EMA
4. Volume > 1,00,000 + Price > 100
First Thrust setup
1. Stock makes a 3/6/9/12 month high and loses 10% in the last 10 days
2. Market has turned direction
3. Sector has turned direction. Stock follows sector.
4. Volume > 1,00,000 + Price > 100
For Stops: I used to use Dave's strategy based on value of the stock. After reading Van's book, I am planning to use 3 * ATR (Volatility of the Stock). I am also looking at Chandelier's exit stop loss.
For Profits: I used Dave's reverse position sizing strategy for taking profits. i.e., once risk is reached, take 50% position off. Set the remaining = buy point. I am considering of changing it based on my reading of Van's book. I want to test the strategy of trailing stop with multiple of ATR, reducing the multiple as more profits are reached. I am looking at several things right now and I may test them to see how they work.
So, there is no direct answer to your question. Only direct thing that you can use is the Position Sizing Calculator. No matter what strategy you use, you need this to be successful.
You can start with Tripple Screen system. Google it. And don't look at the history of a stock and think what you missed. Thats the enigma with these stocks. History looks so easy. Once you step in, things are different. So, train yourself not to think about history. If you were not there, thats not yours.
Interest Rate increase is due this Thursday. I think this is already adjusted in the market. SP500 is testing 200 day EMA. I don't think anything will happen till Thursday afternoon 2:30 PM. I was sceptical last week. But, now my bias is upwards. But, you never know till 200 day EMA is taken out.
Indian markets so far are doing good. Looking at the charts, there should be a pull back this week. MACD has nice divergence and it worked. Hopefully, the markets will pickup after the pullback and cross above 50 day EMA.
visual soft:
Use
http://www.icharts.in/charts.html to see chart from year 2000 to current date. The chart has 4 peaks. Now it is at the base of the 4the peak. Until 100 is taken, I would not enter this stock. Why 100? Draw a line touching all the bases. This line will end up close to 100. Incidentally, 100 is also 50 day EMA point, which is resistance right now. In the short term, MACD histogram is positive. Hopefully, in the next 2 weeks, depending on the market, the stock crosses 100. But, expect drawdown in the mean time.
How do you know it is overbought or oversold. Use oscilators like Williams or Slow/Fast Stocastics or RSI etc. Or, something has been up for 3 or more days, avoid buying. Wait for 2 or more down days (< 7) to buy. Similar for shorting in the opposite way.
did not like the reversal today with high volume. This might be attributed to the stake sale news. Lets wait for couple of days more to see whether it will recover from the reversal. You could use the slow stochastic crossover to enter.
It does not matter if you use MA or EMA. What matters is you using the indicators consistently to get buy or sell signals. When you make 10 trades, each trade signal should have been taken based on same indicators. For this, define how and when you buy/sell a stock. What conditions should exist before you consider a stock. What should happen there after for you to buy. How will you determine the risk you are going to take. How will you take profits. Here is the example, why SAIL has come to your consideration.
A. Lets say you had this Buy Criteria written down (This is called SETUP):
1. Market is trending up or turning with MACD divergence
2. Sector is trending up or turning. Stock is following sector.
3. 8 day EMA crosses up 50 day EMA
4. Volume is above 1,00,000
5. Stock price is above 50
B. When will you pull the trigger? From the above, the stock is identified based on your setup criteria. Here is what you wrote down should happen for you to pull the trigger.
1. Stock should pull back a minimum of 2 days and less than 7 days.
2. Enter above yesterday's high + x. If today's close is close to yesterday's high, then day before yesterday's high + x.
C. What is the risk?
1. You will be using 3 * ATR (Average True Range equivalent to average of High-Low for last 10 days, baring gaps)
D. How much position size should you use. You use the Excel I attached in previous reply.
1. You will be using 1% risk of your Principal.
2. Max 3% risk open positions
3. You willing to take volatility of Principal per day for a stock = 0.5% of Principal
E. How will you take profits.
1. Will trail stop at 3 * ATR from price. Once 1R (R - Risk) is reached, stop will be trailed to 2 * R.
This is an example on how you take trades. Take out guess work. Even if you make 3 positive trades out of 10 trades, you will make money. Concentrate more on Position Size and Exits (Risk and Profits) than the setup and entry. Most traders do the other way. They are more worried about setup than the exits. They think about exit after an entry. Sometimes, they never have an exit strategy. Abimanyu Style!!
It does not matter you lose on 1 stock. 1 stock does not verify your strategy. You have to look statistics of 10 or 20 trades which have been made consistently. Then you can determine your strategy is working.
Sail is looking good. Buy above yesterday's + x. Don't forget to think about exits.
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So, indexes did go up. There are very few instances in the market, where you can say it will go in a direction with some confidence. In fact, one of the objective in trading is to stay in the market. i.e., play small, risk less and focus on accumulation. This will help you stay longer in the market to take advantage these easy moments. If you risk more, you will get busted. And you will bust anyone who mentions STOCK word thereafter (you might have come across people who are anemic to STOCK word by now).
I was following Reliance Industries and wanted to recommend. I forgot. Recently, I did not recommend any stocks because, the market has still not reached a point of confirmed trend. I am looking for 8 day EMA crossing up 50 day EMA for indexes. When I recommend some stock in this thread, I am cautious and want to make sure there is high certainty. I did not scan recently. I will do that and put up a list if you want to choose.
EMA check
-- There is a reply if you go back 4 or 5 pages on checking health of the market. I use 3 EMAs. Short term EMA (8), Intermediate term EMA (50) and Long term EMA (200). Uptrend is confirmed when EMA 8 > EMA 50 > EMA 200. In other case:
EMA 8 < (crossed down) 50 - Bad (Down Trend started)
EMA 8 < (crossed down) 200 - Worse (Down Trend Confirmed)
EMA 50 < (crossed down) 200 - Bear Market Confirmed
I use the above criteria to look for trends. I like Reliance Industries for
1. EMA 8 > EMA 50 > EMA 200.
2. It is in Oil & Gas sector which trades independently of the market.
3. Had a nice pull back for entry couple of days back.
stock can be overbought or oversold condition for long time. Normally, stocks move in waves (like waves in ocean). You buy when the wave is down (pull back). When there is strong demand, the stock continues to stay in overbought condition. But, eventually, there will be profit taking and the stock pulls back.
you buy when EMA 8 > EMA 50 > EMA 200, you can avoid lot of false signals. What this may mean, you are not catching the trend early. You are not catching the bottom. Risk is less. I don't know about reward. You can make money when you follow this technique too, instead of catching bottom. Now you are asking why people buy at bottom. People who do that fall into different category players.
1. So called Long Term players. They look at P/E ratio of a stock and buy some shares.
2. Short term traders who look at the oversold market and make short term trade.
3. Amateurs/Gamblers who look at a price of a stock and compare before the stock has fallen and think it is cheap and buy it. But, they don't have an exit plan.
When do you sell/profit. This has to be defined by you. Stop/Profit exits must be based on your risk level and comfortability. For example, I could use risk based ATR, support, % risk, loss amount etc. Similarly, profits can be taken by trailing stop and let the market hit your stop. Or using % profits. Please read Van Tharp's book on 'Trade Your way to Financial Freedom' on Exits.
8 EMA crossing down 50 day EMA is an absolute sell condition. Most people buy at 50 day EMA. If that buying did not salvage that stock, then it is going down. Holding that stock doesn't make sense. Think about it. If people used this simple technique, they would have been saved in last months downslide. 200 day EMA is a buy for funds. They might help. But, you should wait for the stock to come back with 8 crossing above 50 for buying again.
RIL cannot be said to have overbought codition, as there was a pull back recently. Overbought condition can be seen using oscillators liek Williams, Stocastics, RSI. If the stock remains above 80 for some duration, it can be considered overbought
You can determine the market strength based on the no. of stocks that come up in the scan. A month back, I used to get tons of stocks ready for entry. I had to look on how to eliminate the stocks from the list to display the best. Now, I only got 7 stocks as setup, not even ready for entry. This explains the strength of the market.
Elder is different. I just pointed what is missing in his Tripple Screen Methodology. He does not consider market and sector into consideration in this methodology. Not that he does not look at them when he actually trades. But, if some one followed the methodology based on his previous books, they would not know to look first for market and sector direction. Neither he talks about how to put stops and take profits. So, Elder's first 2 books are a good start. You should read Dave Landry's books for Setups and Van Tharps book for Money Management and Exits.
I didn't understand your question about 'HOW TO HANDLE LOSS'. What do yo u mean by that. When you enter a stock, you know how much you are risking. You are accepting that risk. If you are not accepting that risk, then you shouldn't be in that stock. You should accept loss or gain as same. Remember, just because you made gain in a stock doesn't mean you are running away with the money to the bank and never coming back. You are still in the game and playing again. For example:
Lets say in a span of 6 months you made 20 trades. To make it simple, lets say you made 15 wins and 5 loses (this is hard to achieve). You might be happy when you made those 15 wins. But, if you do not have good trading strategy, money management and mental strength to stick with your defined methodology, you might give back what you gained in the 5 loses. The example is to show you how the result of not 1 trade matters but over multiple trades.
So, strive to achieve consistent results, risking less and focus on accumulation. In the initial stages, defining and streamlining the process is more important than making money. Don't gamble. Use smaller positions
Dabur's ATR is Rs9. RIL ATR is Rs47. Each stock has different volatility. You need to choose a stock that you are comfortable with its volatility. That is were position sizing will come into play. Volatility based position sizing for Dabur will give you more size than RIL. For example, if you are comfortable with a swing of Rs500 per stock in your portfolio, your position size for Dabur is 500/9 = 55 shares. For RIL, 500/47 = 10 shares. Further, you may choose to filter your selection based on volatility. You may choose not to trade stocks that have ATR < 20 and > 100. Thats up to you. Everyone has to customize the system based upon themselves. You need to understand who you are to do this. Are you a low/medium/high risk taking person?
There is nothing in ITC or RIL that makes me think they are going to pull back. In general, a stock has to pull back. It cannot go up forever. Somebody has to take profits. RIL 2 days earlier was in pull back. There is no way to tell when they will do it (other than if they cross Bollinger Bands). Just follow the market. If it pulls back, then identify stocks that also pulled back. Then enter.
About RIL. You should understand one thing about trailing stop and profit exit. If you want to make money, you need leave money on the table. When you trail stop, you are leaving some profits. But, this is essential if you want to make more. So, trail the stop = 3 * ATR = 3 * 47 = 141. So, your stop = 1079 - 141 = 938. Or you could put a stop below previous base at 970. Its up to you. As the stock goes up, raise your stop to capture profits. If it goes down, do not change the stop.
You need enough capital to withstand drawdown. This is more important if your timeframe is long term. You will not have the luxury of taking out the trade when it goes bad like the short term players. If you are long term, if the trades goes down, you might consider buying in more rather than taking out. So, you need more money. Minimum 5,00,000. More is better
Do not buy any of these stocks. The bull market is no to fly these dogs along with. Wait the market to pass the transition. If the bull market continues, then consider these low priced stocks. Until then, if you can't keep your hands off, consider below leaders.
1. Reliance (Wait for pull back)
2. ITC (I don't like the V pattern with a narray channel. How long this pattern can continue?)
3. Dabur (Nice Pull back. Ready for entry.)
4. RelCapital (Enter above last 8 days high)
5. Wipro (Nice pull back. Ready for entry)
6. SatyamComp (Wait for 1 more day before entering)
7. Infosys (Wait for 1 or 2 days before entering)
8. Amarajabat (Enter about 6 days high).
9. Colgate ( I would have liked for it pull back more. But, still ok to enter).
These are the stocks I have been following. I did not run the scan recently. If I get more, I will add to
Normally (in a ideal situation), everyone (should) start(s) with mutual funds. Put your hard earned money in the funds. Contribute monthly. When enough money accumulates, use that money to buy stocks. If you lose, atleast you will be losing what you made in mutual funds, not your hard earned money.
Research on mutual funds that return > 15%. Pick company (that manages mutual fund) with reputation and history. Given India's growth story, select funds that give you exposure from high to medium risk. Distribute the percentage based on your comfortability.
The key is not putting all the money in the fund at a time. You have to add monthly. You will be using Cost Averaging advantage. So, do not add 25,000 at a time. Split the money to add on a monthly basis. Once 25,000 is over, continue to add more money monthly.
Technically, you could buy this stock if
1. It takes out 2 days high. or
2. If the Slow Stochastic crosses up and MACD does not cross down
I will look to sell the stock if
1. Takes out my stop based on 3 * ATR, if I used point 1 to buy.
2. If MACD crosses down, if I used point 2 above to buy.
See, when you enter a stock, you need an exit strategy. An entry will never determine whether you make a loss or profit. An exit will!!!. Inspite of this information, most of us only concentrate on Entry than Exit.
Having said the above, I will take this trade based on positive MACD, coming out of divergence. From here on, it depends on the general market condition. If the market continues to go up, you could see this stock going up from pull back
See the attached charts.
Sectors that are doing good:
1. IT (Leaders - Satyam, Infosys, Wipro, TCS)
2. OILGAS (Reliance)
Sectors that are OK:
3. Metals
Sectors that are still lying down:
All the others including
1. BANKS
2. AUTO
3. Consumer Durables
4. Capital Goods
5. Health Care
6. MIDCAP
7. SMALLCAP
Overall, market is still in transition stage. Except some leaders, most of the stocks are down. This can be seen through MIDCAP and SMALLCAP index. Only exception has been IT and Oil sectors. So, trade cautiously in sectors that are performing better.
None of the stocks are interesting. Some are in transition stage, like the general overall market. Wait for couple of weeks more to see the actual market trend before jumping in any of the transition stocks.
Pull Back for entry:
As you might have read already, there are 2 levels you need consider before you open a position in a stock.
* Setup
* Entry
Setup
Setup tells you the scenario under which you will consider that stock for opening a position.
eg:
1. If you are trend follower, you will select a stock only if it is trending up or down. You will avoid stocks if they are in trading range.
2. If you are a break out player, you will only consider a stock if it has been in trading range for some time.
3. Various Patters: Double bottom, Double top, First Thrust, Head & Shoulders.
Entry
Specifically tells you how you will open the position (buy/short) in a stock.
eg:
1. If a stock is trending, you will buy at pivot point.
2. If a stock is trending, you will buy after a pullback and above today's/yesterday's high + x.
3. If a stock is in trading range, you will buy 1 day after breakout.
4. Each pattern has a way to enter a position after the pattern is complete. For example, in Head and Shoulder's patter, after the right shoulder forms, a line is drawn touching the lower shoulder, neck and right shoulder. You need to enter when this neck line is tested.
Determine what suits you and what makes sense.
One of my criteria for entry is Pullback. Pullback makes sense to me because,
1. I don't want to buy at high.
2. I am ok with missing action in the mean while.
3. I am not ok knowing that somebody is making profits by selling to me at high price.
4. According to Elder: Buying at recent high is believing in fools theory. Because, when you buy, you plan to sell to somebody at even high price. So, if you buy at high price, you are believing some other fool will buy from you at even high price.
After a pullback, Second criteria for my entry is buying above today's or yesterday's high + x. I use this criteria because,
1. I want to make sure there is still upward movement in the stock.
2. I want to buy when the stock is going up and not down.
3. You can never determine the end of downward pull. As the stock goes down, you reduce your buy point.
No criteria is full proof. There are downsides to the above Entry criteria.
1. Inspite of today's/yesterday's high + x, the stock might trigger and reverse.
-----One way to avoid some of these wrong take offs, is not enter position if the open price of a stock is greater that your entry price on that day. So, at the beginning of the day, make sure the stock does not have a open price more than your entry price.
2. Pull back may continue. You should consider based on the stock/market pattern whether it is still pull back based on profit taking or sell off. It is prudent to avoid pull backs that are more than 5 days.
Most important as I was say (preach) is, select a way to do things repetitively. Try out on atleast 10 trades and see how it works. Modify to suit yourself. Don't make changes for each trade.
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I don't understand what you mean by bottom testing. The pull back is to enter as a buy or short, depending on whether the stock is in uptrend or downtrend.
Can be seen that way. If we do believe downtrend is going to start, what is our condition for shorting and when will we exit?
Shorting Condition
8 day EMA is testing 50 day EMA for nifty and sensex.
OR MACD crossing down (this will come little late)
Exit Condition
If 8 day EMA will cross up 50 day EMA, will get out.
OR if you use MACD crossing, then getout if crosses back up.
Profit Target
Previous Low will be your first target. Obviously, if it did reach there, I am sure it is going down more.
I must admit, this is low risk and high reward play. But, make sure you do exit if indexes cross or some other criteria as set by you before you take position. Remember when trying to determine turning points. Run on the first sign of trouble. Don't wait and hope.
On another Note based on U.S markets crashing:
Be careful on the long side. Its ok to miss an entry. If the market continues to go up, we will find lots of entries. Its better to be wrong than lose money. Or you could play with smaller position
That was huge pull back. RIL volatility is 47. On friday, High - Low = 68, with a reversal, opening at high and ending close to low. It took 5 days to go from 1020 to 1100. It took 1 day to come back from 1100 to 1020. This tells you the balance of power between upside and downside. Sometimes, this may be in the heat of over all market and just fade off next day. So, in these conditions, we wait for next day or two to see if the stock recovers and is in pull back mode rather than sell mode. All this text is for new entry. If you are already there, your stop is in place. If the stock hits the stop in the next couple of days, you are out. Let the market hit the stop rather than you take it off. Why, because, no body knows it is going down until it goes down. Daily noise should not make you change previous plans.
Dabur
--It had reversal too. But, not bad like RIL. Today I was looking at the volume. On the upside, volume is low, compared to the May month's downslide. Thats something to take note off. Even though there have been 7 days of pull back, there has been not much downside in the last 3 days. An entry above the high of last 3 days + x is still valid
Given the drawdown in RIL on Friday, it is prudent to wait for 1 more day. If it recovers on Monday, we will revisit it.
How much pullback? I currently do not follow %. I just eye ball the chart. Looking at a chart, I can tell if it is just a pull back or sell off or can go either way. When it can go either way, like RIL, I wait next trading day for more light.
I agree with you that Dabur is not suitable for day trading.
My suggestions are not for day trading. They are for short term trading, holding for couple of days to weeks.
See, when you enter a stock, you need an exit strategy. An entry will never determine whether you make a loss or profit. An exit will!!!. Inspite of this information, most of us only concentrate on Entry than Exit.
Having said the above, I will take this trade based on positive MACD, coming out of divergence. From here on, it depends on the general market condition. If the market continues to go up, you could see this stock going up from pull back.[/quote]
--Look at the chart. I was not confortable with the narrow channel. That doesn't mean it will not go up in that channel. Observe there is an outlier channel. Friday draw down was due to market in general. If it goes down below Friday's low, I would be little concerned. If it does, may be it is changing the narrow channel trend or it is going down. That only time is going to tell. As long as 8 day EMA is above 50 day EMA, our bias should be upwards. Try the chandelier stop 159. ITC ATR (Average High - Low) is 9. At stop of (range between 2 to 3) * ATR should be OK. Chandelier uses 3 * ATR.
1. Look at the volume from May 1st to June 26th. This was the time of its drawdown. Compare this volume to period June 27th to today. Volume during drawdown was low compared to specially high volume during recent updays.
2. Belongs to Oil Sector, which is one of the 2 best performing sectors (the other being IT sector).
3. It does not have the V like pattern. I am looking slower transformation from the recent downtrend. This stock has it.
4. 8 day EMA crossed up 50 day EMA. This is my condition for going long.
5. Its setup as First Thrust pattern to go long.
Suzlon has ATR around 70. Lets use stop = 3 * 70 = 210. So,
Setup: First Thrust Pattern
Entry: 1100 (above today's high + 25)
Stop: 890 (1100 - 210)
Initial Profit: 1310 (1 * Risk = 1100 + 210 = 1310. 1310 is close to May's highs. Ofcourse, we will be looking for multiple of Risk. I will follow on with an update to the stop as the stock moves.)
Position Size: Please use my calculator Excel Spreadsheet. It takes into consideration stocks Volatility. Don't use fixed position for each stock.
Note: If the stocks gaps up above 1100, wait for first 15 minutes to allow the stock to form recent high. Buy above the recent high formed in the 15 minutes. If the stock does not go above the recent high, avoid buying. It might be a reversal.
I will update the stop info after I get the update for my database. I will also add more am still sceptic about the market. Except some leaders, other stocks have been low. You can read it as not so great market (unlike the bull we have seen before) where only the best/blue chips do good. Others stay low. So, continue to concentrate on the best sectors and stocks in those sectors. Avoid others. Hopefully, these leaders pull the others overtime.
entries for other stocks I am following
am still sceptic about the market. Except some leaders, other stocks have been low. You can read it as not so great market (unlike the bull we have seen before) where only the best/blue chips do good. Others stay low. So, continue to concentrate on the best sectors and stocks in those sectors. Avoid others. Hopefully, these leaders pull the others overtime.
I don't enter directly into a stock. I want the stock to go up enough to trigger my entry point. This triggering point's objective is to make sure the stock is continuing the upward move after the pullback. This way, you can avoid those pullbacks that lend themselves into sell off. This triggering point can be either of the following:
1. today's high + x. If the stock's today's volatility comparable to its ATR (average volatility over 10 days) and ends up close to Low of the day, you can use. Choose x so that High + x - Close = (70% to 90%) of ATR.
2. If today's high + x is close to previous day's high, use Previous day's high + x. Here x should be below 25% of ATR. Look at Colgate. Friday's high + x provides better proof net than today's high + x.
3. N day's high + x. Use this if there was a failed attempt on Nth previous day to go up. Buying above this failed attempt gives you a sense of security of the stock going up. Again, choose x to below 25% of ATR. Look at RelCapital. Going above June 27 high is better option. Look also at amarajabat. Using this techinique would have avoided you in buying these stocks.
x is more of an approximation to assure yourself that the stock has enough will to go up. Consider stock's ATR in calculating x.
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The Position Sizing Price Graph Bar allows one to automatically view ATR, 3* ATR Stop Loss how many shares should be purchased based upon a 1% or 2% Risk Management Rule while using Average True Range as a basis for stop losses
copy paste of VVONTERU P68
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Either way, I don't trade breakouts. It requires different method of trading. There tends to be lot of false breakouts. Requires trying multiple times with low stops. You may have lot of small losses (consider also commissions for buying and selling) and may do good once in a while. Don't get me wrong. Trading breakouts still can make you money. It just needs different approach.
Rather, what I look for is, after the breakout, the stock pulls back and does not go back in to the trading range or triange in this case
Couple of things:
1. I know some of the stocks have been mentioned by other members for buy. If you are comparing with my take on then, you will be confused. Each of us have different trading methodologies. Each will produce different results. For example, my way of trading may produce 3 winners out of 10. But, when they do, they may erase the money you lost. Other trading methodologies may produce 7 winners out of 10. But, they may result in less profits then mine. So, each of us have different way of looking at things.
2. Like stock selection, stock elimination is as important. We have so many stocks. How do you pick the right one. What constraints do you use for eliminating those stocks that have less probability of making you money. Following constraints help me focus on few:
a. One of the constraint I use for going long is short term EMA (8) cross up Intermediate EMA (50) day EMA. This condition will virtually eliminate lot of down stocks. It also makes you buy close to 50 day EMA (when the stock pullsback), which is a sweet spot for many traders.
b. Other condition you can use is to pick a stock in the strong sector. In effect, you are eliminating all the other sector stocks.
It all depends on where you entered. If you just bought, use 350 (below previous base). ATR (Volatility of Sterlite) = 37. Consider trailing stop 3 * ATR. As you make profits, consider locking profits by trailing stop by varying (reducing) the multiple of ATR.
Avoid dogs for now. Consider only leaders in IT sector for now. If you can't afford them, may be you are undercapitalized. Undercapitalization will fail you, inspite of good system.
i really need to erase some loses!
-- Trading is a mind game. Try to forget the past. Don't trade to regain loses. If you do, your analysis will be skewed. Trade objectively, with no emotions. Trade because a stock gives you a signal based on set of conditions set forth by you. Ofcourse, this applies to every body (including me. I slip into that trap now and then).
If a stock opens higher then the previous close and then thats the high of the day, its called reversal (not exact def'n). If you want to buy a stock tomorrow, and a stock gaps up open and does reversal, you should avoid the stock. How can we do that. Wait for first 15 minutes to see if the gap is bullish gap. If the stock continues to go up above the opening price, then it is ok to buy.
Why does the reversal occur? Mostly done by the market makers. If they see lot of buy orders at a point, they open the stock up high and get everything. If there is no demand, the stock eventually falls down. But, can't explain why there are so many in this stock. Might be played out daily.
wonder how you guys get ideas about these stocks. For a change, why don't you guys give me explanation why you even consider this stock. If I have seen this stock's chart, I wouldn't have spent a split second. So, why are you drawn to this stock? I want to know your view point.
like Indian Hotels. There was a pull back recently. You could have bought into that.
NTPC looks like going sideways. We can consider it later.
Lack of follow through is a concern in the Market right now. This may be due to geopolitical reasons, U.S market, increase in interest rates etc. Trade minimally.
But, I am worried about the market in general. Lets consider couple of scenarios.
1. Market goes down south from here. Lets use Nifty index for sell condition. If Nifty goes below July 7th sell the stock.
2. 100 is close to previous base of GujAmbCement. Put the stop for break even.
...................................................................My bias is downwards. Nothing in the indexes is telling me that. I am looking at U.S. markets to come to the judgement. They are really doing worse. Couple of observations.
1. Nasdaq is at worst levels. 200 EMA long gone. 50 day EMA crossed down 200 EMA long ago. Recent support level of 2100 (1 month support) broken.
2. Health and Utility stocks are rising. These sectors only rise in recession time.
3. Geopolitical suddenly changing to worse. Iran, Korea and now Gulf war.
Now, this may not happen to Indian markets. But, since there is not follow through to Wednesday rally, chart is not rosy either. Hopefully, Indian markets show resilience. That time will only tell. So, I am adopting wait and see attitude on Indian markets scenario.
I have to get back to you on Reliance Communication. But, Reliance and Dabur are still doing good. You are in the best stocks in the market. I would tighten the stops below the latest bases. As in my previuos reply, set points based on Indexes where you will come out. Again, my judgement is biased with no data support from Indian stock indexes
Until the market makes the move, lets not take short position. However, we can identify at what point the downward move will be confirmed. Notice the low volume the recent uptrend of Sensex and Nifty. Please confirm the validity of data.
We will use the following to identify the start of downtrend. Since, we are determining the turning point, our stop will be close to exit otherwise.
1. If Sensex goes below July 7th. This is the low of the recent base and also the high of previous pull back on June 26th.
2. If MACD crosses down. After June 19th crossing up, it never crossed down.
3. If 8 day EMA crosses down 50 day EMA.
4. Depending what signal we use, we will use the opposite to exit. In case of signal 1, we will use 11000 to exit.
Same can be pointed in case of Nifty.
Market turned. Point 1 came true. This will be followed by Point 2 and Point 3. Major support is at June 14th. At that point, it will be double bottom. If that doesn't save, then the market is doomed. However, there are intermediate smaller supports. If the market stops at these levels, we may for trading range.
Can you short? Market is not yet oversold (RSI = 50). Lets see if we can find stocks that already made a move. Our stops will be far, since we missed the moved today. Or else, we can wait for next pull back. By that time, we will have a better picture. Consider the following for short:
When market goes down south, nothing holds, except Health Care, Utilities and commodity related stocks (Oil & Metals). Cements are doing good. Can they resist the storm? Also, consider 8 day EMA crossing down 50 day EMA to get out.
Based on oscillators (RSI, Williams, Stocastics ....), still it is not oversold. Around 45 for RSI. Still worse is MACD crossing down with histogram negative. There is a chance to attempt to go up after 5 days down. But, thats daily noise. Overall, the trend down is confirmed. Lets consider Down as long as MACD is negative.
Do not open new short positions now. You shouldn't have covered shorts either. The downside just started. However, it depends on your trading strategy. My strategy is to get lot of gains with less number of trades taken and higher risk. Another strategy may be to get lot of winning trades with small gains and smaller risk. Either is fine as long as U fine tune it with no. of trades taken and consistency with risk.
Here is my suggestion for you to consider. There are two steps you need to think about before taking a position. They are:
1. Setup
2. Entry
Does not matter if you are using Technical Analysis or Fundamental Analysis. Lets take Fundamental Analysis, since I know you use it. You look at a company's fundamentals and find that company provides multiplied growth quarter after quarter and year after year. You like the management of the company. Its P/E ratio is low compared to stocks within that sector. So, you determine that it is a well run company and available at low cost. You determine that you want to invest in it. So far, you just have a SETUP.
Now you need determine the condition when you will enter a position in the stock. You don't want to enter when the stock and its sector is tanking. When the market itself is tanking. At that point, it does not matter how good the stock is, how cheap the stock is etc. The conditions have to be right. I will get back to you with some examples if there are any entry conditions from Fundamentals perspective. I know from technicals point of view if you want to consider.
1. Buy only at 50 day EMA. 50 day EMA is the heart beat of the stock.
2. Buy only when 8 day EMA crossing above 50 day EMA. This is more stringent than 1.
3. Buy when some stocks in the selected sector are also having condition 1 or 2 satisfying. Using this condition, you are making sure your stock is part of the group. More safety net.
4. Buy when Market Indexes are satisfying 1 or 2. More safety net in addition to 3.
I like to follow conditions 4, 3 and 2. But, you could choose to be lax only select one of the above conditions. Thats fine.
I like to give example of farming. Farmer determines to use a particular seed because of its high growth and higher output (SETUP). But, the farmer chooses conditions of season and weather to finally plant the seed (ENTRY). He doesn't do it in summer when there is no rain. If he does, inspite of the seeds higher output, he may get lower result or nothing. Why, conditions have to be right!!!
Enough said. TVS Motors has been in continuos downtrend. Draw a trend line from peak of 170 to current price. The stock is below the trend line. Until it crosses this trend line, there is no hope. If it does, we can see some change in trend. May not be up. What is different in this downtrend versus other stocks is, the downtrend is slower along 50 day EMA. That means, less chances of correction. More the stock goes away from 50 day EMA, high chances of correction.
Aftek:
Read above about Setup and Entry.
Draw a trend line between 140, 120 and 100. If that line is broken, then consider for Entry. For your current position, get out if the stock comes down from current trading range between 50 and 60. If it goes up, consider point around 70, where the trend line touches. That may act as resistance. If it goes beyond 70, then you got your multibagger. If not, it comes back to trading range of 50 to 60, I would come out of the stock.
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.
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You have explained BUY in a great way. Can you please explain the SELL consideration in similar manner.
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.
..WE R CONTINUE OUR LEARNING FROM GREAT VVONTERU
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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.
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.
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.
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.
Minimum Stop = 2 * ATR
Maximum Stop = 3 * ATR
Actual Stop = Use previous support/resistance
So, your stop will be between 2 * ATR and 3 * ATR.
ATR(14) is ok.If waiting/holding for 1 year will help stocks popup, then everybody will do that. Buy and Hold is a pre-2000 thinking. By 1 year span, if you are trying to convey to me that you are a long term player, you should know what the stock must be doing within the 1 year. How low or high can the stock go. What fundamentals will help the stock go up in a year. You need to validate these along the 1 year. Just holding and hoping will not help!!!
I am a short term player. I don't have the expertise to tell you where the stock will be in a year. I can only tell you in the next couple of weeks. You should ask some other member who depends on fundamentals.
Each of us wish the stocks trend. But, after a huge fall, stocks take their time to form a trend. Until then, they just move in trading range. If you are a trend follower, it is safe to be out during this time. If not, you will get burnt during the choppy trade.
Looks like that. In any case, it is just a setup so far. Entry condition is that, SENSEX goes above the neck line and pulls back to test the neck line successfully.
I would suggest you guys look at all the banks. Something sure is going on with all the banks with high volumes breaking out of the trading range.
Set Up 8 dma Crossing 50 dma : All the stocks except Ranbaxy have crossed this set up 12 to 14 days ago and started pull back with in 2-3 days for 6 to 7 days. Then they have started moving up again for 5 to 6 days and have gained around 8 to 12 % from their lows. Now we need to wait for pullback to take a position.
Was the set up favourable to take a position 4 days ago during the pullback or the sector analysis did not favour it. Or it went unnoticed.
I think you use dma. I use EMA. For CIPLA, 8 day crossed 50 day 2 days back. If you are following dma, thats fine. You could enter the stocks if you get signal based on DMA as long you use it all the time, like I do EMA.
Looking at the action in indexes, I was not comfortable in recommending a buy. Indexes are still churning. A move above or below the trading range of the last month is desirable, unless the stocks can trade independently of the general market.
Having 8 day EMA crossing 50 day EMA satisfies the SETUP condition. That includes the sector action. Wait for Entry i.e., pull back. Lets also wait for the market indexes to cross the recent trading range. There might be slight pull back tomorrow. But, overall indexes are taking time and resisting downfall.
slope of 50 day EMA vs. crossing
-- U can use any strategy as long as you follow it all through for signals. Any setup + entry condition should give more than 50% probability when you test. Because, we don't need to even think to get 50% success. It is either Buy or Short like heads or tails when you flip a coin.
Decision Time. Up or Down ?
Sectors Up:
-- Banks (Good Volume. We have 1 day pull back after almost 10 day's of upside)
-- Cement
-- Pharma
Others:
Trading Range like BSE500
Initial leaders like IT are stuck in trading range now.
The fact that the indexes were up inspite of US stocks downward path is encouraging. However, the indexes are still range bound, just stopping at the top of the range. Tomorrow's upward movement will get them out of the range.
So, you have couple of choices. Sit out till the indexes come out of the range. Or, if you don't want to miss in case indexes come out of the range tomorrow, buy stocks at CLOSE + 75% of their ATR (ATR is available in iCharts.in). Logic is, if indexes move up, your stop gets hit and you buy into the stock. If the indexes move downwards, you will not buy into the stock. Stocks in pull back mode:
Note on Selection Of Stocks:
One of the problem facing traders is selection of stocks. Rather I would say elimination of stocks to remain with a few for consideration. That is the reason I have strict setup criteria. Why do we need few for consideration. Because, currently my position sizing algorithm lets me have only 3 open positions. So, how do I select 3 stocks from so many. Not that others don't go up. But, I can only expose my capital so much, unless I increase my capital or risk criteria. But, I am only comfortable with the risk I have for the current capital.
The reason I am providing so much verbiage is, you need to customize position sizing algorithm to suit yourself. Some are willing to risk 2% on a trade. I can only do 1%. Some are confortable with swing of 1% capital per day. I am only comfortable with 0.75%. With the variables I have in the Excel sheet, determine how many trades you can have open. Then, have a setup criteria to select the best. If you can trade 10 stocks, your selection criteria must be lenient than mine. Because, a setup criteria must suit the system you have. A setup criteria must end up giving you enough trades to fit your risk criteria. Finally, the amount of profit depends on the frequency and no. of trades with the system you developed.
Can you give me the best 5 of those to comment on. Add to your setup criteria to limit them to 5. Or if you have to trade, which 5 will you trade.
Market,
.........................................
52 week high or 3 month high means you are selecting the channel length. You want to consider stocks above/below the channel. Higher the channel length, stronger/weaker the filtered stocks. Stock market consists of tons of data. There are alway attempts to filter the price and volume data. All the indicators are just filters of price and volume data. 52 week high or 3 month high is another attempt to filter out those stocks that fall with in the channel.
You have picked good momentum stocks overall. I have ranked them. Always restrict to 1 stock per sector. Concentrate on Banks, Cements and Pharma. Wait for the indexes (BSE500, SENSEX, NIFTY) to come out of the trading range. If they don't go above the trading range next week, do not go long on stocks.
Dave is suggesting minimum channel length as 2 month for filter. If you start from stocks that made high compared to yesterday, 1 week high, 2 week high .... 1 month high .... 2 month high, Dave is asking to consider 2 month high. Channel length depends on your descretion and the market in general. After the recent downfall in May and June, if you have asked for 2 month high in July, you might get nothing. In that case you have to try 1 month.
Channel is not some concept, but just a name for setup criteria. Think channel as 2 parallel lines, 1 top and 1 bottom determined by the period (2 month or 12 month etc). There are stocks that fall between the 2 parallel lines and those fall above and below. From the 90s, they has been general understanding that buy stocks that make new highs and short stocks that make new lows. So, those stocks that appear above the top of the channel are considered for buying. Similar is the case for short for stocks that fall below the bottom channel line.
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also does "bollinger bands" comes under the channel length concept,
for acco. to elder in "come into..", buy stocks on the SMA of Boll B., sell at the upper channel or when it is going below the upp.channel, and buyback when it again reaches the SMA. how is it related to volatality?
Bollinger bands are drawn considering the volatility of the stock. I use it to avoid buying (rather sell) when a stock goes above the bollinger band
Elder likes to buy stocks when they come between two short term sma/ema. For example, if a stock comes between 10 and 20 ema. He calls it sweet zone. Stock always go up and test the emas now and then.
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also, how do we know that the trading range is over, does it means that it breaks above the resistence level?
kindly oblidge as u always do.
regards,
sonu m.
Yes. However, there are false break outs. Dave suggests to wait for pull back after the break out. Currently, the indexes are hovering around the top of the trading range. Same with U.S indexes. All are waiting for Tuesday's Federal Resever Interest Rate Hike. If there is no hike, you can expect a big rally. So, I advise wait for Wednesday. You will get hint from tuesday's U.S market.
Based on overbought condition. No body can say what market can do in the next day or week or month. It is just the probability of pull back after an overbought condition increases. With stock market, we are just dealing with probability. If you have not read probability in Math, it is time for you to revisit.
Sometimes you can predict based on fundamental or news. For example, look at how indexes are just dancing around the top of the trading range. If you go and put money now, you will scratch your head as they go up and down ... It is common sense that they (big money) are waiting for something to happen before making decision either way. Closest event is the Fed increase of interest rates on Tuesday.
In affect, when trading, think at high level. Look at market indexes. Look at what sectors are doing good and bad. Look at economics of the market, like interest rates, inflation etc. I know it is lot of work. But, thats what it takes
RSI, Williams, Mommentum, MACD, Stocastics etc are categorised as Oscillators. EMA is a Trend Indicator. Anything which as boundaries (eg: 0 - 100) is an Oscillator. You can use 10 or 15 period for oscillator. Normally, anything above 80 is considered overbought and below 20 is oversold. Now, these numbers depend on period you choose and stock/index you are looking at. Look at the history to get the number suitable for overbought and oversold indicator. Recently, I found another way to look at overbought and oversold indicator. If you have data, find out Percentage of Stocks Above Moving Average 20, 50, 100, 200 etc for Today, Yesterday, Last Week, Last Month. If these percentages go above 80, then considered it overbought. If the percentage of stocks go below 20, then consider it oversold.
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3. dave says, that even though that market is falling, go for sectors that
are strong, and then strong stocks in that sector, what is
ur view on this?
sorry for posting such long questions, plz guide as u always do
regards,
sonu m.
If you can only go long, ya why not
I guess you are far away from what Trading means. You are more into investing mind frame. Stops doesn't make sense anymore. Talk to someone who knows fundamental analysis. Ask them what to keep and what to drop.
-10 Oscillator is a price oscillator of 3 day and 10 moving average similar to MACD. You can construct it by using OSCP function or change the parameters of MACD from 12,26 to 3,10. Oscillates above and below the Zero line.
I understand your frustration. I couldn't give you any suggestion. Because, if I were in your place, I wouldn't know what to do either. Best I would do is take the major loses. Take 6 month break. During the break, read books, develop a methodogy with money management. Do some paper trading. Then come back. But, I couldn't give that advise as it requires complete overhaul.
Every major player in today's market has gone through what you are going now. Its like Jesus (was it Jesus?) asking, show me anyone who has not erred in their life.
However, good news for you. Market indexes are showing positive. They have crossed the trading range. We are going up to tackle 2 more resistances. If they can do it, you can regain the money. So, watch the indexes.
Sectors Up
Banks
Cement
Pharma
Consumer Goods (came out of the trading range recently)
Health Care (came out of the trading range recently)
IT
BSEPSU (came out of the trading range recently and tested the top of trading range successfully)
Sectors Still in Trading Range
Consumer Durables
MIDCAP
SMALLCAP
AUTO
METAL
OILGAS (ONGC is doing good
Rolta
-- Can't argue with what happened today on high volume. Hope there will be follow through. When you add more to a position, here are my suggestions.
1. Never add more than 50% of your existing position.
2. Consider adding after multiple of Risk is reached. If you have risked 20 points, wait at least the stock has gained 20 or 40 or 60 points above your buy point.
3. Add only on pull backs. So, don't add now. Stock went above its normal volatility (above upper bollinger band) and may slightly fix in the coming days. Look at LUMAXIND for idea.
The idea is, never make a winning position a losing position.
Aftekinfo
-- You are right. The stock lacks momentum right now. You should have entered after the stock cleared the trading range. One of the reason I go after the sector is for momentum. Look at Banks sector. How they are flying. For short term traders, momentum is everything.
Don't you think good, a consistent (or sudden) above average volume in a stock is a sign of something immenent---a sign of some dramatic change in the price movement---upwards or downwards movement in the stock price. I want to buy into stocks before they make a upward correction in the stock price, not just find a good trading range.
I agree buying into stocks that get above average volume.
Everyone wants to buy into a stock before they make a upward correction. There is underlying risk of picking the bottom. Today the market has recovered and may make you feel that way. What if the market went down. Rather, have a consistent approach that defines when you will buy, that gives you an edge. That way, you might have failures. But, overall, the success should override failures.
Guys, look at the stock CLASSIC (Gems sector). Its amazing how it is flying. It doesn't it even give chance to enter. Still, I wouldn't enter until it has a correction.
Currently, we don't have tools that can display sector charts. Only website that offers sector data is http://www.ndtvprofit.com/bb/default.asp?Pass=Indices. I had to go through so much strain in getting sector data. I wrote java code to scrape sector info from websites. Every day, after I load data, I run AmiBroker code to generate sector charts. When I talk about sector performance, I am not talking about 1 day. I am looking at the sector just like a stock.
use ADX for scanning. For volatility of a stock, I use ATR. U can get ATR of a chart from icharts.in.
The idea is, never make a winning position a losing position.
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I took position in this stock because of the following reasons:
a) Its quarterly and yearly results was expected on the 8th Aug. Around 1-2nd Aug. The trading volume had started increasing in the anticipation.
B) Low valuation: It was in the range of 220 to 280 for many months.; and the fundamentals have seemed to have improved. Like all good stocks it had corrected.
c) IT companies had reported good results: trong dollar.
I'll keep in mind your advice about re-entry and adding more
agree buying into stocks that get above average volume.
Everyone wants to buy into a stock before they make a upward correction. There is underlying risk of picking the bottom. Today the market has recovered and may make you feel that way. What if the market went down. Rather, have a consistent approach that defines when you will buy, that gives you an edge. That way, you might have failures. But, overall, the success should override failures.
Thanks for ur encouragement. whatever i have learned is from u, the books u have suggested are real gems
the site i visit is twonahalf.com, i suggest u to visit that site. it provides basic information of which stocks are in uptrend, candelstick bullish/bearish patterns
52 week high/low, speed of trend,etc. register urself first, they send u an activation number, activate ur account, and get started.
although i do not entirely follow their recommendations, i do go to icharts.in
and do my own discretional analysis. i think some member in traderji has started that site, i got the site info from here itself, so for more information,
visit http://www.traderji.com/equities/762...ight=twonahalf
what is ur opinion on "historical volatility" that dave suggests, do u use it?
u said u use ATR, from what i have learned, u use 3*ATR as ur initial risk R.
This i think u use it for stop loss, however i dont' know how do u use it to
measure volatility of stocks? what range tells u it is highly volatile?
2. does the 3/10 oscillator that dave suggests, is MACD value of FAST 3 EMA,
SLOW 10 EMA, smoothed by 1 EMA, i.e 3,10,1. If this calculation is right,
can u suggest any indicator similar to "HISTORICAL VOLATILITY" and its
values?
Market has come out of the trading range. It is up 3 days. Will pull back pretty soon. At that time, consider these stocks for entry.
Day Trading Info
-- http://www.traderji.com/44907-post62.html
Its been a while I read it. Historical volatility can be calculated using EMAs of ATR. You know stock's volatility by comparison to another stock. A stock that has ATR = 100 is more volatile than a stock that has ATR=10. Volalitility is about how much swing (High - Low) in a day. You need this to place a stop and also to calculate position sizing.
Lets say you are buying a stock that that has ATR=20 and close = 100. If you are putting a stop between 80 and 100, you are basically asking for the stop to be hit. U are not giving the stock a chance to test your methodology. 3 * ATR is used to give the stock atleast 3 days to prove U are wrong. You could reduce it to be between 2*ATR and 3*ATR based on previous support.
U need stock's volatility for position sizing. If you buy 100 shares of a stock that has ATR 100, you should expect a swing of Rs 10,000 per day. U need to ask yourself the question, are U comfortable with that kind of change to your porfolio. If not, how much swing can you take in principal per stock per day.
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2. does the 3/10 oscillator that dave suggests, is MACD value of FAST 3 EMA,
SLOW 10 EMA, smoothed by 1 EMA, i.e 3,10,1. If this calculation is right,
can u suggest any indicator similar to "HISTORICAL VOLATILITY" and its
values
A stock can be bought or short. Only 2 options. So, flip a coin before you buy or short. Heads or Tails. That gives you 50% probability to win or lose. Most setup and entry algorithms have less than 50% chance of making you money. What makes your trading success or failure is the Position Sizing (money management) and Stop Exit (risk) and Profit Exits (trailing stop mechanism). Do not evaluate your strategy over 1 or 2 trades. Evaluate over 10, 20 or 30 trades. The key is making trades using the same strategy over and over again. Thats really hard. Thats called high probability trading. Read book, 'Trading in the Zone' by Mark Douglas. The book is little bit boring, but does help in this perspective. The author challenges readers to make 10 trades consistently based on a predeveloped setup and entry criteria
thing is, it does not matter. Think about. If you got 90% success trades over a span of 1 year with 10% failure. The success made Rs 10,000 profit. 10% Failure made 8,000 loss. How will you evaluate this system. How about this. A system produced 70% failure and 30% success. Profits are 10,000 and loss is 5,000. Did the percentage success matter.
So, success or failure are just outcomes of a trade where you don't have control over. Market is dynamic environment which is constantly changing. By selecting a setup and entry criteria, you try to give more than 50% probability of success. If it fails, so fine. Your position sizing algorithm already gives you how much you are constantly risking. If its a success, you want to make profit more than the risk. U only have control over what loss you can take when the trade fails and what profits you can make when trade succedes.
No. Most of what I write are my understanding of the market and my readings. I constantly read books along with my trading. They keep me in the loop. If not, as you trade, there is a tendency to move away into the greed/gambling stuff.
Quote:
Also, Should I buy only if there is a buy signal on the previous day or is it fine if I buy if buy signal is generated say 3-4 days back also?
As long as U are not trying to catch up. Feeling of missing out is always there. U should try to get out of the feeling as there will always be opportunities. If you do take it, don't forget to change the entry and exit points in the Position Sizing Calculator to use the new position size.
Market is kind of overbought. But, different sectors are having different timing. Pharma has been down for some time. Look at Ranbaxy. I know from some of you that it is fundamentally a good stock (if it helps setup, why not). It has nice crossover with pull back. What I am not liking about the pharma and cement stocks is low volatility. But, sometimes that is good too. Low volatility compared to its historical volatility leads to higher prices. During the low volatility, consolidation may take place
have 5 updays. I wouldn't buy it now until crossover and pullback. If U already have it, hold on. Market's new uptrend is confirmed. What that means is, most of the stocks will come up.
In the recent days, MIDCAP and SMALLCAP have come out of the trading range. As U see (if you have followed me), we started with couple of sectors in July in uptrend with now, most of them in the uptrend. I am seeing lot of stocks in setup. If market pulls back couple of days, there will be tons of them for entry.
can give you tons of stocks showing this pattern. No doubt because most of the sectors are up. This is the good time to put your money as it is the start of new uptrend and your entry will be closer to 50 day EMA
Nice break out with good volume. Right now above the bollinger band. Let it pull back before entry.
whenever u buy stoaks, first and foremost consideration has to management quality
Market:
I would have liked pullback. Are they not going to give us??? Alright, lets look at some of the stocks.
Ranbaxy nicely went off but, came back. Amarajabat did ok. Its not like in text book isn't it!!! As far of now, I am very positive in the market. As long as you pick stocks in right sector (didn't they all come up?) and with good tradeability/trending you should make money.
Here are my reasons for me being positive about the market.
1) Look at all the sectors. They are all up except Metals.
http://charting.bseindia.com/charting/index.asp
2) My scans are giving high no. of stocks.
3) Most of the stocks are showing above the 50 day EMA with good volumes with few exceptions.
4) Indexes are up more than straight 5 days.
5) Look at Advances versus Decliners and other charts at http://www.icharts.in/breadth-charts.html
You are right that market is overbought. It might pull back. I would have agreed with U that this market would go down if the sector action wasn't good. Or if the advancers vs decliners showed divergence. Or volume in the stocks is low in the uptrend. But, they do not. So, till I see any negative price or volume action in BSE500 and sectors, I will remain positive.
In the end, it is always about what methodology U follow. Simple put, what criteria U are looking for before U take a position. My setup criteria is:
1) Market Indexes (BSE500) should have at a minimum 8 EMA cross up 50 EMA
2) Sector of the stock should have at a minimum 8 EMA cross up 50 EMA
3) The stock has at a minimum 8 EMA cross up 50 EMA.
Criteria 1 is satisfied. Criteria 2 is satisifed for all except Metals. Criteria 3 will depend on the stock. If my methodology gives me a buy, I buy. It does not matter even if I feel I will lose money. Similarly, I will not buy a stock if my methodology doesn't give me a buy, inspite of my feelings of making money.
I (or Neither U) do/should not fear losing. Loss and Gain are just outcomes of trading a stock, which I or U do not have control over. However, we do have control over how we manage loss or gain. We limit loss by constant risk, increase gain with muliple of risk. Difference of this is going to make U winner.
What is this Swing trading? Will it be helpful in trading Nifty futures?
-- Swing trading is synonymous for short term trading with a span of 1 day to couple of weeks. I have never been into futures. Probably U could.
1. If A Particular Sector Has 20 Stocks, Out Of Which 10 Stocks Are
"top Gainers" And 2-3 Stocks Are "top Losers" For The Last 63 Days,
And For The Last 7 Days , If The Proprtion Of "top Gainers" Has Increased, Does That Mean The Sector Is At Intermediate Uptrend?
-- U ask tough questions. May be. I normally look at an index of the sector or the aggregate chart of sector. I peak into some of the stocks in the sector to see the trend. Normally, U would want the chart of the stock coincide with the sector chart. Look at BANKINDIA and BANKNIFTY for example.
2. Or, If A Stock Is At 63 Days High, Does That Mean The Sector Is Also In An Intermediate Uptrend? If Yes, Then Why Is It Necessary To See A Sector If The Stock Is Trending?
-- A sector is important because of the crowd behaviour. U are trying to do the best in selecting a stock. Sometimes, it acts as a limiting agent. If not, U will have so many stocks to consider for entry. At that point, U want to pick a stock which is part of the crowd that is going up/down. It gives the stock legitimacy. That does not mean a stock that does not follow a sector will not go up or down. As I said earlier, U are trying to do the best.
There is resistance at 85. If not, it is prime for new entry. If it is going up, why would you want to take it out. Trail stop at 70 (2 * ATR). Once the current base clears i.e., goes above 80, move it to 74. Let the winners run!!! And remember, in order to make profits, you need to put some money on the table. Like business. U can't make money out of nothing!!!
Market:
Indexes are nicely consolidating the recent gains. Thats good for the next leg up.
Here are some links I follow. They pertain to US stocks. But, methodology isn't different.
Elder Website: www.elder.com
Dave Website: http://www.tradingmarkets.com/.site/...y/dlstoutlook/
Kirk Website: http://www.thekirkreport.com/
Other: http://financialsense.com/Market/wrapup.htm
Nice Article on Stop Loss:
http://www.traderji.com/trading-psyc...s-my-boss.html
Market:
My feelings (fear) tell me it is going Czar way. But, until 3200 of Nifty is taken out, lets be positive. If you have taken a position recently, honor your stop loss.
Not so easy!!! I am bearish on U.S markets due to thin volume and sector action. They are going up to be shorted. But it is different in case of Indian Markets. Good sector action and good volumes in stocks in the recent uptrend. But, I admit anything can happen till it happens.
Look at some stocks in OIL sector.
BPCL
HINDPETRO
As usual, pick only 1 as they both belong to OIL sector. Look at those volumes in these stocks in the recent uptrend.
Hi VV,
Thanks for ur reply. I am not after the "Holy Grail", as i know, no such thing exist in the market. As u have mentioned earlier, when we enter, our probability to win is 50%, no matter how perfect is our system. I find ur system simple, scientific and effective. That is why all of us are hooked to this thread, because ur response is not biased, u encourage to learn ,and finetune our trading system.That is what i tried to do.This was just another way to look at ur system. I hope it works and is benficial to other members.
For stop loss, i liked ur "volatility based stop system". i.e.,
3*ATR = R (initial risk), as it eliminates the risk of market noise to hit ur stop, if we place stop at 5% below ur entry price, as DAVE LANDRY suggests. But i would like to add, "Always put ur stop,below the recent
pivot low or "3*atr or 2*atr", whichever is lower" and check the pivot low in "weekly chart", which gives a strong support area.
For position management, I use "percent risk model". Divide % risk u will take on the stock by 3*ATR, which gives u total no. of shares. For example, i want to risk 2% of my trading capital of 1 lac. 2% = 2000.Suppose 3*atr = 10
Then , 2000/10 = 200 is the no. of shares i will purchase.
On trailing stop loss, I think Traderji's method to put stop at previous 3 bar low, if u r long and previous 3 bar high, if ur short, is very effective. Still i am researching new methods and will update u with my findings.
Lets be frank with ourselves. This stock has good momentum. It pains to be not in it. So, why question whether its too late to enter. Because, it is not the point when we (I) enter a stock.
You might make money if you enter now. But, is it consistent in the way you trade. Definitely it is a qualified candidate that satisfies any trader's setup condition. But, does it satisfy entry condition at this point. Or do you feel you missed the entry couple of days back.
As I said earlier, be consistent in the way you trade. You might make money in the short term by trading arbitrarily. But, you will lose on the long run. Have conditions written down for
1. Setup: When U will consider a stock for buy
2. Entry: When U will actually enter that stock
3. Stop Loss: How U will determine stop loss
4. Profit: How U will sell to make profit
Repeat trades with these conditions without emotions. Once you are comfortable with these conditions, don't change them until U apply for 10 to 20 trades and U can assess the results.
this case, it did work. I understand the reasoning behind what you are getting at. What U are looking for is, if difference between short term ema (8) and intermediate term ema (50) is reducing compared to difference between 50 day ema and 200 ema, then a correction can be expected.
But, if go and look at the chart earlier to May, there were several times MACD(8,50,1) went below MACD(50,200,1). This did result in correction, but not a lot like in May.
MACD(3,10,1) also looks good. Good work.
If you are not using or entering trades in the position size excel, you are not serious as a trader. One of the hard and boring part of trading is book keeping. But, if you don't, how do you analyze your profits and loses. Can you do business without book keeping
. Look also ATR of nifty and sensex. From high of mid May to present, ATR of the indexes and the stocks have been falling. Ideally, a breakout from lows should be with high volume with higher ATR. Lower ATR might mean 2 things. Either its consolidation followed by higher volatility or we are going down. How and when do we know this? Future price action. Lets not predetermine change in market direction
It is worth to look at what Timtomlee has come up with. MACD(3, 10, 1) is good. It does very good in buy signals when line crosses 0. It also gives sell when line crosses back. But, the sell signal may not make you money all the time. It works very good when the stock is trending.
For example, look at Sensex with this indicator. From 2005 Nov to 2006 May, there were only 2 cross downs below 0. One time was in Jan'06 when there was a deeper pull back. The other one in May when sensex came down heavy. So, look at for each stock whether it makes sense. I think it does very well in providing entry point. It provides signal earlier to crossover. Look at how the signal would have worked for:
1. Reliance.
Why do you feel that? Having feelings is ok. But, don't act on those feelings until you see some positive happening for the stock in the direction of your feelings. TA says nothing great about the stock. Why bother about this stock. Why don't U select better trending stocks.
TA: Stock still looks good, even though I admit last 2 days have been bad. Not because of price action, but because of Negative Volume. Remember, buy before news, sell after news. That is the reason it went down after the news. I don't trade based on news. Because, by the time we get the news, its tradable value is reduced. We are at the end of the food chain for news.
This is more of a MIND question rather than a TA question.
Think hard before U get in. Not after!!!.
One of the reason you need to track trades is to specify buy and sell conditions. When you make a buy, write down the reason why you are buying and what will make you sell. Once you hold the position, continue to see whether conditions have changed.
So, I ask you why you bought the stock. If the answer is NEWS, then did that change in the last 2 days. Or is the downturn in the last 2 days has made you fearful of loss. If you get swayed by a tick up or tick down, it will be hard to trade. Do not have emotions for failure or success. One trade will not matter. Even if you make a success in this trade, what guarantee is that you will be positive at the end of the year.
Use the points below in changing how you trade.
1. An outcome of 1 trade does not matter.
2. If you make 40 trades a year, think how your portfolio can be positive after those 40 trades.
U could have 20 loses straight. But, you could also have 5 gains straight that make up 20 loses. What is the point in pondering about 1 trade loss.
Let me give an example. Let say you have 15 gains and 25 loses in an year. Lets use marbles of 2 colors, green and red for this example. Green, win, red a loss. Put these marbles in a bag. Draw each marble out of the bag.
Q) What are the chances of drawing a red or green marble. If the probability of drawing a red marble is more, then did that change the portfolio amount at the end of the year.
Q) Is it possible to draw 10 red marbles out of the bag straight.
Q) Similarly, is it possible to draw 10 green marbles straight.
A) Yes, it is possible, probably both with a lower probability.
The key in this example is, the marbles are constant, the action of drawing (trading) is constant and the risk (stop loss) is constant for either green or red marble. Can we do that with stocks? Stop Loss! yes with position size management. No matter what stock trade we lose, our loss should be constant. Position size should only change. Trading methodology should be constant. Don't trade arbitrarily. If not, results will be skewed.
3. Before you put a trade, assess the loss using Stop. If you can't take the loss, pass the trade. Because, once you put a trade, nobody can determine its outcome.
4. If you can't think in terms of total trades in a year, probably you are trying to gamble. Remember, there is no easy money in stock market. U might have realized this already in the last couple of months
. I look at price chart. Question: Is it in trading range or trending?
2. Answer: trending, then go to 3. Trading Range, avoid the stock.
3. I look at the volume chart. Question: Does the the recent uptrend has good volume?
4. Answer: yes, then go to 5. No, avoid the stock.
5. Look at MACD. Question: Is there divergence against the trend?
6. Answer: No, then go to 7. Yes, avoid the stock.
7. Look at Williams oscillator. Question: Is the stock in overbought condition?
8. Answer: No, then stock is selected for setup. Yes, avoid the stock temporarily.
At each of the step above, I am constantly asking myself why I should (not) trade this stock. Once a stock is selected based on setup condition, I look for my entry condition to satisfy to put a trade. Hope the steps will help you.
Why would any one buy above the bollinger band. Either way, if you have chosen to trade intraday, why did you keep beyond that. It tells me you just gambled. You thought you can just make a profit. You were not prepared for the loss. You never had a exit plan. Please read my earlier comments on Mind game.
TA: I am not worried about the price action today. I am more worried about the red volume. There were many trades that took profits. And why not after gaining 40 points in one day. There may be another down day to make it come below bollinger band. Other than that, chart still looks good.
Stock looks good by price and volume action. 180/190 is resistance. Should you hold it? You should have thought about that before you bought it. CMP is 173, exactly where you bought. What changed?
Now, it all depends on how you trade, what your expectations are etc etc.
Couple of options based on your trading methodologies profit taking:
1. Take half after 1 * ATR is reached and set the stop to break even. If you adopt this method, when a stock makes a high bar, continue to take % of shares for profit. This is the reverse of buying in small lots.
2. After 1 * ATR is reached, continue to trail the stop to 2 * ATR to capture profits. Here you are not taking partial. You are holding on to 100% of the position.
Ofcourse, there are variations to this. You can rate your profit trade based on 1 * ATR - C, 2 * ATR - B, 3 * ATR - A. If 3 * ATR is reached, you can completly take out the position since you have attained A rating for your trade.
3. And there may be other way to do it based on your objectives.
Before I used to follow Option 1. Recently, I changed to Option 2. Whatever option you choose, stick with it. Do not chose option 1 for a trade and use option 2 for another trade. If you are using Option 1, then you should have taken profit for ExideInd.
Stock Tips:
I did not run through the scan due to boring index action. I am just looking at some stocks I am following. Look at CLASSIC for entry. Refer to previous post
This stock is lagging the general market (majority of stocks). If the market was also at this position, I would say, yes, this stock has real scope. But, as U know the market has passed this phase. For this stock (or any for that matter) to move up, the market has to continue to go up. For U, it does it matter. Just trail the stop. If U are considering adding more, I would advise to not do that. At this point, there is more risk of making your winning position a losing one. U should let this winner run for this moment. Lets consider it again after couple of weeks
Ranbaxy
-- If any has taken a position in this stock, don't forget to trail the stop higher to 380. This is a perfect example why U need a minimum of 2 * ATR stop. Stock patterns have less and less becoming what they are shown in text book. After your entry, they may take their own time and swing against you. If U don't give them enough space, they hit your stop and then go in your direction Just like the indexes, its going slow, looking sideways more than upside. Its got a major resistance at 1000. Volume has been drying up in the last couple of weeks. My personal opinion is, stay away. The low volatility in the indexes and stocks is looking more like a puzzle to me. I am stopping short of saying, there is something fishy going on. Is this lull before the storm or just business as usual. This accompanied by low volume in some stocks.
Now, that doesn't mean we go around and short. If we don't learn any thing from our history, lets get this one right. DO NOT TRY TO DETERMINE THE TOP AND BOTTOM. Too many people have lost their shirts from 1900. This is straight from the mouth of Jesse Livermore (so they say. Book was not written by him).
leaving U frustrated
That depends on how U normally go long. Here are some of the options for buying on pullback. These do not apply if you are a breakout player.
1. Long at pivot point. Low of the pullback.
2. Long after stock takes out pivot successfully. On Friday, SIEMENS took out the pivot point successfully.
3. Long between two short term EMAs. Choose either 10 and 15 or 8 and 13. Whenever the stock pullsback to between EMAs, buy. Probably on Thursday. U should note that some stocks have different pattern and may not pull down rather than create a base. SIEMENS is a perfect example. It created more of a base than a pull back.
Depending on what option you choose, results will vary. As I always say, stick with one option for all trades. Don't change between trades.
I want U guys to think the other side of the trade and ask why not. Thats how we together improve our trading.
We need different opinions, with a basis. Thats how we learn. As a trader, we need to think like a lawyer. We need to think other side of the argument (trade) and check if we have an edge
see the difference between mine and theirs. They are going in detail. I just eye ball the chart. I am looking for easy ones. How about this. Look at the stock chart I recently suggested: Godrej Industries. Compare that chart to these charts. Reading their analysis looks convincing. But, I think the charts (ICSA) are not. Ankur is good as long as the stock clears the pull back.
My criteria for stock is based on KISS methodology. Keep It Simple Stupid. Why? because U want to repeat the process. If U can't repeat the process, probability will not work for U. Having such a detailed analysis will make it hard to repeat the process.
Another thing I noted from their analysis is they use Weekly charts. That kind of takes out the noise in daily charts. Its good and bad based on what time frame U base your decisions on. So far, how did they work out for U. Do they give help on position and stop loss management
observed that stocks kind of go in 3 stages. Most of the time, at the 3rd stage, they cannot keep up the previous momentum (buyers don't want to buy so high and sellers had enough profit) and either correct or go sideways before they continue up. Thats what is happening to CLASSIC and so many stocks. What are our options if we are already in the stock.
1. Stay in the stock till its corrected.
2. Use MACD cross down to get out of the stock. Get back in after MACD cross up.
I don't need to tell U that the options will have different results. Try to follow only 1 option all the time.
I am positive about the stock. Compare the volume in July when it reached 200 versus now. Stock has prospects.
U are picking good stocks. Thanks for sharing. Let us know how U are coming up with these stocks to help others
don't know if its the right time to short. Indexes had a good day on Monday. So far they are going up, why really short. Unless U want to use overbought conditions in indexes and short them. At this point of time, resist shorting individual stocks. U should have plenty of stocks to fill your portfolio on the long side. Pick one from each sector.
Reading indicators is tricky as they don't work all the time. MACD does not work if the stock is going sideways. It shows negative histogram and crosses down. Nothing bad at that point. Can go bad or the stock may resume the trend. Don't make a decision using just MACD if the stock is going sideways. MACD is a trend following indicator.
Some stocks are joining the party late. Buying at the beginning of the trend is the low risk high reward play. Ofcourse, determining the beginning is the key. I use crossover to determine the beginning. There may be other ways U could explore.
There is no mystery: I look for good fundamentals, good financial results (past records); more importantly---as far as imminent share price appreciation is concerned---consistent above average volumes and good technicals (this I've started to learn recently); of course, one also needs to consider the market sentiments and the its current trend.
I've picked these things from here and there---thanks to you, Saint, Amitbe, and others!
Short Term (I used daily time frame for 6 months duration)
-- Looks good. Today, it came out of the pull back decisively with good volume.
Long Term (I used Weelky time frame for 1 year duration)
-- Came out of the pull back on weekly too. MACD crossed up and histogram is showing positive indicating up trend. One thing that worried me is the volume. Last 5 weeks, volume has been decreasing.
I am a short term player. I am not good at saying some stock will be there at X position in 3/6 months. I believe any stock can go anywhere as long as good environment exists. U trail the stop. If it goes up, move your stop up
Thanks. I will take this opportunity to recap what I have given and where we want to take this thread in future. Here are the most important aspects I think I have given.
1. Be consistent in whatever U do. Have a trading plan.
Trading is a small cycle. Write down the trading plan and following it consistently. Do not be swayed by the market. Market always lures into taking different paths. Do not get swayed by it. Your trading plan is the Tree which you use it as support in the cyclone of the market.
Do you know about Odysseus and Sirens story. See the attached image. The mast is your plan. Sirens are the market. You drowning in the sea represents loses.
2. Use Position Size for Money Management.
Use the calculator I attached earlier. Without using this, there is no hope for your success. Remember, with one Win you are not going to the bank and taking your money. With one loss, you are not going bankrupt. If you are serious, you are there day in day out for many years. Position sizing with constant risk is the key to winning on Long Term.
3. Stop Loss and Profit Taking
Devise a strategy for exits. Exits are the key to your winning. If you look around on Traderji, most people are bothered about entries. We are looking at the wrong place.
4. Continue to read.
Give yourself many years. Accompany trading with reading. Continue to experiment and improve.
As I suggested in the recent replies, from now on, I want this thread to have your viewpoint. Specially, I like to hear contrary view points. This is what I want to know.
1. I like to know views on pull back methodology.
2. New techniques for Stop Loss, Profit Taking methodologies.
3. When I suggest a stock, I want your pros and cons of taking the trade.
Basically, I want to avoid TUNNEL view. Lets share and improve our trading.
Consider EXIDEIND for entry.
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Looks good. Look at the weekly chart for entry and stop due to the sideways action in daily. I think entry should be CMP.
Other way for entry based on daily is to use MACD crossup. We need this if a pull back turns into short term sideways action.
Entry into Exide Ind should be ok. Do not compromise on Stop Loss. Reduce position size instead.
Pros: Good trending stock with better price action.
Cons: U can see from the chart that it is overextended. It might get corrected to test 50 day EMA.
If U have questions on what approach to take, just choose one. Stick with that approach when similar situations arise.
woudn't lose hope at. Once U put a position, stick with it using a stop loss. Unless U have preset conditions that will tell you to take out the position prematurely. And U follow these preset conditions always.
To start with, I have to admit I am not good at Long Term analysis. Whatever I know is for short term, only using TA. Poor (lazy) in doing Fundamental Analysis. Its not practical for me to check fundamentals for so many stocks either
think we discussed about what options we have for profit taking. If U are a partial profit taker, go ahead and take out partial position profits. If U carry 100% position, trail the stop. When trailing stop, make sure U have atleast 2* ATR. If U grade yourself based on multiples of R and they have reached, then take out the position. As U might have observed, results will vary.
Lets take EXIDEIND for example. Lets say Ur trading plan says U will carry 100% position. But, U saw on August 29th, EXIDEIND hit 375. U got tempted and took out 50% profit at 375. Today EXIDEIND is 385. And hit yourself hard because you don't have the 50% position as the stock still has momentum. So, my friend, do what Ur plan says inspite of how market is behaving. On the long run, you can atleast look at your trades diary and see what is working and what is not.
Great. Thats the mark of a serious and successful trader. Elder stresses so much on keeping trading diary. Not many traders realize this. In addition, you should do a monthly checkup on your trades. Check why a trade successfully worked while the other didn't work. See how you could have done differently. Beware that the market can be a bad teacher. It can award you for bad trades and punish you for good trades. Keep that in mind when you change your trading plan. Avoid frequent changes.
See chart with settings
1. Weekly
2. Year duration.
You will see the downtrend is intact. May be its starting a new trend. But look at BANKNIFTY and compare. This stock has been lagging like YESBANK. Right now banks are as high as there were in May before the fall. Watch BANKINDIA, PNB, ICICIBANK, SBIN.
hi vv, some little birdie told me that stocks which hit 52 week high are more attracted to go higher. And same is case with 52 week low, they tend to go lower. How far is this true????
Isn't that true. A stock will hit 52 week high because its got demand. Every one wants to own it. That is the reason its going up. Similarly, a stock is 52 week low because no one wants to have it. All of them are selling it. Ofcourse, this understanding is at high level.
That is one reason you see websites recording stocks that hit 52 week high and 52 week low. Sometimes, there is speculation that can drive the stocks up. Once that speculation is over, stock drops like a thud.
If U think about it, it works both ways. Lets do the 52 week low again.
Everybody is selling. Stock has been falling for long time. After some time, a stock is worth something that reflects the companies value: its cash flow, technology, real estate etc. So, at that point, is it worth going and shorting. Why do we want to sell a stock when its value is equal or less to that of the company.
Similarly, a value of stock as it goes up happens in 3 stages. In the 1st stage, the value is less than the fundamentals of the company. At this point only few people know about this fact. In the 2nd stage, value is equal to the company's fundamentals. In the final stage, value is greater than the company's fundamentals. The final stage is called the speculation stage. Everybody knows about. Like the stock CLASSIC. Recent example is also GOLD prices.
http://bigcharts.marketwatch.com/int...x=32&draw.y=10
Speculation stage is a good and bad. Good because the stock price increases faster as many people know about. Bad because, sooner or later, there will be correction as the prices get too out of hand. Those people who join late will be hurt. How do you know this stage. From TA point of view, the momentum should tell. From fundamentals, Trailing and Forward P/E of the stock compared to industry and other stocks in the industry.
As I said in earlier posts, its very hard and risky to catch bottom and top. U may forsee stock or market is going to fall. Timing it is very hard. Rather approach it based on your objectives. Be it either entry or profit taking.
Even though 52 week high is good for buying, the risk to reward is much better if you buy close to 50 day EMA. This also depends on the general market. Before May downfall, if you were waiting for a stock to buy at 50 day EMA, you would have been waiting for ever. Right now, most of them are trading close to 50 day EMA. So, there is no straight answer.
This market has been going up. Inspite of that, there are some elements that need improvement. Specially, VOLUME. Also, I see stocks rolling off or going sideways. Rolling off in IT sector: WIPRO, SATYAMCOMP, INFOSYSTCH. Sidways in most of the stocks. Is it consolidation or leg down. Only future can tell. Lets wait for the signs
As U might have realized it by now, day trading is hard. Trading itself is a hard game. Day Trading multiplies that. I have a reply in my thread about day trading techniques using cross over, stop loss and profit taking. % profit taking method makes more sense in day trading due to lot of volatility in a day.
Is there a correlation between open, high,.... Sometimes there is. For example, when reversal (open=high, close is near low of day) occurs, U can predict next day stock to go down. I rather suggest you to use crossover technique. It works in all cases. Gives you concentration. Let me know if U have any questions.
Speculation stage is a good and bad. Good because the stock price increases faster as many people know about. Bad because, sooner or later, there will be correction as the prices get too out of hand. Those people who join late will be hurt. How do you know this stage. From TA point of view, the momentum should tell. From fundamentals, Trailing and Forward P/E of the stock compared to industry and other stocks in the industry.
As I said in earlier posts, its very hard and risky to catch bottom and top. U may forsee stock or market is going to fall. Timing it is very hard. Rather approach it based on your objectives. Be it either entry or profit taking.
Even though 52 week high is good for buying, the risk to reward is much better if you buy close to 50 day EMA. This also depends on the general market. Before May downfall, if you were waiting for a stock to buy at 50 day EMA, you would have been waiting for ever. Right now, most of them are trading close to 50 day EMA. So, there is no straight answer.
This market has been going up. Inspite of that, there are some elements that need improvement. Specially, VOLUME. Also, I see stocks rolling off or going sideways. Rolling off in IT sector: WIPRO, SATYAMCOMP, INFOSYSTCH. Sidways in most of the stocks. Is it consolidation or leg down. Only future can tell. Lets wait for the signs
got the sign. Avoid longs for now. Don't compromise on stops and profit taking.
Cut your loses!!!. But how? This is one area I am currently working. In many books you read, 'Cut your loses and let your winners run'. But, they don't tell how you cut your loses. I sent a mail to Dave Landry once about how we can cut loses. His opinion was that it is hard to cut loses due the recent stock price action. Stocks are not going up immediatly after a pull back as they used to. They take their own time, going sideways before going up. So, here are some questions that we need to answer. And we should be able to use the answers consistently without guesswork.
* how do you differentiate between a stock going up versus going sideways versus going down?
* When can we lose trust in a stock before it hits your stop
* Should we continue to hold a stock when you see a clear signal from the indexes like we saw today
I recently was toggling with MACD cross down as a signal to take out the position. MACD cross down occurs due to stock being not able to keep up with earlier momentum. After the crossover, the stock can trade sideways and go up or go down. We have 2 options.
Option 1:
Cut loss when MACD cross down and avoid that stock until next pull back.
Option 2:
Cut loss when MACD cross down. Get back in when MACD crosses up. This happens if a stock is going sidways and then goes up.
Downside using MACD:
If using Option 2, U might have multiple crossovers if stock is going sideways. However, you could use last N day high to enter again.
Application:
Choose a particular option. Don't change them between stocks.
Your Comments?
Look at Sensex and Nifty. See MACD(12,26,9) and MACD(3,10,1). See Anything? Any difference between MACD(12,26,9) versus MACD(3,10,1) in how they provide information?
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1. Be consistent in whatever U do. Have a trading plan.
Trading is a small cycle. Write down the trading plan and following it consistently. Do not be swayed by the market. Market always lures into taking different paths. Do not get swayed by it. Your trading plan is the Tree which you use it as support in the cyclone of the market.
Do you know about Odysseus and Sirens story. See the attached image. The mast is your plan. Sirens are the market. You drowning in the sea represents loses.
2. Use Position Size for Money Management.
Use the calculator I attached earlier. Without using this, there is no hope for your success. Remember, with one Win you are not going to the bank and taking your money. With one loss, you are not going bankrupt. If you are serious, you are there day in day out for many years. Position sizing with constant risk is the key to winning on Long Term.
3. Stop Loss and Profit Taking
Devise a strategy for exits. Exits are the key to your winning. If you look around on Traderji, most people are bothered about entries. We are looking at the wrong place.
Continue to read.
Give yourself many years. Accompany trading with reading. Continue to experiment and improve.
As I suggested in the recent replies, from now on, I want this thread to have your viewpoint. Specially, I like to hear contrary view points. This is what I want to know.
1. I like to know views on pull back methodology.
2. New techniques for Stop Loss, Profit Taking methodologies.
3. When I suggest a stock, I want your pros and cons of taking the trade.
Basically, I want to avoid TUNNEL view. Lets share and improve our trading.
Cut your loses!!!. But how? This is one area I am currently working. In many books you read, 'Cut your loses and let your winners run'. But, they don't tell how you cut your loses. I sent a mail to Dave Landry once about how we can cut loses. His opinion was that it is hard to cut loses due the recent stock price action. Stocks are not going up immediatly after a pull back as they used to. They take their own time, going sideways before going up. So, here are some questions that we need to answer. And we should be able to use the answers consistently without guesswork.
* how do you differentiate between a stock going up versus going sideways versus going down?
* When can we lose trust in a stock before it hits your stop
* Should we continue to hold a stock when you see a clear signal from the indexes like we saw today
I recently was toggling with MACD cross down as a signal to take out the position. MACD cross down occurs due to stock being not able to keep up with earlier momentum. After the crossover, the stock can trade sideways and go up or go down. We have 2 options.
Option 2:
Cut loss when MACD cross down. Get back in when MACD crosses up. This happens if a stock is going sidways and then goes up.
Downside using MACD:
If using Option 2, U might have multiple crossovers if stock is going sideways. However, you could use last N day high to enter again.
Application:
Choose a particular option. Don't change them between stocks.
Your Comments?
Look at Sensex and Nifty. See MACD(12,26,9) and MACD(3,10,1). See Anything? Any difference between MACD(12,26,9) versus MACD(3,10,1) in how they provide information?
Can we use MACD(3,10,1) for cutting loses?
Hi! I am the new kid on the block! I must tell ya one thing that ur tips & obsevasion regarding stocks are simpy Gr8! I have just started trading couple of months back. Sir! could you plz help me by giving me info abt "srf 'and "indiacement'. Ihave bought srf @ 232 and indiaceme @ 193. what is the best time to book profit and their support and resistance.is there any tip regarding any good share.Thanks
Please Tell Me The Parametres Of The Indicators To Be Used As U Have Given For Macd.please Give Values For All The Indicators With Their Implications I.e Whether To Buy Or Sell As Per That Indicatior.please Explain It As A One Time Explanation For The Benefit For All.i Positively Want A Feed Back On Said Issue From U And Please Dont Refer To A Link.regards
EMAs: 8, 50, 200
MACD: 12,26,9 (currently I do look at MACD(3,10,1))
Slow Stocastics: standard settings
Minimum Volume: 100,000
Price: > 100
Setup: Trend Trading
Entry: Pullback
Objective: Select a stock that has liquidity, is tradable and is trending. Liquidity is defined by the average volume and the ease with which you can buy and sell stock. Tradability can be ensured by avoiding stocks that have lot of gaps or have huge bars. A trend can be identified using EMA crossovers or just looking at a chart.
Its a different story with the trend in this stock. It has been going up. But, look at the volume. Its been going down for last 2 months. I have been saying this for last few weeks about the low volume. We were waiting for the price action. We got from indexes today. So, this confirms the low volume. Again, its up to you to pull the trigger.
One hint I will give U though. Survival in the market is more important than making money. Survival is all about preservation of capital
Thats a very broad question. Here is my take. Planning, Consistency, Will Power, Knowledge of Probability theory and be the best person in real life. Trading is all about what you are made off. It shows all your weakness once U enter a trade. Trading requires U to be the best person U can be.
Quote:
Hi vv, When u speak about MACD cross down/up which do u mean specfically..
MACD(12,26,9) or MACD(3,10,1).?? And Crossover 0(zero) or any other value?
for MACD(12,26,9) - cross of signal line over EMA(9) line
for MACD(3,10,1) - cross of 0 line
Quote:
can you help me by explaining me how to read the future trends in chating?
Broad question. U could use trend lines, EMAs (& other tools) to read the future direction of a stock with certain confidence level. U have to understand that if there is 70% chance of stock going up, there is still 30% chance the stock going down. We can't achieve 100%.
Even though I suggested a chart is good or bad, I don't want you to take my word in exiting the stock. Each trader's objective in exiting a trade is different. When U entered the trade, what was your exit strategy. Please follow your plan. Here is one of the trading rule that fits what I am saying. http://hellotrader.com/2006/07/15/to...rules-5-of-12/
Some Interesting Links from www.kirkreport.com
1. http://hellotrader.com/category/top-12-trading-rules/
2. Rob Hanna on Admitting Trader's mistakes: http://www.tradingmarkets.com/.site/...-Rob-Hanna.cfm
Market:
Its impressive how the indexes came back. Even better is the action in banks (BANKNIFTY). Will there be a follow on to this? Will the volume and volatility be better this time? Lets wait and see.
Link on Keeping Ego Out of Your Trades:
http://us.rd.yahoo.com/finance/exter...mp;cm_ ite=NA
This tenet was told by my friend before I started trading. When you have big paper loss, you are not only losing money on that stock. But, more importantly, it will affect your current and future trades till you close the paper loss trade. So, take the loss and move on.
Here is the example of daytrading using EMA crossovers. Use % profit taking method to take profits. For example, by looking at a chart if you feel the EMA cross down will happen in Rs10, thats were your stop will be. If the stock goes in your favour, then you take profits as multiple of R is reached.
R = 10
1st R = 50%
2nd R = 25%
3rd R = 15%
4th R = 10%
Ofcourse, change the % to your convinience.
U need some improvisations to fine tune the no. of trades. U need to use 10 min, 15 min and hourly for selecting the direction of the trade.
Entry:
After crossover, try to enter when the price touches 8 EMA. Better if U enter when price touches 50 day EMA. Thats the low risk high reward play.
Exit:
Use bollinger bands. Don't forget to take % profits when price moves above the bollinger band. And never enter when price is above bollinger band.
Split V in the middle. U have left \ and then right /. Left represents stock going down. Where they meet is the low point. Right represents stock going up. I am saying, buy low, but don't buy when stock is going down. Buy when stock is going up from low. See the attached image.
can't help you in terms of setting your portfolio. I can give you following advice though.
1. Have only 1 stock per sector.
2. Limit to 5 stocks. No. of stocks depends on your capital amount. But, 5 should be good enough to manage.
3. Try choosing momentum sector stocks. Look at banks. I don't see a bank stock in your portfolio.
Long bars. Careful with stops. Weekly chart looks better than daily. On daily, there was an extended pull back. It will take couple of days to week to see better chart. So, if U say long term, lets apply weekly time frame. I think it looks good with MACD cross up, histogram positive and with nice pull back for entry. Volume is not so great during period June to Sep compared to earlier times.
RSI is an oscillator, used in Trading Range. Use that for entry condition. For setup, ema1 (8 days) > ema2 (22 days) > ema3 (200 days) + MACDSignal, you should get plenty. Recently, due to steeper index action, there might some going of the net due to MACD cross down. I suggest taking MACDSignal out of setup criteria when scanning. But, when U are looking at the chart, then apply. MACD works best when the stock is nicely trending. When the stock is consolidating, MACD doesn't work. Let me attach what I got from Amibroker. You should find more of these files in my thread.
I would advise U to read some books. Play with low amounts. More time U spend learning to trade, better Ur results will be. Good Luck.
Very nice chart. Perspective for next week. Market indices (Sensex & Nifty) have been up for a 4 days with good volumes. They are in overbought condition with some price resistance. Ideally, I would like them to go past the resistance and then pull back. Still nothing is lost. I am still bullish on the market.years back I realized I loved trading. Trading is something I never get bored. I can take a trading book and read several chapters in a row. I look at charts of stocks one after another. I can and I am doing this day in and day out. Still I am not bored. So, that keeps me going. Everyone should find in their life some kind of interest. I think I found that interest in trading. I will see how long it will last. Having said that, I am taking a break from this thread for next couple of weeks. See U later. Good Luck with your trading.
Entry:
Your one of the filter criterian for the entry in the stock:
stock having 8EMA > 50 EMA. ( I am not saying it is right or wrong.)
- 8 trading days means apprx 2 weeks. 50 trading days means apprx 2 months. What is the relation of price and volume during these 50 days and last 2 weeks?
- Does chart talk to you?
You can find many of filters. e.g. 2 months high, 20 day breakout, 10-20-30 set up etc etc.
In software terminology, these filters are nothing but wrappers over P/V relation.
A relation between price and volume is the most important factor.
If one uses filters ignoring P/V then it is just like driving a car without understanding how the car works.
Only thing where filters can help in is to provide a psychological check.
Initial Stop:
Volatility based stops work better in trend following system. Volatility based stops are prone to drawdown. During the drawdown, the equity at risk has to be adjusted.
Most of the time stock/market is not trending. If one wants to succeed in trend following then one needs to look at multiple markets. To do all this, it needs tremendous descipline. That is what famous TURTLES did.
Do you sense something? Are you drifting away from swing trading to trend following?
Exit:
What if stock is trending?
What if stock is ranged?
What if there is a stiff resistance on higher time frame?
Position size:
Let us say R is a initial risk.
If one is already having a postion in the stock then,
if profit reaches to 1R,
should we add another pie of position?
should we book half of the profit?
Expectancy:
E = % of win * avg money win - % of loose * avg money loose.
How E can be greater?
These thoughts are just like fuel to propell you further
As long as you have a plan for them and take those trades as part of your trading. For example, your trade plan for this trade can be:
Setup Condition:
Stock goes outside the bollinger band. You can make this more stringent condition if you get many stocks. Stock Open is above the bollinger band.
Entry Condition:
Days close of the tick which is above the bollinger band.
Exit Condition:
Days high + X
Profit Condition:
Trail the stop above previous day's tick high + x or 10% profit met.
The above is just an example and change according based on your liking and experience. This kind of trade is a CONTRA Trade. Going against the trend. You should be quick in either getting stopped out or taking profit. You will make lot more trades and will have lower loss and lower profits. Time frame for most of these trades can be 1 day to a week. Hope you are getting the point. Each kind of trade has a character to it. No trade is wrong or right as long as you have a plan as above. And you execute that plan to take those trades when you get them.
from oilman5...THIS IS GIFT OF VVONTERU...