Again copy paste from Raunakji.
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4. Most important, define what you want to do with the stock first. In my opinion, clutch auto should not be sold. It is a buy on dip stock as of now.
Waiting to enter .... was on radar ... just at the blue TL. Solid support there .. it i just retracement ... check the vols (not in the attached charts .. imo it should be on decreasing vols) and then the bounce should be super ...
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What is your holding period?
Which instrument have you invested in ? Equity or Futures
Anyway, if u have bought equity, keep holding it. Banking sector is doing very well. If you have bought futures, then you have to decide when to exit it. On short term stock is positive.
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In IDEA according to weekly charts, can this be called as a possible breakout from the descending triangle formation? We had high volumes too last week(though, it was a red candle) when it broke out. So, is this valid formation?
It looks like it is a valid formation. However, I would still wait before actually buying this for investment. Let it show some strength.
Stock however is strong on momentum on lower time frames. Hence, looking good for swing trades.
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My 2 paisa...
I agree... I wud wait for previous swing to be carried out if it is descending triangle.... Fundamental thought behind descending triangle is, bears r in power and pushing price down with the maintained lower highs (swing points) and bulls are also having some strength to not let price go below certain level and hence maintaining equal lows (swing points). When we got higher break out from descending triangle means, bears are getting tired and bulls have hit final stroke.. it cud be coupe de grace by bulls but what if bears are not actually tired.. They are just setting back and preparing themselves for final stroke???!!! so just to make sure who is getting control I wud wait for previous swing high to be carried out with momentum....
Had this been Ascending or symmetric triangle, I wud think of initiating trade on break out...
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How do we interprete these 3 candles made by NIITTECH? 1st long bulling white candle, 2nd not so long but good sized black candle, 3rd again not so long but good sized black candle...
Per Steve Nison, many time we shud or we can combine 2 candles against first one to reach to particular pattern.... so on a similar note, can we say NIITTECH making bearish engulfing or dark cloud cover???
Kindly give your opinion from your observation on indian market for this type of patterns...
Apurv
Look at the chart below. Your chart had too many lines, so read carefully what I have written on your chart.
Look where I have marked previous resistance. It is precisely at a place where bearish engulfing was formed and this now becomes our primary support area (Resistance turning into support).
Also look at the base of a long white candle. Usually mid level and low level of a long white candle becomes important support. Hence we have two zones very close to each other which form good support levels. Also if you look below the long white candle support zone, near levels of 183, NIIT reversed ni mid of june. Hence this intermediate swing top is also a support. So you have three support zones around 190, 186 and 183. If stock goes below these, its time to exit.
These candles do not represent anything as of now. First candle is not a piercing pattern nor is it engulfing one. However, they do represent new resistance zone at 200. Hence anyone holding this stock should only add further positions once the stock is above 200 levels.
Always always and always see where is your candle pattern emerging. Ask yourself, where is the previous support. In this case strong support zone is in 180-190 zone. Stock is in a good bullish wave structure. Even if support breaks, we need to review our view again.
23.7.10
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This might sound strange. But why wait for 1:2 or 1:3 risk reward trades. To me this concept does not make sense. I go for trades with 1:1 rewards. It just depends on the setup and the probability of it running in my favor. This is contrary to what you might have read in some books. But for me, the concept of risk to reward is blown out of proportion.
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Apurv, this is completely normal. I'll advise you to develop a mechanical system first and trade it till you develop the necessary skills to analyze charts with higher probability using discretion based analysis. Hence be patient, read a book on how to develop systems and then go and build one.
Regarding RPOWER
What you are trying to do here is very effective. And amazingly this works with very good accuracy. However, ask yourself this: What does market tell you when correction bars are increasing? Can you tell me what this means? If you can't find the answer, let me know.
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Sir I think all depend on experience of traders and his pocket size
But I saw most of people when in loss stay in trade in hope and when in profit they are in a haste to book instead of trailing and I am one of them too
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When the number of correction candles increase, it does not always signify bears gaining control. In this case, even though the number of bearish candles are increasing, the stock is undergoing mere consolidation. The correct way to interpret this is that the "Cycle or the waiting period of the stock is increasing". This means, anyone now wishing to buy this stock, should be prepared for a little bit more holding time than the situation was on the previous minor cycle. Hope this helps.
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Another way is to look at the chart in a Weekly TF too ....
Price has taken resistance at 178 where some amount of supply has come in BUT follow-up supply vols are not there .. that means either the super vols in the push-up bar of breaking the resistance of 163 has liquidated somewhat .. and the stock may test 163 again once and then bounce back ....
But surely it is not in a downtrend as of now ....
Also the 163 levels were a horizontal trading range for many days and has been broken. Target for the same is 163+(163-136)=190 odd levels ...
If you see previous recent high, it is 210 BUT the body of the candle is from 194 which matches with the horizontal breakout target.
Just a matter of time and patience imo .... and those are two of the few things required in abundance for a trader/investor to get better of the market ...
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I have been building up positions in Adani from 530 levels. Hence for swing perspective, I had a 40 point profit on average. I purely exited based on this. It may well go up and had it been for Investment purpose I would have held on to the stock. But for Swing trades I always have some % profit booking zone and Adani reached those zones. Moreover, I found Lupin on friday, and hence had built up huge futures positions in it. Was up by 4% today, so that kind of also begins to enter my profit zone.
So if you want a one line answer, here it is. "I prefer to buy at weakness and sell at strength". This is applicable to swing trades only.
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What are we keeping as stop loss for Glaxo? My analysis as mentioned below kindly correct me if I m going wrong...
1> It is hovering at 20 and 50 EMAs and seems to be making base here...
2> Strong divergence from the perspective of RSI (9)
3> Contraction on 8 DMI from higher negative index getting contracted towards positive index - my interpretation is bulls loosing dominance...
4> ADX (8) coming down towards no trend strength zone from bear strength..
5> Combined interpretation of ADX and DMI - seems bear trend strength getting reduced and bulls are trying to get control and displayed as contraction of DMI...
In my opinion stop loss should be lil lower than 2000. Kindly evaluate my analysis and correct me...
Apurv,
Nice piece of work. Frankly, I did not see so many things are in favor of this stock. I am more the "Feel" kind of player. If I "Feel" it is good, I just go for it. The stock is relatively weak and hence I am buying it. I'll sell it when it shows strength. Regarding stop losses, my rules are little different than what book teaches. I don't kind of look at previous swing lows that often. I monitor the prices continuously and from that I get a feel of whether the prices are going to slide or going to take support.
If you are talking from text book perspective, then I do feel the SL set by you is appropriate. On the whole Divergence part and ADX part mentioned by you does bring some value.
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As on 27th JUL, 2010 I see that in the cash segment both FII and DII has turned -ve (22 and 222.28 Cr) respectively. In spite of that the indices were up today. For almost the last 30 days FII were +ve(most days) and DIIs consistently negative. From todays figures can we infer that the domestic retail segment is taking on the strength of the financial instituitions? Because we can all see that there is no correction worth its name coming though everyone has been predicting the same since a pretty long time.
In case you find my query to be not relevant kindly ignore it.
Thanks
PS : Was thrilled at the timing of the lupin call, but could not muster the courage to get in at these levels. I am sure that is I follow the thread we will have a plenty of such successful calls coming from you.
Esse,
FII and DII data is a bit difficult to relate with overall market situation. It works well in market extreme. But usually it does not work well in between. Hence what you can do is use the data as one of the indicators to tell you what exactly is happening. On standalone basis the accuracy of this indicator is no good than other indicators available.
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Now that the fundamentals for the company has improved, the main negativity out of the way, what is the target for the company, and does it qualify for a bullish/ swing trade.
I have gone long on the stock, today, at 885 aug fut 2 lots, added 1 lot at 900. what do you recommend that I should do.
Cheers,
Prem Kumar
Prem,
I don't know how you pick a stock for swing trades. But for me, fundamentals don't form a part of swing trades. However, if this is the way you do it and are successful at it, then do not change your method.
As far as technicals are concerned, if markets remain healthy, ABAN should see levels of 925 and 948 for swing perspective. On very shorter time frame, the stock can also undergo consolidation. Hence, be patient.
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Today and tomorrow are extremely crucial days for the Index. For shorter term, we would know whether we are going to go higher or on the way down. The bias as of now remains on the long side in shorter time frame. ..........29.07.10
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Noticed these days ...
LT was down before results were declared. After results ... bcoz they were not as per expectations .. more down .....
Mkt was down bcoz of expectations of tougher stance on credit policy etc. Since they were good .. markets rallied back ....
So maybe today they are down in expectation of bad gdp of the US and if its better than expected we move back up else we stay (no more downs) as it is already factored in ...
Just thinking aloud .. not necessary though ...
Options OI is showing bottom at 5300 though that can change in an hours time .
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Following stocks should do well in short term.
Sterling Tools
Shasun Chem
Precision Wires
Mangalore Chemical and Fertilizers
Lanco Infratech
Indian Oil Corp
HDFC Ltd
ETC Network
Dabur
Archies
Andhra Bank
The one highlighted in Bold have their respective futures in the derivative market. Rest are some mid/small cap companies which are looking reasonably good. Let's see how these work. ..............2.8.10
Statistical probability and practical application of probability are two completely different things. You need to understand this before you can understand what i write in future.
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#82
25th December 2010, 03:16 AM
oilman5
Member Join Date: Jun 2006
Posts: 1,329
Thanks: 262
Thanked 1,212 Times in 433 Posts
Re: my last thread
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I understand this is your scalped call & you squared it off as soon as you get profit.
Just wanted to know what if you would have hold it with stop loss(say5400) for day & waited till day end. OR you was of opinion that there will not be much upside for the day.
Just want to understand your logic while closing this trade.
Whenever I trade, I trade with multiple sub divided accounts. I have divided my assets into three categories. Medium term trader/Investor, Swing trader and Scalper. So when I scalp 33 points, I am essentially doing it through Scalping section of my assets. It is quite possible that on same asset I am long in medium time frame.
Regarding waiting to square off. My scalping targets are 30-40 points on Nifty and 60-80 points on Bnifty. Whenever I get it, I just get out. The sooner the better.
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All I can say is that go through this thread. You will find plenty of things that work. In some places, I have actually posted charts and have explained why they are a good buy. Most of the things mentioned here cannot be back tested as there is a lot of "relative analysis" involved. I am not entirely in favor of too many mechanical systems. Human mind cannot be replaced by some "Ghz processor". Although, you will require to train your mind to look for set -ups. With practice, it will come. Be patient.
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I can help you. But you have to do the hard work.
Don't expect some system/software to generate Buy/Sell for you everyday. Had it been so simple, then all the fund managers would have done the same. Face the reality rather than living in hopes.
If you want to learn, I can help. If you want some system, I can't.
Here's what you can do.
1. Change your attitude !!! Markets pay you to make decisions which are tough, but correct. Market's don't know who Karan Is. Hence, stop being afraid and be prepared to work hard.
2. Read these two books. Master the trade by John Carter and Trading in the zone by Michael Douglas. In the first book you will find many strategies that really work. You will need to master any one of them. But you will have to MASTER it. Second book will get you to think positively and it will help you a lot psychologically.
There's no System which can do the hard work which you have to do. I am sorry if this disappoints you. But this is the most I can help you with. I dont sell systems neither do I give tips. I believe in analysis and that is the path I can show you. I'll definitely help you if you have doubts when you read those books or for the matter any book you find resourceful. But beyond that, I cant do much and that is an honest reply.
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In my opinion, trading system is something which suites and fits individual... something like straigth fit jeans fits me better and boot cut does not... it cud b otherway round in your case...
I wud suggest from my limited knowledge and experience that build your own trading system or pick one and alter it according to your trading style.... i believe in this... "Read, Read and read a lot... then experiment and then u will automatically know what is ur trading system.."
If you can find, try to read Thomas DeMark methodologies, ADXcellence by Dr. Charles B. Schaap and RSI by John Hayden... Mostly these will solve dillema of your life...
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PTC
LT
JSW steel
Reliance Capital
Union Bank
Unitech
Those highlighted in Bold are my favorites. Let's see how these do......2.8.10
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That may be the case blackberry. Accumulation stage is not important. It is the mark up phase after the accumulation phase which holds importance. We have to see when that begins.
Tc
I agree Raunak... Mark up is the phase we should concentrate..
As it is said that practical experience is better than theories, I would like to share my experience on similar note...
I m holding Aloktext since long bought at 18.50 or so with the consideration of accumulation and then sharp shoot out... Though it gave break out but again went into consolidation... Undoubtedly I am sitting on lil more than 10% profit which is not bad at all if ur holding period is less than 3 months...
So what I am trying make point is sometimes, accumulation phase gets stretched and we may get frustrated... in today's world sometimes, accumulation phase is suddenly changed to distribution.
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Begin to tighten your stop losses. Protect your trading profits in whatever positions you hold............this is key.
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Markup phase buying and Euphoria based buying are two different things. Identification of each is extremely important for profitability.
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Keep a SL of 5575 - 5600 in mind. I doubt we will reach 5600 levels. But then, I have been proven wrong so many times that it makes me feel really old at times. This is where Risk management comes into the foray.
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Regarding setups, its better if you concentrate on positional setups first. Swing trading is something you can learn later. It is not easy to pick up swing trading. Hence once you become proficient in positional trading, you can start specializing in swing trading. I'll certainly help you with anything. Keep posting your charts and your trades and I'll take you through.
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When we measure correlation with an underlying asset, the period of standard deviation of results has to be such that error is minimized. This means that although day to day correlation between assets may not hold any value (as highlighted by SM), but long term correlation always holds very important information. This in fact is the correct way to analyze what is happening across the globe. Once we start reducing our time frame (that is, shift to day to day analysis) we are attracting more and more random noise in our decision making. Which for instance is any trader's worst nightmare.
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In the same line, I try to do my analysis of bigger picture of our market based on our chart. Market follow simple thing most of the time (except certain big changes) and it always repeats itself someway or other. We do not really need to see Dow for this.
But I too do some inter market relationship analysis. Sometime trading decisions affect this as well. It is always a complex relation, look at how many question we have to answer, before we can decide what we are going react in current day trading and on the next day (most of us are interested in these two).
1. If EU has fallen 1% in bullish market, can it bounce and trigger short covering in out market while trading?
2. If EU is negative now, can it be up tomorrow and make a bullish trigger tomorrow. Is it making shorters nervous today?
3. Dow has corrected yesterday, can it go up today?
4. Most Asia have closed down today, can those be up tomorrow?
Its a bit complex I think. Better, we look at our chart and get clue most of the time. Though, some cases, global markets do change the path of our market.
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! What I really want to talk about today is to contrast something "context" free versus viewing something contextually.
The market is a two way auction process Allocates bids and offers in an extremely fair and efficient manner(supply and demand) Searches out and
reveals market-generated information. If you will begin to think of markets as an auction process you will begin to understand that if higher prices
are attracting more bids the odds are, that the auction will continue higher.
If higher pirces are cutting off a number of bids, the auction is ending and risk of maintaining long positions has increased substantially.
Of course, just the opposite would be true: if offers were taking the market lower. The results of the auction are what we refer to as market generated
information. The three components of the auction are time, price and volume.
- Price advertises all opportunities
- Time regulates all opportunities i./e., if it is a good deal, it shuold not be there very long
- And volume measures the success or failure of the advertised opportunities
What is important to realize is that the The Market Profile is a real-time evolving database that capture sand records the market’s two-way auctions
(content of slide you see) or, as we say, it allows you to view the market in the present tense
Phil Jackson said when he was managing the Bulls, Winning results from operating in the Present Tense, not rehashing yesterday's game or playing tomorrow's game too early.
We can take some questions for Jim.
Freddy [17:06:41]> Hi Jim, am your biggest fan and have been using the profile for more than a year now - your trading concepts are terrific - one of my biggest challenge as a trader is to correctly anticipate - to the extent humanly possible (!) (and thus have CONFIDENCE in) the TYPE of day (and when there are changes in conditions invalidating such analysis) - breakouts from low volatility, failed auctions or gaps are typical clues for possible trend days, and neutral internals (breadth / volume) and no strong money flow clues for neutral days - any of your own tips you could share on that?
Also, if you don't mind , I'd like to hear you on how you use stops (on neutral and trend days) and how do you take into account the risk/reward ratio (and as well leverage) for your trades, any minimum RR you are looking for, any particular situation where you use more leverage, etc. thx Jim ! You rock
Freddy: the first thing I look for is to see if we are opening above value , within value, or below value
I look to see how much confidence there is around the opening For those who have read Markets in Profile you are aware that we describe 4 types of openings:
- Ranging from very high confidence, to very low confidence.
- Trend days, seldom occur, following an opening that takes place in the center of the previous days value.
- An upside trend day, for example, more often occurs when the market has opened above value for the previous day, combined with a high confidence opening OR
- When the market has opened below the previous days value area and particularly below the previous days lowest price and shows a high confidence opening to the upside (in the case of a long)
Once the trade is entered, it then cecomes important to monitor the trade for continuation. By this I mean, the profile should remain elongated with the
point of control that steadily migrates higher throughout the day Additionally, I would expect to see the market "one time framing" By one time framing,
if the market is trading higher, I mean that the second bar or period, does not take out the low of the first bar but does take out the high of the first
bar (30 minute charts) With this process continuing throughout the day An inside bar, where price remains totally within the bar from the prevous period,
does not negate the one time framing action
It is rare to have a trend day, where the market woudl stop "one time framing" for more then one period. This is my choice, not recommended for most: but I seldom use stops, rather, I rely on changing market structure to tell me that my trade is not developing as anticipated.
rolcol [17:13:49]> (going from CQG display & Stedlmeier observations) ..........do you have any comments on either I/J (12-1 pm cst) or M/N (2-3 pm cst) overlap periods and their tendencies?
I do not consider issues like this even though from time to time they may have relevancy. I have found that by thinking of these types of things
thinking in terms of what time periods' highs or lows are made thinking in terms of average range extension actually diminishes my mental flexibility
and has a tendency to trap me on the really important days such as trend days.
To expand on this question, when the market is in a relatively narrow trading range for the day, these type of things that you bring up are meaningful
as are more traditional technical indicators. However, on the BIG days, when the long term money is in the markets, these type of indicators get blown away and can do some serous damage to short term traders. It is not uncommon, to hear traders say they make money most of the days. However, if it hadn't been for one or two days of the month, it would have been a great month.
By focusing too heavily on shorter term indicators it is too easy to miss the changes that occur as serious money quickly enters the market place.
For more information go here : marketsinprofile.com/
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What you can do is go to "Stock to keep close eye on" thread and from there take asnavale's system. He has posted it with AFL. For a start that system should be very good for you. Just follow that till you learn and develop your own system. And dear don't worry about losses. Just be consistent. Keep your emotions in check. Everything will work out well. Stay in equities initially. Don't take a dip in futures.
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Originally Posted by Apurv7164
Hey Guys,
Kindly have a look on chart of IFB Ind. IMO, it is resuming upward journey after having lil rest and consolidation.
Break out confirmations:
1> RSI (9) breaking out of down TL as well as breaking above previous peak
2> +DMI (13) breaking above its previous peak
3> Low volume during consolidation and significantly high volume on break out
4> ADX (8) moving above level of 20 to 25
Feel free to correct me if I am going wrong anywhere...
~ Apurv
It's in a very strong uptrend Apurv. But let it cool off a bit. Accumulating it from levels of 130 would be ideal. Fundamentally this company will do good in coming years. Business model is very encouraging. 5.8.10
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understand your problem, but you want a quick fix solution to your problems. I am afraid to say, this does not exist.
I have mentioned many times on this thread that I don't trade through systems. Some times (only some times) when I scalp, I trade with systems. I am a medium term trader/investor and hence my analysis has lot to do with subjectivity. I dont have a setup/system which gives buy/sell signals. I have a customized software, which suggests whether the asset is worth investing or not based on Fundamental and Technical parameters. That software is something on which we operate our funds and i cant release it in a forum.
I suggested you Asnavale's setup because it is something that works. He has explained it beautifully. It is a positional based system. Hence that should be good for you to start with. later on you can read and develop your own system.
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It entirely depends on your risk appetite. For me, protection does not mean buying options. When I am short on Index, and the Index keeps rising, I simply open up long futures positions in stocks which are making the Index move higher. As stocks in the short run, tend to outperform the Index, I gain in long futures and if I am right shorting the markets, I gain in that too. Else, I close my positions. The key here is to know the volatility component in each instrument and choosing optimum position size to offset the losses in Index with the gain in Stock futures. Its a bit complex, but I hope you got the gist of it.
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I'll still stay away from these If's and But's. Till the price begins to move, I'll prefer to not listen to any of this. I am more comfortable in catching a trend, riding it and exiting it when I have some profits. Rather than, buying something first, sitting on it and waiting for the trend to appear. Its just more stress free.
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IMO, Objectiveness is not in system, it is in mind... When one is running high on emotions, it is really difficult for the person to be highly objective and keeps on failing... it is common across the globe no matter whether it is business of trading or any other profession.
I would like to share my own experience - when I passed out with my software degree back in 2003, I was struggling hard to get decent job (IT was just coming out of wounds). I started getting into trading just to keep my mind occupied and get lil relief from the frustration of being BEROJAGAR.. Here my point is I was not going through balanced mind set... During those days I kept on jumping on to different methods, systems, strategies and nothing worked for me....
Then eventually, I got the job in the world of software in 2005 and started getting into balanced mind set... now what I m observing is same bloody methods, systems and strategies started working for me as big as one can say WOW WOW WOW! Then I started getting feeling that it is purely luck that these methods did not work back in 2003/2004 and now in 2006/2007/2008 I am lucky and they are working.... then again they did not work in 2009 so I stopped trading with the thought that year 2009 is not lucky enough for me...
Then in early this year (2010), I accidently happened to visit one website related to meditation and attended a seminar on the subject matter of Left and Right Hemisphere of brain and its functioning...
Then I started going through thought process of why I failed in trading in 2003, 2004 and 2009???!!! Why I got beautiful success in 2007, 2008 and 2010???!!! What is common???!!! As a result I realized that during 2003/2004 I was going through professional problems in life and in 2009 I was going through personal problems in life... During both the phases I was not working with balanced right and left hemispheres of brain i.e. in simple words I was not having balanced mind set due to high degree of emotional flows.. Here emotions cud be anything anger, greed, fear, utter pessimism, utter optimism, access happiness, access sadness etc....
As a bottomline, I would say balanced mindset is key to success in trading... many new traders/readers here might be facing similar problem. Observing Karan's posts I started getting flashes of my past (No personal offense Karan, just got into some past memories)... My intention of writing this long story is to explain that be calm, cool down ur emotions, sit aside and think think think....
I can talk or write as long as you want on this subject so better now I end here with the last word... I love Thomas DeMark's statement, "Read, read and read a lot, research a lot and experiment a lot..." I personally say, reading, researching and experimenting is very helpful in cooling down emotions.
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Since this thread is related to trading strategies, I would like to share my collection which I consolidated from different books... Kindly experiment at your own risk...
Currently I am researching on use of ADX/DMI. I have selected ADX/DMI because it is not so widely used and popular and hence cud give very effective signals. I wud surely share my study after sometime.
Buy Set ups
1 2 3 4 Method
1. ADX must be greater than 30
2. 14 days +DI reading must be higher than 14 days –DI reading
3. Wait for the market to have 1 2 3 correction i.e. 3 consecutive intraday lower lows or 2 lower lows and one inside day
4. On day 4 only, buy 1 tick above day 3 high
5. Initial stop loss should be placed day 3 low.
Volatility Observations
1. Whenever 10 days volatility is 50% or less than 100 days volatility, large move is likely to occur
2. The longer the time frame a historical volatility remains under 50%, the larger the move will be
3. When these occurs look for the larger bar within last 9 days and trade in the direction of larger bar
The 8 day low reversal method
1. Day one must be 8 day low
2. Day two must trade above day one high
3. Day three or four or five or six must trade under the low of day two (this can be new low)
4. When condition 3 is satisfied, we buy one tick above day two high within next four trading sessions
5. Stop loss goes one tick below day two low
Spent Market Trading Pattern
1. Today it must make 10 period low
2. Today’s trading range must be the largest range in last 10 trading sessions
3. Today’s close must be in top 25% of the day’s range
4. Tomorrow or day after, buy one tick above today’s high
5. Stop loss goes one tick below today’s low
Sell Set ups
1 2 3 4 Method
1. ADX must be greater than 30. Higher the ADX is better
2. The –DI must be greater than +DI
3. Wait for 1 2 3 rally i.e. three higher highs
4. On day 4, sell 1 tick below day three low
5. Keep stop loss near day three high
Double Volume Topping Method
1. Stock must be trading near or at three months high
2. Today’s volume must be double the 15 days average volume
3. Either today, tomorrow or next day, stock must close below its open
4. When rule 3 is met within next 2 days, sell under the rule 3 day low
5. Initial Stop Loss should be placed at top of rule 3 bar
The 8 day low reversal method
1. Day one must be 8 day high
2. Day two must trade below day one low
3. Day three, four, five or six must trade above day two high (this could be new high)
4. When condition 3 is satisfied, we sell short one tick below day two low within four trading session
5. Stop loss is high of day two
Spent Market Trading Pattern
1. Today it must make 10 period high
2. Today’s trading range must be the largest range in last 10 trading sessions
3. Today’s close must be in bottom 25% of the day’s range
4. Tomorrow or day after, buy one tick below today’s low
5. Stop loss goes one tick below today’s high
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It is good to manage risk in markets. One way to do is with options (like you are doing) and the other way is to do it through low risk - high reward entry. This does apply to forex more where we don't have issues of gap up/gap down, But it works just fine in case of Stock Indexes.
One of the negative aspects of dealing in options to protect risk is that your profit potential gets limited. One really needs great deal of experience to know when to close an option leg so as to increase the profit points. But the point is, how many people know when to do that?
What I usually do is I prefer to enter in situations where i see a low - risk high reward trade. Say for example the current situation, I know the market is lacking momentum and hence any upmove is going to be slow. However, on the downside as the volatility picture is suggesting, Index could move down at a much faster pace. Hence, for me this is one of the parameters which makes it qualify as a low risk trade. Hence, I take positions according to my risk profile and forget about being right/wrong.
Hope this is of help
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Any idea about crash in Alok ind today? I am holding it since around 18.5 and even after today's heavy fall i m sitting on profit. Shall I book profit or today's crash is deceptive?
Bests,
Apurv
It has a base around 18, but nothing more and nothing less. Many good stocks to focus on. Better to stay out of non performing stocks. With every bad investment, even if you don't loose money, you are indirectly loosing as every investment has an opportunity cost associated with it.
.......................................
Market's have a tendency to do same things over and over again. However, every time it finds new routes to do those things. This is something we need to understand and include it in our trading plan. The reason I am writing this is because markets are testing the patience of most of the traders. I find it hard to recollect when in the past markets have been so indecisive. I can recollect the period of 2003 when markets trended up and were due for a correction. Correction came only in May 2004 surprising everyone. Currently, markets are trading extremely weak but still it is continuing to rally. I find it hard to believe that this scenario is going to last for long. It is almost the 3rd consecutive month I am so bearish, but in my defense I have found nothing to suggest otherwise.
As a trader, I still maintain bearish positions in the longer time frame and long positions in the shorter time frame. The time for short term trades seem to be running out soon as the larger time frame begins to take effect. Technically and fundamentally we are on sticky grounds. We need to see if this situation improves or worsens. My bet still remains on the bearish side.
__________________
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Whether one take's Market Profile, Indicators, Price action, Fund action or Intermarket action, all are basically suggesting one thing; Confusion
But when I look at the volatility indicators, I find it very very hard to believe that expansion in range lies on the upside. Options data or FII data can change in a day's time and hence reading too much into it would not be of much value.
I belong to the Larry Connor's school of thought. I believe that essentially volatility is what drives our trading accounts. And to some extent there is less happening in terms of price action but a lot happening in terms of volatility. Volatility based projections are suggesting a price rise of maximum 100-150 points from these levels.
Let's see what actually happens.
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#83
25th December 2010, 03:54 AM
oilman5
Member Join Date: Jun 2006
Posts: 1,329
Thanks: 262
Thanked 1,212 Times in 433 Posts
Re: my last thread
________________________________________
No buddy... market it always right... Expect the unexpected that is the game of trading...!!! I m lovin it... my personal opinion and experience, we should never ever combine TA with the FA... I know I am challenging style of many people here including our most senior and experienced guru like Raunak... Please don't take it personally guys...
Here are my points -
1> When we combine TA with FA in our decision of trading, many times we end up converting our trading call into investment...
2> Many times we can't follow - "Plan your trade and trade your plan"
3> Many times it happens that something looking extreamly good on chart but fundamentally company is scrap, we dont trade and ultimately we r missing opportunity
I only mix those 2 aspects in the case of investment - if i want to invest in something, i wud use TA for the right entry time...
Folks, please dont take my challenge personally, challenging ur opinion or way or stlyle is not to be offensive, it is just raising one more point for brainstorming...
...............................I shall add further from Raunak...............
I meant to say is when we r planning our trade for trading, we need to stick to TA and shud not look at FA...
In your example - if we sell short and tomorrow we see some news coming about fundamental improvement, we don't need to still sell short further but we need to look at our initial technical plan.... in most cases, technicals and charts run ahead of fundamentals. If my trade does not hit stop loss, i usually stick to my trade unless it is taking unusually long time to run in my favor (example brandhouse, it is not hitting SL and neither it is moving in my favor....)
What i mostly do is, I most of the time don't even look at CNBC or any other business channels.. trust me, 99.99% of the time, i dont even know what company does (when i m analyzing for technical trading).... I surely study fundamentals when i have something for investment....
It may be only personally to me but mixing those two methods have always confused me... i have many examples of past wherein i bought something for short term trading and looking at their fundamentals i converted them as my investments... and as a result i many times got into liquidity crunch...
Usually, all the economic and fundamental developments are known to certain insiders well in advance which we call smart money... i mean they know it well before news get published/released in market.... Smart money start flowing in or out in other words they take action before news is declared.... and that action can be cought on chart.... I personally believe that chart is way of being ahead about internal developments... all the positives or negatives are plotted on chart before news come in public... my opinion, may be not correct.
................Look at the weekly chart and compare that with daily time frame using RSI and ADX and it was giving me feel of upswing... honestly i did not expect suddent jump...
......................
agree retail participation is missing. But there is onething we need to discount, and that is, retail participation in F&O markets. Retail investors are lacking the patience, they don't talk about equities now, they want participation in F&O as they feel the road to get rich quick lies in this segment. No wonder why data in futures market point towards high level of participation. How many of the participants here talk about equities? That's for you guys to think upon.
Tc
Very well said Raunakji, retail participation in stock market is to make quick bucks.... and that is why during every bull run everybody talks about stock market and during bear phase they all are gone... this reminded me high of year 2007 and 2008, everybody was talking stock market and giving tips....
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Following the previous post, I am now posting equity curve of the system I use currently. This has been tested on Index with testing period ranging from 1995 to 2010 (current). Please bear in mind that this graph and the graph posted earlier are not curve fitted. I hope experienced readers realize that curve fitting cannot yield such equity curves.
The reason I am posting this graph here is because any user building or operating a system should seek an equity curve similar to this. The key difference between this system and the system posted earlier lies in the fact of its usage. Advantages of this system remain the same when compared to the previous system. I have stopped using the previous system as the equity curve had stopped rising. But I am using this system because this system is still working as highlighted by the rising equity curve. Index has not surpassed the previous high levels, but the system gains have continued to make a new high as shown in the equity curve below.
Key taking: At the max a system should not take more than 2 years to make a new equity curve high. If it does not, then its time to review the system.
.................................................. ...........
Now This WRB's high will become strong resis for upside isnt it?
Plz some one explain how to decipher it.
Arti,
Usually on a smaller time frame you will see many WRB with heavy volume. Not every bar means a down side from those levels. Let me explain this as a WRB has developed on hourly time frame now.
At present we are witnessing a WRB on hourly with volumes. However, this should not be perceived as a sign of weakness. On hourly time frame 5360- 5380 is a pivotal support (it is also a pivotal support on daily charts). Hence, if this level breaches, we would know that the current swing move is now in downward direction. Once this happens, one can review positions there. If there is no base building evident and indicators (if one uses) are also showing the same, then one can initiate shorts.
............................
I am currently taking no longs. Be it scalp wise or swing wise. Markets have now entered a wait and watch zone. On short term, trend is turning down and if I scalp, it will be on the short side. I feel markets will see more downside in next 2-3 days unless strength is depicted. But now I am not taking any position.
Believe in your system though............16.8.10
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this for swing or scalp trading sirji? Kindly share your analysis if you don't mind....
I dont want to sound utterly pessimistic but weekly chart and weekly ADX is not giving me confidence. I may want to wait for taking mid term call on this.
-Ve
1> Price is struggling to cross 50 & 100 weekly EMA
2> Weekly +DMI(13) not gettting dominance..
3> Last ADX peak was -ADX peak and was above the ADX peak before that which was also -ADX peak telling me during last ADX peak bears were still in control. However, last 2 -ADX peaks were around or below level of 25 so that is lil relaxation and last -DMI(13) peak did not go above -DMI(13) peak right before that kindda double top on -DMI.
Positives:
1> I cud see positive on daily chart is 20 EMA cross and hold 50 EMA...
2> Also +DMI(13) holding above -DMI(13) during retracements...
3> weekly 20 EMA is crossed by price and still holding that level....
4> Some of the other infra & realty stocks has already entered in mid term bull phase so we may expect this also to join the train....
.....................
Why not a bullish one ? Volume was on full power. Was there any bad news about this company ?
As you know, and as many others know, I do not trade any stocks.
I am a 90% technical trader and I only trade hedged futures and options and so it doe's not matter what chart or market I trade.
If it doe's not go up any more, what real strategy would you recommend and what would be the main reasons for you, to react now and not later ?
What about a synthetic put ?
As I say : I do not trade this stock, but as we are in a learning thread, what would be a real strategy to implement at this moment for this chart ?
This is the main question we have to ask our self every day, when implementing a strategy on any time frame in the market every day.
What will the market do next and what are we doing ?
What is your idea beside the synthetic put ? Is it just an idea from my side and as I know you as a " try it out " person, what other thoughts would you have on that situation ?
My questions are not mentioned to take you or any one back from any strategy you want to implement in the market. They are meant to be recognized and analyzed from the traders in this thread, with there own ideas.
As this is a thread from raunakagarwal, we know the seriousness of this thread and if I post here any thing, it stays on that level.
..............................
I think what ST has stated could be more applicable to Weakly trading stocks. I would certainly not try and set a pivot point for a stock like Titan or Bajaj Auto at this moment. But I would definitely look into the strategy ST mentioned on Weakly Bullish stocks and Strong Bearish Stocks. One of the main essence to implementing a strategy is to classify it in which conditions and on which stocks (Strong Bullish, Weak Bullish, Strong Bearish and Weak Bearish) it works the best.
.........................
List of Stocks which should be good for day trading in Next few Sessions.
Hind Petroleum
Sterlite Industries
IndiaBulls Real Estate
Unitech
HDIL
Rcom
Idea Cellular
Sesa Goa
Kindly decide the direction of trade. These are just list of stocks which can give good move in day trading. 19.8.10
.....................................
My personal view is that Candle bars by themselves do not give us any edge. You need to interpret the duration "before" and "after" a candle pattern as well. I feel, a candlestick entry signal needs to consider the price action that occured before that specific candlestick and needs to be confirmed with the bars that occur after.
For example: That Doji, had it occured near that downtrend, would have indicated me to wait for a bullish signal. That bullish signal could have been a white engulfing bar .
..................
Where are the volumes ??
What does Candlestick or for that matter any formation depict?
They depict the level of Demand and Supply in the market. Can demand and supply be accurate in absence of volumes?? I think you know the answer to this.
As a filter any stock below weekly average of 1,00,00,000 over period of 1-2 years is not worth looking at.
...................So this is upto page 100.........from Raunak
..............
Originally Posted by stumper
Hello Apurv
My personal view is that Candle bars by themselves do not give us any edge. You need to interpret the duration "before" and "after" a candle pattern as well. I feel, a candlestick entry signal needs to consider the price action that occured before that specific candlestick and needs to be confirmed with the bars that occur after.
For example: That Doji, had it occured near that downtrend, would have indicated me to wait for a bullish signal. That bullish signal could have been a white engulfing bar (Have attached my own addition to your chart).
Hope i was able to make sense.
I agree Stumper that next day and prebious move is very imp. However, i think that is true when normal doji occurs after down trend. Here we have long legged doji that too without having any tail or shadow above it. I try and interprete this way, stock opened high then some supply came which was eventually got absorbed and then again it went up closing at high of the day which is opening also.... I may be wrong... just my thoughts...
............................
Sirji, again this is one of my weakest point and i never understood volume theories...
people say volume should be low during consolidation... i say why? Do you not think that somebody is accumulating stock and hence volume is high?
People say, extream high volume in downtrend is trend exhaution, i say why cannot it be possible that somebody has aggressively built fresh short positions? same applicable for uptrend...
say for example - doji with high volume on after down move... people say demand came at downtrend... i say why can it not be possible that I silently added my short position at opening and then i left stock for public... my this added short positions created high volume....
.....................
What you think about volumes is not entirely wrong. Volume interpretation in itself is like a different "Field". This is how vast it is.
What I was saying is that don't apply theories on illiquid stocks. Pick liquid one's. Keep volume rules as simple as possible. Regarding volumes, listen to what father's of TA say. Hope you get my point.
But, Stay Liquid.
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It works as support in most of the cases. At the same time, all big crashes start with the same doji.
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List of Futures Stocks which will be good for day trading
Sobha Developers
Ruchi Soya
Videocon Industries
Apollo Tyres
Uco Bank
Opto Circuits
IndiaBulls Real Estate
HDIL
Moser Baer
India Infoline
APIL
Sesa Goa
Suzlon
IVRCL
IFCI
Aurbindo Pharma
Tata Chemicals
Patni
Syndicate Bank
OBC
BOI
Maruti
Tata Motors
Kindly pick the direction of trade............20.8.10
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Let me put it this way. Never get tied down with candle names/patterns/formations. As a trader, your aim is to detect change in demand/supply. Once you do that, you need *SOME* confirmation --- Something that confirms your signal. So, you have your trade pattern first (In your case a long legged doji) and then wait for a confirmation (say, a Bullish wide range bar or a engulfing bar)... Anything that confirms what the doji is trying to say to you.
This, a pattern+confirmation forms a trade signal for you. Choose either the bars before, or After, or combine both or none... Its your choice as to what constitutes a pattern signal for you. Just ensure you dont loose sight of your end objective ie; Detecting change in Demand & Supply. As per your back study if a Doji at the end of downtrend constitutes a reversal signal --- So be it (As per me , it does not).
...........................
Very true, but for me your DLF call is better...
Reasons -
you anticipated breakout earlier. We can only follow the move... that is where this is applicable - "Never try to predict the move just follow it"...
As per all theories and studies nobody can judge move in advance and that was the case with DLF. I don't think we had any indicator or method saying getting into it right away. All were saying keep close watch...
I think this is where experience plays wider role than studies. Something like education vs work-experience.
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Originally Posted by blackberry
Raunak ji any word about Ranbaxy sept. futures
Wait for consolidation to happen in Ranbaxy. Its undergoing a trend change kind of scenario. Need to see if this move is genuine. Breakout is quite visible.
But do you know in today's markets, only 4 out of 10 breakouts are successful. Why trade such a low winning probability setup. I am aggressive, but I need to see where I get aggressive. For me, this is not yet a buy. It may well rally and I may be wrong. But in my books, there is a lot more than breakout I look for while taking trades.
Tc 21.8.10
..........................Reversing positions - Nifty View
Well, I have been bearish for 2 months now expecting the Nifty to slide to 5100 levels. Last two days, our team has sat down and dismantled what is happening underneath our markets. We have reached a conclusion that we are amidst a market which is extremely strong. Hence, on Monday we will be reversing our stand on Nifty.
The Nifty could go into corrective phase (5300, 5200,5100 or 4900) this month or next month, but we have decided to be long in the markets with active risk management. During past two months, some of the stock futures deals have worked very well for us. This is primarily why, despite of carrying short positions on Index, we have managed to be deep in the green overall.
At present we are going to position ourselves as being conservatively bullish on the market and will structure our investments around this.
My entire shift from being a Bear to a Bull has been due to some long term fundamental and economic factors. There's nothing technical about it. I feel we are on the brink of something Special. Hence even if markets correct (which it will), I am going to be a net - net buyer.
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Trading from 3-10 day perspective - Go through this thread.
For Equities and Investment - Go to "Stock to keep close eye on -II" thread by Savant and Anant
For Day Trading - Go to Columbus thread on Bollinger Bands or Praveen Taneja's thread
For Options related trading - Go to AW10's thread in Futures and options segment.
For general trade queries - Go to AW10's "Come into Trader's Den" thread or Rajputz thread in Introduction segment.
Following this, you will cover everything in your trading domain. Slowly start reading through these threads and in some time to come you will find yourself profitable
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Stock Futures good for Trading
Apollo Tyres
Educomp Solutions
Grasim
HDIL
HPCL
ICSA
IDEA
IndiaBulls Real Est
Indian Bank
Jain Irrigation
Mcleod Russel
Onmobile
Piramal Health Care
Reliance Comm
Reliance Media Works
Sesa Goa
Shre Renuka Sugars
Sterlite Industries
Triveni
TV18
Unitech
Please decide the direction of the trade.
In between I will be posting the direction of the trades. ..........23.8.10
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Just want to understand concept of reversing our stance from bearish to bullish or vice versa.
Normally, is it done by booking loss on perticular trade?
As indicated by you, your Index shorts were hedged with stock long hence net position was in positive. Now when you are reversing your stance, you will be booking loss in your Index position.
Am I understanding it correctly?
Rrmhatre,
Let me explain it to you, the way I think about this.
I have two ways of executing trades.
1. Trade with trend
2. Trade with opinion
When both agree, my profits are huge. When either one of them agree, my profits are still very good. Now, to start with, I never argue with the markets. Hence, if markets are trending up, I keep taking positions in stocks which are showing strength. Similarly, I never argue with my opinions. If I have a bearish opinion, I do not hesitate to open up bearish positions. I know that the current trend positions will take care of my losses. And when trend reverses, I would close my profits on long and would be prepared with my positions on the short side.
When I bet, I bet big. I don't mind to loose. If I see a trade, I go for it. There is no scope of if, but and why in my trading plan.
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It seems you open position in futures only. (no options to hedge)
How do you hedge your position? pls advice more about your hedging methodology.
OR you control your risk with stoploss ONLY?
If your risk management is with stoploss only then how do you handle gap up/down situation?
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You could well be right. Markets are so strong on momentum underneath.
As of now, I would reverse my positions after market closes above 5530. Reverse levels keep changing based on market scenarios.
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#85
25th December 2010, 09:08 AM
oilman5
Member Join Date: Jun 2006
Posts: 1,329
Thanks: 262
Thanked 1,212 Times in 433 Posts
Re: my last thread
________________________________________
A very well researched piece of document. Whether this will materialize or not, that only time will tell. My advise to you is to not argue with the markets. Always go with the flow. Our analysis is mere mortal. Markets are the King !!
...........................TimeFrameSet(inWeekly);
Plot(StochK(8,3),"Stochastic %K(8,3) Weekly ",colorRed,styleLine);
Plot(StochD(8,3,3),"Stochastic %D(8,3,3) Weekly",colorBlue,styleLine);
TimeFrameRestore();
Store this code in a separate AFL file and save it as stochastic weekly in indicator folder ... then simply add this indicator as well as the normal indicator ... here u go both daily n weekly stochastic at the same time ...
Dear Raunak,
A few questions :
1. Which is best setting to be used for Stoch for EOD & for intraday? 8,3,3 or 14,3,3 or anyother?
2. How do I to have both the stochastic windows (one for Hourly time frame and other for daily time frame) on the same time. Can you give me the code?
3. Similarly for the intraday trading purpose I would like to see both 15 mins stoch as well as hourly stoch at the same time. Can you give me the code for hourly stoch plz
Abhinay,
1. There is no universal setting for stochastic. Hence, you need to see what suites you. In my opinion for shorter frames 15,3 does well and for daily and weekly 9,3 does well.
2. If you want stochastic on daily frame, then select it from the indicator panel. Furthermore, store the above mentioned code as stochastic_hourly.afl in your indicator folder of amibroker. Then from your indicator list you can select Stochastic_Hourly and put it in another window. This way you will get Daily stochastic and hourly stochastic in same view.
TimeFrameSet(inHourly);
Plot(StochK(15,3),"Stochastic %K(15,3) Hourly ",colorRed,styleLine);
Plot(StochD(15,3,3),"Stochastic %D(15,3,3) Hourly",colorBlue,styleLine);
TimeFrameRestore();
3. For 15 minute, this is the code. Save it as Stochastic_15 under indicators.
TimeFrameSet(in15Minute);
Plot(StochK(15,3),"Stochastic %K(15,3) 15 Minute ",colorRed,styleLine);
Plot(StochD(15,3,3),"Stochastic %D(15,3,3) 15 Minute",colorBlue,styleLine);
TimeFrameRestore();
.................................................. ..
Originally Posted by blackberry
Raunak ji, sometimes spot price is more and future price is less or vice versa,what does it indicates in both cases.
In more complex terms I could write a detailed post about why this happens. But I feel that will only confuse you. In much simpler terms, this happens near expiry and also when roll over's are taking place. If you are trading Futures, just trade that. Don't bother about spot. The movement of futures is what will give you profits.
There have been lot of research papers written on whether futures prices have predictive powers within them. And the findings are that future prices (whether in risk or premium do not have predictive power).
As traders, we don't need to bother ourselves with this. Just trade the price. Go with the flow.
....................................
There are 10000 + analysts with better visibility trying to forecast what is going to happen. As far as I know, 99.9% of them are still scratching their heads. Local investors and traders are better off not even trying to judge what's going to happen. Just follow the price and follow the flow. In long run, that would work well.
..................................
My opinion on Mphasis which purely based on ADX (I usually trade with this single indicator only). Kindly look at attached chart and explaination for better explaination of my style of trading.
1> Take a note of Peak A on price and peak A’ on +DMI
2> Now compare bottom formed at X and peak X’ with the A and A’ – it tells me –DMI did not have power to go beyond last peak formed by +DMI which is A’. So bears are still struggling
3> Now compare peak formed right after X which is peak Y on price chart and peak on + DMI, those also could not go beyond A and A’ as well as Y’ could not go beyond X’ telling me that now bulls making attempt but even they don’t have power to win the battle.
4> Again bears attacking with more power at bottom B on price and –DMI peak at B’. Here they had more power to win battle against bulls of Y and Y’ because B’ –DMI peak is higher than Y’ +DMI peak but still B’ –DMI struggled to go beyond A’ + DMI peak which is the starting of consolidation peak.
5> Now comes bulls again making stroke – I wud declare them as winner only if price breaks out with the +DMI peak higher than the strongest –DMI peak which B’. For more conservative approach I wud also like bulls to have more power than when they had at peak A and A’.
As per my style I wud keep close watch on this rather than directly getting into it.
Bests,
Apurv
Apurv,
No offence to the technique you use (based on ADX).
But whatever you explained, applies directly to price. And hence price can essentially convey the same information in a much more concise manner.
...................................
What KSOILS ?
Firstly, If you are talking about some trade I took, and did not update it, then I think it would have hit profit of 4% or loss of 4%. What's there in telling that? Numerous number of times I have said that I operate on 1:1 risk reward with 3-4% as SL and profit target. Majority of members here know this. As far as i remember, in a discussion with SM I did mention that KSOILS was in neutral zone and not in a buying zone. Beyond that I don't think I remember much.
Secondly, if this is about how I pick stocks, then the one one who follows this thread, knows how I pick stocks. I suggest you go back and read these 107 pages. You will find your answer! I work on subjectivity and screen time. Not on some systems. Hence, putting that subjectivity in words is not possible. Even if that is possible, I would only give limited information. I dont believe in spoon feeding traders. I believe in Educating them. Spoon feeding only leads to losses while education leads to profits. Whenever I write, I give enough clues for the prudent trader to catch. This is how one can grow. Hope you know that !!
Lastly, I am a positional Bull now and Swing bear (I switched my stance from being a positional bear to a positional bull). And that switch was based on some fundamental reasons. These two are different and try and see the words Positional and Swing before you think I have gone from Bull to bear in two days. My style of working is to be positional and to be swing all the time. Ultimately, its what you generate in profits.
Enough Said!
....................................
Why I was positional short earlier
Now, those who have been regular visitors of my posts know that when I swing trade I don't take fundamentals into consideration. But, when I trade on positional basis, I do combine Technicals and Fundamentals together. I was positional short on the markets due to some fundamental reasons. Let me explain those to you first.
When I take a fundamental call, I take into account India's forecast of annual GDP growth, production numbers and inflation. Government of India had given a forecast of India to grow at 10% annual GDP. This was something I was not able to visualize. There were some reasons I thought about this. Let me explain in detail.
Firstly, savings rates, which remain the back bone for any economy to move forward, dropped in 2008/09, and this is likely to continue in 2010/11. Second, India's net fiscal deficit is at 10% of GDP which is also the highest in previous decade. Third, recently we have seen how dovish the Reserve bank of India is behaving regarding Interest rates. Currently, the interest rates have begun to move higher and my personal take is that with rising inflation, we could potentially maintain this trend. Lastly, appreciation of the rupee against the US dollar is beginning to act as substantial risk to Indian economy. There is no doubt that with growing economy, our currency will appreciate. But the real threat in this scenario is the pace of appreciation.Since March 2009, effective exchange rate has increased by 15.7% while that of other countries have seen little or no change.
What I had thought was that before moving forward, we would definitely see a bear phase. Fundamentals needed to catch up and that only happens when we give our Economy enough time to restore the economical balance.
Why I changed my stance from being Positional Bear to Positional Bull
Last week I had posted that if and when Indian markets start correcting, I would be buying heavily into it. I changed my stance from being a positional bear to positional bull. Here are the following reasons.
Now we all know that India is prospering and it grew at about 10% in previous decade. Analyst expect that this growth cannot be repeated and hence India would grow at 7.2-7.7% in fiscal 2010 -2011. Now, in their own right they could be right. But they are not discounting the fact that India grew earlier at higher levels due to exceptional Global economic conditions. Whereas now, India is growing based on faster expansion in private consumption and investment. With some reasonable accuracy, we can say that global economic conditions are not going to enter a confident phase for a long time to come. But will that impede India's growth? Well, the answer is no.
If one reads the 11th five year plan, then one would come to know that in the 11th Five Year Plan, Government of India would like to spend $500 billion in the areas of Power, Road, Irrigation, Railways, Water Supply, Ports, Airports etc. Now this is some serious money which will pumped back into our economy and will be again consumed within our country. With rising doubts about the real growth in "China" where would investors turn to. Which economy is surrounded with problems but yet continues to grow amidst all threats and crisis?
The biggest positive for India is that our problems our known Internationally. Investors (FII's) know we have had a problem of unstable governments, poor governance and problems associated with our neighbors. But yet, they recognize that India gets up at 6 in the morning, to live another day for a better future tomorrow. Our governments don't support their citizens like governments do in other parts of the World. But still, our people find perky solutions to the never ending problems and begin from scratch to build something substantial. These are some facts which cannot be validated statistically but are of immense importance to my Investment decisions.
Personally, when I sat back and weighed all the problems in India, with the number of opportunities in India, then the Opportunities surpassed the problems by a long margin. That for me was the critical point in being overly Bullish on our economy. I have had an amazing run from 2002 -2010 and I feel India's better years are yet to come. In conclusion, change in my thought process was equivalent to resetting my mind to the 2002 year. It was a gradual process and certainly not sudden.
There are obviously many more points to add, but I hope this certainly gives an insight on why I changed my stance. Time only permits me to write few things on the web.
..................................
my opinion, SL depends on the strategy you use. It cannot be applied similarly to every strategy. For eg, for some trade I post live SL. That's because it changes with every tick. Whereas for some trades I place fixed SL.
Hope you get my point. If you want to discuss optimal SL technique for your strategy then feel free to PM me. I understand many users cannot disclose their strategies publicly on forum.
........................................
Nothing to hide. I am still learning trading methodology & psychology.
Traderji has various techniques. I am studding some of them. I am yet to decide which will suit best to me.
But mostly I will planning trading on two fronts
1. Intraday
2. positional trade (Ready to hold upto one month also if potentials are good)
Currently i am not going into stocks & dealing with Nifty only till I gain confidence on one of the technique.
At this moment I am having positional trade of NF short @5490 qty 2lots.
I am already gaining `85points/lot. I feel potential to gain at least ~80 to 100points more. But as you always say "Market is king" hence have money management & risk management plan.
Now I am not sure what stoploss to put in this case.
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You probably did not follow what I wanted to convey.
You said you have this position in markets. But you did not mention based on which methodology you have taken this position. Every methodology has a different SL technique. It cannot be same for every strategy.
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Those who are expecting markets to go down, should be prepared to be patient. Same applies for those who are long. Our stand remains the same, we are swing short on the market and positional long. Our positional long time frame stands to 1 year as of now and swing short time frame is variable.
Short time down side seems to be around the corner. However, timing the markets is something which is so difficult. Don't expect markets to go down in a straight line. Retracements till 5500 - 5600 are always possible. If one cannot manage risk via futures, then accumulating put options is not a bad idea. Volatility is still low and options are not that expensive. ..............30.8.10
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Well, whether it reverts or not, we will have to review our position. Always remember that markets are dynamic and hence our opinions cannot be static. They need to be dynamic as well.
Regarding you feeling as a frog in the well .... Sureyes, keep working hard and strive for understanding concepts. Once you do that, money making in the markets will be as simple as you fishing a frog from a well.
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There's a fair bit of chance that we will open on gap up basis and will remain there in terms of market movement. But before calling for the markets to move down further, I would wait for the price to confirm that. It's better to stay with the flow.
"Opinion can be separated from what is currently going on – this will allow you to profit by trading with the market right now, instead of believing your opinion should be right at this time.
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Its amazing how America is rallying on the basis of $4 trillion economy which is again dependent on America itself as exports will dry up Chinese economy will falter too yet the vicious circle is not adhered too by the news channel.
China on the basis of which America is rallying today, though had a positive growth numbers and better than expected economic data it closed negative while US where all the storm is brewing is 225 points up truly senseless animal spirit from the market.
One of the prime reasons few make money in the markets is because of our nature of arguing with the markets and its movements. Humans have a tendency to justify everything. Those who can curb this instinct, do very well in markets. Sadly, less than 1% of traders can do that.
Its not a comment on your post or your analysis. It's a comment on Humanity.
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That is exactly what I meant Raunak bhai market is supreme. Hence this morning in my other post I said go long on the breach of resistance of 5445 and once that was taken out market rallied. I have learnt this the hard way not to be biased one way and also the thanks goes to you. Macro Economics and Fundamentals do matter in the long run. In the short run however, fighting with the market is similar to bull fighting. Still a student of the market and trying to learn from you guys who have weather the market.
Again from Raunakji
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Will it or Won't it?
I think one question pondering every investor and trader on Dalal street is whether Nifty will crack or whether Nifty will rally? Virtually every investor is out there with one theory or other justifying what the markets should (will) do. In my trading and investing career, this is the first time when everyone seems so confused.
Some suggest volatility is at record low levels and hence markets should crack. Others suggest futures and options data is suggesting towards a crash. The never ending theories of Volatility, F & O, Harmonic patterns, Seasonality and Elliot Wave are all going for the toss. It's not only Technicals, but Fundamentals in their own are taking a beating too. Valuations are touch high, forward earnings are not encouraging, inflation is up, interest rates are rising and production if not slowing is not galloping either. So what should an investor/trader do at this point?
The best way to be in this market is to trade it. Some suggest volatility is too low to trade. Well I would request the skeptics to visit volatility data of stocks since 90's. Volatility is cyclical and currently we are in low volatility cycle. That's it !! This market is absolutely ideal for trading. However, there are few things we need to take care of. While trading these markets, it is an absolute necessity to book partial profits. In this thread I have been posting my live index trades and have been showing how and when partial profits are booked. We are in a phase where trends are being established and reversed too quickly. Hence, we need to ensure, we take some profits off the table in order to keep our equity ticking.
As far as Investing in this market is concerned, I sincerely feel markets are fairly valued. Every year or two, we have got corrections of 15-20% and since the last time that happened was in June - October 2008, I guess we are due for one now. I would be more happy to invest when this dip comes. At this moment, we need to be objective. We need to be rational. And going by this, it seems more logical to wait for a dip rather than to invest in markets which are richly valued.
Coming back to what Nifty will do. I feel markets are hinting towards following its price action closely. By following, I mean, going with the flow. If you see some of my previous trades, I have exactly done that. And I feel at this moment this is the right tactic to adopt. Lets follow the market and let our theories rest in peace.
May the markets be kind to all.
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I will certainly back test your system. But you need to know what I judge a system on. I don't want to disappoint you with my comments later on. I dont pay much emphasis on profitability. There is a vast difference between profitable systems and good systems. A good system has to be profitable, but a profitable system is not necessarily good. For me, the main criteria is Draw downs (in trade and end of day), profit factor, number of winning trades, time spent in markets and risk to reward. Apart from all these, I also give importance to equity curve, MAE and MFE.
So, if you need an honest analysis, I will help you with it. If you want, I can also suggest you with some improvements if the need be.
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I am no expert. Raunak Bhai is the king I am very new to trading and very young in this business only seen the bull move from march 2009 until now
No bear phase seen yet. But there are some stocks with good value for 6 months period try and look for agriculture related stocks even the fertilizer sector. The demand in emerging economies is going up the food consumption in the world is reaching sky high. With the ever increasing population and improving welfare this shortage will keep growing. Next 10 years will be boom period for rural sector. Look at meat products, coffee, wheat etc all hitting life time highs. This is my view also aviation sector around the world is rebounding so Kingfisher spice Jet should do well too.
I also believe KS Oil is a good investment at this level because India is the biggest importer of edible oil and the demand for edible oil is going up and KS Oil should definitely see the profit margins increase.
Punj Lloyd may also be the dark horse. Will try to look for other good stocks too and will put it here right now not in touch with the market that much.
...Don't waste your time on picking multi baggers or whatever they are called. The odds of one hitting bulls eye is way way way less than the odds of you hitting bulls eye with a descent stock. Focus on that.
Everyone hear's stories of how some guy became extremely rich by investing in penny stocks. Believe me, these stories are created and floated by some sources to keep investors engaged.
Stay out and have fun. Invest the right way and believe me markets will reward you in a manner you would never forget.
Tc
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Whether it's small cap or large cap, I would not invest in a market which is trading near high's of its valuation band. I know in 6 months, I will get most of these stocks at a much better price. It's only a matter of time.
With your cash, its not a bad idea to make 1 month fixed deposits. Let the market correct. You will get plenty of opportunities. sept'2010
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Yes, two patterns can form within each other. Trust the one which reflects the broader picture. I would trust the outer channel in this case. And as SM said, this stock looks good to retrace.
Get hold of a good book and go in depth. Once you finish, try and figure out what works for you. Books are just for reference. One needs to figure out what works for him.
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Starting an Investment Portfolio
Since January - February 2010, we have been working constantly towards developing an "Investment" oriented Technical Model. After 7 months of rigorous back testing across several asset classes and several International markets, we have finally finished the development phase. The results were very encouraging and we have decided to replace this model with our current one. Currently, the model is being documented and we wish to take the model live from January 2011. Meanwhile, Since this model will be in use from 2011, I would be posting investment related stocks starting from this Monday based on this model.
Time frame of Investment
This can range from anything from a 3 month period to a 5 year period. In most cases, it is going to be long term bets. Please remember, we are going to Invest in stocks. We are not going to trade them.
What about drawdowns
Since this model is Investment based, we do witness large drawdowns. Sometimes, drawdowns go up to 20%. I know this is too much, but the results we have got are simply worth taking this risk. After all, there is no reward if there is no risk. When markets correct, we could see stocks falling to 20-30%. Even in that scenario, if our investments still remain a buy, we will be holding our positions.
What type of Assets do we invest in
Absolutely everything and anything that moves. Be it stocks, etf's, mutual funds or commodities.
What about Penny stocks
List of stocks posted here could be penny stocks as well. Currently we are not separating penny stocks from rest. This is something we will be doing by December 2010. Whichever stocks are traded in NSE, results for those shortlisted will be posted. Hence please watch out for Penny stocks or operator driven stocks.
Mode of Posting
I would be posting trades on Google documents. Will be leaving a link of the sheet. Whenever the sheet is updated, I will notify all of you by posting a message here. Google sheet will be updated automatically and hence tracking it will be more easy.
What about exits and stop losses
Will be updated in the sheet
Why not a new thread
If results are encouraging, then I will shift these trades to a separate new thread.
Finally .. What about returns
This is something we all will witness over time. If results are good, then I will keep posting it. If results are bad, we will go back to finding improvements. Since this is investment based model, I will give this model enough time to work. Need to be patient.
Tc
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I dont mean to be offensive or rude either. But I am not in agreement of your post.
Technical Trading is not something wherein u get all ur trades correct and as per your plan. My success to failure ratio is 1:1 but still my account is in profit because I usually maintain risk/reward ratio of 1:2 or 1:3...
TA is more of art than science... Success purely depends on individual's skills. And IMHO, faith, system/method/strategy and proper money management is key to the making ur account profitable.
Again, i dont mean to be offensive, just don't want you to lose faith... u can PM me and we can have chat sometime and I wud love to guide you or u can send me ur set of questions and I wud try to reply. You can post here also so that other senior members can also vouch for it...
Humble Request: Don't ask me for my system or setup or anything... probably i will not disclose it. However, if u have observed or read my posts, u wud have made pretty accurate guess of my style of trading...
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As far as your challenge is concerned, I think that is your personal opinion and it may well be right. As far as I am concerned, my balance sheet year on year contradicts what you say. Hence, I own the right to believe what I believe. Finally that is what eventually matters. Our own belief !!
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Originally Posted by Apurv7164
Raunakji.... I m planning to enter into it for 4-5% swing trade... M not looking for investment at this moment... your thoughts on this? ...Usha martin
Apurv,4.9.10
My views were reserved only from investment point of view.
But from swing point of view, it looks kinda ok. Range expansion is being witnessed in all forms. Should do well. You would get a better risk reward from investment trade. Not from swing trade. Investment is a lot easier and more rewarding than trading. If done properly.
Tc
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Investment Portfolio
Guys, in the below mentioned link, there is a spreadsheet linked. That contains list of stocks which are worth investing till they show sign of not moving forward. Since we are just seeing the real time results, it would be strongly advisable not to buy any stock based on this list. Let us see how this goes. The sheet has two pages, one is the fresh buy column and the second one contains list of stocks which had given buy earlier but still look good to move forward.
In this list, A category stocks are highlighted in green and Z category stocks in orange. Personally, I would never ever invest in a Z category stock. Stay with the 'A' list always. Since we have not separated the A category from the Z category in our database, we are posting results for both. Also, some stocks may be low volume, operator driven stocks. At present we are posting results for all stocks. By December 2010 we will be separating stocks based on various criteria.
The current price column contains the last trade price of the stock. Anyone who knows how to link the price to NSE website or google finance page can volunteer to code the current price column. That way, the sheet would be updated real time. Else, every week I will get one of my guys to do it. If anyone is willing to do that, then just post here and I will PM the password to the volunteer.
Please Read this before beginning to follow this document.
Starting an Investment Portfolio
Since January - February 2010, we have been working constantly towards developing an "Investment" oriented Technical Model. After 7 months of rigorous back testing across several asset classes and several International markets, we have finally finished the development phase. The results were very encouraging and we have decided to replace this model with our current one. Currently, the model is being documented and we wish to take the model live from January 2011. Meanwhile, Since this model will be in use from 2011, I would be posting investment related stocks starting from this Monday based on this model.
Time frame of Investment
This can range from anything from a 3 month period to a 5 year period. In most cases, it is going to be long term bets. Please remember, we are going to Invest in stocks. We are not going to trade them.
What about drawdowns
Since this model is Investment based, we do witness large drawdowns. Sometimes, drawdowns go up to 20%. I know this is too much, but the results we have got are simply worth taking this risk. After all, there is no reward if there is no risk. When markets correct, we could see stocks falling to 20-30%. Even in that scenario, if our investments still remain a buy, we will be holding our positions.
What type of Assets do we invest in
Absolutely everything and anything that moves. Be it stocks, etf's, mutual funds or commodities.
What about Penny stocks
List of stocks posted here could be penny stocks as well. Currently we are not separating penny stocks from rest. This is something we will be doing by December 2010. Whichever stocks are traded in NSE, results for those shortlisted will be posted. Hence please watch out for Penny stocks or operator driven stocks.
Mode of Posting
I would be posting trades on Google documents. Will be leaving a link of the sheet. Whenever the sheet is updated, I will notify all of you by posting a message here. Google sheet will be updated automatically and hence tracking it will be more easy.
What about exits and stop losses
Will be updated in the sheet
Why not a new thread
If results are encouraging, then I will shift these trades to a separate new thread.
Finally .. What about returns
This is something we all will witness over time. If results are good, then I will keep posting it. If results are bad, we will go back to finding improvements. Since this is investment based model, I will give this model enough time to work. Need to be patient
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I think the most crucial thing is discipline and money management. One can make money in the mkts consistently without any TA or any kind of analysis but no one will make money without the first two. Even the best of technical analysis will not yield money without moneymangement and discipline in place. Once we put in place a discipline and money management strategy then we should go in for technical analysis.
Also what Raunak has mentioned many times in this thread is that he uses TA to minimise losses when the trade goes wrong and maximise profits when the trade goes right. This I personally believe is the ideal approach.
TA or for that sake anything else only increases the probability of a trade going right, it does not ensure it.
Anyway, thats what I feel. Everyone has their own opinions and beliefs.
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Originally Posted by saivenkat
With what reason can one attribute to, the todays up move in market?
1) Is it due to the US job report?
Neither it ever was, nor it will ever be. What has US jobs got to do with Indian Economy? Yes we do get temporary gyrations. But long term price structure has no relevance with US jobs
2) Is it a bear trap to trap innocent investors built by heavy weights?
Trap is created by innocent investors themselves. No one can trap anyone. Do they make one trade at gun point? The problem is, innocent investor speculates a lot. He does not think of investing. All he wants is short term quick gains.
3) Is it Short covering or creation of fresh longs?
Till the price structure suggests, it is better not to argue with the markets. One can trade with the markets and with opinions. Balance is required though. In some posts earlier, I have replied to Rrmhatre about how to trade with markets and how to trade with opinions.
4) Or nothing in the above, as on expected lines only?
To expect is to commit the biggest mistake.
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Position Sizing in Investments
Assuming account of Rs. 10 Lac
Risk per trade - Variable or based on historical volatility
Maximum positions - 20
No brokerage is assumed for simplicity
Initial Strategy
Now it is widely known that position sizing can vastly increase one's trading performance. In this post, I am going to highlight a simple technique which I use for positioning my trades. Please remember, position sizing is different for the kind of trade one undertakes. Here, I am going to explain position sizing for long term investments. Hence don't follow these techniques when you trade.
Now, lets say I identify Stock ABC as a potential investment candidate. Initially, I put in 1% of the account size, which in this case would be Rs. 10,000. If I have identified something as investment trade, I would definitely expect before hand what sort of levels that stock can attain. Usually, if everything remains normal, it is fine to assume that a good investment will double in 2-3 years. Hence, our motive should be to capture bulk of the move with the correct position size.
The maximum I invest in any one trade is 5% (in current market conditions) or 10% (if market conditions are extremely robust). At the moment, I would commit only 5% of my account size in one trade. So this means we need to start with investment of Rs. 10,000 and scale in positions till our investment reaches limit of Rs. 50,000.
TO start with, lets assume ABC is currently trading at Rs. 100. With an initial investment of Rs. 10,000, I would be in a position to buy 100 shares. I would then, scale in another Rs. 10,000 when ABC appreciates by 10% that is, Rs 110. Going forward, I will keep increasing my position at every 10% gain till my investment reaches value of Rs 50,000. When I do so, I would get an average price of Rs. 119.9 and number of shares equivalent to 417.
What if trades begin to fail
I will just mention two scenarios here and I would leave the rest for you to figure out.
Scenario 1: Stock Moves down from 100
In this case, we would incur a loss on 100 shares. That is, loss on Rs. 10,000. The amount of loss occurred is determined by the kind of exit strategy one uses. I have observed most traders keep stop losses in the wrong manner. They keep a fixed % stop losses for all stocks. Well this should not be done because every stock has different volatility levels and hence each stock must have a different stop level in % terms. Else, one simple way to limit large losses is to not incur loss of more than 20% of investment. Which in this case would be Rs. 2000 on investment of Rs. 10000.
Scenario 2: Stock Moves up to 110 and then collapses to 100 and then probably further.
In this case the average price would be 104.7 and we would get 191 shares. Well, the exit in this case is very simple. If the stock reaches Rs. 110, you would be in profit of Rs. 1000 (100 shares * 10 Rs gain) and it is here where you would add another Rs. 10,000. You would get roughly 91 shares at 110 level on investment of Rs. 10,000. SO, if the stock collapses and reaches Rs 100 again, you would be incurring a loss of Rs 910 (91 shares * Rs 10 loss). Once Rs 100 is reached, I would square off the add on position with a loss of Rs 910 and would have the basic 100 share position open which I took when I bought the first time. With this position, I would exit the same way like I did in scenario 1. Remember, our main motive is to ride a possible trend of 100 - 300 % and hence we should be prepared to take a loss of 20-30% on our investments. Since this percentage seems high, we diversify and position size to take loss at small quantity and gain at higher position size.
Isn't investing Rs. 50000 at one stroke better?
Well, lets work the math here. Typically, before getting on to the real trend, we would get whipsawed a great deal. Hence we need to ensure our losses are small. Now lets assume, I buy Rs. 50,000 worth shares when ABC was at 100. I would get 500 shares. If I take 20% loss on investment as stop loss, then I would roughly loose Rs 10,000 on one trade. Now imagine what if I have 5 such losses in a row. I would incur a total loss of Rs. 50,000, which by the way is 5% of my account size.
Now, going by our original plan of investing just Rs.10,000, we would have a loss of Rs.2000 on each trade. Even if we take 5 losses in a row, we would get a loss of Rs. 10,000 in total. This is only 1% of our account size and is totally acceptable. Remember, our main aim is to preserve capital. And once we learn how to do this, we will be far better money managers than we were earlier.
I hope this post helped many of you who wanted to position size properly. This is not exhaustive. Infact this is something I have worked on my own as it suits my style of investing. At times I scale in quickly if I find a stock moving at great pace. Hence, position sizing is also subjective and discretionary. If one wants advanced strategies, then one can refer to many writings by Van Tharpe.
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My Beliefs:
Any indicator or chart can talk to you if you spend quality time with it to learn and understand it especially construction and structure of it. ADX is not something exceptionally good. It is just I happen to read work of Dr. Charles and Chuck Lebeau and when implemented in my trading found good results so I continued with using ADX.
Like any other indicator, ADX also has got lot of subjectivity involved.
What I still do not know:
How to use it for intermediate time frame or lil more profit than swing of 5-7 %.
When to exit – Currently I use 5% exit strategy. I seriously want to learn this combining any other indicator with ADX. I would appreciate if somebody helps me in this.
How do I use ADX/DMI:
ADX to know trend strength but generally this is just informative nothing else – we all know how does this work. If ADX is above 20-25 and rising tells us trend is strong enough to trade in the direction.
Relative analysis of ADX peaks i.e. comparing ADX peak with the past ADX peaks. This is very important to understand whether current down move is retracement or reversal. I would mark previous couple of ADX as +ADX or –ADX. When –DMI is above +DMI and ADX has formed peak, I wud say that ADX peak is –ADX and vice versa. Whenever, I encounter down move very first thing I would do is will compare current ADX peak which is -ADX peak for down move with the previous ADX peaks if current –ADX peak is significantly lower than previous couple of +ADX peaks then there is a possibility that current down move is complex correction rather than down trend.
Range expansion and contraction on DMIs. Here I wud keep my eyes on DMI behaviors within the consolidation. For example – if range between 2 DMIs is expanding within the consolidation, I wud get early guess of which direction price going to break out. We should get into breakout only.
Traditional use of DMI is to go long or short on crossovers. I do not give importance to cross over on standalone basis. I always want DMI to make new high after cross over. When I say new high, I mean DMI should make high above all the opposite DMI highs as well as same DMI highs within the consolidation period. If price breaks out or breaks down but respective DMI is not going above all DMI peaks within the consolidation period I wud not get into trade (Dr. Charles quote this as cross over high theory). The only exception (my observation) is DMI expansion within the consolidation. If DMIs have clear range expansion within the consolidation and respective DMI does not make new high on break out, I wud still get into trade. As Raunakji mentioned many times, sometimes we can make educated guess. However, I wud not recommend getting into trade without new high if you are not having sound understanding of this indicator.
Cross & Hold and Dominant DMI – many times it happens that DMI does not give us trigger high on breakout. Does this mean we shud not get into trade on this type of breakout? I wud watch DMIs after breakout. If DMIs do not cross back in reverse direction and holds the original cross over, I wud get into trade as soon as DMI makes new trigger high. This is lagging signal but works so I thought of including it.
DMI continuation high – many times we don’t get consolidation and have established trend. Why wud we let go trading opportunity presented by established trend or in other words why wud we not ride on established trend? I would wait for the price retracement and DMI contraction. Once it happened, I wud get into trade as soon as dominant DMI goes above its previous pivot high.
DMI divergence – As we had discussed earlier, I am still not fully convinced with the divergence concept. However, I give lil importance to DMI divergence in getting information. Divergence between price and dominant DMI tells me that correction/retracement/reversal can be on cards. I do not take action based on this. I wud want price to confirm with the breakdown or lower high/low.
Putting all together:
I usually trade where ADX is below 15 and preferably below 10 suggesting me currently price is in congestion or consolidation. I will watch price to give break out with the trigger high/low on respective DMI.
When ADX is extremely low, DMI and price break out generally work for you. Very less chance of getting stopped out.
Well established trend and retracement – First check relative ADX peaks with previous ADX peaks. If it suggests you that it is not trend change. Get into trend as soon as respective DMI makes continuation high. This works best when combined with MAs.
I also combine John Hayden way of looking at Fibonacci and RSI with my ADX analysis. Since this is all together separate topic I am not going into much details here.
I generally use 8 ADX of 13 DMI or 7 ADX of 12 DMI but also seen simple conventional 14 ADX and 14 DMI working equally well. I usually reduce look back period of ADX to make it little more sensitive.
I mostly trade in the direction of higher time frame – I need to have weekly ADX telling me same story about trend when I want to trade on daily chart. Or I need to have daily chart telling me same story when I want to trade on 60 min or 30 min chart.
I have certain strategies defined to trade using these but I am keeping them with me. I am very confident that anybody can improve failure to success ratio understanding above concepts very well and being friends with ADX.
I am very much open for constructive and healthy debate on this if anybody having different opinion. Healthy debate and brainstorming always lead to greater insight and understanding.
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I surely dont mind posting chart but traderji is allowing me to manage attachment to the max limit of only 100 kb. Now it is difficult for me to show all the examples within 100 kbs only.
However, kindly go through below mentioned charts for the points.
Go through USHA Martin daily chart for knowing relative ADX analysis and break out from consolidation and confirmation on DMI by making crossover high.
Also go through ACC daily chart for breakout confirmation on DMI. Weekly chart will show you relative analysis study.
Check 60 min Fed Bank chart for breakout confirmation on DMI. Daily chart of Fed Bank will give you relative analysis study also.
Check sonata software daily chart for probable dominance failure by -DMI. This is still under development.
Check Nifty daily chart for break down but -DMI did not made cross over high, neither cross & hold and maintain dominance.
Check TVS Srichakra chart for DMI range expansion example...07.09.10
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Nifty is climbing up, yesterday's moved look liked a climax. P/E ratios are coming at 25 now for the index. Bubble phase is underway and this is the most riskiest period as everything in the market goes up and everything goes crazy. Everyday market rises.
Bubble of any sort is identified quite easily with the kind of leverage underneath. There has to be something substantial for the bubble to form and for it to burst. Words like crash, bubble are used so frequently by the media these days that even a common investor now understands these terms. In my opinion, any information which is out with the masses has no value at all. Remember, it is information asymmetry which causes markets to move. Not symmetry of information.
As far as PE goes, I think world wide in all economies, PE bands have shifted range. This happens in a growth stock so why can't it happen in a growing economy. When the band shifts, the momentum and prices are bound to expand. I feel currently we are witnessing the same. I don't rule out the possibility of a correction, but I won't anticipate it. If it comes, so be it. I am prepared.
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Hi Raunak,
pls confirm me on my Understanding.
1) You anticipate 100% to 300% growth in these stocks in next 2-3year
2) You will have next investment of 10k, only after you see 10% rise on your current investment. You will keep on doing so till you invest 50k in each stock. (With this logic Vis Finance & Wockhardt should have deployed with next lot of 10k)
3) You will come out if you see 20% loss in any script.
I am not clear on following points.
1) We have invested all 50k. Let us take your example & assume our avg price is Rs119. our target is min of Rs200 for this stock. If stock starts falling down before target is hit then what should be SL? Is it Rs95 (20% lower than avg buying price of Rs 119)? or Rs120 (20% lower than your last purchase @Rs150)?
2) What will be exit strategy after hitting target of 100% growth? Will it be, exiting 20% amount everytime in five steps or exit with all the qty in one shot.
...................Rahul,
For Wockhardt, next lot of Rs. 10,000 has already been deployed today. As far as VLS finance is concerned, I have mentioned earlier that I don't invest in Z category stocks and hence no 'actual' money has been put in the stock. In the given sheet, the scripts given in green color are the one's where actual money has been put in.
Rahul, as we scale in at every 10% jump, we begin to scale out when our positions start coming to the price where we added lots. Only loss we take on add ons is the brokerage loss. For the first lot (Rs. 10,000), I take a loss of X% depending on the volatility of the stock, which typically ranges from 10 - 30%. For every stock this is different.
Regarding exit, if our investment gives 100% return, we start keeping a trailing stop loss. Now this again depends on the volatility the stock is exhibiting. I would never get out of a investment just because it has doubled. On the contrary, once I have 100% returns, I would think about deploying more money in that stock.
We keep going in and out, we keep scaling in and scaling out and this is all done to adjust the alpha and the beta of our portfolio.
Lets see how it goes, we are just testing a new model with real money. We are confident of the performance, lets see what markets have to offer. My aim is to outperform the market. That's it.
Tc
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Just a word on Investing and trading.
If we have a portfolio, in which alpha is generated with given set of stocks. We need to make sure that when the market goes into volatile phase or starts to correct, short selling becomes an instrument to rebalance the alpha lost by market correction on portfolio.
This is where a trading technique or a system comes in handy. During consolidation, our alpha won't be affected much and we must not get into the frenzy of trading. However, when signs emerge of correction, then we must be prepared to short sell in order to restore the alpha lost in correction. This is how one can be a long term investor and at the same time be a short term trader in order to balance alpha. In other words, Trading instrument simply becomes another portfolio vehicle ensuring alpha generation capability.
Rahul,
Let me answer your query in parts.
1. Index stocks - I am a value investor and there are so many small sized companies which are going to do wonders ahead. Yes, I trade and invest a lot based on Technicals. But, I am very sound on fundamentals too. Most of the companies I buy are either good fundamentally or are expecting a turn around. However, some of the companies which I buy are not so good on fundamentals but are still rallying ahead due to momentum. I still prefer to ride those. In short, I am aiming at growth stocks, momentum stocks and value stocks. This in itself is diversification within diversification.
2. Correction - I am very bullish on India. And I assume India's good years are yet to come. We have our own risks, but I think we will sail through all the hurdles. An economy with every individual wanting to be rich can never go off track. Hunger to survive and to do well in life is what India is all about. Dreaming is essence to enhanced performance and my dear India is full of dreams and aspirations. So, when corrections come, I will trade those to balance my portfolio. But till anything catastrophic happens, I will continue buying. We are investing and we should not be scared of a 10-20% correction. Should we? Keep strict money management rules and be disciplined.
3. Trying this concept - I will strongly encourage you to try this concept and you can comfortably try it with any fixed amount you want. But stay in equities and try this entire sizing concept with your own system and own stocks. I have mentioned earlier, we are trying out things with real money. So, just be careful picking out stocks directly based on the sheet given. We are here to stay for long term and I am not expecting returns in a day or two.
4. List of stocks - When you open the sheet, the list of stocks whose rows are in Green are A category stocks. List of stocks highlighted in orange are Z category stocks.
...................According to recent report FII have largely exited investments in small caps and have focussed on the larger caps. Hence many are available still at attractive prices. For a long time now the action has shifted to small and midcap. Any correction will have a small blip but the targeted returns are potentially higher.
Since brokerage is a percentage it will not matter either ways. For starters you can look at returns for 3-6 months. Short term calls are less riskier than trying to do intraday and you can get better returns.
Well, I won't read too much into what FII report says about where they are investing. Trading where the action is something one should focus on. Historically, in every economy, midcaps have always outperformed large caps. Also, Midcaps and small caps also fall a lot more than large caps. Hence, the risks are more in such stocks.
But if you pick the right kind of midcaps, the gains are just staggering. How many large caps are the best performing stocks every year? Some manage to creep up, but the majority of best stocks year on year in terms of risk reward are usually midcaps. Small cap are a bit scary though.
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As traders why should we have a long term perspective of Investment ?
Well, it entirely depends on your mindset. If you are a trader, then you don't need to bother about anything else. As I have posted earlier, I cover up some of my investment draw downs by trading. So, in short I am a medium term trader and long term investor. My time frame in defining what is Long term and what is short term is not fixed,it changes with volatility.
In what way a short term portfolio(1week to 1 month holding) different from a long term Investment portfolio ? How the returns are expected to exceed the returns of a Swing trading Portfolio ?
It is different in terms of alpha and beta both. In short term portfolio, your gains are less and your risk is relatively high. Depending on your skill set you can find suitable risk to reward trades. In long term, you have time on your side and if your investments are sound, then the gains can be spectacular.
For a short term portfolio's returns to be greater than long term portfolio, you need to have the right sort of environment. For eg, when the volatility is high, your short term returns can out run the long term portfolio returns. But, how many traders actually know how to position themselves in high volatility environment? That my friend is key to returns in the shorter term. And don't forget the risk that high volatility environment brings to a trader.
Note:- Lost hope in investment after burning my fingers in Sathyam, Teledata
What are the odds of this happening again to you. Satyam I agree was a shock for many. But how often does this happen? You can't draw inferences based on some trades. Furthermore, one year like 2008 will sway your faith away from trading. So many traders in that year swore never to trade again. Hence, its a double edged sword dear. Ultimately you need to know what works for you.
...................................India is in second place with 39 entities, 19 more than last year, thus making it the biggest gainer. More Indian companies made it to the list this year as the country is less open than many other Asian economies and was therefore less affected by the global downturn," Forbes said in a statement today.
Other Indian firms in the list include Allied Digital Services, Exide Industries, Jubilant Organosys, Spice Mobility, Zydus Wellness, Amara Raja Industries, Compact Disc India, Everonn Education and Micro Technologies.
The 'Best Under A Billion' list is chosen from nearly 13,000 publicly-listed Asia-Pacific companies with actively traded shares and having sales in the range of USD 5 million- USD 1 billion.
The selection of the best 200 companies is based on earnings growth, sales growth, and shareholders' return on equity in the past 12 months and over three years.
According to Forbes, the latest list has 151 new entrants as compared to 136 last year. Information technology, health care and electronics companies accounted for nearly half of the 200 entities.
Indian entities such as Ashiana Housing, Banco Products (India), Bliss GVS Pharma, Deep Industries, Glodyne Technoserve, Kaveri Seed, KNR Constructions, ELGI Equipments and ICSA (India) are also part of the list.
upto page130
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#87
25th December 2010, 11:13 PM
oilman5
Member Join Date: Jun 2006
Posts: 1,329
Thanks: 262
Thanked 1,212 Times in 433 Posts
Re: my last thread
________________________________________
Learning through your own mistakes is expensive, but it is also one of the most effective ways to learn. I have learned that way. Hence dont feel bad about opening your own thread. That was a bold move and you did well. Keep it up.
Portfolio is not based on pivot method, neither on break out method. But thanks for telling me it coincides with that. Also, from the list of stocks posted and which will be posted further, we dont expect more than 2-4 to go in our favor.
Regarding stocks looking stretched, the continuation buy list is where most of the stocks have moved up significantly. That is why we have not committed any fresh money there. On the contrary we are booking some profits there. For the next few weeks to years, I am more interested in the Fresh buys list. That is where I am expecting some action.
That's good Apurv. You must have different positions in different stocks. But I hope you are not over trading based on your account size. As far as your account size suggests these many positions, its fine. Otherwise, you are taking unnecessary risk. Remember the 2% rule. That's it.
No trade taking more than 2% of your account size as risk.
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Posting the list of stocks for fresh investment here. List will be updated as and when new stocks match the criteria. List from continuation list have not been posted here as no fresh money is committed. Excel sheet given earlier has been removed for adding some more real time features and system statistics. Will be made available as and when updates are made.
Code:
Stocks Buy Level Buy Date Quantity Exit
Arvind 42.95 Sep 6th 2010 233
Asahi Safe 92.55 Sep 6th 2010 108
Dish Tv 55.15 Sep 6th 2010 181
EIH 150.8 Sep 6th 2010 66
Guj Fluro Chem 211.35 Sep 6th 2010 47
IBN 18 Broadcast 124.7 Sep 6th 2010 80
IOB 133.95 Sep 6th 2010 75
Jindal Drilling 606.35 Sep 6th 2010 16
MVL 101.5 Sep 6th 2010 99 91.4
Religare Enterpr 480.2 Sep 6th 2010 21
Srei Infra 90.6 Sep 6th 2010 110
Texmaco 160.75 Sep 6th 2010 62
United Brewries 326.25 Sep 6th 2010 31
Venus Remedies 305.3 Sep 6th 2010 33
Videocon Industr 265.5 Sep 6th 2010 38
Wockhardt 237.7 Sep 6th 2010 42Tc
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only say one thing.
Stay with the speculation till the speculation lasts. Don't question it. Let the questionable scenario present itself rather than you trying to find it.
Tc
Adding to what I have written above. I feel, we are at an extremely important juncture as investors. There are some unbelievable investment opportunities present out there for the next 1-5 years and I sincerely feel, India is at the brink of something really really special. Hence, don't limit to explore yourself and your beliefs just because there is 15-20 % correction expected. Feel your spirit, believe in your vision and set yourself free !
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ADX Has it's Limitations
(I'm referring to Welles Wilders Average Directional Index in case you are a "newbie".) After many years of extolling the virtues of the ADX in articles and lectures all over the world I have become closely associated with this indicator. That's fine with me and I don't mind being considered the resident expert on ADX. It is an excellent measure of trendiness and a good indicator to be linked with.
However, I think it is a mistake to try and over work or become too dependent on any one indicator. If you were going to build a house you would need more than one tool and you wouldn't try to do it with just a hammer. The same is true of building systems. The ADX can be a very valuable tool if used correctly but it has some major shortcomings that everyone should be aware of: We all know that the ADX is slow. This is because of all the smoothing in the formula. The basic ingredients are smoothed and then the results are smoothed again. For example I think it takes more than 30 bars of data to calculate a 14 bar ADX. This smoothing makes the ADX slow but there is an even greater problem than just the speed of the indicator. The logic of measuring directional movement makes the ADX very reliable at certain times and very unreliable at other times.
A rising ADX is a reliable indication of a trend when there has been an extended sideways period before the trend gets started. Before all the high tech computer mumbo jumbo we used to simply refer to this sideways period as a "basing pattern". The ADX is most effective when it begins to rise from a low level (low = 15 or less). This low level on the ADX indicates that there has been a basing pattern for a while. This interpretation is contradictory to those users of the ADX who want to see the ADX cross above a specified threshold (usually 20 or 25) to indicate that a trend is underway. This technique would make the ADX even slower and means you would be confirming a trend and entering your trade long after the basing pattern was broken. But even if you were late due to your method of interpreting the ADX, following the ADX after a base pattern is still quite reliable. The potential problem I want to bring to your attention in this article is the action of the ADX after major peaks and valleys.
The logic of the ADX is best visualized as measuring directional movement over a moving window of data on a bar chart. If we have sideways data in the window followed by recent trending data (lets think of rising prices but it could be the reverse), the rising prices would show directional movement relative to the sideways data at the beginning of our window. The ADX would promptly rise and call our attention to the fact that there is now a direction in prices that should continue for a while.
However, if the prices rise for an extended period and then begin to fall sharply (a typical scenario) we now have a window of data that shows rising prices followed immediately by falling prices. The ADX formula measures the rising prices in the window and compares them with the declining prices in the window. Because the two trends are about equal they cancel each other and the ADX does not detect any net directional movement. The ADX now begins to decline indicating that it is finding no net directional movement in the period measured by the window.
As the window moves forward, eventually the older rising price data falls outside the back of the window so that the window now contains only the more recent downward price movement. The ADX suddenly begins to rise rapidly because the data window at this point contains only one trend. The problem with this new signal is that the downward trend in prices has been underway for quite some time and only now has the ADX finally begun to rise. This is obviously not a good point to be entering a trade to the short side. We are probably nearer the end of the trend than the beginning.
Remember that the ADX works best after a basing period and is unreliable after a "V" bottom or top.
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I slightly differ on what is mentioned here. I do know a fair bit about most of the indicators out there and hence, although I do agree one should not rely too heavily on one indicator, I also support the view of having absolute mastery over any one of the good indicators.
We don't need to dwell too deep into science to understand why at times trading with one indicator is a good thing. We just need some basic combination theory to understand this. Now, if we have 2 variables, Price and one indicator, we could map out different market specific behavior of these two variables and study them under those conditions. We could then know, how these two variables behaved and what result to expect under those circumstances. Now, as we begin to increase our variables, we find it very tough to monitor and research these variables. Two variables combined with each other, gives a finite combination. But as we begin to introduce more and more variables, the combinations start to increase and hence the result starts to vary. Now, which result to pick in which condition becomes quite a task.
This is precisely why financial markets are something one needs to be at peace with. Some can manage 2-8 indicators, while some can only manage one. The effectiveness however of using 1-2 indicators is no less than using 2-8 indicators. This is just my own experience. Some do believe that the more number of indicators you have, the more accurate the result becomes. I, however, do not voice this view. At the most I prefer to see one indicator. That's it!! Most of the times, price is enough.
Anyhow, the way to master the markets is to approach it step by step. If one picks up one indicator, he should try and research it in and out. It is only then that one can truly master the markets. And once that's done, you'd be in a position to take out money at your own will.
Selecting Time frame to Trade - Data Validation
Majority of the traders in the stock market like to Swing trade using the daily time frame and the 60 minute time frame. Furthermore, about 99% of them use indicators to take a trade in either direction. Now, taking trades based on multiple time frames is very logical as this ensures that the trader always trades in the direction of larger trend. But, which smaller time frame one uses determines whether the trade results in profits or losses. In this post, I want to highlight a very important aspect of data validation which is often the most neglected aspect in Swing trading. In doing so, I will also highlight, why the 60 minute time frame is not suitable for swing trading. Let's begin !
For the sake of simplicity, we will assume that a trader uses Daily time frame to measure the trend direction and 60 Minute time frame for taking the trades. Furthermore, we will also assume that the trader uses stochastic oscillator to enter and exit trades. Now, before getting into data validation aspect, lets briefly review what the stochastic oscillator does. The Stochastic Oscillator measures the level of the close relative to the high-low range over a given period of time. So, when we apply the stochastic oscillator over period of daily time frame, then, the stochastic readings typically depict the level of close relative to the High - low range over the entire day. Now, till here, everything seems fine. It is only when the trader switches to 60 minute does the problem begin to arise.
Our markets are open from 0900 Am IST to 1530 Pm IST. This means we have 6 bars (each of 60 minute) on hourly frame and 1 bar of 30 minute trading. Now, this poses a serious problem if one wants to take trades based on hourly time frame. Each price bar is a representation of the supply and demand prevailing in that hour. When we get one bar which is just of 30 minutes, then we are bound to get an error as that bar does not represent the accurate demand and supply scenario in the market.
Similarly, now, If the trader is using Stochastics oscillator that measures overbought and oversold based on where the close fell relative to the high and low of a bar, then the size of the bar is integral to the result. Because price ranges tend to increase with the length of time, a bar with too little time will give inaccurate signals and give false reading on a market. Once this happens, the profitability of the trader gets seriously affected as now he has deviated from his plan unknowingly.
Typical solution to counter this problem is to create bar sizes with equal length of trading action. Our markets are open for a total 390 minutes. In this case, it would mean, creating a time frame which represents 65 minutes of trading. That is, a 65 minute time frame in which we will have 6 bars of 65 minutes of trading representing the total 390 minutes worth of action. Those who fail to adapt to this concept, will be neglecting a very serious problem of data validation. All we do is trade on data, and if the underlying data is not validated and accurate, then our entire plan is prone to errors.
In conclusion, the next time one uses different time frames to enter trades, please ensure your data is validated and is error free.
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I have given my Nifty view earlier when I became extremely bullish on markets (Technical And Fundamental) and the view remains the same. If you have right money management rules in place, nothing should bother you. Just ride the trend.
I have mentioned this earlier also, having an opinion is good, but sticking to it and expecting it to happen does not have positive expectancy.
Don't focus on what FII's or any other investor is doing. Focus on what your thought process is and what the market is telling you right now. Once you focus on these two aspects, you will get your answer.
Someone recently had asked me about valid interpretation of Open Interests in Options. I just read a very good explanation of the same and thought of sharing it here. I am highlighting the important points in bold.
" Open interest represents the total number of option contracts currently open and is a measure of liquidity in a particular options class. In other words, open interest is a figure that reflects the number of contracts that have been traded but that have not yet been exercised or liquidated by an offsetting trade. When you trade an option, you may in fact be creating a new option contract. Both buying and selling options will increase the open interest figure, providing the action opens a position. Conversely, buying or selling to close a position will cause open interest to fall. If one side is opening a buy position and the counterparty to the trade is selling his existing bought position, then the open interest will not change.
Looking at the open interest, there is no way of knowing whether the options were bought or sold. However, the figure can be compared with the volume of contracts traded on a given day. When the daily volume exceeds the existing open interest, it suggests that trading in that option was unusually high. Open interest also indicates the liquidity of an option. When options have high open interest, it means they have a large number of buyers and sellers, and an active secondary market will increase the odds of getting an order filled at a decent price. Generally speaking, the larger the open interest, the easier it will be to trade that option at a reasonable bid-ask spread. "
Tc
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OILMAN'S PERSONAL VIEW..........I COPY PASTE RAUNAK.............AS ONLY 2PERSON TRADERJI & VVONTERU..........I FOUND TO COPY PASTE...........definitely many including CV knows more than me,............yes presently Tnsn2345 & Raunak r higher callibre successful trader...........who r of superior individual.Even if they would not in trading,.........because of their superior knowledge & balance of mind ,i shall show my respect to this 5.
Regards
Importance of Getting in and Getting out of a trade
Has it ever happened to you that as a trader you chase a stock and it continues to give you whipsaws. You finally make up your mind to give up on that stock and ironically find it rallying on the very next move. I guess, this has happened to each one of us in our trading career. Therefore, as traders what can we do to counter this? Before we touch upon this topic in detail, I'll assume that everyone reading this has a distinct advantage over the markets in form of systems or methodology. By distinctive advantage, I mean a system which does not depend on specific market conditions to work. So, let's begin !
Well, if you think about this issue in detail, this is more of a psychological issue than a system issue. As soon as we get a couple of loss making trades, we begin to look at our P&L statement. Furthermore, we begin to extrapolate the P&L "if" we were to loose a few more trades. Believe me, if you want to be successful, then don't do this ! We all go through phases where the stocks just don't move and eventually when they do move, we are ultimately out of it. Most of you who follow this thread, must have noted on many occasions that I keep reversing my trades till I find that stock in my favor. Currently, I am doing the same with India Bulls Real estate. I will keep reversing my positions till that stock fits my scaling in and profit booking criteria. It's psychologically tough, but who told that markets rewards one for taking easy decisions? When we are wrong, we want to make sure our losses are small and when we are right, we need to make sure our profits are relatively large.
There are few things in trading which are not documented well enough. Out of those, the topic of getting out and getting in is one. Folks, as far as our system has a positive expectancy, we should not be bothered with the whipsaws and the draw downs. To be successful in this, never ever forget the 2% risk management rule. If you don't let one trade take more than 2% of your portfolio, believe me you'll be soon taking your account in the whole new direction. That is, towards profits.
If you intend to become a good trader, you have to incorporate this in your trading plan. Be relentless, don't think about potential losses, let them show up and then apply the risk management rules. Don't trade what you think, trade what you see.
1. Focus on your thought process - This means focus on your methodology, your system. If your system is good, it will always chase the smart money. If you are able to do this, you will be able to make money. Don't think what they will do, just keep going with the flow.
2. What the market is telling your right now - This means look at the Nifty, Bank Nifty and ask yourself what do you see? Does the Nifty tell you it's going to correct? Don't think it might correct. Let it tell you in person. Once it does, reverse your positions. For eg. As of now if I ask Nifty to short it, I get an answer where Nifty tells me I am a fool. Hope you get my point. It's communication, its logic and its all about being in the present.
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This is completely your call. Let me tell you what I do.
I have three completely different accounts. One for Swing, One for Investments and the last one for scalping. For Swing and Investments I keep 2% (Swing) & 1% (investment) criteria of the account size. For scalping, it is usually 0.3-0.5 %.
Now coming back to your query. Dear, we can never know when FII's will pull out their money. Hence, don't pay attention to these news or rumors. If they will, we will come to know through price structure. Till then, its better not to assume. October is cyclically a corrective month for India and the Global markets. This is just a possibility. This is not certainty. Hence, trade with stop losses and you will be fine.
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To me FII wud pull out money only if they have major redemption pressure else in normal situation they wud not because 1) retail participation is not there and if they start pulling out money they will be in loss 2) they do not have any other (other than GEM - global emerging markets countries) places to park their money. their internal system is not efficient enough to get good returns.
I completely agree with Raunakji that we wud never know when they wud pull out money coz most of the money dumped in indian market is of hedge fund and regulations are not good enough world wide to have any quality standards....
The "What If" Syndrome
As technical traders, we are always dealing with probability and never with certainty. We make systems, we practice them and eventually we trade them in the real markets. In the end, we all know that no matter what analysis we do, markets will eventually do what it wants to do. When we see certain trades going against us, we immediately begin to question our systems, market structure and eventually conceive the worst syndrome a trader can ever have. That is, "The What if Syndrome".
This is a syndrome which is responsible for wiping off 50-60% trading accounts every year. What this does is, it creates doubt about our skills, about our intellect, about our systems and about the potential change the market can go through going forward. We begin to look around and start to feel inferior to other knowledgeable traders around. Believe me, trading has nothing to do with intellect and nothing to do with vast knowledge. Like we cannot change ourselves overnight, similarly markets don't change overnight. It takes time for Bull market to turn Bear, and for Bear market to turn Bull. We begin to assume that just because we start trading certain methodology, the market will start changing its inherent character. This concept is wrong and this never happens.
Once a trader gets affected by this syndrome, he steps out on a path to find the ultimate indicator, oscillator or system. He believes he can find one such system which is going to yield minimum losses and maximum profits. There is absolutely no such system which yields minimum losses. Losses are a part of Technical trading and have to be accepted if one has to stay in the game. Typical symptoms of this syndrome is when one starts switching systems or when one realizes that it is more knowledge which is required to become a good trader. If anyone of you is suffering from this syndrome, then let me tell you that all one needs is a simple methodology, simple rules and discipline.
If systems and methodology were so important, then eventually every technical trader should have been extremely rich. The truth is, systems and methodology form a small part within one's entire trading system. The key ingredient to one's success is the right mind set and immense discipline. If you remain mentally strong, then neither will you nor the markets work against you. Ultimately, strength does not lie in systems, it lies truly in the mind. Keep the "what if" syndrome out of your trading plan and work towards peace and prosperity.
Here's how to identify stock price structure. Look at the graph below.
Now there are two parts to this. One is identifying base and second is what happens after base is formed. In this case, whenever a base is formed, the stock has made a new high with force. This has happened on 3 occasions. Today it was the 4th time when the price has just brushed through the previous high's. The OI and volumes was building with every base and peak.
Now this is why I feel that stock can fall tomorrow. Because today, the volumes were so high, it could be possible that stock has been passed on to new entrants. However, today there was an OI addition of 70%. Hence we need to see what happens. For traders to execute these type of trades, one has to have a care free attitude. If it works, it works. Else, bring the next trade on.
Tc
Originally Posted by jagankris
Thanks Raunak ji,
Just now saw the script.
Monthly breakout after consolidating in a narrow range on heavy volume.
Also the stock is in news
OI has increased by 77.69 % or 700 lots.
Today is the 52 week high.
A good BTST candidate too.
Best Regards,
-JK
But the stock has closed well below its VWAP of 794.
700 lots or 35,000 stocks addition in OI is defenitely in significant compared to the traded volume of 19,82,031.
Delivery volume is 17%. which comes to 338364.
Not able to guess if it is accumulation or distribution at the higher levels ?
Please advice on how to find accumulation/distribution patterns ?
Thanks.
Entry criteria depends on Exit criteria Prem.
I entered APIL for 2-3% kind of play. Hence my entry yesterday is justified. If you wish to enter for another leg of upmove, then let it consolidate.
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JK,
1. Focus on your thought process - This means focus on your methodology, your system. If your system is good, it will always chase the smart money. If you are able to do this, you will be able to make money. Don't think what they will do, just keep going with the flow.
2. What the market is telling your right now - This means look at the Nifty, Bank Nifty and ask yourself what do you see? Does the Nifty tell you it's going to correct? Don't think it might correct. Let it tell you in person. Once it does, reverse your positions. For eg. As of now if I ask Nifty to short it, I get an answer where Nifty tells me I am a fool. Hope you get my point. It's communication, its logic and its all about being in the present.
Tc
Thanks a ton in advance Raunakji.
The mind always resists to see what is happening in the markets.
The mind remains in anxiety of greed or fear thinking of the past or anticipating the future.
It always tries to find an opinion about the direction and tries to stick on to that.
Or in other words it wants some thing concrete.
It is not flexible enough to change with the change.
(How to develop this ).
For example Yesterday morning before market opening I was of the opinion that Tata steel is weak.
But the same morning it went almost 1.35% up.
From 602 it went to 609.
Came to 597 again went to 607 range.
Finally corrected down to 593.
But in the meanwhile the roller-coster turmoil undergone by the mind was tremendous.
Each time the script reacted against the opinion held by the mind the struggle was more.
To take positions opposite to the opinion of the mind but with the direction of the script is a very difficult challenge.
How the mind got its opinion ?
By analysis.Analysis is the key of the mind to keep itself alive
Because in the "present or now" mind is not alive.Hence it is an survival tactics played by the mind.
How to see the prices and trade with out keeping an opinion ?
Does this mean that don't do your homework ?
Don't do analysis ?
Because by doing analysis mind gets an opinion.
The opinion framed or the belief that the prices would go up or down is the key obstacle for trading.
Which again creates resistance.
So which means throw all your technical analysis/charts/fundamentals/News etc and just follow the price action or flow
At the end of the day I get very tired.
Please enlighten us how to make trading a pleasurable event with least stress possible.
Thanks a ton in advance.
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Jagan,
What you have analysed is very true and congratulations to have got this right in such an early stage. Now, coming back to answering your query.
Markets neither know Fundamental Analysis, nor does it know Technical Analysis. There have been proponents of both fields and yet somehow they are so wrong. Fundamentals argue about valuations, P/E, Growth and Technicals argue about Patterns, VSA, Market Profile etc. Does the market actually care about these? Well, I have seen stocks dropping like there's no tomorrow even when there P/E/Valuations were indicating 'Buy'. Similarly, patterns, VSA etc fail more often than they work. Hence, both methodologies are prone to fallacies.
What does an investor do then? Well, the answer lies in our mind. It is not that Fundamentals and Technicals don't work. It is just that one has to hone his own skills to judge when these will work. This unfortunately comes only with persistent practice and discipline. Both these fields have immense value, but that value needs to be unlocked by conquering our mind. And that my dear is not an easy task.
Have you ever thought why market analyst try and justify Technicals and Fundamentals? Answer to this lies within our psychology. Our mind has a habit to compartmentalize all the information available to us. It is within this compartment that we seek an answer to all the investment related queries. If the compartment and the information within it is not organized and appropriate, no matter how hard we try, we would never succeed. Hence, the answer to all your queries is the word "Organize". You have to see what you believe in and then have to organize your thoughts in a way where picking stocks becomes just another habit for you.
Don't worry and keep trying. We have all been in this similar situation. The one's who never give up are the one's who always succeed.
Trading with MACD and Stochastics
Tools – Candlestick/Bar Chart , MACD Oscillator with standard settings, Stochastic Oscillator with Standard settings
Trade Setup – The basics of this setup is very easy to understand. All you need to do is monitor selective stocks (high beta high volume) or the Index. My preference is more towards Index. Now, everyone absolutely loves trading with Stochastic and MACD. But in my Opinion, they use these tools in the wrong way. Stochastic and MACD are extremely valuable tools and one needs to use them correctly in order to profit from them.
Buy Setup – Usually, traders begin to buy stocks when they see the stochastic cross below 20/30 or any level. Though this is profitable sometimes, it leads to serious draw downs in the long run. The value of stochastic crossover increases tremendously when it is used with MACD. Next time whenever you see a stochastic cross, wait for the MACD cross to happen. In other words, if one stock exhibits stochastic crossover, begin to watch it. Start looking at the MACD, if the MACD cross happens, then take that trade. Essentially we are using MACD as a trigger to enter trades.
Important Notes – At times, it will happen that Stochastic crosses for a Buy and then by the time MACD crosses for a Buy, Stochastic would cross for a Sell trade. Under these circumstances, always trust the MACD cross. Stochastic will eventually turn up and will move up. To enhance the profitability, one should always trade this setup in the direction of the main trend. Furthermore, this setup will work well in stocks which depict high volatility.
Short Setup - Exactly opposite of the Buy setup.
Targets - Aim for 3-5% Gain.
Example - Look at the example below. I am not going to take you deep down in the History. Hence, I have attached example of Bank Nifty for the Year 2010. With this setup, you would have captured every down move and up move in this year. Whipsaws are common for this strategy as it is for every other, but once you get the hang of it, this is again profitable. I have plotted the recent down move and up move as example. Go back and history and see if this makes sense to you. Try and visually identify this setup. Don't pick up your trading platforms and code it. The more you trade this visually, the more accurately you will identify the false signals. Computer cannot see what the human eye can. Remember, this is no Holy Grail !
Have patience and you will see this pattern occurring regularly.
Tc
__________________
Originally Posted by alroyraj
But the key question is whether you would trade the price action ,if it has a compelling significant move ,opposite to your view before market opening or would stand your ground and enter only once the price action reverts to your view?
I know its a tough question.
Majority of times, one will always know when an explosive move is about to occur. This just comes with experience and significant amount of screen time. So there's no question of trading when the price is not moving in your favor.
Markets opening up or down, against or in your favor, is just another phase in market. Often overstated, but statistically of far less significance.
Tc
Thanks to the golden words "Trade what you see and not what you think".
Instead of holding an opinion on the Script, If I had blindly traded the script with Price Action - I could have eliminated the element of fear and doubt of the trade pricking my mind against my opinion.
That particular day the script moved twice against my opinion and twice in the direction of my opinion.So out of the 4 moves - I was able to remain calm only for 2 moves.
By entering a trade only when the the price action reverts to my view
again
1. The opinion still remains.
2. There is a chance that I could have missed a big move on that against my opinion or hit my stop loss.
So it is highly imperative to trade with out framing an opinion.
or in other words don't have a long or short view at least in day trading.
Very difficult to bring it in practice indeed.
To elaborate more - How opinions framed kills traders I would like to share the following real story.
My friends were seeking professional advice from a well known TA.
He was of the opinion that Nifty would go down from 5100 levels after a pullback from 4800 levels because of RSI divergence in the monthly charts.
They wrote 4900,5000,5100 calls.
In spite of all the technical indicators showing long they didn't square of their positions till the month end saying that we will stick on to his instructions.Again they rolled over their positions to the next month and again went short by writing calls.
Markets never corrected as per their opinion.
Markets are designed to deceive people.
How to deceive people ?
By making them to believe in something by making them to form an opinion.Then react exactly opposite to the opinions of the majority.
TA is not a science it is an art - what does this mean - There is only a high probability but there is no guarantee of the predictions based on TA.
Hence stick on to your trading rules but don't stick on to your opinions even based on Technical analysis.
Market makers,TV channels,News Papers,Analysts,Broking houses want us to have a opinion and stick on to that.So that it will be easy for them to move the markets against most of the crowds opinion.
It took so long to understand the real meaning of the golden words - "Trade what you see and not what you think".
"TA is not a science it is an art .
Jagan, I disagree with you on this.
Markets are designed only to give one success, provided you listen to it. It does not know who you are, what you do or where you come from.
Also, Market makers, brokers, analyst etc don't form an opinion for you. They don't make anyone trade on gun point. It is the trader himself who forms an opinion based on what he hears. Also, the concept of majority and minority is just over stated. There's no visible majority and similarly there's no visible minority which the majority target.
Also, how do you intend forming rules without FA OR TA? Opinions are inevitable. Hence, its easy to say that opinions should not be formed. An year like 1987,1995,2000, 2008 will get all these concepts out of any trader's head. That is why, trading is the most well paid profession, and also the most difficult one.
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Stocks to Focus on for next 1-3 weeks are,
Ashok Leyland
Alstom Projects
BGR Energy Systems
Colgate Palmolive
Container Corp
Mundra Port
None of them except Alstom and Mundra has indicated buying pressure. But my guess is that they will sooner or later. Alstom will consolidate more before beginning an up move. Mundra is a high risk trade. 19.9.10
#89
25th December 2010, 11:58 PM
oilman5
Member Join Date: Jun 2006
Posts: 1,329
Thanks: 262
Thanked 1,212 Times in 433 Posts
Re: my last thread
________________________________________
I absolutely agree with you from an individual trader's perspective that
if you are able listen to the markets then one will get success.
My opinion below could be highly debatable but in my several years of observation I held the below opinion.
Markets are designed only to give one success, provided you listen to it.
It does not know who you are, what you do or where you come from.
Most of you would have heard mutual fund advertisements and at the end there will be lightning voice
"Mutual funds investments are subjected to market risks".Have any one thought what those risks are ?
Markets are designed to deceive people.
Some thing like a lier's poker.
In Las Vegas terms - The house always wins.
Like wise in capital markets majority of the people loose their hard earned money for the benefit of a few.
No matter how good a stock - the price is determined by the smart money.
There are several good stocks with less P/E,PEG ratio buts till remaining un touched.
What do you mean by listening to markets ? -- go in the direction of the smart money.
Find out the scripts where accumulation is happening or where distribution is happening.
NEVER SIT IN FRONT THE TRADING TERMINAL.SIT IN FRONT OF A DECISION MAKING SYSTEM.
This is the first basic thumb rule for a trader to take money out of the markets.
How many people can afford to do this ?
Is it possible for every person to spend monthly on Internet/NSE Data charges/SW charges/ and more over their time.
How many people have the capacity in terms Money,Knowledge,Patience,SW background to understand the market dynamics.
That's the reason people come in and go but markets remain.
How many people in our country have advanced get/Amibroker/Metastock or conversant with AFL ?
or atleast aware that there is a sw called Advanced Get/Amibroker.
All the rules are in favour of Big Investors.
Even Automation SW are highly priced to the tune of 1 Lakh/month.
First of all how many people are aware that trading could be automated.
How many of people know that Big investors get news few minutes before news getting published in the TV channels.?
How many people here are aware of Reuters ?
Money lost by a person is not money gained by another person.
Trading is not a Zero Sum Game.
For every click on a computer trading terminal some one is paying the following
Govt + Brokers + Stock Exchange one way or the other.
They are the winners irrespective of people make or loose money or crash or bull run.
Govt being the highest gainer out of Stock markets.
Stocks doesn't have any intrinsic value for themselves like commodities.
There is no real production involved.You have limited stocks.
Supply and demand of the stocks are created artificially.
It is just the opinion or bet on the stocks future prospects.
If you have money Just accumulate/operate a stock at the bottom and dump it on the retailers at the High.
No questions asked.Just make sure that it is not done so visibly like Harshad Metha,Ketan Parekh.
A stock like Satyam can go down to 7 - 8 rs from 650 rs in stock markets but the same cannot happen for a commodity.So who determines this price.It can go to zero as well.
Global Trust Bank.
DSQ.
ASTRAL
.......
.......
The list goes on.
Who brought the price of Satyam to 7 - 8 rs level ? - The market makers.
By precisely knowing the demand and supply of a stock they are able to manipulate well.
One fine morning One reputed TA gives a short call news in CNBC on Tata Steel with a down side target of 480 rs a day or two before expiry.The same day it touched 494 rs.
A smart Fund manager of a reputed Mutual fund purchased certain percentage of TS that day.The script is going up non stop from then.
That evening the news appeared in the same channel.
The day before expiry Maruti crashed like any thing.
On the day of results BOI(11 % earnings up) crashed 11%.
During the previous govt
Most of us should be aware of the play on oil companies like BPCL,IOC,HPCL by the then M.......r.
Why go to that extent.
Most of us would have observed Block deals in NSE.
The companies would buy in lump like 5 lakh shares.
The retail people would buy the shares following jump in volume.
They would dump it pass it on to the retail customers with a minimal margin say a ruppee per share.
So we cannot avoid manipulation by smart money.
Just think of the following situation
1. Remove the so called liquidity providers/Market makers from the exchange.
2. Companies should not be allowed to provide the market makers with crores and crores of shares.
3. Corporates should not be allowed to trade their shares.
4. or Leave market making to a Non profit organisation.
5. Define an intrinsic value for each share.
6. No rumours/News/policies/ during market hours.
7. On upper freeze down freeze days publish the names of the major profit makers.
8. After listing a share with premium if the share price goes down beyond a certain limit.
9. Make sure if the company board of directors/insiders trading.
Or it should be released with a buy back promise from the company.
9. On any single day whether any one has been charged with circular trading ?
How many people have committed suicide in the 2008 market crash ?
Market makers, brokers, analyst on gun point don't force you to trade.
It is the trader himself who forms an opinion based on what he hears.
Why do analysts/Brokers give calls they could themselves buy the shares and get rich ?
It is some thing like this why do you trust a Broker/analyst ?
Bcoz for the lack of infrastructure,knowledge,Money one person seeks advice from an analyst.
Otherwise TV channels and Analysts wont exists.
Again people getting free calls are more vulnerable to cheating.
Why a loosing trader is not able to stop trading ?
It is called gambler's syndrome.He will always be deluded with a false hope that he could recover the loss and make a fortune in short span.
One cannot keep himself out of trading even knowing that he will loose when he goes to broker house.
But your inner urge to recover the loss will create chaos and will make a person ultimately to surrender to some sources.
Broker Houses
1. I know personally broker houses giving calls to generate their daily turnover.
They will make sure that their clients will not make huge profit or loss but survive so as to generate enough brokerage for them.
2.Their HNI calls gets circulated first few days well before in advance than to ordinary clients.
Analysts
1.Some Analysts do have hidden agenda there are many wrong calls given by them purposefully during accumulation/distribution phases.
2.For analysts it is a risk free source of money in the form of consultation or technical calls which is highly being misused now a days by mushrooming TA companies.
TV channels/News Papers
Are being misused by operators/Smart money to distribute/accumulate shares.
Insider trading is happening.This will happen and nothing can be done since Market makers/Brokers/Analysts/Traders - They are all humans with greed.
Leave here.What about recent US Investment banking house crashes ?
The reason behind the fall of banks.
What about the watch dogs and Regulators
Sample Jokes
If you trade with out leverage in forex it is legal.
"Margin trading in derivatives" is allowed for stocks/commodities but the same is not allowed in Forex.
I went to court with my friend for his sub broker fraudulently cheated him by selling a IFCI call@10 paise from his account and sold the same immediately at 8.75 rs when the stock was trading 9 rs.
The Judge asked what do you mean "Options" ?
Finally
Also, how do you intend forming rules without FA OR TA? Opinions are inevitable.Hence, its easy to say that opinions should not be formed.
Fundamentals are required but again are today they are highly and easily manipulated.Not all fundamentally strong companies are trading at their deserving valuations(which is again highly subjective).
Technicals are absolutely required to pick a stock.
Personally I would prefer technicals rather than fundamentals and keep fundamentals as a supporting mechanism for a stock pick.
My point is technicals or fundamentals just don't hold on to your bullish or bearish views.
Just go with the Price action and be with the trend and let the markets decide the view.
Trading rules - Money management rules.
Fibanocci or ATR based targets/Stop loss.
And especially for day trading I think trading with out any bias or opinion would be best.
My point is "It is our hard earned sweet money friends" and it is our responsibility to protect ourselves from the markets.
It is a high risk game and we should play the game accordingly.
My apologies if I hurt ed any one's opinion or sentiments in my above writing.
1. Focus on your thought process - This means focus on your methodology, your system. If your system is good, it will always chase the smart money. If you are able to do this, you will be able to make money. Don't think what they will do, just keep going with the flow.
2. What the market is telling your right now - This means look at the Nifty, Bank Nifty and ask yourself what do you see? Does the Nifty tell you it's going to correct? Don't think it might correct. Let it tell you in person. Once it does, reverse your positions. For eg. As of now if I ask Nifty to short it, I get an answer where Nifty tells me I am a fool. Hope you get my point. It's communication, its logic and its all about being in the present.
Tc
Who Said Life is simple and is not Cruel So is true for the 'Market'. The essence and beauty of Raunak's Teaching is Let life (Market) flow, go with the flow..and the Core message is.."You have a right to perform your prescribed action,but you have no 'control' to the fruits of your action.":-("Karmanye Vadhikaraste Ma Phaleshu Kadachana),...The highest principle to live this complex life (Market) successfully/peacefully Result is the destiny anyway...same is said as "thy (Market's) 'Will' be done..not your 'will' or my 'will'."you just focus on your methodology 'your right of 'action' in the given situation'...rest is INSHA ALLAH... If we focus to much on the results (thniking) there will be stress, we can save our that energy and focus what we simply 'see' our system ..methodology...
"Trade what you see and not what you think".
I'll encourage you guys to discuss things off the forum first. Once you have set rules which work well, then bring it on the forum for other users. Too many views are not good in initial stages of research. Once the research is successful, then put it here for further improvements.
One more thing Apurv, Divergence is among the most over rated technique in Technical trading. I wish markets were so simple. Sadly, most of the traders are not willing to hear this.