TA indicators don't agree with each other

[srisara]

Dear SwingTrader,

Can you tell me which Software you used to produce the above Chart. I am badly in need of a good software to go ahead.
I am a junior Trader and still learning how to analysie charts. Your writeup has helped to learn some more new things.

waiting for your reply...
Thanks Again...

Satya

 

[swingtrader]

Thanks everyone for the kind words. Ivan, thanks for your input.

I will post the second part shortly - stop loss & profit taking exits - for the simple trading system.

--SwingTrader

 

[swingtrader]

Dear SwingTrader,

Can you tell me which Software you used to produce the above Chart. I am badly in need of a good software to go ahead.
I am a junior Trader and still learning how to analysie charts. Your writeup has helped to learn some more new things.

waiting for your reply...
Thanks Again...

Satya

Satya,

I used my own web based software that I programmed to build the chart, it is still incomplete. I will make it available freely on the web once it is ready.

--SwingTrader

 

[swingtrader]

Can you tell us which two best indicators to watch?
So that I can study that more.

It really doesn't matter. For the simple trend trading system we are discussing here you need one indicator (or any method) to objectively identify trends. It could be moving averages, MACD, ADX etc or if you are experienced enough then just your discretion will do. Next you need one indicator to identify overbought/oversold conditions, now this can be one of these - RSI, Stochastics, StochRSI etc. Or it could even be just a price pullback to a moving average.

When I first started trading about 4 yrs ago I did detailed study of the above mentioned indicators and finally decided to use EMA & Stochastics. The only reason why I selected the above was because I felt very comfortable using them. It really doesn't matter much what you end up using, the important point is you should REALLY know the INs & OUTs of the indicators you use.

--SwingTrader

 

[swingtrader]

About Stop Loss Exits for the above system

When you enter trades there will always be failed trades, that is part of trading. The main thing to ensure here is that you don't lose too much and have more than enough capital for taking the next trade that fits your criteria.

In the attached Ranbaxy chart I have pointed out one additional trade that failed when the uptrend finally ended. Stop loss order is required on each trade to ensure you don't lose too much on failed trades. This decision has to be made before you enter the trade and the stop loss order should be put in as soon as you enter a trade.

There are many types of stop loss exits but I won't go into them here (I will go into detail later in a different thread). The idea here is to keep it simple.

Fixed Amount based Stop Loss: You can put a stop order based on the maximum amount you are prepared to lose on a single trade. It is suggested that this amount shouldn't generally be more than 2% of your total account equity. This type of stop should probably be avoided because there is no rationale behind this type of exit.

Recent Short Term Support: For the system we are discussing it makes sense to place a stop order few ticks below the recent swing low/high. This is because we expect the price to move in our favour after we have entered the trade, so if it doesn't and it moves past the recent swing low/high then the reason to enter the trade has been defeated so it is best to get out of the trade. I have pointed out such stops in the attached chart with a small orange colored bars.

The above suggested stop is very simplistic but makes sense for the type of trade we are entering. There are many other good stop loss strategies based on ATR (Avg True Range) multiples & MAE (Maximum Adverse Excursion) but the discussion would have got really complex. I will post these with examples in another thread.

Always take stop losses, there will be many good trades available to take later. The main thing you have to ensure is that you are available (with enough money) to take the trades.

--SwingTrader

 

[novice1]

It really doesn't matter. For the simple trend trading system we are discussing here you need one indicator (or any method) to objectively identify trends. It could be moving averages, MACD, ADX etc or if you are experienced enough then just your discretion will do. Next you need one indicator to identify overbought/oversold conditions, now this can be one of these - RSI, Stochastics, StochRSI etc. Or it could even be just a price pullback to a moving average.
--SwingTrader

Hi SwingTrader,

Very informative and educative one.

I am just learning. I found that www.buzzingstocks.com gives online charts for the stocks and I am not sure how to interpret them. They have MACD and ADX in the same page. Please advise how to use these charts and yahoo has got RSI and Stochastics. Using both of these resources how do you think one can benefit.

A detailed explanation of how to read the charts would help a newbie like me.

Thanks in advance

Sekhar S

 

[novice1]

The moing averages/MACD identify the trend (rising MA identify uptrends and vice-versa) and the RSI identifies oversold(buying opportunity)/oversold(selling opportunity).

Dear Sir/Ji

I am a newbie (but my posts are more than 5) and I am not able to view the attachments still. Do you have the number of days restriction ?

Sorry to post this in this forum but I was eager to look at the Ranbaxy chart and hence thought would ask this question here itself

Regards

Sekhar S

 

[TradingSystems]

Dear Sir/Ji

I am a newbie (but my posts are more than 5) and I am not able to view the attachments still. Do you have the number of days restriction ?

Sorry to post this in this forum but I was eager to look at the Ranbaxy chart and hence thought would ask this question here itself

Regards

Sekhar S

Dear Shekar,

If the moderator is satisfied with the quality of your posts he/she will remove the restriction.

So hold on!

 

[nihar15]

WOW!!! This just blows me off!!! I was of the impression that more the merrier. So that means one should not be bogged down by too many indicators but study only a couple in greater depth. How about looking at others to build confidence?
Your Stop Loss discussion was extremely helpful. Infact that was going to be my next question. I had heard about the 2.5% stop loss thing but was not very convinced with it.

Is there an indicator which correlates stock movement and market trend?

Thank you so much to swingtrader and all others for making this thread a wonderfully educative.

Thank you
Nihar

 

[swingtrader]

Is there an indicator which correlates stock movement and market trend?

Relative Strength (not to be confused with RSI) shows the relative strength of a stock vs another stock or the market itself. But I am not aware of any websites that provide charts with this indicator.

--SwingTrader