Trading Strategies Using Technical Analysis

Is sugar space on the verge of breakout??? Kindly see attached chart of Renuka sugar where breakout has happened and many more forming basing pattern....

Thoughts please?

Bests,
Apurv

Bought IBrealestate Futures @ 182.1

Stop and Reverse trade.

Tc

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.

Tc

Kooldude1411,

I see you have immense discipline to read every post in this thread.

I would encourage you to post also. That way, I can get to learn from you too.

Tc

Hi Raunak bhai

There is nothing that you can learn from me. I am a regular & silent reader of these thread. I am trying to learn as much as possible from you. :thumb:

I was having few questions but I noticed that you have blocked PMs.

Thank you for these great thread.

PM is now enabled.

Tc

Hi Raunak,

How do you analyse today's nifty move?
Nifty PE has crossed 24 after today's move.

I remember 2008 peak.
last run from 5700 to 6300 run was achieved in ~15-20days.
Will short covering repeat same history?

Pls give your technical & fundamental views.

Rahul,

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.

Tc

Tc

Raunak,

Is it a good time to buy puts of Bharti or wait for 1-2 days to understand what's there in the mind of the FIIs for this stock before shorting?

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.

Tc