Trading Strategies Using Technical Analysis

Hi Raunak,

Went thru all the posts on the index page. Great stuff:thumb:

One thing if you may please expand on. I think you mentioned you would do so some time soon, so whenever you can please...and that is Position Sizing wrt to adds and cuts.

Somehow I can understand cutting losing positions and not averaging down ( sometimes even that seems counter intuitive) but adds at higher prices seems great in theory but seems difficult in practice cos if prices drop that could seriously erode a formerly profitable situation.

Kindly enlighten us on the most elegant way ( or general rule of thumb for adds) I realize this must work as most seniors advocate this , specially Smart trade (ST) in many of his posts mentions the power of adds to be a technique to go from small time to making larger gains.But somehow I am unable to wrap my head around it ( guess im hoping to get that A-ha moment

Well thanks again for all the insights

@Dan

Its ST (SmartTrade) and not SM (stocks.murtaza)

:thumb:

Setting Stop Losses

way to go about it.

Again there are many ways to do this. But, here I will focus on how it is done through ATR (Average True Range). Now, before getting into the depth, lets first recollect what ATR is. It is is the difference between the high and low price on any given day. It reveals information about how volatile a stock is. Large ranges indicate high volatility and small ranges indicate low volatility. Essentially this means, if a stock A of Rs 100 has ATR (14) of 10 Rs and another stock B has ATR(14) of 5 Rs, then there is high probability that stock A can fluctuate 100 + 10 or 100 - 10 and stock B can fluctuate 100 + 5 or 100 - 5. Hence, stop losses for both cannot be the same as their fluctuation range is different statistically. I hope this is clear up till now.

Moving forward, let's actually see how it is done. There are many ways to implement ATR in stops. However, here I will explain it in the most simplest form. Let us assume we are using a Technical System where we Buy when prices crosses 20 day MA and Sell when the price crosses below 20 DMA. Now the initial stop loss considered by most traders in these systems is the 20 DMA itself. For Eg. If Nifty is at 5000 and it has crossed its 20 DMA (4950) today and given a buy, then many traders will keep 20 DMA (4950) as the stop loss. Now, keeping this stop loss is wrong as it does not take into account the inherent volatility which is being reflected currently. To make the stop loss more meaningful, we can subtract the 20 DMA with the 10 day ATR to get a more appropriate stop loss. This way, we would give ourselves, reasonable margin of not getting whipsawed again and again. Below I have attached a figure to understand this better.

Tc

Hi buddy

I know Raunak will answer your question.

May I aske you what you trade : Option, Futures, Shares or maybe even Swaps.

You mentioned ST ( Sorry SM got me on that one and his post:lol:.)

Did you ever try to make a real trade with the information from ST or is your statement build on a paper trade.

If not, could you pleas show your last try in reality ( means real past numbers and strikes you tried to do such a try and we then could discuss, where the mistakes maybe was. You may also could show a chart, where exactly you implemented your trade , so we can take a look at the past and test your idea )

Thanks for your cooperation

DanPickUp

Hi Raunak,

You have mentioned ATR(14) what does 14stands for?

I have also not understood correctly the data given by you.
e.g. If cross over happens today & we are taking position today then.... for finding ATR.... do we need to take range of that day?
let us go by your example. cross over is at 4950 & we have taken position at 5000. Say range on crossover day is 100 (say low of 4900 to high of5000)
This means stoploss is 4950-100= 4850
Am I understanding it correctly?

Hi Raunak,

Went thru all the posts on the index page. Great stuff:thumb:

One thing if you may please expand on. I think you mentioned you would do so some time soon, so whenever you can please...and that is Position Sizing wrt to adds and cuts.

Somehow I can understand cutting losing positions and not averaging down ( sometimes even that seems counter intuitive) but adds at higher prices seems great in theory but seems difficult in practice cos if prices drop that could seriously erode a formerly profitable situation.

Kindly enlighten us on the most elegant way ( or general rule of thumb for adds) I realize this must work as most seniors advocate this , specially Smart trade (ST) in many of his posts mentions the power of adds to be a technique to go from small time to making larger gains.But somehow I am unable to wrap my head around it ( guess im hoping to get that A-ha moment

Well thanks again for all the insights

Hi Dan,

I trade in futures and not paper trading :lol:

I didnt take any trade based on anything ST said, what I wrote was that Raunak , ST and others mention adding to winning trades. I just recall reading on various threads and post from ST how adds should be taken to be more profitable and not some specific instant or call given by anyone.

The fact is I follow the opposite by squaring of half my position when in some profit and leave the rest for bigger move if i am anticipating one. This becomes contrary to adding winning positions, but it is in line with taking profits of the table when ever possible. Quite different techniques, hence wanted Raunak to give his insights on the same.

Dear (Brother,Apurvji,Mr. Apurv..... please accept one of these words,Sir not added as I dont like it and please dont cut Dear, which you like and think befiting you also please consider it is coming from a lowly educated man of 52 years of age)
Such nice words. Please give the address of Yoga web site also. So many things to learn and so little time. Emotions also required,without it one is nothing but machine.
Thank you,other members and traderji.com from my heart.
My best regards to you and all the members.
Partha Roy

Parthaji.... I am not follower of yoga..however, i m practicer of meditation but the website i was talking about has information related to both... kindly visit http://anmolmehta.com/ and http://www.eocinstitute.org/brainwave_s/46.htm

Bests,
Apurv