IDEA NSE CASH STOCK TECHNICAL ANALYSIS FOR EDUCATON PURPOSE
Rules for profitable day and swing trading must follow
1. Trade in the direction of the trend. Buy at or near rising 20 period MA, sell at or near downward sloping 20 period MA.This will eliminate 70-80% of your losing trades.
2. Always cut your losses and let your profits run. Take small losses and large wins.
3. Trail stop loss. Don't let a profitable trade turn to a looser.
4. Trade as per plan. Don't trade unless you know where you should get in and where you should get out.
5. Always use protective stop to limit your losses.
6. Learn to be patient. Don't trade impulsively. Wait for the right opportunities and setup.
7. If the reason you entered the trade is no longer valid, get out.
8. Do your own homework. Keep ready long/short levels to enter trade. Make use of system to inform you when the target entry/exit price is there for the taking.
9. Be open to research.
10. Give time to your sytem to work. If your method of trading is working, don't keep changing it.
11. Remember the market is never too high or low to buy or sell.
12. Be disciplined. A trader has periods of profit or losses. Don't let the losses get to you psychologically.
13. No indicator that is a 100% right all the time. Use common sense along with your method of trading. If your indicators are telling you one thing but the market is obviously doing something else, listen to the market.
14. Remember the golden rule - The market is always right.
15. Never risk all in a trade/trades. Max. loss on open positions should never be more than 5% of capital. Close all loosing positions immediately if this loss level is reached.
16. Don't overstrech your capital. Trade markets you are sufficiently capitalized for.
17. Never trade with money you cannot afford to lose.
18. If you hit your target profit, take it, or atleast protect with trailing stop loss.
19. Don't revenge trade and try to make up for all your losses in one trade.
20. Don't blindly follow someone else's recommendations or tips.
21. If there are few consecutive days of losses or there are a row of loosing tades, take a break for a few days or weeks. Trade only when you are in the right psychological frame of mind.
22. Don't trade to many markets. It's better to be an expert in one market than a novice in many.
23. If there is a marging call, it means something went wrong with your trade, and exit the trade.
24. Don't take losses personally.
25. Most important, have a life besides trading. If you are not happy with life in general, you will not be in the right frame of mind to be trading.
2. Always cut your losses and let your profits run. Take small losses and large wins.
3. Trail stop loss. Don't let a profitable trade turn to a looser.
4. Trade as per plan. Don't trade unless you know where you should get in and where you should get out.
5. Always use protective stop to limit your losses.
6. Learn to be patient. Don't trade impulsively. Wait for the right opportunities and setup.
7. If the reason you entered the trade is no longer valid, get out.
8. Do your own homework. Keep ready long/short levels to enter trade. Make use of system to inform you when the target entry/exit price is there for the taking.
9. Be open to research.
10. Give time to your sytem to work. If your method of trading is working, don't keep changing it.
11. Remember the market is never too high or low to buy or sell.
12. Be disciplined. A trader has periods of profit or losses. Don't let the losses get to you psychologically.
13. No indicator that is a 100% right all the time. Use common sense along with your method of trading. If your indicators are telling you one thing but the market is obviously doing something else, listen to the market.
14. Remember the golden rule - The market is always right.
15. Never risk all in a trade/trades. Max. loss on open positions should never be more than 5% of capital. Close all loosing positions immediately if this loss level is reached.
16. Don't overstrech your capital. Trade markets you are sufficiently capitalized for.
17. Never trade with money you cannot afford to lose.
18. If you hit your target profit, take it, or atleast protect with trailing stop loss.
19. Don't revenge trade and try to make up for all your losses in one trade.
20. Don't blindly follow someone else's recommendations or tips.
21. If there are few consecutive days of losses or there are a row of loosing tades, take a break for a few days or weeks. Trade only when you are in the right psychological frame of mind.
22. Don't trade to many markets. It's better to be an expert in one market than a novice in many.
23. If there is a marging call, it means something went wrong with your trade, and exit the trade.
24. Don't take losses personally.
25. Most important, have a life besides trading. If you are not happy with life in general, you will not be in the right frame of mind to be trading.
STOPLOSS BIG Mystery and its three golden keys
Mystery of
Stoploss
One of the great mysteries of trading is the dreadful stop.
*what kind of stops should I use?
The philosophy outlined here regarding stops is very different than most others. when you learn how to use stoploss wisely, you discover that stops don’t have to hurt.
Stoploss orders are the medicine of trading.
When your trade is sick, stops are there to heal it.
The big question is whether you like to take the medicine before you get sick
as a preventive measure or you wait till you really get sick,and then use the medicine. Natural choice seems to the part two.
There a few ways of using stops:
1. No Stop specialist
What do you call a trader that doesn’t use stops?
An investor.
When a trader lets a trade go against him, he gets married to the stock, starts looking at fundamentals then becomes an investor.
I have seen people, especially six years ago, buy a stock at 100 and still hold it today, even though it’s a penny stock today.
2. Random stop or Gambling stop
These happen when a trader knows how much money he wants to risk on a stock, his bet on the stock, and that is his stop.
Buy ABC stock with a 500 stop, because that is all they can allocate for this trade. These PEOPLE think trading as gambling, they put their money on the table and forget about it.
The problem with this method is that it is not a method, there is no reasoning behind the placement of the stop.
3. Adding in stop
Some traders keep adding in money into their position as it goes against them. This is also called Dollar Cost Averaging.
When people begin trading they think that adding money to a position lowers your cost on it and, therefore, allows you to buy more shares at a lower price. Any Investor, who liked ABC at 60, surely will like it so much more at 50, right?
The reasoning behind this method is very dangerous.
You buy 1000 shares at 60, buy another 1000 at 59, buy another 1000 at 58. Now, your average cost is 59, not 60 as you originally wanted. The stock only has to jump up a single for you to break even, not two.
BIG PROBLEM
Problem comes when the stock keeps FALLING and you are now stuck with 3000 shares on the wrong side of a breakout.
People using this method wipe out their accounts. Traders will become investors. If not on the first 20 trades, then on the 21st that would wipe them out.
It only takes one large loss to devastate an account and devastate the trader.
Stops are like medicine for your trading.
The longer you take before you swallow the bitter pill, the worse your condition is going to be.
Preventive medicine works so much better, it prevents small weaknesses from becoming serious diseases.
Trade this way if you agree it is better
Follow this method of stops =it is very simple,
kNOW YOUR ENTRY REASON,
WRITE IT DOWN,
Always exit a trade
when the reason for your entry no longer exists.
Take Notice We said Exit, not stop.
We do not take stops, we exit.
At times it’s a negative exit, but it is still an exit, not a stop.
A stop loss stops your loss, we are not interested in the trade becoming a loss.
follows
ENTRY
If you have done your analysis right, you should be able to pinpoint an entry.
An entry is a trigger
that starts a trend,
starts a wave in a trend,
starts a bounce,
starts a fade or a break out.
--------------------------------------------------------------------------------------------------
BE accurate with your entry, AND your exit should be very simple.
If you entered a trend, you exit when you know that the reason for your entry no longer exists, when the stock refuses to start your trend.
If you entered a breakout, you know the reason for your entry no longer exists when the stock returns back into your consolidation.
So how much is that?
Your stop, or negative exit, (if you did your home work and pinpointed your entry,) is Noise + Spread.
Noise is the normal fluctuation of the stock and spread is the difference between bid and ask.
Basically, if you add them together, it is the amount that the stock can pull back before you know that your entry is wrong.
For example, in day trading, most of our negative exits are less than 1 RUPEE Most of the stocks that we trade have less than A COUPLE OF RUPEES spread and noise. In Swing trading, most of our negative exits are less than 10 TO 20 RUPEES(TEN TIMES plus THAT OF DAYTRADING) for the same reason.
Some people day trade with a RUPEE stop or even two or three rupees. If you do your home work and can pinpoint your entry, how many 1 rupee negative exits can you take before you equal one point or two points?
Imagine having 10-20 attempts for the price of one.
---------------------------------------
Three keys
There are three keys to success here:
1. Pinpoint your entry - You need to know exactly where to enter.
2. Know exactly where the reason for your entry no longer exists - Where on the chart does price have to go to invalidate your entry?
3. Re-entry - If the stock comes back and your setup is still valid, make sure that you re-enter.
Most of us pay less than 100 in commissions, which is a lot less than a devastating stop loss of multiple points.
If you have to pay 500 plus rupees for a trade that didn’t work, it is a business expense, not a stop loss. It protects you financially and psychologically. It allows you to re-enter the trade without any damages.
If you exit with an expense of 1000, it will do a lot less damage than several thousands or your whole account.
How would you feel if you spent a few hundred bucks on a trade vs. lost several thousands on a gamble?
Traders need to get educated how to pinpoint their entries and know exactly when the trade is working or not, in order to keep stops down to business expenses, instead of serious losses.
The secret to longevity and prosperity in trading is
knowing why you are entering,
pinpointing your entries and
preservation of your capital.
Preservation of capital is always more important than capital appreciation.
Hope this helps your trading in some way.
Dedicated to maximizing your profits,
One of the great mysteries of trading is the dreadful stop.
*what kind of stops should I use?
The philosophy outlined here regarding stops is very different than most others. when you learn how to use stoploss wisely, you discover that stops don’t have to hurt.
Stoploss orders are the medicine of trading.
When your trade is sick, stops are there to heal it.
The big question is whether you like to take the medicine before you get sick
as a preventive measure or you wait till you really get sick,and then use the medicine. Natural choice seems to the part two.
There a few ways of using stops:
1. No Stop specialist
What do you call a trader that doesn’t use stops?
An investor.
When a trader lets a trade go against him, he gets married to the stock, starts looking at fundamentals then becomes an investor.
I have seen people, especially six years ago, buy a stock at 100 and still hold it today, even though it’s a penny stock today.
2. Random stop or Gambling stop
These happen when a trader knows how much money he wants to risk on a stock, his bet on the stock, and that is his stop.
Buy ABC stock with a 500 stop, because that is all they can allocate for this trade. These PEOPLE think trading as gambling, they put their money on the table and forget about it.
The problem with this method is that it is not a method, there is no reasoning behind the placement of the stop.
3. Adding in stop
Some traders keep adding in money into their position as it goes against them. This is also called Dollar Cost Averaging.
When people begin trading they think that adding money to a position lowers your cost on it and, therefore, allows you to buy more shares at a lower price. Any Investor, who liked ABC at 60, surely will like it so much more at 50, right?
The reasoning behind this method is very dangerous.
You buy 1000 shares at 60, buy another 1000 at 59, buy another 1000 at 58. Now, your average cost is 59, not 60 as you originally wanted. The stock only has to jump up a single for you to break even, not two.
BIG PROBLEM
Problem comes when the stock keeps FALLING and you are now stuck with 3000 shares on the wrong side of a breakout.
People using this method wipe out their accounts. Traders will become investors. If not on the first 20 trades, then on the 21st that would wipe them out.
It only takes one large loss to devastate an account and devastate the trader.
Stops are like medicine for your trading.
The longer you take before you swallow the bitter pill, the worse your condition is going to be.
Preventive medicine works so much better, it prevents small weaknesses from becoming serious diseases.
Trade this way if you agree it is better
Follow this method of stops =it is very simple,
kNOW YOUR ENTRY REASON,
WRITE IT DOWN,
Always exit a trade
when the reason for your entry no longer exists.
Take Notice We said Exit, not stop.
We do not take stops, we exit.
At times it’s a negative exit, but it is still an exit, not a stop.
A stop loss stops your loss, we are not interested in the trade becoming a loss.
follows
ENTRY
If you have done your analysis right, you should be able to pinpoint an entry.
An entry is a trigger
that starts a trend,
starts a wave in a trend,
starts a bounce,
starts a fade or a break out.
--------------------------------------------------------------------------------------------------
BE accurate with your entry, AND your exit should be very simple.
If you entered a trend, you exit when you know that the reason for your entry no longer exists, when the stock refuses to start your trend.
If you entered a breakout, you know the reason for your entry no longer exists when the stock returns back into your consolidation.
So how much is that?
Your stop, or negative exit, (if you did your home work and pinpointed your entry,) is Noise + Spread.
Noise is the normal fluctuation of the stock and spread is the difference between bid and ask.
Basically, if you add them together, it is the amount that the stock can pull back before you know that your entry is wrong.
For example, in day trading, most of our negative exits are less than 1 RUPEE Most of the stocks that we trade have less than A COUPLE OF RUPEES spread and noise. In Swing trading, most of our negative exits are less than 10 TO 20 RUPEES(TEN TIMES plus THAT OF DAYTRADING) for the same reason.
Some people day trade with a RUPEE stop or even two or three rupees. If you do your home work and can pinpoint your entry, how many 1 rupee negative exits can you take before you equal one point or two points?
Imagine having 10-20 attempts for the price of one.
---------------------------------------
Three keys
There are three keys to success here:
1. Pinpoint your entry - You need to know exactly where to enter.
2. Know exactly where the reason for your entry no longer exists - Where on the chart does price have to go to invalidate your entry?
3. Re-entry - If the stock comes back and your setup is still valid, make sure that you re-enter.
Most of us pay less than 100 in commissions, which is a lot less than a devastating stop loss of multiple points.
If you have to pay 500 plus rupees for a trade that didn’t work, it is a business expense, not a stop loss. It protects you financially and psychologically. It allows you to re-enter the trade without any damages.
If you exit with an expense of 1000, it will do a lot less damage than several thousands or your whole account.
How would you feel if you spent a few hundred bucks on a trade vs. lost several thousands on a gamble?
Traders need to get educated how to pinpoint their entries and know exactly when the trade is working or not, in order to keep stops down to business expenses, instead of serious losses.
The secret to longevity and prosperity in trading is
knowing why you are entering,
pinpointing your entries and
preservation of your capital.
Preservation of capital is always more important than capital appreciation.
Hope this helps your trading in some way.
Dedicated to maximizing your profits,
Type of analysis in stock market - Fundamental analysis, technical analysis
Stock analysis is a technique to measure the pulse of the stock and determine the right price to enter and exit stock with handsome return. There are two major yet very contrasting approach to do same. They are :
- Fundamental analysis :- Fundamental analysis is a study base on company financial past results including sales, profit, operation, general economic forecast, expected demand, profit margin, sales forecast, debs, competition, management and many other parameters. Based on these studies, analyst tries to find right value (intrinsic value) of the stock. A buy or investment decision is taken and when stock is trading below right value and a sell decision is taken when the stock is much above it's far value.
- Technical analysis :- Technical analysis on the other hand do not believe in the finding intrinsic value of the stock. They rather study equity's price and volume movement to predict the future direction of the stock price. Technical analysis in a very simple definition is, study of chars to determine patterns and use them to trade when such patterns has very high probability of a stock movement in a certain direction.
Most five reasons to keep things simple when you trade in share market
Keep things simple will put you on the road to profitable trading. By maintaining simplicity you can refine your trading. You will improve your odds of success if you stick to the following rules :
- Your methods will be clear :- When your friends ask you how you pick stocks, you should be able to tell then in just a few sentences, without any convoluted statements like, "I buy it when it looks good."
- You will have fewer expenses :- Instead of wasting money to buy overpriced trading systems, software, or other people's opinions, you will have more money to trade. You should be able to get almost all information you need for free.
- You will have fewer decisions to make :- Instead of being indifferent about twenty or thirty stocks that someone else suggested to you, you will realize which stocks are ready to be bought and which ones are not.
- It's less work :- This one should be self -explanatory in world where time is money.
- You have less to learn :- This on goes along with number four. Less to learn means less time wasted and more opportunity to make money. It also means there's less to forget and fewer mistakes to make - always a plus.
Most important stock market trading rules
- Learn to function in unchartered, less predictive and uncertain environment.
- Think without any bias of your trading position.
- Keep your emotions under check and maintain objectivity.
- Get rid of hop and fear.
- Learn from past mistakes and Success, analyze your moves and respond quickly at critical events.
- Trading requires your responsiveness is in high alert.
- In trading you are competing with more wise and resourceful pool of peoples. Always trade along with them not against them.
- Know your personality before choosing your type of trading style.
- If you don't change your attitude towards market, you will get the same results what you are getting now.
- Study well about the markets, don't stop studying else you will lag behind others.
- Shy away from others opinions about your position or market movement.
- Never exit or enter the market just because you have lost patience or anxious from waiting.
- Avoid over trading.
- Smart money is always behind the trend.
- Every loss is markets new lesson to improve your knowledge of market action.
- The most difficult task is not entry, just sitting tight in an open position.
- Price and Price action is the only factor that reflects the market sentiment.
- Don't allow winning trade to turn into a loser.
- The real difference between winners and losers is discipline exercised in avoiding mistakes.
- Trade only when you have a good reason to trade.
- Made a loss? Forget it quick. Made a profit, forget it quicker. Don't let ego and greed Fog clear thinking and paralyze you.
- There is no 100% perfect trade entry or exit method.
- Market will not move the way we expect, we have to join hands with the way market moves.
- Stay calm and think clearly when trading big positions.
- don't try to beat the market, it will always humble you.
- Trade within your limits. Slow and steady goes a long way.
- Capital preservation and capital appreciation is like two sides of a coin.
- Work hard and smart. It's the only way solution available for your trading success.
- Few good trades are better than many loosing trades.
- Trade when you find opportunities. Don't be greedy!
- Do not add a losing position.
- Do not waste your energy on trying to pick tops or bottoms.
- Risk Reward makes your account healthy irrespective how good your trade entries and exits.
- If everybody is bullish, be nervous!
- There is only on side to the market that is right side neither bull side nor bear side.
- FIIS, BANKS, Big Financial Houses and Mutual funds makes money capitalizing the fact that Novice retail traders will continue in the future to make the mistakes that they have made in the past.
- If a bull market takes 5 days to go to a level, a bear market only takes a day.
- The market's reaction to new information is vital than the piece of news itself.
- don't diversify too much, few is enough to become successful trader.
- Highs and lows are turning points of any market. Keenly watch that level.
- Price is everything. Indicators are derivatives of price. So follow price for opportunities to trade, not the indicators.
- "If you get in on XYZ tip; get out on XYZ tip. If you are riding another person's idea, ride it all the way.
- The market is an expensive place to find out who you are.
- Prognosis doesn't work in human behavior operated market. Always be ready to react the situation.
- When the stock moves against your open position, don't pray - just close the position.
- Always trade with the market flow and smart money.
- Constantly evaluate your open positions.
- Volume and open interest is equivalent to a technician as price.
- Prices are real for "Now", it doesn't Reflect real value of the concerned stock.
- If the market breaks Monthly or weekly high it's a buy. If the market breaks Monthly or weekly low it's a sell.
- Trading Break. A trading break may give you a fresh look in your thought process and will reduce your mistakes.
- The trading rules which are working for you have to be followed religiously.
- Don't add a position in a stock which had run up more in the recent times.
- Cut losses small let run your profits big. Many traders finding this simple task toughest to do in real time.
Different between day trading, swing trading and position trading
DAY TRADING OR INTRADAY TRADING
Also known as 'Intraday', positions are usually entered & exited within the same trading day. Obviously scalping fits into this category. Traders in general are interested in quicker, smaller amounts and making multiple trades per day.
Advantages:
Smaller take profit target = Smaller risk per trade.Because of the amount of trades being placed, compounding has a greater effect on your overall profits.
The Brokerage required for trading is very less.
No delivery charges.
With little money you can trade using the intraday margin given by the broking house.
You can make money faster.
Allows you to always be actively participating in the market
Because most positions are closed out at the end of the day, able to take advantage of interest earned in their account.
Risk control - positions are closed out overnight so unexpected market changes will not affect your bottom line.
Disadvantages:
If you don‘t have experience or Guidance, You can lose money faster.Time consuming - very difficult to trade properly if you have a full-time job.
Fast pace & necessary concentration can make day trading very stressful.
Discipline, proper money management, risk/reward and a profitable system are a lot more
important when day trading. Even a small mistake can result in a huge loss.
SWING TRADING
Swing trading is typically a short to intermediate term trend following system lasting anywhere from 1 to 30 days. Traders who swing trade typically look for trend reversals & retracements for their entry/exit points.
Advantages:
Manageable take profit and stop losses.Less time involved in actively trading - it is not necessary to ‗babysit‘ your trades.
Can be worked around a regular job - a couple of hours per day should suffice.
Less stressful than intraday trading.
Disadvantages:
Need to pay full amount to purchase the stocks.Susceptible to market disasters.
Can be difficult to learn and become profitable.
While it requires less time than day-trading, preparation and analyzing the markets is still necessary and can be time consuming. Tending your positions daily is a must!
Some traders have a tendency to develop emotional attachments to a trade.
Discipline and keeping emotions in check are very important. It is not uncommon to exit on a retrace or trend change only to have the market immediately change back and head in the original direction.
POSITIONAL TRADING
Position trading, also known as 'trend trading', can best be described as a 'buy and hold' method. Positions can be open for a few days, a few weeks, a few months or longer. They are also held during periods of minor retracement with the expectation that they will eventually continue trending in the desired direction.
Advantages:
The most forgiving type of trading - small mistakes are more easily absorbed in market movement and the size of your eventual profit.The easiest to learn. It is estimated that up to 25% of position traders learn to become profitable.
Easier to become successful with smaller startup capital.
Much easier to predict the market as in general you will be following the overall trend.
In general position trading is profitable.
Less time consuming than day trading.
Disadvantages:
Compounding has a lot less effect on profit than both intraday and swing trading.Because positions can be highly leveraged and trades remain open for extended periods of time, unable to reap consistent benefits of interest.
There is inherent risk in keeping positions open over night. It is quite possible for drastic changes to occur in the market while you sleep.
Money can be tied up for an extended period of time. This can prevent entry into new positions as they arise.
Because of the length of time involved in position trading, traders can experience significant drawdown with the expectation that it will turn around and start trending back in the desired direction. Psychologically this can have a very negative effect.
