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Shorting August 8, 2006

Posted by श्रेया in Queries.
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When we talk about an uptrend we buy on small corrections. but in a downtrend i did not understand when we say every rally is a shorting opporunity. can u explain the process of shorting.

Another question is we see a uptrend on the weekly chart and we enter. now we see a minor correction coming in and we think of buying at declines. But what if that particular downtrend itself ends in a lower pivot low than the previous one. What should our trading stratergy be. we will ofcourse have a S/L in place but then it could again go up.

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TRADING with TRENDS,PIVOTS and SUPP/RES August 8, 2006

Posted by श्रेया in Tutorials.
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BUYING DECLINES &SHORTING RALLIES :
 
Let’s make this as simple as we can…….We know what an uptrend is,a series of higher pivot highs and lows.Vice versa in a dntrend.Now,for some rules……..we only BUY in an uptrend.So long the uptrend is held,we do NOT think of shorting.Yes,one could always do a sniper attack on an intraday basis or at max,on an overnight basis.That is one’s decision to make.
 
The most often repeated line “The trend is your Friend”,means we never cross the trend.The trend is UP,therefore we buy declines.When the trend is DOWN,we short rallies.If you can’t short for whatever reason,then a downtrend is reason to stay out till we get a change in trend to the Upside.
 
Therefore,it is very important to be able to detect the change in trends in the first place.Therefore,our minds must work like this…..
 
->All the analysts on TV,magazines are saying that the markets are way too over heated,overvalued,over…….etc,etc.Is this the time to buy some puts or short the NIFTY FUTS?
 
==Look at the charts.Take the weekly charts.Why,the weekly?Because we are looking at intermediate to long term.Are we making higher pivot highs and lows?If the answer is YES,then we are in an UPTREND.And in an UPTREND,we think “BUY DECLINES”.That’s it!!We let people play God ,but we stick to our plan.
 
==If the answer is NO,the previous pivot low just got cracked to the downside,we are thinking of getting out of our longs in that particular stock or index.Now we are thinking, “SHORT RALLIES”
 
In a downtrend,every rally is a shorting opportunity.In an Uptrend,every decline is a buying opportunity.
 
The market changes from Uptrends to Downtrends,again and again……..we are not here to predict tops and bottoms.We are not here to anticipate anything.We are here to follow the trend.And as uptrends change to the down,we change from BUYING DECLINES to SHORTING RALLIES.
 
Forgive me for repeating this many times…….but in trading,basics is everything and the rest just icing on the cake.The rest of what we will learn in future increase our odds…….but these basics are the Gospel Truth of Trading.

Trading in the markets? August 8, 2006

Posted by श्रेया in Tutorials.
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Okay,so far we ,as beginners in the market interested in trading trends,…we have taken that first step.So far,we know nothing much.We do not know of any complicated indicator,or any stylish chart pattern.We have no idea of Elliot’s,or Gann,or Fibonacci.We know only that :
 
=The market moves in trends.We have an uptrend,downtrend and sideways trend.
 
=That there are different categories to Trends.We call it Major(when we are talking long term and of the monthly charts),Intermediate(off the weekly),and near term or short term(off the daily).
 
=We know that a series of higher highs and lows is termed a rally.That a series of lower lows and highs is termed a decline,that a series of higher pivot lows and highs is called an Uptrend,and a series of lower pivot highs is called a downtrend.
 
=And about Supports,Resistances and Trendlines.
Now,before we go ahead with Gaps,and Chart patterns,etc………let us take a breather.We are not doing this to learn something academically.We are not learning this so that we can regurgitate this knowledge to our neighbours and family,and feel good about ourselves.We are not learning this so that we can go to CNBC,wear a suit and a boot to match, and mouth off some technical jargon so that we can make our money selling some newsletter.
 
We learn this so that we can directly use this knowledge to make profits off the market. So everything has to be applied and practical,and if it can’t,and is of no use to profitting in the markets,then we have no use for it.
 
And therefore the question is :With only this much of knowledge,can we apply this to Trading in the markets?
 
The answer is YES……….we’ll get into the practical aspects of Trends,Supports and Resistances tomorrow.

SUPPORT AND RESISTANCE 2 August 8, 2006

Posted by श्रेया in Tutorials.
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We had discussed regarding trendlines in the beginning.Basically same principles applied here,the only difference being these are sloping lines as opposed to the horizontal lines discussed yesterday,but same principles.
 
At that time we had discussed about Uptrendlines and Downtrendlines.The Uptrendline acts as Support each time prices decline and come towards it.So too the downtrendlines act as resistance as prices rally to the trendlines and fall from it.Example in the attachment below of DELL.Prices hit the downtrendline and resume its decline.Therefore the dntrendline acts as Resistance.
So too with an uptrend……….
 
And as was discussed regarding the breakout over resistance and breakdown below support,the same applies here.We have an uptrendline,we have prices taking support at this trendline.And as the trendline breaks,we say that the uptrend is in question.
 
A break in an Uptrendline is not a Downtrend………it merely tells us that this uptrend that we have been trading and making profits from is now in question.So too with the Downtrendline.A breakout above the downtrendline does not mean that the stock is now in an uptrend,it merely means that the downtrend is now in question.
 
To assess uptrends and downtrends,we are back to pivot highs and pivot lows as has been discussed.

SUPPORT AND RESISTANCE August 8, 2006

Posted by श्रेया in Tutorials.
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SUPPORT is that area where buying interest exceeds selling interest,and therefore a previous decline gets halted at this area and turns back up again.It is marked by drawing a horizontal line connecting two or more bottoms.
 
RESISTANCE is that area where selling pressure exceeds buying interest.It is an area where previous rallies get halted and turn down again.It is marked by drawing a horizontal line connecting two or more tops.
 
Support and Resistance are not absolute points.They are areas.
When Support breaks to the downside,we call that a Down Side Breakout or Breakdown.When Resistance breaks to the upside,we call that a Breakout.
 
When we get a breakdown below support,that area of support now becomes an area of resistance.Have a look at the JNPR charts below.That area of support broke down and that same area is now acting as Resistance.
 
A breakout above Resistance,and that same area of resistance now becomes a new Support.
These are important areas for every trader,either as an entry point or an area to take profits.

Trends August 8, 2006

Posted by श्रेया in Tutorials.
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Most important thing that we all have to remember,Trading is very simple.Our minds being complicated is the reason why we try to over complicate a simple thing.So as in anything simple,we try to leave it as simple as we can.
There are various types of charts :
Line Charts,
Bar Charts,
Japanese Candlesticks Charts……….
Basically your preference,whatever you are most comfortable with.I personally use the Candlestick charts,because it makes it more visually obvious to me.I have to strain to see the same in a bar chart.But basically upto you….
Whether we take a bar chart or a candlestick chart,each bar/candle tells us of the Open,Close,High and Low of that particular time frame.Therefore,in a daily chart,the high is the high of the day.The close being the close of that day.But in a 15min chart,each bar represents the trade in a 15minute time frame,therefore the high of that bar is of course the 15minute high…so on so forth.
We have three trends :
 
UPTREND,DOWNTREND,SIDEWAYS TREND
 
UPTREND :An uptrend on a chart of any time frame is nothing but a series of higher highs and higher lows.
DOWNTREND:A downtrend on a chart of any time frame is nothing but a series of lower highs and lower lows.
SIDEWAYS TREND :A sideways trend is nothing but relatively equal highs and lows.
 
TRENDLINES :
An UPTRENDLINE is nothing but a line that connects two or more LOWS,in a chart in an uptrend.The more points that meet up to this line,the stronger this line is.This trendline acts as support,as prices blast off,then pullback to this line before taking off again.Therefore,in an UPTRENDLINE,the 2nd point is always higher than the 1st point,and the 3rd higher than the 2nd.
 
A DOWNTRENDLINE is nothing but a line that connects two or more highs in a downtrend.Once again,the more number of points that connect,the stronger the line is.This downtrendline acts as resistance.Each down move is followed by a pullback rally to this trendline which acts as resistance only to be met with more selling and lower prices.In DOWNTRENDLINE,the 2nd point is always lower than the 1st,and the 3rd lower than the 2nd.
 
A break in the UPTRENDLINE signals a possible change in trend.So too with the break in the DOWNTRENDLINE.

Types of Traders August 8, 2006

Posted by श्रेया in Tutorials.
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Just have a look at the attachment…..looks like a familiar story for many of us.The successful trader does exactly the opposite as stated below…….He has something that gives him an edge over the others.He has that something that tells him when to get in,when to stay out,and when to accept a mistake……..He has his charts and the knowledge of how to use it.

What are these charts?A chart of Reliance is not the chart of the company,but the chart of the investor and trader emotions in that company.A chart tells us about the whole play of fear and greed,again and again,all over again.The chart of a particular time frame is therefore a study of fear and greed in the particular company or market in that time frame.

Various types of traders based on their time frame:

Day Trader :He trades intraday.He buy and sells,shorts and covers within that day.He closes all positions by the end of the day.He takes no risks overnight.He basically uses the 5 and 10 min charts for his trading with the 15min and the 60 min charts as backdrop.

Swing Trader :A trader who trades the daily charts,fine tuning his entry using the 60min charts.His trades last 2-5 days.

Position Trader :Nearly equivalent to investing,but nearly can be an important distinction.He trades the weekly charts which means he holds trades from weeks to months.

 

Introduction August 8, 2006

Posted by श्रेया in General.
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As the famous Chinese Proverb goes,”Give a man a fish,you feed him for a day.Teach a man to fish,and you feed him for a lifetime.”
 
This thread is a result of multiple emails from fellow members with a desire to learn how to trade,rather than to just take the calls here and there.This thread may not catch the interest of many,as the “many” are always interested in the ‘fish’ rather than learning how to.But this thread is intended for the few……..the few that want to learn,or at least make a beginning to learn how to trade,the few that do not wish to bow to any other individual or organiztion as authority when it comes to decision making but instead wish to come to these decisions by himself/herself.
 
This thread will be of no help to those who make trading decisions based on the fundamentals.This thread will be of no help to the many that wish to know what this company did or wat was the news when a stock broke out.This thread will be of no use to a few members here,all brilliant traders,all great minds–
 
This thread is for the newcomer to charts and who has that desire to learn.It is for the student of the market by a student of the market.I am no master,no teacher,no expert,all words that I abhor……..this thread is to my friends who want to learn,from a friend who is just sharing what little he knows.