Trading entry plan:mrtq13

Below is a simple but important road map on how to analyse and enter a stock that I created. You can call it checklist....I like the process.........I see many of us base their TA analysis only on buy/sell signals!! That's a strange step.........Because a buy signal in downtrend has no meaning and will fail in 90% of the cases.............In uptrend,trades work fine!!

Once I was in trading chat room. There one russian trader was saying that he doesn't take any trading signal unless the price has broken the trendline after the signal is generated........I loved that idea and am trying to create a trading system with trendline breaking idea...........

The map below will have more branches. Say,for example,pivot high-low has certain patterns that are important in uptrend.We need to define which patterns to be taken and which not......etc........



There are also maps on exit,hold etc.........Say,for example,in downtrend,one should stand aside and not trade at all..........But what do we mean by downtrend!!!!!!!

ALWAYS DEFINE THE TREND FIRST BEFORE YOU GO FOR BUY/SELL........

Ummmmmmmmmm............

I posted the above map for a purpose...........It's a disciplined approach to trading........In fact,it is a real way of TA trading.......

In no book,you will find disciplined approaches to TA,because firstly,there is commercial reason. They will write on same the shits several times and publish them in several book for earning money. Fuck these shits....Have a look at the book,"Master Swing Trader". That book sucks. None can trade reading that fucking book,though it is a well-known book in TA world.

Secondly,because,if all topic is really illustrated,then the volume of books will increase.........Anyway,cut the shit!! Let's get to the buisness..............

I always go by Pivot High-Low.........Because,only by that we can determine uptrend-downtrend quickly,detect all types of patterns.................But the process of pivot high-low is so vast that only one single post will not be enough to describe it all........But for giving you some hints on pivot high-low,I am posting on my systems' pivots below..........

The rule of trend is an uptrending stock must have higher high and higher lows When you will understand this,you will feel charmed. Because you will then be able detect stocks moves.........

Below image is an example of the road map for entry that I uploaded above.........Now this road map can again be divided into several sections like I said above...........For example,all trades/entry below will be based on pullback trading......Note that in its uptrend,Yahoo making small pullbacks/dips........And we are supposed to enter them......This is swing trading!!!

Note that we stand aside when the stock pullbacks..........

For trend determination,MA is slow. That is why,I try to avoid them........

Also,note a band like indicator is used to use as a trendline for short term moves.........

There are two trading styles that can be used in an uptrending stock :

1. Pullback trading.
2. Breakout trading.............

Stock making Lower Low and lower highs are in downtrend..............We are not supposed to trade this downtrend. It is like falling knife. You try to catch the knife,your hand will cut..........

See how trendline is broken before the stock goes high........This can be called reversal trading.........Also note the reversal double bottom pattern..........Cool!!!

We connect the Higher Lows in uptrend and Lower High in downtrend with trendline. That is how we use trendline to determine trends and trendline breaks...........See the image below...........



A long way to go yet,my friend..............

Take care!!!
Happy trading!!

Trading system development – The DUM method:mrtq13

Trading System Development

Trading system development – The DUM method

D - Define

All trading systems are based on finding and pulling a fundamental truth about the market. Define what fundamental truth you'll be going after. Eg. All markets have a tendency to trend beyond random. Now you've got the definition that most technical-based hedge funds are derived from.

U - Understand

Determine the conditions under which the defined truth tends to occur. In the case of a trend tendency it could be when does the trend tendency begin beyond random? This will lead you to how to measure a trend. Since trends can occur randomly, how do I determine if a trend is beyond a confidence level of randomness? Does the trending tendency beyond random exhibit the same degree of persistence beyond one year? two years? 5 years? If not, is there some point at which the persistence beyond random occurs every year? If so, does it also persist at the same frequency for 5, 10, 50 different markets? If so, you've discovered a fundamental truth and you now understand what you need to know about the behaviour.

M - Mine

Once you understand the conditions under which the behaviour occurs, you write the code necessary to map the understanding of the behaviour. Is the code going to be all inclusive of many markets? or try to just go after the best of the best? Once mapped it's a mechanical process to determine how well it maps against the behaviour. After you're satisfied you've developed a satisfactory method for mining the behaviour, you can do an edge test to see if it happens beyond random. If not, use Monte Carlo sims to determine confidence levels for trading the method. Determine at what confidence level you'll stop trading. Examine the drawdown versus the profit. Is it worth risking any money on this? If so, allocate money using a money management scheme.

After you're done with this, you'll have your first system. Next, develop a complimentary system (non-correlated). Go through the same process for (a different type) a range bound system. Once you've gone through the mining stage, use the correlation test to weight the two systems. Apply the weights to the money management scheme and move on to your third system.

Volume Analysis-a new approach!!!:mrtq13

There is a book on volume and price analysis named "Master the markets by Tom William". I read it year ago. I had hard time understanding it then, though it helped me then in several ways. Now I think that volume analysis needs not to be that complex. For example,we don’t need to understand “test of volume”. It is however a good book-worth reading and collecting……………….

I like to think averaging…………..I found that averaging candles boosted my trading!

How about averaging volume? This is an interesting idea. In fact,this is an important idea. We need to see volume or accumulation by averaging!!! Why? There are several reasons. But I want to keep this tutorial simple and small(I don’t have time)…………So…………….

I have seen we count the volume like this : If today’s volume goes above last 15 days average volume,then we take it as bullish volume………..This is ok. But this doesn’t tell me many important things………..For example,this doesn’t actually give me buy signal,or accumulation zone,or euphoric zone,or consolidation zone…………….

-----------------------------------------

The techniques/Four techniques :

There are some techniques of volume reading you need to know. It may make your volume analysis simple, but better………………

First technique is : we need to see accumulation of volume before we buy a stock. This accumulation could be by institution or retail traders. We don’t care. All we care is there is accumulation at our buy zone or signals………..We need volume traded enough before we buy something. Because that accumulation of volume says,the stock is of interest of many………….We need to buy something that the market likes………..And accumulation will tell us about that………..

Accumulation,after a stock has retraced enough or consolidating after retracement,can signal upcoming uptrend of a stock. Let’s give it a name,AV or accumulation volume…………….

Second technique is : after the stock has gone high enough,there will always be profit taking situation. There will be good volume traded,and then the stock goes into consolidation with grey or bearish volume zone……….

But interestingly the stock may start to generate new buy volume at this high level of price. And this new volume generation or accumulation could start a new trend upwards by the stock. TAs have given this type of scenario the name – VT or volume trend. Such volume generations push the stock higher or refuel the trend………..

Third technique is : all stocks must stop their uptrend at a climax situation or euphoric zone. What happens is that a huge volume is traded at the very high level of price. This shouldn’t have happened. This is euphoric zone,because small traders mostly enter at this zone with huge enthusiasm,and big traders sell to them here……….

You will see this situation again and again in almost all stocks. TAs call this zone,VC or climax volume……………

Fourth technique is : we need to ignore falling volume. There are some zones where volume means nothing,and so is the price trend or movement. We need to completely ignore them. This is known as null volume or VN…………….

*********************************

The indicator/V-spike :

Fine………..!!! But how do we find out all these? Any indicator?? There is one interesting indicator with the Bull and Bear Volume indicator(a nice one) of amibroker. I have separated and somewhat modified it to suit our need. I will attach it at the end of this post,so all can use it and try it…………..By the way,I have given this indicator the name,V-spike,it shows volume spikes at different level of price……………

See the V-spike indicator in the chart below……….The green is accumulation(depending on where the stock is),the grey is distribution zone……………….




Accumulation Volume/AV :

Now let’s see some example…………First,we need to see accumulation before we buy or when we get a buy signal…………See the chart of Batashoe below. We got a buy signal at the last bar. But interestingly,before that our V-Spike Indicator told there were buy volume. Price has retraced enough. We got a buy signal. Volume is in accumulation zone. This is a good place to buy…………Right…………….

This is known as AV or accumulation volume………..We need to see average accumulation,because that tells us that the stock is strong enough to enter…….





See another type of accumulation. We know that consolidation is a good place to enter a stock. But wouldn’t it be great that we could see that accumulation is going on in the consolidation area……………?? Yeah,it would be great……….Our V-spike indicator will tell us that accumulation is going on at the consolidation zone.………..

See the chart of Agni below. Such a nice accumulation at the consolidation zone will surely tell us that this stock is a nice one to get in………………



Volume Trend/VT :

After the stock goes high,there will be some kind of profit taking. If you have good trading system,your trading system will show you that profit taking zone. Interestingly,after the profit taking is over, the stock goes into some kind of rest. Then,again,we start to see accumulation of volume. Why………..??

Because the volume is actually trying to start a new trend or wave or leg(upward).

Now when we start to see spike by our V-spike indicator at or after the stocks’ consolidation or resting period,we should treat it as the accumulation for the start of a new trend…………This is known as Volume trend or VT. New buyers are entering at this zone,pushing the previous trend of the stock upward again……………This is easy to detect. Usually,breakouts are such trend makers……………….This is the second entry zone into a stock!! See the chart below to understand VT.

Volume climax/VC :

This is a very important concept to understand. A very important one. After a stock has gone higher,the volume suddenly rises unusually. Our V-spike starts to give green volume signals. But that is unusual. Because at a high price,why should the stock generate huge volume………?? Something is wrong here. Yeah,there is…………..

What happens is called euphoria. A lot of small traders for an unknown reason or impulsive attitude feel that the stock is just gonna move higher,and so they should enter at that level…………They can’t understand that it is the top position of the stock. Here the smart traders start to sell,and even manipulate the price to rise higher; and then start to sell. That is why,you will see bullish candle with very high volume at the top of price. But you will see that later,the stock seems to have lost strength and falling and falling…………..

Now if our V-spike gives green signals at the high of price,it tells us that we may see VC or climax situation. After the green signals,the indicator also will turn grey,which indicates more bearish scenario………….

Below is an example of VC in Aramit. See where that climax has happened-just at the resistance level with unusual volume. After that all indicators turned red or bearish………………

Remember the 500 crore day in DSE??? That was also VC day………..!!!!!

Volume Null/VN :

Now the indicator will tell us about another type of scenario where no significant volume is traded……….We sholudn’t bother about volume that is of little or no interest to us. For example,when the stock is falling,the volume of that fall doesn’t mean anything to us………..Our V-spike shows us that zone of null volume and thus shows us the way of better analysis……………..See the Null volume on the chart below………

Summary :

Well,this is all there is……………I hope this article will be helpful to ur analysis. Also,the indicator would help you,I hope…….Note that the indicator(V-spike) is no magic. It just hints us some directions,sometimes it can be wrong. But the good thing is that many times the indicator works nicely……………Whenever we see a spike,we need to try to understand what is going on behind that spike(Green or Grey) of our V-spike indicator..........I have attached the indicator below.Pls,download it,and load it in Amibroker.See if you find it useful.................!!!




THX!!!!

Strategy of trading-averaging or stoploss:mrtq13

Good topic-a very good one.......

This is a very elaborate topic,and needs extensive discussions.............

There are several things we need to focus while discussing this whole issue........Say for example :

1. How is the market condition now.......
2. Are you at the top of market-we are at the top of the market............Aren't we??? Did anyone notice this? DSE isn't expending upward,right???
3. How do you feel about large fall or short fall........?
4. Your risk tolerance level..........Do you have another sources of earning money and can take too much risk?
5. Your total capital...............
6. Your trading system. Is it set for short term swings or long term trades..........
7. Your experience............

--------------------------

Let's discuss the above in a very short manner..........

DSE isn't in good condition. Too much inconsistency is there. Any trader should remain cautious in such situation...........So,your stops should be tight......Right......? I have seen that in the last fall recently,many became freezed and started to think if they will hold on to their stocks or sell..........There is nothing to think......The market is falling....And that is a fact! Accept the fact and act accordingly........

We are at the top of DSE's history. And this is the riskiest zone! Believe it.Don't be too brave at this level!! Whatever your big brothers/so called gambler brothers say,only care about your money and be scared!! Think about it.

Let's say,you have invested ur whole amount in the market. Tomorrow market has fallen 90 points like it did recently..........Then,market stops. You feel good,though ur total lose is 4% at the moment! Market stops some times,but crashes upto 300 points. Your lose reaches 15%. Now what are you gonna do?

You would become freezed! You wouldn't be able to sell,because the lose is huge. The market doesn't stop.And you lose more and more everyday.

Think about the Jamuna oil's holders. Everyday they lose. For last couple of months,they have been having pain............What was the point of such holding............Some are down 40%!!! Wow,what if they took 7% lose and got out this loser stock initially............???

The same applies to the whole market.........

Now bravity can be shown when you are at the low of the market. If you showed bravity last year,you would gain hell lotta profit..........Because the market was at its low,and going upwards...........Now we are at the top...........So,a lot of correction is expected. But alas,market never goes straight up,or down. It comes down goes up,comes down and down.............What are you gonna do!!!!

Try to understand that market's situation changes,and with the changing scenario we should change our strategy...................

How much you can bear in a single trade............? Did you ever give it a thought..........?

I think I can take 7% lose in every trade and total 3% lose in my total equity on each month..........But what about you...........

What kind of trader are you..........? Are you a very short term trader. In that case,you should not bet more than 6% lose or even 5% lose............

But if you are buy and hold type of trader............You can bet 30% and even 40% lose sometimes..........But the question is where the hell you have entered the stock........If you have entered at the low of a fundamentally good stock,then taking 40% lose makes sense..........But if you have entered at the top of a fundamentally weak company,taking 40% lose or betting 40% doesn't make sense,does it.........

How about your trading system...........How did you set it............I have seen all of our trading systems are for very short term trade............So,our exists should be no more than 6%..............

How much experienced are you...........How much you are pshychologically capable of handling a drawdown situation............

Now this seems to be the most important point..............

When I begin trading with system or TA,I had hard time trading. Sometimes I used to lose my faith in it,because it just didn't give what I expected.........

Year ago I bought Intech Online. I put 6% stoploss in it. After I bought,I saw it falling. And even though It didn't go below 6% lose,I sold it. Because I didn't believe that it will work,my system would work.........I got scared,and very indisciplined. After I got out,I saw Intech rocked. I got fucked up,and frustrated................

I had more than 4 losing in a raw in a month sometimes. I got frustrated. I thought I may not be able to recover those loses. I felt like kicking the Trading Systems and TA. But later,I saw I not only recovered my loses,rather I was up more than the lose with the same system and strategy.

Why do those happen............? Think about it.........There are several factors that work here......Lack of plan is the most crucial,and controlling mind is another important thing.........Anyone telling you that he had never a losing trade is great lier! So,except the fact that lose is a part of our trading. If we can accept it,we will be able to overcome it...........

Fear matters!

Did you practise your trading style and strategy in real life trading.....That is a very important thing.....Sometimes it is wise to take loses for the shake of practise only. Believe me it works.

Trading seems to be a matter of experience too.Oneday will come when looking at a chart you will be able to feel what may happen and act accordingly............

Whatever happens,preserve main capital..................

When we are at the top of the market,long term hold strategy doesn't make sense,does it..........

We never know about future. So,what's the the point of thinking about it.........We should go by strategy,and change our strategy when the market changes.........

DSE has changed.......So,it is better to change our old strategy,and be quick to take profit and cut loses............

------------------

Now regarding strategy,may be,in coming days I will release some tutorials on exit strategy...........But now a days I really don't feel like doing those..................

Why “buy and hold” strategy carries more risk?:mrtq13

Good and interesting article-should be read by all.............!!!!!!

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Why “buy and hold” strategy carries more risk?
Posted on Sunday, May 4, 2008 by sagecapital

Most of us hear the advice- “Buy XYZ stock and hold it for a long time”. These advices are more rampant when markets are down and the current stock prices are usually below your purchase price. This is because no “buy and hold” expert wants to acknowledge his/her mistake . So till the stock price gets above the recommended price, you can continue to increasing the holding period ( From 1 year to 3 years to 5 years to even 10 years). Some might even recommend to buy even more while the stock continues to fall! I don’t blame them-after all their job is to offer you some hope in bad times.

There are couple of things which I have observed for “buy and hold” investing. One thing which often gets quoted in favour of “buy and hold” is that it is not possible to time the market. Of course, I can’t pick tops and bottoms but one can’t surely pick a few uptrends and avoid a few downtrends.

Secondly-people often quote the famous Warren Buffet while advocating “buy and hold” strategy. Now can you be as patient as Warren Buffet in holding a stock like Coca Cola for last 10+ years without generating any significant returns. He holds Coca Cola for its “brand value”. Mr. Buffet can afford to “own a business”and influence the way it is run. Can an ordinary investor emulate that? How many “buy and hold” investors can stay on cash like Mr. Buffet did from 2004-2007 (during the great bull run) ?

I feel that “buy and hold” carries a lot more risk for a normal investor.

From the recent memory take a stock like JP associates. The stock went from 150 in June-July 2007 to 500+ in December 2007, only to fall back to 200 in January 2008.

If you consider a “buy and hold” investor who bought at 150, he would have made 30% on his investment but his drawdown from the top would have been 60%(risk). And those who bought at above 200-250 might have experienced a negative return.

Now lets take the case of picking a few trends. Even if a trader bought at 170 and sold at 400 or even 350 (not at the peak of 500), he/she would have made a return of more than 100% (in 6 months) while having a drawdown of just 20% from the peak (your risk). Doesn’t it offer a better risk/return profile?

Another advantage is that “buy and hold” guys never know when to cut their losses . They are so blinded by their hope and conviction that they sometimes miss the real picture. Take the JP associates example again. When do you think will the “buy and hold”investor bail out? Add to it the psychological pain of seeing such huge drawdowns (50-60% sometimes) in “buy and hold” strategy. It shakes your confidence and affects your mental ability to seek superior performance in the markets.

On the other hand, if you are trading the momentum you are always prepared to cut your losers(again not easy!) and get the best out of your winners.This results in better risk adjusted returns.

The only word of caution is that you don’t want to be over leveraged while trading trends. This is because one bad reversal can ruin your trading account!

“Buy and hold” is more about the future and I feel future is unknown. Do you know how stock markets shall look like in next 10 years? Would they still be generating 20% per annum returns or will the returns shrink to 5%? Is it a good idea to hold a stock for 10 years when you don’t know its future?

Many people ask me to recommend a stock they can hold for the next 10-20 years. Although I personally like a stock like Reliance which is in long term uptrend but I am not too sure if it shall stay that way for next 10 years. What if oil falls back to $30/barrel? Will Reliance stay at these elevated levels? What will a buy and hold investor do if Reliance stock reverses sharply in case of such scenarios?

Thats I why I feel uncomfortable giving such “buy and hold” recommendations. To me they appear more risky as it involves a lot of guess work.To me a simple”buy and hold” offers no real edge to the investor.

What happens when trading bets go wrong?
Posted on Monday, September 17, 2007 by sagecapital

I have been talking about many stock ideas that have been climbing up for past couple of weeks. Some of have gone up 20% and some 50%- from Titan to Rajesh Exports and Bartronics to Kirloskar!

Today I am taking a “stock idea’ which went really bad. The stock in question is “Deccan Chronicle”. The stock actually fell by 20% last week! So what did I do?

I had to sell the stock at a loss when it broke the 215 support levels. My entry was around 235 levels, so I had to take a 10% loss on my investment. At the same time, as the stock only formed around 3% of the portfolio, the actual loss on the portfolio level was just 0.3% (Didn’t I tell you that risk management is the key to success?)

This is what “investing is all about”. It is not about ” being right” but realizing when you are wrong! Imagine if I hadn’t gotten out of this position thinking that “this too shall rebound’ like many other stocks, how’d I be feeling today? I might have lost my peace of mind and it might have affected my ability to pick the next winners.

Trading is difficult because people find it impossible to “accept a loss”.If you go deeply it is all about accepting the fact that “you were wrong”.Now I have not seen many people who take it easy when someone tells them that they are wrong!They try their best to ‘defend” their opinions and actions.
Wins and losses are part of investment game. So every moment you have to deal with the possibility of “being wrong”. If you can’t deal with it, you end up hanging on to your losing positions till the time they become extremely painful!

Think over this and you might get “insights” into your trading patterns.

Retracement trading with Fibonacci : Video Tutorial!!!:mrtq13

Below is a video tutorial on Retracement trading with Fibonacci tool.

Fibonacci is a very important tool and Fibonacci ratio is very interesting thing to know………..

Fibonacci is used to measure how much pullback there could be when a stock is in correction after an uptrend…………..

After a stock goes up,it will stop somewhere and start to fall. And if we can know beforehand where the stock may stop its fall,then we can plan accordingly.

Fibonacci gives us some levels at which the stock price is likely to stop its fall. It is found that Stocks many times stop at Fibonacci levels. Not clear why. But this happens……….You can test it for yourself…………If you play with this tool,you will find that many times Price actually stops at Fibonacci level in pullback!

I have created three videos on Fibonacci trading. This is just an introductory video on how to use Fibo tool and measuring by it………….Each video has different purpose. Pls,watch each one………..

I created the videos in shockwave. Thus, the video files are small in size(only 1mb). AVI or WMA would have taken huge space, and the file would have got huge.That is why,I avoided those formates…………

You will need Flash Player to run the video. You should have Flash in your computer. It is a very important thing……….If your computer doesn’t have Flash, pls download it from the link below(1.50 mb only). And install it before watching the vidoes………..

Download the Flash player :

http://fpdownload.macromedia.com/get/fl ... player.exe


Download the Fibonnaci/Retracement trading videos :

http://www.4shared.com/file/69565445/f951c357/Retracement_Fibo_Tutorial_Video.html

Fibonacci works. It is not clear why.It works in every aspect of this universe. I tried the mathematical part. But couldn't comprehend that part. So,I gave up. However,there is no need to know the mathematical part. We just need to know where the price of a stock is likely to stop its fall...........And you may be surprised to see that many times prices do stop at Fibonacci levels............

Fibonacci is a tool to help us measure the likely retracement of a stock or index. Other things,if combined with this tool,will give us better prediction power. The good thing about Fibonacci is it is not a lagging tool. It is,unlike MA and oscillators,capable of predicting...............So,we need it. Candlestick is capable of predicting future,so is Fibonacci. So,when both are combined,we get a strong output.................

There are different strategy to use with Fibonacci. For example :

1. Fibonacci+candlestick buy/sell signals.
2. Fibonacci+moving average.
3. Fibonacci+Support/resistance
4. Fiboancci+Trading system signals.
5. Fiboancci+Volume..............and so on..............

We need to have defined strategy on each of the above. That way,our trading will be better and disciplined............!!!!

Hope you will like it.

Take care!!

Think like successful traders, trade what u see….not what u believe.!:mrtq13

Successful traders think in probabilities.

U don’t have to know what the market is going to do to make money. In fact, U CANNOT
know what the market is going to do, so trying that would only interfere with your thinking in
probabilities.

The techniques you use should give you an edge, which is nothing more than a probability that the trade will go in my favor.

Take every clear trade setup according to my edges; this guarantees that the probabilities will work in my favor.

One is never right or wrong, because right and wrong on trade outcomes has absolutely nothing to do with successful trading which requires thinking in probabilities.

Trading edges are like a coin that is rigged to give heads more often than tails. Taking a trade setup is like flipping the coin. The concept of ‘right’ and ‘wrong’ do not apply to trading, anymore than it would apply to the rigged coin coming up tails.

Don’t try to predict outcomes. By taking every clear trade setup, I generate a sample size sufficient for the probabilities to work in my favor.

Do not seek ‘certainty’ on trade outcomes, because certainty does not exist in markets.

Always pre-define my risk prior to taking a trade. If a trade does not work, it’s history and patiently await the next trade setup.

Have profit objectives on every trade, but no beliefs as to what will happen next. If a trade does not go in my favor, I am no more concerned than a casino operator would be about losing a single hand of blackjack.

The market is your own personal casino. By taking all of ur clear trade setups, the casino is rigged in ur favor.

Every moment in the market is unique…anything can happen!

Good rules to must follow!!:mrtq13

Below is a collection of rules from my trading library......................Simply great rules to be followed.................



I'm sure most everybody knows these truisms in their hearts, but this list is nicely edited and makes a good read.

-Plan your trades. Trade your plan.

-Keep records of your trading results.

-Keep a positive attitude, no matter how much you lose.

-Don't take the market home.

-Continually set higher trading goals.

-Successful traders buy into bad news and sell into good news.

-Successful traders are not afraid to buy high and sell low.

-Successful traders have a well-scheduled planned time for studying the markets.

-Successful traders isolate themselves from the opinions of others.

-Continually strive for patience, perseverance, determination, and rational action.

-Limit your losses - use stops!

-Never cancel a stop loss order after you have placed it!

-Place the stop at the time you make your trade.

-Never get into the market because you are anxious because of waiting.

-Avoid getting in or out of the market too often.

-Losses make the trader studious - not profits. Take advantage of every loss to improve your knowledge of market action.

-The most difficult task in speculation is not prediction but self-control. Successful trading is difficult and frustrating. You are the most important element in the equation for success.

-Always discipline yourself by following a pre-determined set of rules.

-Remember that a bear market will give back in one month what a bull market has taken
three months to build.

-Don't ever allow a big winning trade to turn into a loser. Stop yourself out if the market moves against you 20% from your peak profit point.

-You must have a program, you must know your program, and you must follow your program.

-Expect and accept losses gracefully. Those who brood over losses always miss the next opportunity, which more than likely will be profitable.

-Split your profits right down the middle and never risk more than 50% of them again in the market.

-The key to successful trading is knowing yourself and your stress point.

-The difference between winners and losers isn't so much native ability as it is discipline exercised in avoiding mistakes.

-In trading as in fencing there are the quick and the dead.

-Speech may be silver but silence is golden. Traders with the golden touch do not talk about their success.

-Dream big dreams and think tall. Very few people set goals too high. A man becomes what he thinks about all day long.

-Accept failure as a step towards victory.

-Have you taken a loss? Forget it quickly. Have you taken a profit? Forget it even quicker!

-Don't let ego and greed inhibit clear thinking and hard work.

-One cannot do anything about yesterday. When one door closes, another door opens. The greater opportunity always lies through the open door.

-The deepest secret for the trader is to subordinate his will to the will of the market. The market is truth as it reflects all forces that bear upon it. As long as he recognizes this he is safe. When he ignores this, he is lost and doomed.

-It's much easier to put on a trade than to take it off.

-If a market doesn't do what you think it should do, get out.

-Beware of large positions that can control your emotions. Don't be overly aggressive with the market. Treat it gently by allowing your equity to grow steadily rather than in bursts.

-Never add to a losing position.

-Beware of trying to pick tops or bottoms.

-You must believe in yourself and your judgement if you expect to make a living at this game.

-In a narrow market there is no sense in trying to anticipate what the next big movement is going to be - up or down.

-A loss never bothers me after I take it. I forget it overnight. But being wrong and not taking the loss - that is what does the damage to the pocket book and to the soul.

-Never volunteer advice and never brag of your winnings.

-Of all speculative blunders, there are few greater than selling what shows a profit and keeping what shows a loss.

-Standing aside is a position.

-It is better to be more interested in the market's reaction to new information than in the piece of news itself.

-If you don't know who you are, the markets are an expensive place to find out.

-In the world of money, which is a world shaped by human behavior, nobody has the foggiest notion of what will happen in the future. Mark that word - Nobody! Thus the successful trader does not base moves on what supposedly will happen but reacts instead to what does happen.

-Except in unusual circumstances, get in the habit of taking your profit too soon. Don't torment yourself if a trade continues winning without you. Chances are it won't continue long. If it does, console yourself by thinking of all the times when liquidating early reserved gains that you would have otherwise lost.

-When the ship starts to sink, don't pray - jump!

-Lose your opinion - not your money.

-Assimilate into your very bones a set of trading rules that works for you.

-HAVE COMPLETE FAITH IN YOUR INDICATORS. “This is a must for success,” said Cook. “Many times your indicators give you a buy or sell signal, and you don’t follow it because you don’t have the confidence the signal is right this time. Successful day traders believe in their indicators, but also are aware that nothing is 100% foolproof.”

TC!!!

Review your trader mind!!!:mrtq13

Market's current situation needs some positive articles on trading psychology,I think............

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The Trader’s Mindset

Bennett McDowell, TradersCoach.com

Developing “The Trader’s Mindset” is a must for trading success and this can take some time. This is not an area where you can take a short cut or learn a formula. You usually develop it by actually trading and the experiences you gain from trading. We will help guide you towards developing “The Trader’s Mindset” and help you handle account draw-downs, losses, and profits. Yes, profits can actually cause you stress!

You can see how powerful psychology in trading is, if you show the same successful trading approach to one hundred different traders. No two of them will trade it exactly the same way. Why? Because each trader has a unique belief system and their beliefs will determine their trading style. That is why even with a profitable and proven trading approach, many traders will fail. They do not have the proper belief system to enable them to trade well. In other words, they lack “The Trader’s Mindset.”

When you encounter psychological issues it is best to recognize the issue, just be aware of it, don’t deny it. In order to “fix” psychological issues we as human beings must first become aware of the problem and issues causing the problem in order to heal and “fix” the problem. This is much of what psychoanalysis is all about. The psychologist or psycho- therapist tries to let the patient first see the problem and then the patient must believe that these issues are causing the problem in order for the patient to heal. The reason this process can take so long, perhaps even years is because the patient needs to not only recognize their problems, but must accept that there truly is a problem. They must take responsibility for their problems to heal.

Success in trading is a direct result of a sound trading system, sound money management, proper capitalization, and sound psychology. All of these must be in sync to be successful in your trading. The “ART” system is designed to focus on all of these areas. The only area where you may need additional help once you have mastered your trading skills, is your psychology.

Psychology is the one area that you may need additional help and can take up to a year or so to resolve personal issues attaining trading success. Our consultation services focus on this aspect and if you find yourself struggling with psychological issues, you owe it to yourself to get help in this area.

Here is a list of common psychological trading issues and their causes:

Fear Of Being Stopped Out Or Fear Of Taking A Loss: The usual reason for this is that the trader fears failure and feels like he or she cannot take another loss. The trader’s ego is at stake.

Getting Out Of Trades Too Early: Relieving anxiety by closing a position. Fear of position reversing and then feeling let down. Need for instant gratification.

Adding On To A Losing Position (Doubling Down): Not wanting to admit your trade is wrong. Hoping it will come back. Again, ego is at stake.

Wishing And Hoping: Not wanting to take control or take responsibility for the trade. Inability to accept the present reality of the market place.

Compulsive Trading: Drawn to the excitement of the markets. Addiction and Gambling issues are present. Needing to feel you are in the game.

Anger After A Losing Trade: The feeling of being a victim of the markets. Unrealistic expectations. Caring too much about a specific trade. Tying your self-worth to your success in the markets. Needing approval from the markets.

Excessive Joy After A Winning Trade: Tying your self-worth to the markets. Feeling unrealistically “in control” of the markets.

Limiting Profits: You don’t deserve to be successful. You don’t deserve money or profits. Usually psychological issues such as poor self-esteem.

Not Following Your Proven Trading System: You don’t believe it really works. You did not test it well. It does not match your personality. You want more excitement in your trading. You don’t trust your own ability to chose a successful system.

Over Thinking The Trade, Second Guessing Your Trading Signals: Fear of loss or being wrong. Wanting a sure thing where sure things don’t exist. Not understanding that loss is a part of trading and the outcome of each trade is unknown. Not accepting there is risk in trading. Not accepting the unknown.

Not Trading The Correct Position Size: Dreaming the trade will be only profitable. Not fully recognizing the risk and not understanding the importance of money management. Refusing to take responsibility for managing your risk.

Trading Too Much: Need to conquer the market. Greed. Trying to get even with the market for a previous loss. The

excitement of trading (similar to Compulsive Trading).
Afraid To Trade: No trading system in place. Not comfortable with risk and the unknown. Fear of total loss. Fear of ridicule.
Need for control.
Irritable after the Trading Day: Emotional roller coaster due to anger, fear, and greed. Putting too much attention on trading
results and not enough on the process and learning the skill of trading. Focusing on the money too much. Unrealistic trading expectations.

Trading With Money You Cannot Afford To Lose Or Trading :With Borrowed Money: Last hope at success. Trying to be successful at something. Fear of losing your chance at
opportunity. No discipline. Greed. Desperation.

These are by no means all the psychological issues but these are the most common. They usually center around the fact that for one reason or another, the trader is not following their chosen trading approach or system. And instead prefers to wing it or trade their emotions which in trading will always get you in trouble. So, I think you can see how psychology is all important in trading.

Our goal as traders in regards to psychology is to maintain an even keel so to speak when trading. Our winning trades and losing trades should not affect us. Obviously we are trading better when we are winning, but emotionally we should strive to maintain an even balance emotionally in regards to our wins and our losses.

It will happen when it happens and when you achieve this level of mental ability; it will come after working long and hard on your problems, but will come without you knowing it. It usually happens when you least expect it.

Below is a list of what one feels after acquiring “The Trader’s Mindset.”

-Sense of calmness
-Ability to focus on the present reality
-Not caring which way the market breaks or moves
-Always aligning trades in the direction of the market, flowing
with the market
-Not caring about the money
-Always looking to improve your skills
-Profits now accumulating and flowing in as your skills improve
-Keeping an open mind, keeping opinions to a minimum
-Accepting the risk in trading
-No Anger
-Learning from every trade
-Winning and losing trades accepted equally from an emotional
standpoint
-Enjoying the process
-Trading your chosen approach or system and not being
influenced by the market or others
-Not feeling a need to conquer or control the “market”
-Feeling confident and feeling in control of “yourself”
-A sense of not forcing the markets or yourself
-Trading with money you can afford to risk
-No feeling of ever being victimized by the markets
-Taking full responsibility for your trading
When you can read the list above and genuinely say that’s me, you have arrived!

World and Stock market is not chaotic:mrtq13

Do you believe in Chaos theory...........!!! I don't............I don't know why.........But I strongly believe,the universe is moving in a logical rhythm,it is not chaotic...............

We are dealing with a chaotic thing-and that is Stock Market..........Now I don't believe,stock market is chaotic! It is rhythmic...........This however contradicts my previous statements that stocks' movement is unpredictable...........

I strongly believe,though there are some kind of uncertainity in stocks' movement,there is a high probability that we can win in the end,if we can eliminate the chaos and manage risk in stock market................Actually,it is not my belief; It is what I have found so far...............And now I believe this to be true.........!

-------------------------------------------

10 years ago, A computer, Deep Blue, beat Russian Garry Kasparov, the greatest chess player on the planet, and mankind’s place in the order of things was reshuffled.

Think about it...........How was Kasparov defeated.........? By the way of coding...............

Anyone having experience in chess knows that it is complex. And if you look at chess board while playing,you would realise chess is a game of chaos! Think!

Still the Coders/Coder of Deep Blue made it such a way that it could calculate every move in chess board and find out the "best possible solution" to defeat the oponent................Hell,what kind of a thing it is...............!!!!!!!!! Deep Blue actually defeats the Chaos Theory!!!!!!!

--------------------------------------------------

Now it is all about Coding...........

What I want to point out is if we can code a thing like Deep Blue,we can code a thing that would defeat the chaos in stock market...............!!!!

I heard of systems by big institutions in U.S market in which there are "thousands" of lines of coding............!

But we code a system that has only five or six lines,which work as the main engine. Think of the system by those institutions that has thousands of lines of coding. How would it act and react to certain situations or move of a stock...........!!!!! It will surely be superior than ours.................

--------------------------------------------

Now we need a superior system. We do..................

All the things that I have said so far has a reason...................

You might have seen that I am just switching from one system to another-creating and recreating................But I am actually not leaving them aside/behind. I want to create a unified thing in which all theory would be put together...........

There is no end of this,I know. But there will be a unified thing sooner or later...........

Actually,if someone stops to explore this world of systems,indicators in stock market,one would not become perfect..............

We may not be able to sort out every problems in stock market...........But we can and we will be able to make a perfect thing-a thing that answers to all possible questions and puzzles known to us!

-------------------------------------
The creator of MACD released it for general traders...........Do you really believe that the world has stopped its move in that creation...........? Nope.............Traders have move ahead...........Do you think a system/indicator creator like Tushar Chande would give every idea of his to you free...............Nope! Note that if we think RSI,Stochastic,MACD are the end of the world,because some great guys had created them and stopped creating anymore indicators,then you are damn wrong........

There are far more superior systems and indicators than the ones you have got in net for free. But the fact is that they are hidden and secret...............

So,if we stop ourselves till the MACD and think this is the end,we might never be able to become perfect-the perfect machine..............

-------------------------

Think of the different things that I have been releasing since last year.............The things that I have created today will be released may be two to three months/or even six months later.Even some of my creation may never be released because of the privacy concern..........So,I am getting ahead...............

----------------------

Let's not stop ourselves from creating a unified and perfect machine-a machine that defeats the chaos of stock market "most of the time"......................It is all about research,coding and creativity,by which we,the human being,would defeat the universe,too..........!!!

This is not the end!

Intuition & mathmatical calculation:mrtq13

Now this is interesting. And this is terrible.....I thought human intuition is stronger than mathematical calculation. But this stupid research shows I am wrong again. It slapped me again by saying that in chess human brain is a loser before computer. So,calculation is stronger......

There are a lot of discretionary traders like Jessy livemore,Warren Buffet,Soros,Stephen Bigalow etc.............

Again,there is a lot of mechanical trader of modern age like Ed sekoyta,Richard Donchian,Turtle traders..........

Both groups are successful................

Mechanical Trading VS Discretionary Trading
By Shaun Rosenberg


Which one is the better system? These are two different ways to trade the stock market. They each have strengths and weaknesses. First let us examine the difference.

Mechanical trading is trading with set buy and sell signals. When the stock does this, and this, and this you have to buy. When it does that, and that ,and that you have to sell. This system should be back tested. You will want to make sure that the system actually works before trading with it.

Many traders will start off by using this system and then switch to a discretionary system once they gain market experiences. This system incorporates fundamental analysis as well as interpretation into a stock. They no longer set rules exactly but now combine rules with their expectation of the company itself.

Trading with a discretionary system has many strengths when compared to mechanical. Since it incorporates Fundamentals into trading A discretionary trader may already have insight to what a company is likely to do beyond what technicals will tell you. This gives the trader more vision when trading.

Another advantage it has is its ability to adapt to any market conditions relatively fast. This is untrue for other methods. While a mechanical system may work very well during an up trending market it may work terrible or even produce a loss during a sideways trending market. This could lead to delays. During these times you may experience a set of consecutive losses.

So does this mean that discretionary systems are better than mechanical? No, mechanical systems have many benefits. They can be just as profitable as discretionary systems can.

Mechanical systems are based on following strict rules and back testing. Any trader using this type of system should understand its greatness and its flaws. That is more than you can say for discretionary.

When you trade discretionary you do not know that your system will work for certain. There is no way to back test that type of trading. It could be that your way of trading doesn't work and you will not know it until you lose $1000s of dollars.

Another major reason why using mechanical systems can be great is that it takes the emotion out of trading. You simply buy when your rules tell you to and sell when your rues tell you to. A discretionary trader cannot do this.

Because they have no set of rules, they have to interpret the company to help them decide what to do. This could often lead to emotional trading which could result in losses.

There is no way to say that 1 system is better than another. They each have flaws and advantages. I will say this however. When you are starting off it is much better to start with a mechanical system. You do not have much market experience and as such will not be able to interpret company fundamentals.

Mechanical trading systems: a ray of light or a cavern of darkness?

There is a difference between happiness and wisdom:
he that thinks himself the happiest man is really so;
but he that thinks himself the wisest is generally the greatest fool.
Francis Bacon 1561-1626, British Philosopher, Essayist, Statesman

We have been lead to believe that mechanical systems and to some point fundamental analysis are the necessary skills to master in order to prevail in the markets. In an abstract way fundamental analysis is nothing but mechanical system in disguise; the data is put forth in a standard manner and so anyone can decipher it with almost no effort. Mechanical trading systems put forth a set of rules and all one has to do is follow these rules; in essence all the players become nothing but robots following a routine. The paradox theory comes into effect now; it basically states that one will get exactly the opposite of what one chases. We all know that at any given time the masses must lose in order to be able to feed the big players. That’s why the 90/10 ratio has almost seen no variation; 90% representing the percentage of losers and 10% the percentage of winners.

I could go on into great detail about why mechanical trading systems must and will fail and in the process put almost everyone to sleep. So in the interest of keeping you all awake I will keep it short and sweet. Let’s just pause for a second here and investigate the name “Mechanical.” One of the definitions by Merriam’s Webster online dictionary is “done as if by machine: seemingly uninfluenced by the mind or emotions”

Notice the key words here uninfluenced by the mind or emotions. First of all the market is nothing but a composition of a million minds so using a system that’s based on the rules set forth by one man’s mind and worse still devoid of any mental influence is a recipe for disaster. Secondly the market place is nothing but a sweat pool of emotions; lust, greed, power, hate, fear etc swirling through the markets like a hurricane descending on village of huts ready to decimate everything in sight. The above definition of the word mechanical is enough to make you want to run from any such system.

It’s virtually impossible for a mechanical system to last forever, since by design anything mechanical must and will break down at some given point in time. It’s rather amusing the terms we chose to represent the things we use or to define what side of the markets we are on. It’s almost as if we have nothing but a secret programmed desire to lose syndrome ingrained deep with our psyches. Bullish and bearish, we choose two of the most stupid, dumbest, irrational and easily angered animals to represent whether we think the market will go up and down. Then if we happen to be individuals that favour just one sector we come up with the term bugs as Internet bugs or gold bugs. Why such a disgusting animal to represent ones position and views. As we all know most humans react in an adverse way to bugs, the first thought that springs to mind is to crush them.

Even examining the language we use in the market places illustrates further psychological issues; scalp, plunge, up thrust, perfect bottom, down thrust, flip, climactic sell off, etc.

The worst part of all this is that we pass nothing new to the next generation. We simply reinforce these Neanderthal views, in fact branding them into the next generations memory more aptly describes the process. Is it any wonder then that we keep repeating the previous generation’s mistakes but do so in a much more grandiose manner? Just look at the speculative phase we have entered now (credit bubble, real estate bubble and so on) it makes all the mistakes our ancestors made pale in comparison. We leverage ourselves to the our necks with debt to buy goods we don’t need and use money we don’t have to pay for them; the real estate bubble is one classic example of madness and history repeating itself on a gigantic scale. Individuals take home equity loans against the rising values of their homes and use this to finance their extravagant lifestyles. Is there anything more insane, taking credit to buy something more on credit?

Anyway getting back to the topic at hand; no one is taught to look at the markets as a game and study the mass mind and behaviour of individuals and then learn how to use a few TA tools that are open to subjective interpretation. By subjective interpretation we are referring to the statement that “beauty lies in the eye of the beholder.” Each individual should see something different when using such an indicator; this TA tool must never be allowed to become standardized. If it is, the end is near. The ones that learn to correctly master this tool will come out ahead, however since the method is not available in a standardized format this system could work almost indefinitely.

In the end mechanical trading systems are reflective of our lifestyle and the way we are as group of individuals; the 9-5 rat race and the zombie like nation where everyone thinks and acts like one. A mechanical system is also reflective of the fact that most of us do not want to think, we want everything handed down to us and when we get whacked on the head we cry like babies. It is for this reason we never seem to learn from history but only look for ways to perpetuate the same mistakes on a flamboyant style. The only way to break from this way of thinking is to actually attempt to start thinking and using your mind. There is nothing wrong with making a mistake because you might actually learn something as a result of one; perpetuating someone else’s mistakes provides no clues for improvement but only rules for self-destruction.

At the very least some customization should be attempted so that the system is adapted to ones own needs. It amazes me that the easiest and most effective system in the world is not studied or followed more widely. The system I am referring to is trend analysis; all you do is spot a new trend and stay on board till the trend ends. Trend analysis involves the drawing of simple lines; it takes a little practice but is worth its weight in platinum.

So let’s look at what type of system can and will work in the markets. First of all one has to understand the difference between contrarian investing and investing based on Mass psychology. Contrarian investing is a very simple system as it basically involves taking a position against the masses. Mass psychology measures the frenzy periods or periods of extreme hate or disgust towards a specific sector or sectors, and then a position is taken during these extreme times. Furthermore it measures the level of euphoria in the camps of those that believe in the investment. In other words it will measure how many of the so-called contrarians are now extremely bullish and euphoric on a given sector. In most cases when a contrarian takes a position in a specific sector he is doing so as counter move to what the masses are doing. However the majority of the contrarians are still nervous and keep checking their positions rather frequently to make sure that at the very least the bottom is in. Once the sector starts to take off and produce returns they actually lose this nervousness and become very bullish; in other words they have now entered the euphoric phase. This is where mass psychology kicks in. At this point it will be time for the smart investor to bail out, you may not be selling at the top but you will be pretty close to it.

So understanding mass psychology is really an important and integral part of a trading system.

Second is to master several TA tools and make sure you do not use them in a standardized manner.

Thirdly you need to understand be patient and disciplined. You have to understand that sometimes you might have to wait for months on end before you can take a position, however you could be rewarded in weeks for your patience.

Modified chart...................:mrtq13

I want to demonstrate what can be done by coding and creativity................I always had trouble and dislike of disturbance and whipsaws of a chart. I mean,you look at a chart of normal candlestick..........And you get almost nothing............Especially,in our stock market,where no trend is clear,we need something to smooth out the trend. Without knowing the trend,how can we enter or exit into a stock! However,we have a good thing like Heikin Ashi to smoothen the trend. I like it...........

But I want to make you guys(old and new TAs here) aware of the thing that nothing is an "end". There is always something new,something cooler,and better in TA world...............And also,note that what you see around the net and in the old systems,indicators are not what the experienced TAs mostly use. Experience and skilled TAs will have something better,faster,and the thing that has been created in secrecy...................

Anyway,much has been said............Now see the difference of charts below. The first chart shows the normal candlestick in which it is difficult to interpret what is going on in trend.The second chart is of heikin Ashi(modified) in which the trend is somewhat clear. The third chart is created by me(only me,my dear.You won't find it anywhere else for sure) in which the trend is clearer than the previous two chart types.I had been trying to create a chart that gives smoother trend. And after nearly six months of trying,I came up with this chart,which would be enhanced with the course of time. I am too excited about it............

I hope I have been able to show you an example of how TA can be. I see many so called new born TAs in BD struggling with MACD and candlesticks. They dream of profiting with these two. Well,I tell you,you will be damned if you stick to those two or those type of things..........You have to come out of traditional stuffs and create things on your own........You have to be advanced...........

Remember that there are more than what you see~~~~~~


1. Normal Candlestick Chart :

2. Modified Heikin Ashi Chart :



3. My modified chart :

Well,be the world class TA. Rule the world..............
You got the power..............
Happy Trading,pals...........!!!!!
More example of my modified candlestick chart below...............Compare them with yours.............

Reversal Trading. Reversal phase-1:mrtq13

Reversal phase/trading is the most baffling and perhaps the most profitable phase in a stock's movement..........This could give us huge profit if timely entered. Again,this could give us loses,if wrongly entered..............

Recently,I am working on Reversal trading style. I think this is the most interesting phase of a stock,as it is the recovery phase..........

Believe it-every stock goes down,and that stock will oneday go up................

We need to find out stocks that have gone through heavy correction and now trading in a Flat manner. Or,that it is showing that it is trying to move up.................

Following criteria can be applied to such trading strategy.............

1. The stock must go through heavy correction-big fall..............
2. The stock must show signs of stopping its fall.This is the trickiest part.
3. The stock will show less change in price movement. For example,a lot of small candles with doji.
4. The volume may dry.Less trading.....................However,some spikes in volume may happen...............

After I started working on Reversal trading,I found three stocks to be tradable a couple of weeks ago,which I mentioned in the Yahoo group..............They are AftabAuto,EHL,Niloycem. I have entered into two of them-Aftab and EHL. Let's see if they met the criteria mentioned above.Both Aftab and EHl had almost same pattern. Let's see what Aftab did....................

As you can see below. Aftab had gone through long correction meeting our first critaria...........Now the second criteria had problem. Aftab had flat trading three time in three months. It broke down three times. What to do in such cases. To avoid entering at wrong time and at wrong pattern,we can use some more criteria at this level. For example,we may see if buying is occuring,which we will see in the next image............Also,note the volume.There is not much movement in volume in this level................So,this is recovery phase. This is bottom trading,the trading that every trader dreams of..........






Now to avoid whipsaw or false entry or bad timing for entry,we can use criteria like these :

1. we need to see buying.
2. we need to see breakout of trendline.
3. we need to see price going above moving averages.
4. we need to see volume..........Though this isn't neccessary at this stage...........

But Aftab showed the first criteria to me. See the image.The white candles are buying candle,backed up by volume. Also,see the breakout line(pink line)is upward. Also,the dotted white line is penetrated by the candles,which is another indication of recovery................




Now above mentioned one is one of the many reversal patterns that I like. The pattern goes like this : Fall>Flat trading>Recovery. There is another pattern like this : Fall>Reversal.............This pattern is a bit amusing. It just puzzles! But for a very quick profit,this pattern is interesting...............!!! There is another reversal pattern that doesn't reverse fully. It is a kind of pullback type thing.But the fall is for a longer time than normal pullback..............

Hopefully,we will have more discussions on this..................

What is most important to note about this type of trading is that we are buying at the lowest price,we are trading at the bottom.This is at least better than buying at the top......................

Trade pattern.Find and trade longer term trend...........That gives you better understanding of things,better view of market.................

If you can use it combining with other charts,you will be amazed to see its power.........I hope you understand I am trying to create system for each different strategy. And this is better than sticking to one single thing..........graph4,graph5 etc are the breakout lines.They are developed following certain days and calculations of days.For example,if the breakout is shorter term,then the lime color line will be broken. If the breakout is longer,then the pink line will be broken...........They also work as support and resistance zone..........You would be surprised to see how many times the stock stops their fall at the support lines(Blue and Bright Green color). So,you don't have to draw the lines manually as the chart already has the line...........You can use the four lines instead of bollinger bands!

Above strategy is a very important one. One should be able to catch such patterns and research them.............Note that this is one of the main four trading styles that I talked about : 1. Pullback. 2. Breakout. 3. Reversal. 4. Rangebound.

And above mentioned pattern is one of the important patterns in Reversal trading styles..................There are other patterns in Reversal trading...........

Four Trading Styles-tutorial!:mrtq13

I always keep my plannings,and ideas documented/written so that I can review, mamorise, modify them whenever I can…………..Below is an important article that I have written recently. It is about different types of trading in TA. I was looking for an arranged situation of Trading. I mean I wanted to know how many styles are there in trading,and which one is better or of what are needed for a specific style. I wanted to know which one suits me better.

This is an important learning for me-a very important one indeed. I have recently come to know about this…………And this small document can be expanded into several parts to describe the styles of trading. And I will be adding new things with this document(for myself) and share it with all……………

Did you ever think how many trading styles are there………? Trading style can be catagorised. We can categorize trading into four parts. I mean, there are four types of basic styles of trading from TA’s point of view. They are :

1. Retracement or Pullback trading.
2. Breakout trading.
3. Reversal trading.
4. Rangbound trading.

Yeap,you can put trading into only these four category. And depending on what type of trading style you are comfortable with,you chose your style and indicators. You setup your indicators according to the style you chose to trade………….

For example, Moving averages are useless for Rangbound trading styles. Only oscillators are effective for such style. DSE at the moment is in Rangbound trading situation. So,we should heavily depend on oscillators to trade stock like Southeast bank,which is not trending, but in Rangbound situations..

Now go on reading following four types of trading. I will discuss them in details later....... :

1. Retracement or Pullback Trading :

This is the most interesting and profitable trading style! Known as Retracement/pullback trading,this style has several different ways or techniques to trade. For example,one can buy on pullback to Moving averages,or pullback to Fibonacci retracement levels,or pullback at support level,or pullback at pivot levels etc……….

2. Breakout trading :

After pullback/retracement trading style, this one is known to be the most profitable trading style. Ah,the breakout style……….I had hard time to trade it. It is quick and nice! There are a lot of breakout in an uptrend of stock. Trendline is the most useful indicator in breakout trading style……….See the image below. In an uptrend,stocks usually don’t go straight up. It takes rest and creates consolidation patterns.After a stock trade in a range or consolidation for a while,it is usually bound to go up from its range or consolidation area resuming its previous uptrend. If we can enter into the stock before it breaks out of its trading range, we can gain quick profit. The great “turtle traders” were breakout traders……………

3. Reversal trading :

This is known to be the lowest profitable and heavily risky trading style. This can be compared to the axiom :” catching a falling knife”. After a stock goes through a long fall ,it somewhere stops and reverses its downtrend and start to go up. This is sudden and many times uncertain. See the reverse of NTC recently. It suddenly reversed its downtrend. There are several reversal patterns like double bottom, falling wedge,V bottom,etc…….See the reversal below

4.Rangbound trading.

This is an interesting style of trading. When a stock trades in consolidation situation or within a specific support and resistance zone,it can give small and quick profits. Oscillators like Macd,Stochastic are very effective to trade in Rangebound style. The plan is we have to buy near to support level and when the oscillator is oversold,and we have to sell and when he oscillator is overbought. Recently,DSE is trading in Rangebound situation. Oscillators are good in such situation…………Intrestingly,Rangbound trading can turn into Breakout trading…………

Break out-1:mrtq13

A breakout is the point at which the market price breaks away or moves out of a trading range or pattern. A breakout is simply a resolution in terms of price. The trend usually continues in the direction of the breakout. If previous trend is up,next trend will be up. If previous trend is down,next trend will be down...............The opposite of breakout is breakdown...............

Some points :

• When a price breaks out of a stable, established range or trend, for whatever reason, the odds are high that it will continue to move in the same direction
• The longer the trend, the greater the potential move
• An upward surge in trading activity, or volume, confirms the validity of the breakout.
• When the volume does not show a significant increase on the upside price breakout, the price pattern/breakout should be questioned. It means breakout should be backed up by high volume..............


Entering breakouts can be dividided into two-

A.entering a position when the stock is in congestion before a breakout.
B.entering a position after the breakout occurs.

Now let's see some examples....................

See the image below of ICBislamic.............In the image,you will see there was an uptrend(white arrow). Then,the price stops to go up. The price started to trade in a specific price range. It didn't go up or down. This is called Trading Range(White box). So,we have got the first uptrend and then trading range..................

Now we know that we have got a buisness. And we know that the price could go up from this level breaking up the trading range. So,what do we do now..........? We draw a trendline above the price range like below,and we know it is 430 taka line..................So,we prepare ourself to get into this stock whenever it goes above 430 taka range with high volume...........

See the last trading image. The price actually went above from that trading range/box breaking the line we drew............Now this is called breakout...........

There are several different types of breakout.What I have shown above is one of the famous ones.................After pullback,breakout is the most traded strategy in TA's world. And it is very famous strategy and a reliable one............The great Turtle traders were breakout traders..............

As you can understand,we could apply two different entry strategy after we detect a breakout is coming...................They are :

A.entering a position when the stock is in congestion/trading range before a breakout occurs.
B.entering a position after the breakout occurs.

You will get a lot of breakout and pullback trading in uptrending stocks......After a stock goes up but you can't enter into it at the bottom,then don't worry. Wait for the stock to come to a pullback or breakout trading. It will come someday...........

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Surely,there are ways to find out breakout automatically.............For example,you can use Breakout Trading System,which will indicate when a breakout has happened. You can set Amibroker in such a way,that the software will scan 300 stocks and find out which stocks have gone through breakout today............Turtle traders used to use Donchian Breakout system. They used 20 days highest high breakout system.

But I think you should also try to find out breakout manually at the beginning of your learning. It is because you need to get your eyes used to catch breakouts..................

Actually,it is all about patterns..........Breakout is also a pattern.And you need to know the patterns,you need to get used to the patterns..............After you get used to breakout patterns,you need to define your own patterns,that you like to trade.You need to have strategy about what you would do or don't do after the pattern appears. And then whenever that patterns appear,you just trade.............!

Highlight phase:mrtq13

Pls,see the image below. I hope the image describes itself................I like to have some discussion on phase of a stock. Stocks go through phase. And we must understand in which phase the stock is in to enter in disciplined way.

You might see a strange thing in the image below.That is the stock below is moving in a calculative manner. If we research,we will see that there are several strategy that can be applied to this stock for entry.............

One could enter at first phase,which is recovery phase. Recovery phase is the most profitable phase of a stock. In this phase,the stock stops its fall and just move sideways.There will be flat base type pattern in this phase. The volume may not be heavy.Just some spike of volume can be seen here..............But the problem is we really don't feel like entering a stock at that phase. It is difficult to enter a stock when it is not moving up.But interestingly,big investors start to enter in this phase.This is their accumulation phase. Only big investors have strength to do that,as they have news in advance.They know that the stock is going to go up soon...........

Then,the stock starts to move up,which is the starting of second phase.Some small traders(especially the experienced,risk takers,informed ones) enter into beginning of the second phase when the stock has just started to move up.These are reversal traders.........Some enters into the middle of the move and just get out soon............These are momentum traders. Both of these groups are skilled traders. These are profit takers,and low in quantity in the market.

But problem occurs with the top,where new traders,inexperienced ones,uninformed ones start to enter. They are late. And they enter just at the top. Because already the stock is in fire,everybody talks about it.There is rumor in the market spread by other traders.So,all want to jump in it. The sentiment rises,and with that the price and volume rise heavily. Now getting a chance to have some lucrative profit,those investors and small traders that entered before everyone start to offload their holdings pushing the price down. This is euphoria or blow out phase. This is a bad entry.We should always try to avoid this phase...............

Then comes the pullback................Big traders already sold much of their holding to small traders at the euphoria phase.Now there is no manipulation by big traders.They are not holding the stock.The supply is high.Small traders hold on to their stock in lose.Some panic,and start to sell. Now if the selling is hard at this level,then the stock will go to reversal. But if the selling is not hard enough,or the stock is still in demand,the stock will go to pullback only..........This is another entry point............

Now there will be another entry point in the stock after the pullback.And technically that would be the last entry in this stock!!!!!! However,sometimes the stock may have several breakout and pullback. See Bracbank's one year trading..............

If you go through the data/charts of all stocks,you may find stocks usually go through such phases. And whether a stock will go to pullback or reversal situation,none can say unless there is indication of it.............

Now think why huge volume at the top is bad indication.................Because a lot of transaction is occuring. And usually,big traders are selling to the small traders there.............And usually,after tht euphoria phase,stocks lose momentum.............

Now why should we know where the stock is in at the moment! Because we need to be disciplined......................

Now how do we enter the stocks. We develop some criteria to enter the stock at each phase. We will work on each phase and find the best possible entry...............

Now if we have some pre defined entry strategy or patterns,we will have some advantage over the market. And one of them is discipline..............Because then,we will know what we will do under certain situations..................