Asset Purchase Programe

Asset Purchase Program

What is this?

In every month we see some central banks is going to buy Asset. What is this? And what is the effect of these purchases? Here Asset means what we have to understand it. Asset is mainly Treasure Bonds or Bills. Or it may be Share of companies. But rarely it is meant shares. Normally it is meant BONDS OR BILLS. So when a CENTRAL BANK buy assets from Economy, it pushes money to the Economy. BONDS is going out of Economy so its supply is reduced, so yields is down. So Currency will strong. Again the opposite side is: when money supply is increased in the economy the Currency should devalued. So Currency will depreciate. So ultimately overall reaction is near about ZERO in the economy. 

Best of luck. 

Happy Trading. :)

FED Operation Twist September 2011

FOREX TRADING with Fundamental Analysis

I am trying to explain it in simple language. I could use TECHNICAL language like yield, face value or bla bla but I am not using to make it simple.

Twister means swap or change.

Federal Reserve has bonds in their portfolio. You know BONDS have maturity period like 1 year, 2 years, 3 years, 10 years, 15 years, 30 years. Higher period BONDS give higher interest and lower period BONDS give lower interest. So if we get 2% interest rate from 1 year BOND, then obviously we shall get 2%+ interest rate from 2 years BOND. This is normal situation. Sometimes abnormal situation happens. That is different situation.

Now Supply and Demand: You know guys when something's supply is up, then its price will go down. Say a BOND has a face value and market value both of $100 and its interest rate is 2% . Then right now its Yield is also 2%. If its market value is lowered due its supply then say its market value right now is $95. As bond's interest rate is fixed so you will get $2 from this bond also per year. Now you bought the bond at $95 and the amount you are getting after one year is $2 then your YIELD=2.10%. So if one bond's supply is increased then its value will go  down and its yield will rise. If a bond's Supply is reduced then its demand will increase and market price will go up and yield will go down. This is all about BOND market and YIELD in Brief.

Now the Twister Operation: FED has BONDS in their portfolio. I have told it in the outset of the article. They have some short time period BOND which have to pay off within one or two year. The total BOND valued like this is near about $400 Billion Dollar. They are going to sell their short term bonds. When they will sell bonds they will get money after the sell of short term bonds. Right? They will use this money to BUY LONG TERM BONDS from the market. I think up to this it is clear to all about what is actually TWISTING OPERATION done by US FED in last September.

What will be the reaction? This is the main part of the article. As there are so many news and so many articles available on this issue. But I rarely got any clear clue about the reaction of this decision made by FED. I am here explaining it. The sold BONDS are short time right? Then who will buy those bonds will be able to en cash those bonds within short time..Right? Then the money flow in the economy is going up. FED was trying to do that…They wanted to increase money flow in the economy.. Quantitative easing can do this, but the problem with Quantitative easing is: it makes the inflation high and vulnerable. So they are doing it with selling short time period bonds to holders of long term bond holders. In this way LONG term bond holdings of FED will go up and the yield will go down as the SUPPLY is reduced of long term bonds.

So ultimately FED is empowering money supply in US economy without hampering the US inflation and not extending the Balance Sheet of FED.

This is all. Will see you again with another issue. Happy Trading

Trend in FOREX market

Do you know guys what is the most beautiful thing in FOREX market?From my side it is TREND. Many of us search a market for big trend and they want to earn from trend. FOREX is that market. Here is a one and half years analysis of EU from November 2006 to May 2008. It made a gap of about 3500 pips within this time. It did give correction in many zones but the ultimately TREND was long. So what should be your trading approach in this market? Will you trade anti or the TREND direction? If you are a fool you will trade ANTI DIRECTION of TREND, and if you are smart enough then you will go for TREND DIRECTION.

For long term Trend Identification you can use many things. You can use Technical Analysis, you can use Macro Analysis for long term Trend Analysis. I use MACRO analysis for TREND identification. If you don't know Macroeconomics, it is no matter. Here just see I did use only 200 SMA for trend show. The reason is why I did use this 200 parameters? The reason is though the a year has 365 days, after deducting two holidays every week and other holidays for occasions, the year total trading days is 200 near. So many traders and me use 200 SMA. You can also use it.If FOREX is so easy then why people lose money here? People lose money here as they have no idea about risk management and their greed. You have to have your own risk management system then the TREND is reversing. You can use Price Action of Daily, Weekly or monthly for reversing your Trend. Here is a chart of USDBDT pair for the last two years. What will you do here? Go long or short? I can explain the reason of USDBDT uptrend. Will do it in some other post. Just I wanted to show you guys the REAL FOREX trading with proper Money Management.

Will I follow FA or TA in FOREX market? Part One

           In my last one year training experience the most answered question was this one. Someone asked me whether he would follow only TA or FA or both. Someone asked me whether he would follow news from different sources. Here I am explaining it with my experience in FOREX market. 

           FOREX market is moved by fundamental or Economics rules. Ultimately every thing is controlled by Economics' rules DEMAND and SUPPLY. But how demand and supply is controlled? And who are creating this demand and supply in FOREX market? If I want to answer this question I have to explain the different levels of buyers in FOREX market. I shall write an article on this later. Right now just remember that some BIG institutions together making this demand and supply. And they are really big. May be they are central banks, may be they are big corporate banks who has trillion dollar assets, they are your brokers who are making market every time you are trading. So you are trading in a place where the water is full of crocodiles and you are a tiny fish in that water. A tiny fish is fighting with many crocodiles. 

            But FOREX is a very popular place for general people. Do you know why?As they win their first trade in life. That is worse and they believe that it is an easy market to earn money. Actually it is not. They feel it with the course of life. Only 5% traders in long run win money in FOREX market. Every market in the world is designed for the big institutions as the institutions made the market. So who are in a dream that he will make money with the eye blink, then he is in a dream. So wake up guys. Your hard earned money is not for gambling. Put them for trading when you are expert in this arena.

            To be continued.........

DSE today:mrtq13

DSE has got oversold in Daily chart. All oscillators like Stochastic,RSI,Macd are in oversold zone. We have reached the support zone too. We can expect some kind of rise now.

Ummm..........I am however not gonna be very excited about the oscillators' getting oversold in Daily charts. Because weekly chart is not yet in oversold zone.

Daily chart below:


Market is oversold in Daily chart. But in weekly chart,it is not yet oversold. That is what troubling me. Besides we haven't reached to the bottom yet,it seems.............This time things are a bit complicated.

As I am looking for entry position,I would like to see oversold condition in weekly chart before I enter! I would like to wait a bit more. But for those that are holding stocks at this fall,well,wait and see seems to be the only policy now for them..........

But honestly,I am concerned now. I was enjoying the fall all this time. But today's fall made me concerned..........However,we have seen fall of three consecutive days just before election. One of the fall had lost 100 points in oneday,more than today. After that day,big buyers entered the market. I hope same thing will happen this time too...............We need to see big buys...........

Interestingly,oversold condition in weekly chart always has triggered a new bull run in DSE during last three years. I want to see what happens this time. I know there will be a bull run-short or mid term. But I want to wait to see where the Index stops!!!

Waiting!!

A must know for Beginners!!mrtq13

Here is my one of the most important posts in TA for "beginners". Advanced level TAs already know it............

You must know about "Paper Trading" in TA.................And below is that..................

I don't want to elaborate a lot. If you are intelligent,you would be able to catch what the following stuff means............

All the good TAs you see around are born because of the following feature. If you don't know the following thing,you won't be able to analyse many things.............Besides,you will be self dependent TA,if you know the following feature............

I could have polished the whole Tutorial and put a new one. But I am posting the old Tutorial of mine,for the sake of old time,good time...........See where we were,and where we are now...........

Open the file in Internet explorer or Firefox.............Read it thoroughly..................This one single thing can change your life................

Download :

http://www.4shared.com/file/73638121/7a6918f0/Bar_Replay_tutorial.html/

Something to give a thought!!:mrtq13

It was an amazing situation. I was watching it,and my heart beat was rising and rising..................

I learned an important lesson. I am not sure if this lesson is gonna be any of any help for me in future. But at the moment this is a very important discovery of mine.

I treat this a research conducted.

Note my posts on Banks of last week. I suddenly started to post on banks. There is a reason for my posts on banks.

I am posting some charts of Banks including bank sector's chart. Now I want you to see them one after another.

"See the fascinating way the market is being manipulated by big gamblers"(I love these guys). They collected banks before we imagined(we saw the spark; but many didn't believe it). Now I wonder who are the smartest. We,the ones that go on calculating one after another things. Or,they,the ones that "take calculated risk at fall and play in the dark".........................

We get confused. We jump; we anlyse. In the mean time,market rise and fall. We get stuck in the middle of the fall and rise...................

And what is more interesting is,we are not coordinated,balanced. If we check the posts in this very forum on banks,we would see many were "feeling" banks are moving. But.......................We went on gossiping,talking about useless stuffs in the forum. In the meantime,there were "buys" in the exchange. We just didn't see that............Or,we didn't care............May be,our mind was blind because of index itself..........!!!

Now,let's cut the long story short,and have some reaserch. May be,this will help the TAs in future. That is why,I am posting. (by the way,I am posting from my journal here)................

At first,have a look at the chart of Bank sector. See the volume of 14/11/08. It was accumulation day. Interestingly,after that day,everything went silent. It is as if nothing had happened. But they were smart. They tricked us into believing that the rise was just a "bluff". It wasn't..............Because if it were a bluff,then this sector would have fallen later. But as you can see in the chart below,this sector instead of falling went into consolidation. And then,it started to trade above the short term moving averages..................


Bank sector :




Now go on seeing the "mastery of the masters............"

If you think your current knowledge regarding the market is enough to profit,think again(like Emu bhai said)............

Below I keep on posting the banks chart. If you are intelligent,you would see how these guys did what they did. I was seeing them in disbelief. Later,I couldn't hold anymore. And I posted about banks in the forum at the end of last week.

They loaded their gun long ago. And they shot later- Bullet in the blue sky!!!!

ABBANK :




All buy took place on 14/11/08.

Is that incidental.................??
All were bought almost near to support line.............!!!
After the buy was over,there was consolidation. Shouldn't we have entered in consolidation instead of thinking that it was bluff???
Do you think the trend is over in Banks.................???
Are you being fallen in bluff again................Think again

NOTE (from quark,admin of blog):
This type of consolidation is showed also in ALARABANK,BRAC,DUTCHBANGLA,EBL,IFIC,NBL,NCC,ONE BANK,SHAHJALAL,TRUST,UTTARA BANK by GURU(mrtq13).

How to detect reversal:a strategy:mrtq13

Well,I have no idea at all about Excel Sheet used in TA.................Why don't you use software to make charts........?? That would be easy,wouldn't it?

My/our style is completely different,I think..........

You are already using all the tools you need. But I think,you need strategy now,not tools. I mean where are you gonna buy and sell at the levels of an indicator? That is what you need to know or "plan"! Let's see this strategy :

We buy if :

1. Candlesticks giving bullish signal :
2. At oversold situation
3. At moving average.
4. At support level.
5. At moderate volume.

Above is a strategy that combines candlestick,oscillators,moving average,volume and support level. There could be a more than 20 different types of strategy like above for a TA to stick to..........

You may find it pretty interesting to see that stocks usually act according to strategy. And almost 80% times,strategy works. And it gives disciplined approach to market. Most of all,when a TA has defined strategy to trade,the TA is not scared or panicked or blind...........

You aim is to find our reversal signal...............If you look at the DSE index itself and our forum postings on Index,you would see that the index has reversed just at the support zone. That is reversal. And I don't think you can easily detect it without software. I have no idea how you are gonna do that with Excel.

I suggest you to use software to make life easier. I know it is difficult to break old habit,and establish a new one. But that is worth it.............

TC!!

I think this forum,"dsetrader.com" itself is enough for answering all the queries you have below.............This forum is self fulfilled............You will get anything you want to stand up and get going. Any new trader's life can change forever from this forum.

All you have to do is to find out stuffs of this forum. Use "search",or post queries................I think there are several great guys here enough to answar anything you need to know.............

It looks like you have remained disconnected from the forum for long,and don't usually browse it. If you did,you would see we have not only uploaded the softwares needed to trade in stock market,we have also showed everything needed to setup the database for trading DSE symbols............

Amibroker is always the best.No deny..............

No,written manual is surely not enough for anyone to get going. Help of other advanced users is needed.

We have already uploaded five years data of DSE here. All you need is to save only one page of dse in text format to regularly update the data. There are softwares in this forum to do the work for you of extracting data............

If you are gonna be a very long term trader,then try weekly data,and weekly chart instead of daily data/chart. See the condition of your holdings every weekend and decide accordinly. Hull's long term investment techinque consists of Weekly chart. A very cool stuff!!

No,I don't have such provisions to train and supply the soft in BD................I am also not able to train anyone at the moment. I am too costly for that. I would take big amounts if I ever train TA to ppl face to face/physically.........LOL............Joking...........

Optimizer started to train on software. I am not sure his present standing. You can contact with him.

TC!!!

I have 25 different strategies better than that of below one...........................The following is nothing. That is just a child play type technique.............

But strategy has huge value.Without strategy,you will be doomed to failure. Because if you know what "may" happen next(from past),you would realise/understand what your standing/action should be when things go wrong.

If you check out(taking a long time) the past of all stocks(not only in BD,but also around the world),you would see an amazing thing. And that is,all stocks in its journey have similiar patterns,patterns that repeat themselves. It is just a matter of time...........

Unfotunately,you can't detect anything!!! Because you have no clue as to how to create and detect patterns.........I won't clarify why I am saying this. But this is vital to learning and using TA............

A discussion on INDEX:12 Nov 8.56 am:mrtq13

Very interesting situation............Right???

So,at last,things seem a little green for us. Or,is it?

SEC has talked about some magical(hypocritical)words last night,the positive effect of which may be found on Index today and tomorrow.........But what is gonna happen after that........???? I wonder,what is gonna happen if institutional traders and market makers don't really bother to enter the market with full swings this time.............That is what is concerning me....!!

Is there any sign of big buyers' buying in any stock yet............?? I need to see them buying....

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

Now what about Technical point of view. That is interesting....................

My trading setup is simple. I would trade if the index goes above the yellow line in the chart below. Simple.............And that Yellow line could act as a resistance line soon.That is a very stupid problem. I want to see how DSE acts over there...........Because DSE index may fall down from there.

I am not in hurry. Why? There is a reason. I have found. Not all stocks follow Index movement instantly,though we may see some rise in many stocks,as the Index is about to turn.

What I mean is,have a look at BIFC chart below. Isn't it in charming position? Yeah,it is..........Nice position..........I know it is gonna take at least a couple of days more to rise(If it wants to rise). Several stocks like it will be consolidating at a specific level before they go up. And we will be able to trade them. So,I don't worry. I don't need to worry. There will always be a lot of stocks to trade in the market,if the market is in bullish trend..............

Bullish trend-that is what I am looking for. And if the Index goes above current Yellow line of mine in the chart below,I would consider it bullish trend for short term..............Also,a very important thing for me is that the Average Bull Volume(my third indicator in the DSE chart below)must be higher than Average Bear Volume for me to be confirmed about trend change................

Now another thing we should note also. That is,this new trend may not last long. However,that is a matter of future.............

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



Now,why I am waiting for more confirmation. Because around Jun 18th,I had bad experience. I tried to take risk and went anti-trend. I bought at support level of Index taking risk. Things were good at first. I didn't pay attention to trend moves. I didn't care. But Index fell breaking down the support level after a couple of days. And I had to exit with frustration. Later Index remained down for three months. Good for me that I exited early before the downtrend of three months started.

So,this time,I want to go slow.....................But,like I said,in another thread,I feel like entering and buying.........

Anyway,it is never too late. And I don't want to be impulsive. I always know there will be several trades ahead. So,I don't worry and hurry.............20% to 30% profit before election would be enough for me for the time being. And only a couple of quick trade can get me that much. So,why hurry!!!!

Technical indicators:mrtq13

I think :

The first thing about Technical Indicators is,if we believe in them..............
The second thing about Tech Indicators is,if they are suitable for our own personality.................
The third thing about Tech Indicators is ,if we have really understood them and can play with them.............

It looks like you have missed all points needed to chose the indicators for Technical analysis......................

I would have chosen Candlesticks just to assess market sentiment of a specific day. Candlesticks hardly ever show long term trends. It is just a quick exhibitor of a day's sentiment............

I would have chosen Heikin ashi to see longer term trend and to get rid of whipsaws........................This is not the main chart that I would use,just supplementary chart to the main chart............

I would have used Moving averages to find out if the market is in uptrend or downtrend,or about to reverse..........

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

But most of all,I would have at first have faith on any indicators. Otherwise,I would have not learnt Technical analysis.Because it is worthless to do go ahead in TA world without beleiving in it. ...........Believing is doing,believing is winning............

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

What you have asked is a matter too advanced. You are looking for a way to trade "anti-trend"..........I think only too advanced TAs should try such stuffs,and try to buy at market fall(when bear rules)/or reverse....................Say for example,DSE index is now at a nice position. Now it is easy to take decision for any advanced level of TAs to enter in the market. Because now TAs know if the Index goes below the support line,that is a "sure exit". But if not,then heaven is there....................

Now have a look at the Index below and the positions of the moving averages. If you want to buy,it would be wise you bought when the Index below crosses the Yellow Moving Average..........Because it means the market has just reversed,may be in short term length...........And this is in way would be an "anti-trend" trade if we start to buy now. Because market is in falling mode now,but the Index's position is too good at the moment that it may reverse from here. So,taking risk now makes sense..............



Still,it is not something that anyone should try............Like I said,it is a matter of Advanced Level. But be it "anti-trend" and "trend",nothing is better than "moving averages" to catch trend.When we combine Pivots with MAs,it becomes more stronger................And only when you can understand trend and its moves,you can trade in Bear moves.............

Success in trading is DISCIPLINE,MONEY MANAGEMENT AND TRADING SYSTEM:x-man

Success in trading is DISCIPLINE,MONEY MANAGEMENT AND TRADING SYSTEM-IN DESCENDING ORDER OF IMPORTANCE.

If you want to give weightage to the above three then :

Discipline is 50%
Money Management is 40%
And trading system is 10%

You may not agree now but once in your trading life you will realise it.For the time being lets proceed with the above weightages.From the above weightages, Discipilne and money management is 90% factor for success.

Lets see Discpline first.

What is discipline?

Its nothing but following completely the rules which an individual trader as framed for trading.Now what are the rules of trading ? The rules of money management rules and trading system rules.

Money management (from internet)

A basic investment tenet states there is a direct relationship between risk and return. Trading is no different - the greater the account value risked on a single trade idea, the more volatile the total returns from the trading strategy will be.

A simple strategy is to never risk more than 2% of your trading account on a trade. Most professional money managers will risk a fraction of 1% on a single trade.

"There are many bold traders, but there are very few old, bold traders".

One final quote:

"Winners hold their winning trades, losers hold their losing trades"

MONEY MANAGEMENT IS VITAL TO TRADING SURVIVAL,TRADING SUCCESS,AND TRADING PROFITS.......know them and open the treasures available.Know them not ,and that will be at your peril and doom.

Basically,we use money management rules to restrict how much the market can take away from us. Certain rules that we follow with discipline.Rules that are written and implemented trade after trade,again and again.Rules that help us to stay with the trend and to let profits run as long as possible.Rules that trigger off small losses as compared to the big profits.

Like a warrior,this is the Code that a trader swears by,and adheres to,come what may.

If his stop is triggerred,a trader is out,he does not sit there reasoning that the economy is growing 15%,and the fundamentals of this company is great,and that it is expecting good earnings............If the stop is hit,that's it.He/She's out of that trade.All thought therefore goes into the trade BEFORE the trade.No more thoughts after the trade has been set in motion.

The mind is set into "NOW" mode,no more planning ,no more thinking.When the stop is hit,the trader is out,...........and that's that!

But,there is more to money management other than stops........stops is an aspect of it.But there is more.....

But before getting into it,just noticed that there always is this great amount of blabber about the number of wins a trader has had,etc etc...............So before getting into things,felt that we all should realise one thing.We are in this business to make [b]profits,we are NOT in this business to win......[/b].you can have a Batting Avg of 95% and lose out when you look at profits and losses.You can have a Batting Avg of 30% and come out with stupendous profits by the end of the month.

How is that possible?Well,presume you make an average of 200 taka per trade for 19 trades,and lose 5000 taka in the 20th trade,well,you are sitting pretty with a 95% batting avg and a loss at the end of the month.

Presuming that you have made losses in 14 trades,an average of 400 taka per trade,and we made 10,000 taka in the other 6 trades,well,we are sitting with a profit at the end of the month although we have been wrong 70% of the time.

So,it's not about about the number of wins that one makes,it's all about making profits............and that verily is the heart and core of money management!

Cites of Ed Seykota-a great trader:mrtq13

1. (So you didn't have a clear exit point) In other words, the only way you could stop trading was by losing.

2. If you can't take a small loss, sooner or later you will take the mother of all losses.

3. There are old traders and there are bold traders, but there are very few old, bold traders.

4. Dramatic and emotional trading experiences tend to be negative. Pride is a great banana peel, as are hope, fear, and greed. My biggest slip-ups occurred shortly after I got emotionally involved with positions.

5. I prefer not to dwell on past situations. I tend to cut bad trades as soon as possible, forget them, and then move on to new opportunities.

6. The elements of good trading are: 1. Cutting losses, 2. Cutting losses, and 3. Cutting losses. If you can follow these three rules, you may have a chance.

7. Trying to trade during a losing streak is emotionally devastating. Trying to play "catch up" is lethal.

8. I set protective stops at the same time I enter a trade. I normally move these stops in to lock in a profit as the trend continues.

9. One evening, while having dinner with a fundamentalist, I accidentally knocked a sharp knife off the edge of the table. He watched the knife twirl through the air, as it came to rest with the pointed end sticking into his shoe. "Why didn't you move your foot?" I exclaimed. "I was waiting for it to come back up," he replied.

10. Losing a position is aggravating, whereas losing your nerve is devastating.

11. I intend to risk below 5 percent on a trade, allowing for poor executions.

12. The trading rules I live by are: 1. Cut losses. 2. Ride winners. 3. Keep bets small. 4. Follow the rules without question. 5. Know when to break the rules.

13. Be sensitive to subtle differences between 'intuition' and 'into wishing'.

14.Everybody gets what they want out of the market.

Jesse Livermore's Stock Trading Rules:mrtq13

Trading Rules
Jesse Livermore's Stock Trading Rules

All successful stock and commodity traders have rules for buying and selling. Many traders today still use the trading rules Jesse Livermore first devised almost a century ago.

Jesse Livermore constructed his rules over several years while he learned by trial and error what worked on the markets. He was guided by one of his favorite principles:

"There is nothing new in Wall Street. There can't be because speculation is as old as the hills. Whatever happens in the stock market today has happened before and will happen again."
Trading Rules

* Buy rising stocks and sell falling stocks.
* Do not trade every day of every year. Trade only when the market is clearly bullish or bearish. Trade in the direction of the general market. If it's rising you should be long, if it's falling you should be short.
* Co-ordinate your trading activity with pivot points.
* Only enter a trade after the action of the market confirms your opinion and then enter promptly.
* Continue with trades that show you a profit, end trades that show a loss.
* End trades when it is clear that the trend you are profiting from is over.
* In any sector, trade the leading stock - the one showing the strongest trend.
* Never average losses by, for example, buying more of a stock that has fallen.
* Never meet a margin call - get out of the trade.
* Go long when stocks reach a new high. Sell short when they reach a new low.

Other Useful Trading Guidance

* Don't become an involuntary investor by holding onto stocks whose price has fallen.
* A stock is never too high to buy and never too low to short.
* Markets are never wrong - opinions often are.
* The highest profits are made in trades that show a profit right from the start.
* No trading rules will deliver a profit 100 percent of the time.

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…………….

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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!