MASTERING THE TECHNICAL TOOLS

Yes, let us try to understand what is technical trading and the tools  which help us to understand the trading opportunities.  There are more than a dozen of tools available for technical trading and it is not necessary that you have to apply all the tools for a successful trade. You can master three to four of them and become a smart trader.

Support and Resistances.  Depending supports and resistance is one of the  widely used concepts in trading.  Every one have their own idea on how you should measure the support and resistance.  Let us first understand the basic.

Look at the chart below  It is a daily chart of Tata Steel. You can notice those red lines joining two tops(resistances) and blue lines joining two bottoms (supports).  You can also notice a red line converted into blue. When ever a support has  witnessed a break out, the support  automatically becomes the immediate resistance.  It is also applicable when price break out a resistance.  Many time you can see that a support or resistance is broken but with in a small time you will come to know that was not an actual break out and the market has tested the support or resistance levels. Some may call it as a false break out.

How can we understand the actual break out?  There is no definite answer for this question.  Some analysts argue that a support or resistance level is broken if the market can actually close past that level.  But you will find that  this is not the case always. How ever there are many other ways to be assure about the actual break out which you may learn latter.

Trend Lines. Applying trend lines are the most common form of technical trade.  It can show you the accurate place of entry and exit if it is drawn correctly.  Unfortunately most traders don't draw it correctly or try to make them fit  favoring  their way of wishful thinking  to analysis the market.

Drawing a trend line.  To draw a proper trend-line, you have to spot two recent  major tops or bottoms in the chart and then join the spots with a line.  You have to join the  bottoms to find out an uptrend and tops to find out a down trend. An uptrend trend line shows you the supports and a down trend line show you the resistances. See the chart below.

 

Now you may feel it is so easy to trade and you understood  all the secret of smart trading. No it is not that.  You have to master this first.

I am sure that you can make more than 50% of your trades as  winning trades if you master only these tools.   And ......... Yes,  it is much better than making your 90% trades as losing trades  by simply depending on tips by some one else.

Channels   No, we are not talking about  a TV channel like CNBC NETWORK18, so there will not be a commercial break!!!  Taking the trend line theory one step further will enable you to create a channel. What you have to do?  Nothing, just draw a parallel line to your uptrend or down trend lines.  Yes  you are  right, there you made a channel and it is an additional tool  for you to determine  good places to buy or sell.  Both bottoms and tops of channels  represent the potential areas of support and resistance.

Channels are always helpful in trend trading especially in a shorter time frames. It is used as a supporting tool in other types of trades.  It is a wonderful tool to assess the price actions coordinated with volume play. Try drawing a parallel line to the trend lines shown on the above chart.

Regards,

NEW YEAR GIFT

Hello Friends,

There have been request from my friends who are regular traders of Indian share markets and were doing trades on the basis of TRADING TIPS by medias and analysts to provide them some tips for trading.  So it has been decided to analysis the available tips from the medias an brokers. Some of my friends have agreed to help me providing tip announcements from different sources by mailing me the same.  I will check those tips according to my knowledge and experience and filter out the most dependable tips here. In a way I am trying to analysis the analysts and I believe it may be helpful for those who visit this blog regularly I will also provide one or two day trading and swing trading tips here from my side.  Day trading tips are valid only for the day and the Swing Trading tips are valid for a period of 7 to 15 days.  Please refer the disclaimer

• Day trading tips
• Swing Trading Tips
• Mastering The Technical Tools. 

Hope you enjoy this,

Regards.

Wish you all a Very happy and prosperous 

New Year

THE GAME INVESTING.

This post is for those who want really invest  with me in share market. I am looking forward to invest in 10 scripts from the Month of January 2011. The scripts are selected from 10 different  sectors which I hope to out perform in long term basis. The total Investment will be of 50 lakhs and it will be divided in to scripts accordingly based on their future performance and the performance of the sectors they belongs to. This is going to be a long term portfolio for a period of 5 years and target will be a pure 100% profit on investments in every year.

Rule. 1 Fund allocation=80% for investing/10%for hedging/10%for trading.

Rule  2.Slow buying based on supports & performance.

Rule  3 Position Building based on supports

Rule  4 Profit Booking at 50% earning on the invested fund

Rule  5 Hedging Using Put Options apply in between 7th & 20th of the month

Rule  6 Hedging Using Future Trade apply any time.

Rule  7 Trading in Nifty and other Indexes apply.

Rule  8 Trading with positions apply

Rule  9 Stop Loses apply only on intraday trades (apply on positions in case of profit booking )

Rule 10 Hedging amount used = 4 to 8 % of the invested amount.

The selected scripts are BIOCON,    HDIL,     JETAIRWAYS,    M&M,    RCOM,    RELIANCE,   RENUKA,    SBIN,    TATASTEEL,   TCS.

The trade and investment executed with hedging and current value will be posted here daily.  As I am sure that I will be achieving my Target of 100% profit on yearly basis, I suggest if any one who want to follow me in this trades can do that at their own risk.  Why I say at your own risk?  It is because  I am trading with the support of charts and all other available advantages which may not be the same with others. I will be buying Equities on quantities based on their lot sizes in future segment. For example Tatasteel has a lot of 500  so my buying quantities will be 500,1000,1500,2000 or some times  even 125,250 etc.  I have noticed that if you buy in such an equation it becomes very easy while hedging investments or profits.

System set up For Trading.

3-15-45-225emas, Japanese Candlestick Chart with Stochastic RSI & Bo-linger Bands With the support of Fibonacci Replacement & Extension Levels.

TREND IS YOUR FRIEND TILL IT SHOWS YOU THE BEND......BUT......THOSE WHO WORRIED ABOUT THE BEND WILL NEVER EARN TILL THE END.

Best Of Luck. 

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TRADING TO FEED YOUR INVESTEMENTS

OK Friends,

After seeing the last post about the way I traded in RCOM many of you will be wondering how is it possible in an intraday trade.  Be frank with you I was tracking RCOM  since last 1 month to add it  in my portfolio.  I know that  many people in Indian Market are not in favor to the sector it belongs to and to  the script itself because  the sector  going through some negative sentiments.  More over the last few quarters are also bad for the company.  At the same time we have to understand that it is  a big company and the script is available even now at the lowest price of March 2009 which was the end of bear market. So in my opinion it was a good buy even at 122.  But I always use to buy some thing when it shows some strength.  I was doubtful about its performance  with a strong and wide bearish channel with strong volume following a mild and thin bulish channel with low volume. I was sure it have to go upwards but waiting for a confirmation of volume strength.  And my 315-45ema chart was also telling me to wait. Hence RCOM was there in my waiting list.(Refer the charts attached)

What you are seeing in 5 day chart  in previous post  is the play of Fib retrace levels.  I have seen it as a very good dependable tool not only in intraday trades but also in positional trades.  It always help us more than 50% in winning trades.  You can ride a script with Fib.. levels  for keeping  trailing stop lose and adding positions. ( I will definitely describe the way of using Fib.. levels in a different post.

Now let us go back to Mr. A's portfolio where we are aimed to a target of 100% profit per year and with a life span of 5 years.  We have also decided to  invest the fund diversifying in different scripts and  Mutual Funds and ETF.  Now what  we have to discuss and understand is that how to do it.  In one of my previous post you have seen a chart of NIFTYBEES and its performance without management and with management. (see the chart below)

Let us go back to 2003 with Mr. A and his investments imagining that we have invested for Mr. A  in NIFTY BEES. We bought it at 95.50 in 2003 May and have a target of 100 % per year. We have to make some strategy here with some prescribed rules because it is a business.  So let us make a strategy this way.

Rule No. 1 Will Never sell the product with out achieving the target.

Rule No. 2 When we are going to earn 100% profit within a year we are ready to spend 5 to 10 % for an insurance cover of our investment by way of hedging it.

Rule No.3 We will treat all the hedging trades as a fresh trade in case that trade is giving profit in between 50 to 100% of the fund used to hedge.

Rule No 4 We will add positions as and when required as per our system

Rule No 5 We will again diversify the fund in to 3 parts.  i.e. 70 percent for position 20%  for  trading and the rest 10% for hedging.

Rule No.6 We will never violate the above rules.

You are invested in NIFTYBEES now after seeing all the possible ways and understanding that it has to move up.  What will you do your invested  script have gone up 10% on the same day... (like today's RCOM).  Even though you are earning 10% in a single day ..... oh... you cant sell it ..... because of the rule.. What the hell.. what a rule you have made... You are mad... go to hell with your rule..  I need only ten days like today in a whole year to achieve 100% ......... that the script may go down 10, 15, 20%  in future it is foolishness if I dont sell it now. ........   But dear you cant sell it, because you are the one who made the rules.. Breaking rules are very bad. . .......  Don't worry.  you will not loose because you are generous to spend 5 to 10%  to hedge your investments   Here it is called hedging your profit. And this is the way to book your profit with out  selling.   You bought it  at 95.50+10%.i.e. 9.50= 105. your rate is 105 now.  As it is NIFTYBEES you have two option to hedge it.  One is NIFTY PUT and the second is NIFTY FUTURE.

If you are using nifty future you know what to do but instead of doing  it with the current month future it will be better to do it with the 3rd month because you will get a little more there.  I will not tell you to  hedge it with the  put option  if you are in the first week of the month.  hedging  your investment with put option is good only in the second and third week of the month.

Hope you are tired with my boring hedging.. please  have some fun.

These are XMAS DAYS.  Very Best Wishes.

Bye for now

• The New Year Gift
• Mastering The Technical Tools

THE POWER OF TECHNICAL TOOLS

 Friends,

Technical tools are  very much dependable in Technical Trades.  Using multiple tools for confirming your trading decisions help you a lot. Look at these charts.  One is a part of 5 days chart showing a trade executed by the help of multiple tools and another is an end of the day chart (daily chart) showing how two different indicators showing a resistance point.

I will give the details  today itself in my next post

 

Best of Luck.

• Trading To Feed Your Investments 
• New Year Gift
• Mastering the Technical Tools
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