journey of a trader

[kkseal]

Soliloquoy

 

[rajeshrao1]

hi Oilman, thanks for sharing your story.
Dont you think that you were undercapitalised to begin with? You were taking large risks because of small capital.
As a saying goes-- if you want to make 1 million$, start with 2 million$.
Psst--I myself am undercapitalised!!!

 

[oilman5]

yes, 1990...8000.....experiment...
1991.........20000/. further.. i add
1992.........20000/..

1993.......i encash..........2 lakh...

1994.54......holding value 2 lakh ....vanishes...
never in life i believe i buy & hold..
1997 experiment...fail
2000 experiment fail


2001-02 come back as day trader..
make money...shear luck
2002..03 trade...diciplined to earn..
2003.... encash investment[ now i understand value of holding]
run family from trading@20000/month
2004 i stay out on medical advice...
2005 i play...any fool. provided dont short'..can earn
2006 win some..loss some.. fig wise nomore..small investor..
%wise.. return..18..
learning volatility..
practice mm
2007.. i found too risky...occational entry & quick exit..
recent play..cmc..eil...bel agro dutch..ongc
present play...arvind..dlink bpcl

 

[oilman5]

theme...DAYTRADE VS SWINGTRADE VS POSITION TRADE
..................................................................................
DAYTRADE..i treat as gambling..
totally unsuitable for amateur...
pro...can do..suits DEALER..RM..as its their job to watch
call helps..provided u understand reason of call
personally u should know call giver....u execute ...
as per luck and survival skill u make money...
DAYTRADERS BIBLE..
DAY TRADING UNIVERSITY... HELP FUL

INVIDUAL SENSE .. OF BULLPOWER ..BEAR POWER..MUST..
PIVOT PT CALCULATION ..
ANOTHER IMP CONCEPT..JUDGE THE DAY..
UPDAY BUY FIRST,SELL LATER
DOWNDAY SELL FIRST, BUY LATER

NO TREND DAY OBSERVE..
VOLATILE DAY USE YESTERDAY MEDIAN VALUE..
BUY 2% BELOW
SELL 2% ABOVE..
STUDY NIFTY AND NIFTY FUTURE....ORDER POSITION
TO JUDGE WHAT WHAT DAY IT IS...

SWING TRADE.......
nobody join in thistype of trade...
with 3yr trade experience...guidance..by ..senior u can...

its not at all atrade...basically judicious use of day trade and position trade...
book loss early being ..daytrader..
hold the winner...like position trader...
y have to face highest level of stress during this style..
computerised signal helps..
min 2 time frame concept..useful
conflicting signal ..study ...
use..1hr breakout as entry...
any momentum tool ...helpful

VVONTERU, SWINGTRADER can help..

position trading
................................
its possible to learn ..if u have done investment before...
holding period is key..
stop..for save from rainy day..
trend concept...very useful//
fundamental idea help..
ma x..dual or band..sector strength useful..
weekly chart..good..
concept learning for free...www.ino.com
part time play..possible..
in metastock aroon helps..
for pro scan tool must...
by the way if u enjoy WINNING TRADE IN MIND...
AGGRESSIVELY DREAMER...

DONT JOIN IN ANY 3 VENTURE......observe other in brokers office

oilman5[ pro can make comments]

 

[oilman5]

here i am copy paste..from traderji himself....
this can be useful to any learner...
VIEWS R OF TRADERJI, A 30 YR TRADE VETAREN


1] I had to undergo training in price movements with a number of professional traders where I learnt my first and most valuable lesson "The Trend is Your Friend".
2]I prefer trading the medium to long term trends although I do sometimes trade short term trends lasting a few days.
3]I personally prefer the conventional simple or exponential MA and MACD
Indicators are a personal choice and most indicators give reliable trading signal. However the trick is to use them often over a long period of time to understand how they behave under different market conditions. Then only will you get the desired results from that indicator.
__________________

4]About 30-40% of my trades are not profitable. The Maximum Loss I take on any single trade does not exceed 1% of my trading capital.

It does not take too long to cover up any loss as I trail profitable trades which enables me to capture a good 70-90 % of its trended move.
5]I do not do intra-day trading. I prefer positional trades where the holding period can be anywhere between weeks to months.

My method of selecting stocks to trade in are different. I do not use any technical indicators. I visually scan through the bar charts every day/week for consolidation/congestion patterns and trade breakouts of those patterns

I also always make sure that the difference between my entry price and stop loss level multiplied by the number of contracts does not exceed 1% of my trading capital.

Once in a trade I keep adding more positions (as soon as the current stoploss reaches break even level) in the direction of the profitable trend.
6]I prefer the ERS when compared to the RSC. The ERS is superior because it compares a single stock to all the other stocks in the market and ranks that stock from 1 to 99. The RSC drawback is that it only compares a single stock to another single stock or index.

I personally use the Trend Trading Newsletter for the daily ERS reading and trend signals.
__________________
7]If I go long I use the previous 3 bar low as my stoploss

 

[oilman5]

VIEWS FROM TRADERJI. A SUCCESSFUL TRADER'S JUDJEMENT
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I search for stocks manually. I visually go through about 100-150 charts every day. This gives me a better feel of what patterns could be developing in every stock.
__________________
2]A new three month high confirms and indicates that the stock has begun an intermediate uptrend.

A three month high is 63 bars on the daily chart and not 90 bars. You can easily scan for stocks making a new 3 month high using the following formula in MetaStock:

c> ref(hhv(c,63),-1)
3]since I use a trailing stoploss which changes everyday I input stoploss orders on a daily basis.
4]The other things that I consider apart from price trends is volume ( I prefer to trade large & mid cap high volume stocks) and most important ERS.

I select sectors with the highest ERS and then stocks within that sector with the highest ERS. This helps me select the best performing stocks within the best performing sectors. Most amatuers make the mistake of selecting stocks that have fallen the most and are cheap. However to be successful in trading one should buy into stocks which have the HIGH ERS readings and short sell stocks with LOW ERS readings.

Volatility is important for intra-day traders and not for medium to long term position traders. In fact do you know that stocks in strong trends have low volatility
4] No warning signal just use a trailing stoploss which is the previous 3 day lowNo I do not trade in any other way. My current short trade on the NIFTY is still on with a trailing stoploss at the 3 day high (3045.35).
Since my trailing stoploss is at breakeven I will now initiate another short position on Monday. What this means that the risk on my previous short trade is nil and I will be adding another position in the direction of the profitable trend.
5]To go short you need to confirm a downtrend first. For this look for a new 3 month low and not 3 month high. So the formula for the scan would be

c<ref(llv(c,63),-1)
6]It does not matter if you trade stocks or stock or commodity futures. Your approach should vary depending on the time frame you would like to trade. If you a day trader you will have a strategy which will be different from a swing trader. A swing trading strategy will be different from a position trading strategy. So first you have to decide on the time frame you would like to trade in and then develop a trading strategy to suit that style
7]The 2% stoploss really depends on your trading capital. If you have a very large capital your stoploss could even be as low as 0.25% to 0.50%. If you have a very small trading capital then one has to trade with a larger stoploss of maybe 3-5% of you trading capital. I always keep my stoploss the same while taking positional trades - last 3 days low for long trades and last 3 days high for short trades. If you can use a system tester check out its profitibility.

If I find that the stoploss is to large (during highly volatile times) I normally reduce the position size to fit into my % rule of money management. Keep in mind that one should not change the stoploss to fit into your money management but rather the position size. If you find that the difference between the entry price and stoploss is too large and you cannot take the loss then do not take the trade.

I do not change my trading strategy during the first three days of the month or last three days of the month. The trading strategy remains the same
8]In highly volatile markets it is always better to swing trade. Your stoploss should be the swing low and if you do your analysis correctly the chance of your stoploss getting hit will be lower.

I use the previous 3 bar low or the swing low whichever is lower.

I would suggest you wait for a pullback and then BUY only after it closes/crosses above its previous bar's high.

If I entered a trade at this level I would use the previous 3 bar low or swing low whichever is lower as my stoploss.

Amaraja was a good swing trade. However it looks ready for a pullback/correction. Iwould suggest you to make a list of 50 stocks which you should visually scan daily for such setups. I am sure you will not be disappointed
9]It is generally recommended to use trend following indicators in the daily chart when the weekly ADX is rising and oscillators in the daily chart when the weekly ADX is falling.
The ADX indicates the strength of the trend whereas the MACD indicates the dierction of the trend.
10]You can enter the next day immediately after a breakout out of the pattern. Taking a trade is probably the most common heartache faced by market timers and all market traders, and is only compounded when it turns out that it would have been a profitable trade.

"Uncertainty is a powerful emotion that can weaken the resolve of even the best of market timers." You need to get rid of this.

Mark Douglas, an expert in trading psychology, says this about trading fears in his book "Trading in the Zone."
"Most investors believe they know what is going to happen next. This causes traders to put too much weight on the outcome of the current trade, while not assessing their performance as "a probability game" that they are playing over time. This manifests itself in investors getting too high and too low and causes them to react emotionally, with excessive fear or greed after a series of losses or wins.

As the importance of an individual trade increases in the trader's mind, the fear level tends to increase as well. A trader becomes more hesitant and cautious, seeking to avoid a mistake. The risk of choking under pressure increases as the trader feels the pressure build.

All traders have fear, but winning market timers manage their fear while losing timers (as well as all traders) are controlled by it. When faced with a potentially dangerous situation, the instinctive tendency is to revert to the "fight or flight" response. We can either prepare to do battle against the perceived threat, or we can flee from this danger.

When an investor interprets a state of arousal negatively as fear or stress, performance is likely to be impaired. A trader will tend to "freeze."

There are four major trading fears:
Fear Of Losing

The fear of losing when making a trade often has several consequences. Fear of loss tends to make a timer hesitant to execute his or her timing strategy. This can often lead to an inability to pull the trigger on new entries as well as on new exits.

Fear Of Missing Out

Every trend always has its doubters. As the trend progresses, skeptics will slowly become converts due to the fear of missing out on profits or the pain of losses in betting against that trend.

Fear of Missing Out on Profits

This fear is usually felt during runaway rallies. All your friends are talking about the incredible profits they are making every day. If you really look at this in the right perspective, it is a very dangerous kind of fear. It eventually causes you to buy in, and of course, when you and thousands of others who feel the same way react at the same time, the market is finally at its top.

Fear of Being Wrong

The desire to be "right" is in direct opposition to the ability to be successful.

The desire to be "right" is in direct opposition to the ability to make money.

A market timer's desire to be right, to be able to tell his friends how successful he or she is, can become so powerful, that a he or she winds up second guessing, the "strategy." Taking winners too quickly, or holding onto losers in the hopes that they will come back, or at least break even.
__________________

 

[oilman5]

hey we all member of traderji.com..enjoy his knowledge
.............................................................................
1]IMHO market Direction is most important as majority of stocks move in the same direction of the market. One should always trade in the direction of the market.

I do not BUY 100 Days HIGH. Please read the discussion again.

The reachable % profit yearly depends on your trading style and how the market behaves. One cannot exactly pin point this figure.
__________________
2]use the 3 month high to identify stocks that are in an uptrend. Once the stock is in an uptrend I transfer it to a separate folder and then watch it for consolidation patterns. The 3 month high/low can be used to identify stocks for swing or position trading.

When long I keep a stoploss at the previous 3 bar low. When I am short I keep a stoploss at the previous 3 bar high. I keep this stoploss irrespective of how the market or that stock behaves.
__________________
2]Thats probably because most analyst are not professional traders and are unable to decipher the disinformation of the markets.

I could not find disinformation in my dictionary, but it is a term coined in the intelligence community and now in broad use. In intelligence parlance it means false information designed to mislead and confuse the adversary.
The market behaves much like an opponent who is trying to teach you to trade poorly."

A common formulation of this phenomenon is the concept of random reinforcement. Traders are not rewarded with a profitable trade every time they do something right, nor are they penalized with a loss every time they do something wrong.This makes it exceptionally difficult to figure out what is right and what is wrong. Compare this to an electric fence. Every time you walk by and don't touch it, you feel fine. Every time you touch it, you receive a painful shock. It doesn't take a man or animal long to learn how to relate to an electric fence.

Think how much easier learning to trade would be if you automatically took a loss every time you failed to follow correct decision-making procedures. At the same time, what if you were always rewarded with a profit when you traded correctly? You would be able to learn the correct trading rules much more easily
3]The rounding bottom is a long-term reversal pattern that is best suited for weekly charts. It is also referred to as a saucer bottom, and represents a long consolidation period that turns from a bearish bias to a bullish bias.

4]Close crossing above previous 3 day high
cross(c,ref(hhv(h,3),-1))

Close crossing below previous 3 day low
cross(c,ref(llv(l,3),-1))

the risk of losing money is a part of trading process. You just have to prepared for it and take it in your stride.

I generally try and aviod trading or holding open positions on highly volatitile days when company results are declared or budget day, etc. This has saved me a number of times.
I generally wait for 30 minutes before entering the trade


HOPE YOU ALL LEARN FROM THIS GREAT MASTER REAL TRADING

oilman5

 

[karthikmarar]

Oilman

Somehow missed this thread till Siva pointed out. Interesting journey indeed..
Looking forward to more interesting stuff from you..

regards

Karthik

 

[oilman5]

HERE I AM WRITING CONCEPT OF MY FAVOURITE SWING TRADER.VVONTERU
...
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credit goes to crystal clear view of this excellent trader in india[i copy paste it

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let us start....1I do swing trading. I like site: http://www.icharts.in/home/ to start with, which I got from this group. Please take a look at: http://www.icharts.in/breadth-charts.html. The market in the hindsight will have a deeper correction (more than a pull back). So, be carefull and have stops

any slight downturn, can make people jittery and leave their positions. Result, deeper correction and heavy losses.

trading and investing is different. I am a trader using TA

you placed a stop at 450 (below the recent base and taking into consideration the volatility of the stock and below its 50 day EMA). Right now, the stock is at 650. so, you had more than the risk run. I would take 50% off, and move the stop to 530 (break even). So, now you can let the stock run on table's (read others) money. As the stock moves up, move the stop. Make sure you put the stop below 50 day EMA, around 100 rupees (volatility based on price of stock) less than current price and below a recent base.

In TA, when you select a stock, look at the chart considering data from all years. Then compare the chart with the sector and the market. The reason I like stock pick 1 than 2 is that, stock 1 mimics the market more than stock 2. I did not compare with the sector. Ideally, the sector should also be trending. We want the momentum. We want the wind to sail easily. Avoid the harder stocks. There are so many easy ones like the stock pick 1.

Remember the saying, Bulls make money, Bears make money, Pigs get Slauttered. Don't look at your paper money and be happy. Till you book your profits, you will see the money and then one day, you don't have it. Think stock trading as business. If you had profits in your business, will you continue to invest all the profits in the business?, or

you are picking good stocks and making right entries. Concentrate on the market, pick right sector and then the right stock. Take profits (always).

Again. Market, Sector, Stock, Clean Chart. I know the market is shooting. I didn't see which sector your stock is it in. I don't have to. The chart is all over the map. Its like a heart beep. beep! beep! beep!.... Like Sine curve. Avoid those stocks. Ask yourself a question. Is the market doing the same. Market is trending at an angle 40 to 70 degrees. Pick stocks like that. Take some from harmad's pick. You don't have to reinvent the wheel. I like Godrej Consumer Prod. Wait for a pull back around 2 to 4 days. Make sure the market has also pulled back (distinquish between pull back and sell off). Go long with a stop 10 rupees or X amount based on the volatility (determined based on the stock price and how much average it moves in a day) above previous high. If you are interested, here are suggested readings on swing trading.

1. Dave Landry's 10 Best Swing Trading Patterns and Strategies
2. Dave Landry on Swing Trading

To get basic ideas of stock trading, I would read
1. Come Into My Trading Room: A Complete Guide to Trading - Elder

More to read
1. Reminiscences of a Stock Operator - Edwin Lefvre
2. Trading for a Living: Psychology, Trading Tactics, Money Management - Elder's 1st book

Buying high is a fool's game. When you buy high, what you are expecting is that another fool will come along and buy it from you at even higher. The guy who bought at pull back or at 50 day EMA will run all the way to the bank by sell the shares to you. You like that? So, next time, buy at pull backs or given the volatility of the current market, buy at 50 day EMA.
Positive: Having said the above, hopefully the bad times are over. 8 day EMA has crossed above 50 day EMA. MACD is showing bullish. There will be slight pull back before the stock takes off.
Negative: Trend line has been broken. It may depend also on the general market. Index is moving up. Stocks are not. See Advances versus Decliners chart comparision with Index chart.
So what we do. We put a stop. Conservative - 230. You want to give some room, 220. All depends on the market and the sector in which this stock is in. Frankly, there are no enough tools to see the sector chart.

Be careful of the 50 day EMA. In this kind of bull market, stocks always test 50 day EMA and have high volatility. 50 day EMA for this stock is 369. I would put a stop at 400. Hopefully, the stock comes out of the pull back. Based on your risk (hopefull you thought at some loss, you would come out of the stock), take partial profits. Lets say, when you entered at 412, your stop was at 380 (base below previous pull back), your risk was 32 rupees. So, at 444, you would take 50% of profits, and trail the stop on the remaining shares. Hope you got the idea.
You can Buy, Sell, Short & Cover stocks. But, there is time to Buy, time to Sell, time to Short and time to Cover. Trying to pick top is a loser's game. Many tried that and lost shirts. Always first allow selling to happing first (I forgot something, Profit Taking. Do you know profit taking is different from selling?). Then, depending on the percentage of % drop (above minimum 7%. Conservative 10%), how much the stock has recovered, and based on the volume of recovery (volume must be low for recovery versus sell off), you would decide to go short.
Ofcourse, there are other patterns (Double Top, Head & Shoulder's) under which you can decide to go short.

Stock selection is most important. In the previous email, I mentioned, one can Buy, Sell, Short, Cover and take Profits. I forgot to mention another thing you can do with a (lot of) stock(s). Just pass on. Don't pick a stock because you see something in future or something is going to happen. You should say to yourself, let it happen. Let the stock show why I should buy it. Its like playing cards. Who will show their cards first. If you buy now thinking something is going to happen 1 month from now, you already showed your cards. You should wait for the stock to show. Then, on a pull back, you will reward the stock by buying it.
The chart by itself was not interesting. Stuck in a trading range from the last 6 months. So, if you want to buy this stock, let it come out of the trading range, go beyond the previous high aroung 120 and then on pull back, you would buy it.
Rather, look at some stocks previously, I discussed in this thread. Compare those charts with this stock. You will understand what I am after. Need a clean chart. No mumbo jumbo Sino curvo heart beto.

You need to select stocks which
a. have high average volume ( high liquidity)
b. Move a lot - high beta ( you don't want something not going anywhere. They are waste of time)

2. You need to know where to enter and where to exit. These points should typically help you make money. Thats the hardest part. Since, there is lot of noise during the day.

3. However, in this market, for the most part, they always go up. Just avoid trading when they go down. I mean to say, avoid trading when the market is pulling back

4. Use good money management. When the stock moves on your side and crosses what you risked, take 50% profits. Then, move the stop where you bought to break even. This way, you make enough income to keep you going. During day trading, the stocks typically move up and down (noise). Don't expect to see chart like what you see in EOD chart. They don't just go up. So, if the stock goes towards you, take half off. There are high chances that those profits will also go if you don't make a move. That way, you will not last long enough
What were your reasons for entering (rewarding) this stock. Its below 50 day EMA (read Bearish). Could not take previous high (Aug vs Jan at 130). The market is pulling back. So, ask yourself why you entered this stock today
how much time we need to spend studying for the opportunities of endless wealth. You need to give yourself atleast 2 to 10 years. Everyday you learn something. Please read the books I mentioned before you put your money. Start with small amounts so that you will lose less amount while you learn your lessons.

I don't remember the exact definition of MACD. Please refer the books. But, the way it works: there are 2 EMAs. Short term EMA (9) and Long Term EMA (12,26). Short term EMA tells what is happening right now. Long Term EMA tells you what has been happening for some time. Difference between these EMAs will give you the divergence (Present - Past), shown by MACD histogram. MACD is a very powerfull indicator. It can tell you what is happening underneath the price movement. As with any indicator(s), MACD may not be usefull all the time. For instance, if the stock is any trading range, MACD is not useful. MACD Histogram above 0 will tell you bullishness and below bearishness. This is useful to compare how strong bullishness/bearishness between 2 points.

 

[oilman5]

page 2....from vvonteru
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Nothing replaces the experience though. Continue to look at the charts. You might have seen earlier that I have just been trading for only last 2 years. So, you might wonder how I got so much knowledge. I almost spend each day looking at charts. I might have looked at thousands of them. Stock Market is my passion. I continue to read books along the way. This is important to not forget the basis in the midst of fear and greed.

As Elder says, in stock market, 3 Ms are important. Mind, Method and Money Management. Control your mind from fear and greed. Have a methodology (Tripple Screen, Swing Trading etc) and follow it in every trade, so that the probability works in your favour. Have a money management plan to allow the maximum risk (typically less than 2% of your principal amount) you want to take in each trade. Keep this risk constant and change the position size you are going to trade based on the stock price and loss stop.

Example, if you are following Tripple screen (I am not going to go through the methodoloy. Please refer online or book), decide on the risk. Lets say, your principal is 1,00,000 (1 lakh). You want to risk 1% on any trade. You would risk a maximum of (100000 * 0.01) Rs1000 per trade. If the stock price is 100, your determine stop at 90 (based on volatility/support), your risk is Rs10 per share. So, at max you can trade position (1000/(100-90)) 100 shares. If the stock price is 1000, stop is 900, your position is (1000/(1000-900)) 10. This way, the amount of money you risk is constant.

Basically, this technic of money management rewards you to trade more when you make money. Similarly, it would reduce your position when you are losing. Hope I made a point.

I am not a break out player. I am a kind who ask, let it breakout and then I will think about it. Playing breakouts is a risky game. There are a lot of false breakouts.

Not trading is most important part of trading stocks

Whoever reads this article, I want to stress on simplicity. Don't think there is always secret behind the price movements. Specially, there is none when the market is so strong. Don't go after all those indicators (DMI, RSI etc etc). What is most important is Price and Volume. Price tells whether there is demand for it or not. Volume gives us the value for that demand. Every thing else is a potpourii of this data.

I use Price, EMA(8), EMA(50), EMA(200), Volume on top. In the middle, I use MACD. Last box, I use Williams or Slow Stocastic (if I don't have Williams). I am using EMA to get a feel for the average price. MACD is used for divergence (I already explained in this thread). Williams, I use it for overbought and oversold condition (Try not to buy where this indicator is above 80%. Don't sell (short) when this indicator is below 20%).

EMA(200) is for fund managers buy point. Anything below that are the fallen ones (dogs, don't touch them in this market). EMA(50) is a buy point for lot of fundamental stock investors. Avoid shorting at this point (wait for it go below this point and pull up). Stocks display elastic band effect over here. EMA(8) is the short one, which gives us the heart beat check of the current price.

Volume can help us for confirmation. If you are buying, look at the volume. For example, if the price is going up, volume is drying, we don't want to buy that stock. This is also divergence (secret underneath the price )

Stock selection:
When you look at a chart, if you spend more than couple of seconds, then its not worth it. Skip it. Chart should not be complicated. It should be simple. Take a look at NIFTY chart. It should be simple as that. There were couple of stocks (SATYAMCOMP) mentioned in this thread. Look at them. Simplicity is the key.

It all depends on your methodology. If you are person buying at 200 day EMA (always), why not. Look at the stock. If fundamentals (thats what fund managers look at 200 EMA) are good, but the stock is down for some temporary reason, they go in.

MACD is slightly turning positive, which in itself is not a big thing. The big thing over here is that this stock has lost lot of points and is at 200 day EMA. I looked at ROC indicator. It is going up. So what. I don't think you want to go just based on that. As I said, you have to be careful in using the indicators. You have to know their applicability, given the price movements.

Don't use indicators only to justify your entry in to the market. When I say that I mean, be consistent in using indicators. If you are using ROC for entry, use that always. Don't use ROC one time and the next stock use RSI. On the other hand, you can see lot of indicators for confirmation of information your regular indicator has given. (I always use MACD and Williams. Thats it).

For this stock, I will go for it (if someone is forcing me with a gun) based on the following reasons:

1. If my methodology warrants me to buy. Most important. Don't change your methodology in order to trade different stocks. Overall results will be skewed. I discussed this before in this thread.

2. Fundamentals look good at the long term. I admit I am bad (nor interested) at looking at fundamentals.

3. This stock technically uses 200 day support. Look at the chart on 2005 April and 2005 Nov. Both the cases, the stock jumped after trying 200 day ema. Hopefully, it does that this time too.

4. Draw a trend line joining 3 points (2005 April, 2005 Nov and current price). Trend line is not breached.

Negatives (I would not buy this stock for the following reasons):

1. This stock does not follow the regular market. Compare this stock's chart with nifty. No comparison! Nifty is above 8, 50 and 200 EMA. This stock is not. Select stocks that mimic the market (haven't I repeated myself enough already). Are you asking why? Because, you need stronger wind to sail. If nifty is the wind, the sector is the breeze. You need these to sail fast to reach your destination (money ). You don't want to stay in the middle of sea all by yourself right? (how do you feel if the market moved 100 points and your stock didn't even move 5 rupees. Even worse, it goes down).

2. For me, I am not a 200 day EMA player (Unless the market i.e., nifty is also at 200 day ema). I am a kind looking for stocks above 50, 200 ema. Need to mimic nifty. Simply said, my stock filter would be,
52 Week High and minimum 2 day Pull back.
I will go long above the 2nd day pull back.


Hope this helps.

Pull back,

Look for a pull back for atleast 2 days. You can be conservative and wait for more than 2 days. I know people who enter after 1 day pull back. I don't.

Is 2 day pull back enough? How do I know if it is a pull back versus sell off versus no change. It all depends. Read further.

1. The whole idea of pull back is that somebody is taking profits after a good run (Wouldn't You ). This will lead to stock losing some points. How much, depends on the stock price. Based on the experience, you will figure it out.

2. If the stock has more than 7 days of pull back, its more than a pull back. Some times, stocks do 2 to 4 days pull back. Trigger your stop. Then don't take off, but don't go down either. This happens when market conditions are not right. That doesn't mean you should quit your position. Don't micromanage. Once you are in the stock, give it a chance. Think before you go in. Not after.

3. If a stock loses 7 to 10% in the last 10 days, its may be a sell off. Atleast you would think before you go in.

Would I just use pull back to enter. Not true.
1. I am selecting the stock which made 52 week high (just like nifty). That tells me the stock is strong.
2. I look for clean chart. Not lot of gaps. Looking for trending stocks.
3. I look at MACD for convergence and no divergence.
4. I look at Volume to make sure it is not drying up.
5. I look at the sector of the stock to also have made 52 week high and has pulled back. If this is not true, I don't take the bite.

Thats it. Is that easy or what. Thats what I mean about simplicity.

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