Teach A Man To Fish And.........

[Ganesh]

Good Stuff Saint.

Thanks

 

[Saint]

loved the short piece. Hope all of you find it interesting as well.

Saint I hope you dont mind my posting this here..

best regds

Mohit

Hi Mohit,

Enjoyed it as well.......no,don't mind at all.

Keep em coming

Saint

 

[Saint]

Good Stuff Saint.

Thanks

Thank you,Ganesh..........

Saint

 

[Terahertz]

Hello Saint,
How are u?

Some questions:
1) Everything u said about trends, support, resistance etc. was excellent and beautifully explained. u said that we only identify the trends and get into a stock. We dont determine trends or direction of a stock, just ride the trend- that's all. Everything looked perfectly logical to me until u started patterns.
if we take the example of a double top pattern, u said that if some criteria given there is fulfilled then the stock will dip down again. How can we determine the direction of any stock??? the stock may go up or down or sideways or whatever. i just wanted to know why a stock will behave that particular way when certain patterns build up.

2) Normally we take the weekly charts if we want to trade for the medium term(3-6 months). but if i want to trade only for very short term i.e 1 week or max 10 days then can we take the daily charts? if we take daily charts then, how many days of data should we consider. is three months of data enough?

thanx
satish...

 

[Saint]

Sorry Saint to come on with questions so late, Everything seems ok to me but trendline break and previous pivot low are two things we used intermittently. I assume that both are one and same.

Whenever the previous pivot low is broken then Uptrend is in question So we get out of the trade.

Here in this context what is trendline break, is it small crack in the uptrend move, I mean is it a decline or anything else. When I looked at the weekly charts on Satyam (7th Apr) it is small decline. Saint, pls add If I am missing out anything.

Thanks a Lot
Saint

Hi Rajesh,

lol .......you signed off as Saint.

When you get out of a trade is entirely up to you.......the fact that this stock put in an accelerated up move,take out your trendlines and draw it.Why?Because we don't want to give back too much when the pullback starts.

We therefore already have a bearish divergences on the RSI and TRIX.What do we do?We get cautious,we get our hands ready on the trigger,but we DO NOT do anything.We wait,and wait.....till we get a break in trendline.Then,we are out.We are always READY to pull the trigger,the Bearish divergences tellus GET SET,and the trendline break tells us GO!!

Now,if your mindset is very long term,and these pullbacks mean nothing to you,then take some profits off the table in a trendline break.But hold the rest till we get a break in the previous pivot low on the weekly charts ie 720.If it does not break 720,the uptrend is still on and you will see higher highs and lows.

So,that decision depends on the type of trader that you are.

But you must understand this,Raj.......a break in the uptrendline is not a downtrend.It puts that run up in question.

Any more questions,feel free to ask.......took some time to answer as been travelling a lot last2 weeks.

Apologies,and regards.

Saint

 

[Saint]

Hello Saint,
How are u?

Some questions:
1) Everything u said about trends, support, resistance etc. was excellent and beautifully explained. u said that we only identify the trends and get into a stock. We dont determine trends or direction of a stock, just ride the trend- that's all. Everything looked perfectly logical to me until u started patterns.
if we take the example of a double top pattern, u said that if some criteria given there is fulfilled then the stock will dip down again. How can we determine the direction of any stock??? the stock may go up or down or sideways or whatever. i just wanted to know why a stock will behave that particular way when certain patterns build up.

2) Normally we take the weekly charts if we want to trade for the medium term(3-6 months). but if i want to trade only for very short term i.e 1 week or max 10 days then can we take the daily charts? if we take daily charts then, how many days of data should we consider. is three months of data enough?

thanx
satish...

Hi Satish,

Let us go to the 2nd question first..........even for short term trading,a weekly chart is important.Let us say you intend to get in to a position as a swing trade,maybe 5-7 days.First look at theweekly charts,it MUST be in an uptrend.Now that we have a weekly that is in an uptrend,we now intend to buy.A weekly in a downtrend,we DO NOT buy however great looking the daily chart is,however great the news is,we DO NOT buy.

Have a look at the chart of IND SWIFT below.We have a weekly in a dntrend,making lower pivot highs and lows,DO NOT BUY.Buy only when the weekly gives you a clear cut change in trend,and then buy declines using the daily charts.

Shall answer the other query a bit later.....

Saint

 

[Saint]

Just another chart.......


Basically,in a nutshell,for starters,keep away from trades where the daily is setting up,and the weekly is still in a dntrend.The desire to predict and get in at lower prices will cost you dear.Get into another stock where we have a weekly in an uptrend,and then buy declines.

Saint

 

[avinash]

Just another chart.......


Basically,in a nutshell,for starters,keep away from trades where the daily is setting up,and the weekly is still in a dntrend.The desire to predict and get in at lower prices will cost you dear.Get into another stock where we have a weekly in an uptrend,and then buy declines.

Saint

Hi Saint!

The above is an important lesson,especially for newbie traders.When weekly is in a downtrend,and daily starts moving up,we think that this bottom is the absolute bottom and weekly charts will also start to move up.Very wrong thinking..........as you have said before,catching a falling knife can be one very painful experience.

Best to enter stk that is making higher pivots and buy pullbacks.

Avinash

 

[Saint]

Hello Saint,
How are u?

Some questions:
1) Everything u said about trends, support, resistance etc. was excellent and beautifully explained. u said that we only identify the trends and get into a stock. We dont determine trends or direction of a stock, just ride the trend- that's all. Everything looked perfectly logical to me until u started patterns.
if we take the example of a double top pattern, u said that if some criteria given there is fulfilled then the stock will dip down again. How can we determine the direction of any stock??? the stock may go up or down or sideways or whatever. i just wanted to know why a stock will behave that particular way when certain patterns build up.

thanx
satish...

Hi Satish,

Great going on your understanding on the basics........as you go along,you will realise that unlike in school,these basics are enough to give you sweet profits.

But learn the patterns as well.......learn them because everyone else is looking at them,and to know the strengths and weaknesses of your rivals is going to be important for you.

Now let us say that you do not want to have anything to do with patterns.......no problems with that as well.Example,we have a pullback that is overdone and comes to support and then rallies off to the same previous high and then back to the same level of support.The conventional tech analyst calls it a Double Top,but you are least concerned.You instead draw your resistance and support lines........and wait.A breakout over resistance and you will be in it LONG,a breakdown below support and you will be looking to SHORT.

So,are you really bothered about a Double Top or Bottom?Not required if you are a trend trader.

Another chart pattern,we have a huge move up on high volumes and then a pullback to an area of support,and then a rally on decreasing volumes to a new high,and then back to the support area,and another rally of lesser vols and then back to that area of support again.

What would you do?You would draw your lines of support,a breakdown from there,and you are in SHORT.Do you need to know that this was actually a HEAD AND SHOULDERS pattern?Obviously not.You,being a trend trader,if you were in long would have been unhappy that new highs were coming in decreasing vols and then the 2nd pullback to support would have already put the entire uptrend in question,and will be looking to exit......So therefore,can you as a trend trader manage to make huge profits in the markets,without knowing abt the Head and Shoulders pattern?Surely.........Just drawing trendlines,Supports and Resistances would do the trick.

That is as far as ReversalPatterns go.........but you may need to know something abt the continuation patterns though.Why?It gives you an idea that the trend that you are in so far is doing great........You got a nice move up,and then sideways pattern.If you didn't know that it was an ascending triangle in progress,you could still draw a resistance line and buy the breakout.But knowing that an ascending triangle USUALLY is a continuation pattern before a strong move up,gives one the courage to hold on to that trade.

In summary,is learning chart patterns vital for the survival of a trend trader?No,not at all.........can come in useful,but not vital.........if you feel you can manage without it in your style of trading,by all means do so.No compromises on the Basics we learnt in the beginning.But on Chart Patterns,your call.Skip it if you don't need it.

All the best!
Saint

 

[phoenix]

Saint,

I agree with you on you recent article.I had learnt of all the various patterns,etc,but now that I am sticking with the trend,I hardly care about patterns.......as you rightly pointed out,may come in useful at times,but for a person following trends,can do without them.Trendlines,pivots,support resistance,volume,rsi,ma's,stochastics more than enough to help one to stay with the trend.

As you always say,.......Ride the Trend and Enjoy the Ride!!

Phoenix