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

[Saint]

The below is another example.CSCO trading in a tight range.Then we have a breakout above resistance.That area which was previously resistance now becomes Support,as prices use that floor for the next rally.

Saint

 

[Saint]

Yet another example :GOOG(Google )trading on the NASDAQ.Through November to early Januray,we have higher pivot lows and highs (UPTREND).Then we have that turn around in Mid-Jan.So long as GOOG did not break that previous pivot low of around 422,It was still in an uptrend.Then we have that ugly bar on the daily charts that broke previous pivot lows.Are we in a downtrend now?No.

But as far as we are concerned,the uptrend is over.Then we have a rally back to the 450 area in the later part of Jan.This is making a lower pivot high as compared to the previous pivot high.Now are we in a dntrend?Looks more and more likely.But not confirmed as yet.Then that gap down and lower prices taking out the previous pivot low as well.Now we are in a confirmed Downtrend.

All the best!
Saint

 

[Saint]

SUPPORT/RESISTANCE CONT.

We had discussed regarding trendlines in the beginning.Basically same principles applied here,the only difference being these are sloping lines as opposed to the horizontal lines discussed yesterday,but same principles.

At that time we had discussed about Uptrendlines and Downtrendlines.The Uptrendline acts as Support each time prices decline and come towards it.So too the downtrendlines act as resistance as prices rally to the trendlines and fall from it.Example in the attachment below of DELL.Prices hit the downtrendline and resume its decline.Therefore the dntrendline acts as Resistance.

So too with an uptrend..........

And as was discussed regarding the breakout over resistance and breakdown below support,the same applies here.We have an uptrendline,we have prices taking support at this trendline.And as the trendline breaks,we say that the uptrend is in question.

A break in an Uptrendline is not a Downtrend.........it merely tells us that this uptrend that we have been trading and making profits from is now in question.So too with the Downtrendline.A breakout above the downtrendline does not mean that the stock is now in an uptrend,it merely means that the downtrend is now in question.

To assess uptrends and downtrends,we are back to pivot highs and pivot lows as has been discussed.

More in the next!!
Saint

 

[Saint]

Okay,so far we ,as beginners in the market interested in trading trends,...we have taken that first step.So far,we know nothing much.We do not know of any complicated indicator,or any stylish chart pattern.We have no idea of Elliot's,or Gann,or Fibonacci.We know only that :

=The market moves in trends.We have an uptrend,downtrend and sideways trend.

=That there are different categories to Trends.We call it Major(when we are talking long term and of the monthly charts),Intermediate(off the weekly),and near term or short term(off the daily).

=We know that a series of higher highs and lows is termed a rally.That a series of lower lows and highs is termed a decline,that a series of higher pivot lows and highs is called an Uptrend,and a series of lower pivot highs is called a downtrend.

=And about Supports,Resistances and Trendlines.

Now,before we go ahead with Gaps,and Chart patterns,etc.........let us take a breather.We are not doing this to learn something academically.We are not learning this so that we can regurgitate this knowledge to our neighbours and family,and feel good about ourselves.We are not learning this so that we can go to CNBC,wear a suit and a boot to match, and mouth off some technical jargon so that we can make our money selling some newsletter.

We learn this so that we can directly use this knowledge to make profits off the market.

So everything has to be applied and practical,and if it can't,and is of no use to profitting in the markets,then we have no use for it.

And therefore the question is :With only this much of knowledge,can we apply this to Trading in the markets?

The answer is YES..........we'll get into the practical aspects of Trends,Supports and Resistances tomorrow.

All the best!
Saint

 

[rahulg77]

All the best!
Saint

Amazing work saint. though i have already read all this, it is interesting to see your point of view and how easy you make it for everyone.

Rahul

 

[Saint]

TRADING with TRENDS,PIVOTS and SUPP/RES

BUYING DECLINES &SHORTING RALLIES :

Let's make this as simple as we can.......We know what an uptrend is,a series of higher pivot highs and lows.Vice versa in a dntrend.Now,for some rules........we only BUY in an uptrend.So long the uptrend is held,we do NOT think of shorting.Yes,one could always do a sniper attack on an intraday basis or at max,on an overnight basis.That is one's decision to make.

The most often repeated line "The trend is your Friend",means we never cross the trend.The trend is UP,therefore we buy declines.When the trend is DOWN,we short rallies.If you can't short for whatever reason,then a downtrend is reason to stay out till we get a change in trend to the Upside.

Therefore,it is very important to be able to detect the change in trends in the first place.Therefore,our minds must work like this.....

->All the analysts on TV,magazines are saying that the markets are way too over heated,overvalued,over.......etc,etc.Is this the time to buy some puts or short the NIFTY FUTS?

==Look at the charts.Take the weekly charts.Why,the weekly?Because we are looking at intermediate to long term.Are we making higher pivot highs and lows?If the answer is YES,then we are in an UPTREND.And in an UPTREND,we think "BUY DECLINES".That's it!!We let people play God ,but we stick to our plan.

==If the answer is NO,the previous pivot low just got cracked to the downside,we are thinking of getting out of our longs in that particular stock or index.Now we are thinking, "SHORT RALLIES"

In a downtrend,every rally is a shorting opportunity.In an Uptrend,every decline is a buying opportunity.

The market changes from Uptrends to Downtrends,again and again........we are not here to predict tops and bottoms.We are not here to anticipate anything.We are here to follow the trend.And as uptrends change to the down,we change from BUYING DECLINES to SHORTING RALLIES.

Forgive me for repeating this many times.......but in trading,basics is everything and the rest just icing on the cake.The rest of what we will learn in future increase our odds.......but these basics are the Gospel Truth of Trading.

All the best!
Saint

 

[jraj]

Thank you Saint for your efforts.

Just found out abt this thread.Looking fwd to your posts.

Regards,
Jay Raj

 

[rakamath]

dear saint,
you are a real saint helping people to gain knowledge without expecting anything in return. Keep it up. May God shower the choicest blessings on you.

 

[rahulg77]

Hi Saint,

I have a few questions. When we talk about an uptrend we buy on small corrections. but in a downtrend i did not understand when we say every rally is a shorting opporunity. can u explain the process of shorting.

Another question is we see a uptrend on the weekly chart and we enter. now we see a minor correction coming in and we think of buying at declines. But what if that particular downtrend itself ends in a lower pivot low than the previous one. What should our trading stratergy be. we will ofcourse have a S/L in place but then it could again go up.

Hope I am clear.

Rgds
Rahul

 

[Saint]

Hi Saint,

I have a few questions. When we talk about an uptrend we buy on small corrections. but in a downtrend i did not understand when we say every rally is a shorting opporunity. can u explain the process of shorting.

Another question is we see a uptrend on the weekly chart and we enter. now we see a minor correction coming in and we think of buying at declines. But what if that particular downtrend itself ends in a lower pivot low than the previous one. What should our trading stratergy be. we will ofcourse have a S/L in place but then it could again go up.

Hope I am clear.

Rgds
Rahul

Hi Rahul,

Every rally in a downtrend is a shorting opportunity,meaning we sell first and buy back later.The reverse of buying.When we get a downtrend,we look to short or we stay out of the fall.Of course,there's all those restrictions of not being able to short except in futures,etc..........the whole idea is that we do NOT buy in a downtrend.We look to either short or stay out.Only when the trend has given a move to the UP,do we think of buying.

It is a rule that you do NOT break.......therefore the importance of first being able to detect the trends and the chnage from one trend to another.And then following the discipline.However juicy a stock is,and whoever tells you,that a stock is undervalued,fundamentally great,and the CEO is the brother-in-law of.....you,being a trend tech trader,will listen to all he's got to say,then pull out your charts,realise that maybe he is right,maybe he is wrong,but your charts tell you that this stock is not yet in an uptrend,and that is that.You DO NOT BUY,as you do not buy in a downtrend.

As for the 2nd part of your question.........yes,a risk that all traders take and may not exactly work out.Therefore the stop.However great the probability of success in any trade,we still have stops at important pivotal areas.We are only too happy with success,but if that is not to be,we do not mind the small losses either.

Another clarification,a stock put in lower pivot highs and lows.It is clearly in a downtrend.Then it put in an impressive rally from the bottom.Are we in an uptrend?NO,not yet at least.Then the stock retreats and puts in a higher pivot low as compared to the previous pivot.Now,looks more and more like a change in trend.Then it confirms the trend change by making a higher pivot high as well.The stock is now clearly in an uptrend.Now your brain says,BUY DECLINES.And true enough you get that decline.You bought in ......and horrors of horrors,the stock went on declining to lower pivot low than the previous low.Your stop at the level of the previous pivot is triggerred.You are out,and looking elsewhere for another trade.

The answer to your last ques:You take your stops and get out of that trade.As far as this stk is concerned,it continues its downtrend.And ,as always,in a downtrend,WE DO NOT BUY.We keep it on our watchlist.We track it,we stalk it,but we do not buy.Till we get a trend change that is.

All the best!
Saint