Trading as a part time profession.

[rajendrani]

This thread is for all those who would like to take trading as their part-time job. This is for those who dont get much time to read all those big books and still trying to understand the very basic of trading. With the view that this thread will be useful to all those new comer and even myself who is still a newcomer to the trading.

As I am from different profession and I came across trading when I left my job, and with the help of seniors in this forum, specially the saints teach a man to fish... I had gathered good confidence in trading. What I liked about saints teaching was its simplicity, with which he just didnt make things complicated. If we are going through all big books, personally I myself get scared looking at those number of pages, even if I start reading a book, I loose my interest in midway.

At present I have a job and still doing my trading and touch wood I have been doing great, Now myself making money in trading, I thought of teaching the same to my family members and friends so that even they get benefit out of this and myself help increasing my knowledge toward this.

I have compiled my own theory for the benefit of my friends and famiy member which I am sharing with you.

Hope you all like it.
Thanks and regards,
Rajendrani

 

[rajendrani]

Index

Introduction

TRADING USING BROKER TERMINAL

CHARTS

TRENDS
1. Rally and Decline
2. Pivot High and Pivot Low
3. Uptrend, Downtrend and Sideway trend

TRADING

BUILDING YOUR OWN STRATEGY​

HOW TO TAKE TRADING AS PART TIME PROFESSION?​

MY STRATEGY​

HOW TO MAKE IT HAPPEN?​

BUILDING STRATEGY AS PER OWN NEEDS​

 

[rajendrani]

Best resources

Must read - Saints Teach a man to fish

"Teach a man to fish ..." Compilation

List of Trading system /Method by SGM

Links to posted software by MurthyMSR

Nifty pivot based Mechanical method by tsunil

 

[rajendrani]

Introduction​

When it comes to money, we all want it more. The need and the greed for money never end. Trading stocks, futures and options is one profession where we have big profits if we follow some trading system and if not then we loose lot of money.

Trading needs lot of discipline, emotions need to be controlled and should have mind over market. If all these are balanced properly then we have a great success in trading. We have plenty of books and every book gives a different perspective as to how to trade profitably in the market. All traders try to make up their own system which suits their mentality and trade accordingly. Even I have my own, so will be sharing some of mine so that we make good profit in the market.

If we have to start our own business, then we need to have a capital to start it and need some strategy so that our business runs profitably. For example, If I have to start my own Restaurant, then I need to have a good setup for restaurant at good location, this itself will cost me lot of money, then I will need good staff and then have to be always ahead in this competitive business to survive long and if I am able to do this then I will be very rich. But the first constraint over here is the capital. I dont have that big capital. Most of us, specially the middle class people stay out of this and prefer to take a job rather than doing their own business.

If you ask any of our friends, colleagues, or any financial advisor about trading, their view will always be negative about trading. Financial advisor will say that we go for investing and in long run we get more profit out of it. Almost 90% people will say that trading is not good.

Now I dont say that they are wrong, yes they are right. They are telling about this because they have seen people loosing all their savings in it, so as our friend our well wisher they tell us to stay away from trading.

We all have a dream that we grow in our life and we work accordingly, we give our best in our jobs to make it happen. Now imagine if you can devote some of your time may be 10 min in morning and this will help you to make more money would you like to do it. I guess your answer would be yes. So keeping our job and also doing trading by giving only 10 min of your time for trading will help you to earn some extra money, wonderful isnt it? Well things arent that easy how it seems, but it not that difficult how it looks, so try to understand the basic concept of trading, if you like it go for it and if not then just stay happy with your job.

 

[rajendrani]

Trading and Investing​

Investing is for a long term period, we put our money in some mutual funds, or stocks or in a new ipo and just forget about it and in long run and most of the time we do get good profits.

Trading on the other had is something different, we dont invest our money for longer duration, we trade the stocks or futures market for max of 2 or 3 days or to the max a week, we take our profit or loss and exit the trade. Most of the time, if we have a good strategy then we end up in profit or else we end up in big loss, loosing all our capital

 

[rajendrani]

TRADING USING BROKER TERMINAL​

Enough of my philosophy talks on trading, now lets start.

I would like to keep things as simple as possible, so that we all understand the basics very well.

Let start with some of the terms we will be using and what they mean.
1. Long When we buy some stock we often refer to it as we are long in some stocks
2. Short When we sell some stock we often refer to it as we are short in some stocks

These are the two terms which we will be using most of the time, as this is what we are going to do, buy and sell. We will buy some stock first and then sell OR sell some stock first and then buy.

Now your next question to me is how is it possible to sell stock first and then buy?
In Intraday trading, in Indian market we are allowed to sell stock first and then buy but, in futures we are allowed to sell futures and carry on the position overnight too.

We do trading using a trading terminal, so whenever we trade we have to give them the brokerage; now this brokerage differs for intraday trade and delivery trade. So if we have to make profit we have to cover our brokerage.

So how we will make profit?
Simple accounting formulae,
Profit = Selling price Cost price
To make it more realistic the formulae would be,
Profit = (Selling price Buy price) Brokerage

 

[rajendrani]

CHARTS​

For our trading we will be using the charts, without charts it would be difficult for us to understand how the stock or index is performing. We go just by two rules: 1. We go long when market it up and 2. We go short when market is down.

We have different charting software available on net and there is some website which generates chart for particular stock or index for our reference. And we have our broker terminal which generates a real-time chart for intraday trading.

We have a line chart, candlestick chart , bar chart and various other types of chart. What I use is candlestick charts, because it give a good visual as to where did the market opened, closed, high and the low. The bar chart is also good but doesnt give good visual. I will suggest go for any kind of chart which you can understand better. I will be going with the candlestick charts.

I will just tell you two different types of candlestick and what does that means.

We have a green candlestick which means the market is going up therefore we have the open near the low and close near the high. The second one is the red candlestick which means the market is going down therefore we have the open near the high and close near the low.

We have different other types of candlestick the shape they make and it has a specific meaning for all those, these candlestick when combined with other technical indicator will give good result in identifying the trend for its continuation or reversal. I will not go into much details of this, but it is advisable that if you have time please go through the candlestick basis. Otherwise these two candles serve the purpose for the basic.

Example of a candle stick chart

This candlestick chart is a daily chart of Nifty spot, the green candle shows that on that particular day the market closed above the opening and the red candle shows that the market closed below its open.

We will try to learn how to use this for our benefit and can stay in the market for longer time and making more profit.

Before we proceed on how we trade we need to understand the trends better

 

[rajendrani]

TRENDS​

Market moves in trends, we have three types of trend, UPTREND, DOWNTREND AND SIDEWAYS TREND.

To understand the trend better we need to understand the rally and a decline. Or the upmove or the downmove.

Example of a Rally

In the above chart we have the first green bar with high and low and then we follow with another 5 green candles. In all these candles every candle forms a high higher than its previous bar high and low higher than its previous low. So, when we have a series of higher highs (HH) and higher lows (HL) then we have a rally.

Example of Decline

In the above chart we have the first green bar with high and low and then we follow then we follow with another 4 red candles. In all these candles every candle forms a high lower than its previous bar and low lower than its previous low. So, when we have a series of lower highs (LH) and lower lows (LL) then we have a decline.

 

[rajendrani]

TRENDS......


Now we got what is rally and decline is, rally is a upmove and decline is a downmove but this doesnt means that rally is a uptrend and decline is a downtrend.
So what exactly is uptrend and downtrend?

To understand this we also need to understand two more important aspects the pivot high and the pivot low

Lets first understand these two pivot points the pivot high and pivot low.

Example of Pivot High (PH) and Pivot Low (PL)

In the above chart, I had marked three area, Area A, Area B and Area C,
Now the market starts at market A, then we have a rally till Area B and at this area we got the highest high and then we see the decline, so the highest high which was form is known as Pivot High (PH)

Now from Area B, we have a decline and then at Area C, it reaches its lowest low and then we get a rally again, so the lowest low which was form is known as Pivot Low (PL)

These pivots high and lows are considered as the turning points where the market changes its direction.

 

[rajendrani]

Now using the rally, decline, pivot high and pivot low , how we will understand what is uptrend or downtrend is.
Simple for a rally we have a series of higher highs (HH) and higher lows(HL) and so, for uptrend we have a series of Higher Pivot high (PH) and higher Pivot Lows (PL)

And for a decline we have a series of lower highs (LH) and lower lows (LL) and so, for downtrend we have series of Lower Pivot highs (PH) and Lower pivot lows (PL)

Example of UPTREND

In the above char, we see there is a series of higher pivot highs (PH) and higher pivot lows (PL) this form an UPTREND

Example of Downtrend

In the above chart we see there is a series of Lower pivot highs (PH) and lower Pivot lows (PL) this form a DOWNTREND

So now with the UPTREND and DOWNTREND example, can you figure out what would be SIDEWAY TREND?

Well I dont have a perfect definition for that, we can say that in SIDEWAY TREND we have a relatively equal pivot high and pivot lows.

Now we have understood the very basics of the trends, using this we will go on for trading.