Trading Strategies Using Technical Analysis
- Thread starter SwingKing
- Start date
- Tags trading strategies
Dear Sir ,
Nice to know my answer was close on the Hare and Tortise question
. Its amusing one always finds ones answer closest to the correct one
Awaiting your reply on my query for stop loss and support pasted below:
************* Query : Start **********************
I have a small query wrt stop loss and support for a stock.
Can these terms be used interchangeably ? If yes under what circumstances - long term Time frame , short term etc ?
For eg, lets say I have a time frame for 6 months. I buy a stock @100 . I have a SL of 10 % , and hence i should exit this stock if the price comes below 90.
But incidentally , the last support for this stock was @ 95 . (hypothetical , but possible i suppose.)
Now I am completely confused as to when to exit. As mentioned above, does the exit depend on the time frame i have in mind ? With a 6 month horizon , shall i ignore the support level (95 ) if its higher than my stop loss(90) ?
*********************** End *************************
Not sure if a week day is the right time to ask this question. I will remind you again in case needed.
Warm Regards
Kg
Nice to know my answer was close on the Hare and Tortise question
. Its amusing one always finds ones answer closest to the correct one Awaiting your reply on my query for stop loss and support pasted below:
************* Query : Start **********************
I have a small query wrt stop loss and support for a stock.
Can these terms be used interchangeably ? If yes under what circumstances - long term Time frame , short term etc ?
For eg, lets say I have a time frame for 6 months. I buy a stock @100 . I have a SL of 10 % , and hence i should exit this stock if the price comes below 90.
But incidentally , the last support for this stock was @ 95 . (hypothetical , but possible i suppose.)
Now I am completely confused as to when to exit. As mentioned above, does the exit depend on the time frame i have in mind ? With a 6 month horizon , shall i ignore the support level (95 ) if its higher than my stop loss(90) ?
*********************** End *************************
Not sure if a week day is the right time to ask this question. I will remind you again in case needed.
Warm Regards
Kg
Dear Sir ,
Nice to know my answer was close on the Hare and Tortise question . Its amusing one always finds ones answer closest to the correct one
Awaiting your reply on my query for stop loss and support pasted below:
************* Query : Start **********************
I have a small query wrt stop loss and support for a stock.
Can these terms be used interchangeably ? If yes under what circumstances - long term Time frame , short term etc ?
For eg, lets say I have a time frame for 6 months. I buy a stock @100 . I have a SL of 10 % , and hence i should exit this stock if the price comes below 90.
But incidentally , the last support for this stock was @ 95 . (hypothetical , but possible i suppose.)
Now I am completely confused as to when to exit. As mentioned above, does the exit depend on the time frame i have in mind ? With a 6 month horizon , shall i ignore the support level (95 ) if its higher than my stop loss(90) ?
*********************** End *************************
Not sure if a week day is the right time to ask this question. I will remind you again in case needed.
Warm Regards
Kg
Nice to know my answer was close on the Hare and Tortise question
. Its amusing one always finds ones answer closest to the correct one Awaiting your reply on my query for stop loss and support pasted below:
************* Query : Start **********************
I have a small query wrt stop loss and support for a stock.
Can these terms be used interchangeably ? If yes under what circumstances - long term Time frame , short term etc ?
For eg, lets say I have a time frame for 6 months. I buy a stock @100 . I have a SL of 10 % , and hence i should exit this stock if the price comes below 90.
But incidentally , the last support for this stock was @ 95 . (hypothetical , but possible i suppose.)
Now I am completely confused as to when to exit. As mentioned above, does the exit depend on the time frame i have in mind ? With a 6 month horizon , shall i ignore the support level (95 ) if its higher than my stop loss(90) ?
*********************** End *************************
Not sure if a week day is the right time to ask this question. I will remind you again in case needed.
Warm Regards
Kg
Setting Stop Losses Using Historical Volatility
Historical Volatility
Historical Volatility is a measure of price fluctuation over time. It uses historical price data to empirically measure the volatility of a market or instrument in the past. In other words, it is also known as statistical volatility, which is also the standard deviation of day to day price change expressed as annual percentage. In terms of practical implementation in trading, Historical volatility is essentially used to know how a stock has fluctuated in the past and how much likely it is to fluctuate in the future.
Calculation
HV = StandardDeviation(Ln(close/yesterday'sclose), days) *100*Sqrt(number of trading days in year)
where, Days = Length of days (10,20,30,40 .... )
Ln = Natural Logarithm
For e.g A 50 Day HV with 252 trading days in an year would be calculated like this,
HV(50) = Stdev(Ln(Close/Yesterday's close), 50)*100*Sqrt(252)
Use in Setting Stop Losses
Suppose the 50 day HV of stock which trades at 100 is 20%. Now, if we assume that prices are normally distributed, we can with 66% certainty say that prices for this stock will fluctuate between 80 - 120 one year from now. Hence any stop set on this stock should be kept with this fact in mind. If you don't use this concept, then you are going to get stopped out more often than you should.
One more thing that has to be analysed is that every stock of same price range has different volatility and hence stop loss technique cannot be same for both. Hence, depending on the stocks volatility, stop price is set.
For Investment trades, try and use HV calculated across 40 -60 days and use it on the daily frame only.
Caution
Some times you will find that the volatility band is just too wide and hence stop losses will be set 10 -15% away from the current price. In this case, you can do two things.
1) Either use ATR in this case as I had explained earlier.
2) Find stocks which offer better risk to reward in terms of stop losses set on HV parameters.
Don't expect to get hang of this concept immediately. It took me almost 6 months to refine and use this properly and hence be patient with it. One easy way would be for me to share my entire research here. But, that will limit your growth as a trader. Believe me, I have given a lot of lead here. You just have to put in a little more effort.
At first this concept seems very intimidating, but as you research more, you will know how to use this better. Once you can do this, your Investments and Options understanding will reach the next level. Hence, research more and don't expect any easy answers from the market.
Tc
Historical Volatility
Historical Volatility is a measure of price fluctuation over time. It uses historical price data to empirically measure the volatility of a market or instrument in the past. In other words, it is also known as statistical volatility, which is also the standard deviation of day to day price change expressed as annual percentage. In terms of practical implementation in trading, Historical volatility is essentially used to know how a stock has fluctuated in the past and how much likely it is to fluctuate in the future.
Calculation
HV = StandardDeviation(Ln(close/yesterday'sclose), days) *100*Sqrt(number of trading days in year)
where, Days = Length of days (10,20,30,40 .... )
Ln = Natural Logarithm
For e.g A 50 Day HV with 252 trading days in an year would be calculated like this,
HV(50) = Stdev(Ln(Close/Yesterday's close), 50)*100*Sqrt(252)
Use in Setting Stop Losses
Suppose the 50 day HV of stock which trades at 100 is 20%. Now, if we assume that prices are normally distributed, we can with 66% certainty say that prices for this stock will fluctuate between 80 - 120 one year from now. Hence any stop set on this stock should be kept with this fact in mind. If you don't use this concept, then you are going to get stopped out more often than you should.
One more thing that has to be analysed is that every stock of same price range has different volatility and hence stop loss technique cannot be same for both. Hence, depending on the stocks volatility, stop price is set.
For Investment trades, try and use HV calculated across 40 -60 days and use it on the daily frame only.
Caution
Some times you will find that the volatility band is just too wide and hence stop losses will be set 10 -15% away from the current price. In this case, you can do two things.
1) Either use ATR in this case as I had explained earlier.
2) Find stocks which offer better risk to reward in terms of stop losses set on HV parameters.
Don't expect to get hang of this concept immediately. It took me almost 6 months to refine and use this properly and hence be patient with it. One easy way would be for me to share my entire research here. But, that will limit your growth as a trader. Believe me, I have given a lot of lead here. You just have to put in a little more effort.
At first this concept seems very intimidating, but as you research more, you will know how to use this better. Once you can do this, your Investments and Options understanding will reach the next level. Hence, research more and don't expect any easy answers from the market.
Tc
Similar threads
-
-
Trading the S/R Flip - Strategies around this widely used concept
- Started by ASB
- Replies: 4
-
I am tradingview paid user and want to use their strategies for algo trading
- Started by curiousv
- Replies: 9
-
-