Monthly Archives: January 2013

Trendline can make wonders!!!

Yes friends, it happens that we forego simplicity and strive for more and more complex scenarios & solutions.  Beneath this mentality, human nature lies which discard the simple in favor of complicated. (More difficult to understand, more accurate will be analysis??) Personally, I don’t believe that complexity can give you better solutions every time.  You also have to look in for put in efforts and reward, that is what I understand; look for risk(time)-reward ratio man…

We are thought and also we have observed that some simple technical tools can do wonders and can give you an excellent, out of many simple tool, one is Trendlines. Trendlines are one of the most dynamic & versatile tool to apply in the analysis.  Despite being extremely useful, trendlines are often overlooked.

NIFTY-WAY2PROFITS

NIFTY AS ON 30/01/2013

I have applied trendline in below attached chart of Nifty, which itself speaks thousand words than I can write here, and you don’t need to be expert to understand from visual presentation.  As we can see Nifty is moving in an uptrend from mid May’12.  I have drawn rising trendline from the low of 4770.35, and adjoin it to the next immediate higher low of 5032.40, that’s it, after that I have only extended the line, and you can see how swiftly this trendline was respected, prices took support on this trendline, twice then after.

Now second observation- recently prices has formed a channel, where prices moved in a range, where it touches upper boundary of line and again retraces back to lower boundary.  Although, on Nifty this range is very small, but as you can see it is trading it.  Basically, prices are moving in a rising congestion, and breakout from this congestion is quite obvious, can you stay in a single room, when you are use to stay in one large apartment?  Obviously answer is no, you have to make compromises, and that is exactly what is happening with prices, one or another day compromise ends, and prices can blast.  Now, don’t ask me in which direction, you yourself guess and understand, do I need to answer your question.

Lastly, third observation which I like to highlight here is, just look at momentum oscillator RSI (14) there is clear cut divergence between prices and oscillator, which clearly indicates that momentum is not in tandem with price rise, alternatively, momentum is declining as prices are rising, such situation does not holds for long, either prices or momentum has to make compromise, let’s see who does?

Now let me give you a clue, once prices moved out from rising channel, you should be on alert, and if it breaks below than wait for day or two and initiate short position. Here let me speak some wise words….Never pre-empt the market, ask the question to market, rather asking to anyone, and I am sure it will give you answer.  I hope now you got the answer….hmmm

Candlesticks- The Price Doctor Part – I

Dear Friends,

In the series of educating my readers, I am introducing e-book on Candlesticks, which will be useful to all of you.

Candlestick - The Price Doctor

Various Candlestick Patterns

I will appreciate and welcome your feedback and suggestions.

Good News, your Technical Analysis Group is changing its name.

Dear Group Members,

When we have formed this group, intention was to keep in touch with our batch mates of BSE Technical Analysis course. Now, it is almost more than 4 years, some are in touch, some are not.  From our batch few become Technical Analysts, many left the subject. 

As time passes, we have to broaden our vision and so network.  Previously formed group with narrow vision, can become platform for many aspirants and new comers, and as always medium to share your views with group members. To expand our horizon, I have taken small initiative and changed our group name to“Technical Analysis Talks” where anyone can share their views on any market based on Technical Analysis (preferably), even fundamentalist are welcome.  By changing name, I have also changed group email id to technical-talks@googlegroups.com . 

I hope by doing this we can expand our network and knowledge.  I request all group members to add our group email id in your contact list. Now, you can add your friends to our group.  Also, members who wish to quit has an option by going to Google group and unsubscribe it, or also you can put mail to me on way2profits.24@gmail.com to unsubscribe.

Thank you all, for your kind support.

Eight reasons to visit my blog…

Let me put it this way, why you are here for now?

  • One possibility, you may very well know me,
  • second possibility, you must be searching for something and accidently you click on an article and you are here.
  • Lastly, I believe you are passionate about Technical Analysis.

From the give three broad reasons, you are here and reading my blog.  Now question comes do my write up attracts you or not? Why you should come again and revisit my blog, than let me give you eight reasons to revisit my blog.

If you are trading Indian Equity markets, than I am sharing my views here.  Like I have shared this-

If you are trading Agri-Commodities and Precious metals, than here I share clear views on highly traded commodities.

If you are Forex player, than I also share my views on Global Forex pairs, as well Indian Forex pairs.  Like I have shared this-

If you are looking for medium to long term price forecasting on any given asset class, than please share with me, as I can share my posts on requests, which is not published directly on this blog (don’t worry it is not charged)

If you are Jobber or scalper than in this blog I share trading strategies which are very much useful for intraday trading.  Like I have shared this-

If you are a learner, aspirant technical analyst, than you will get many things to learn from articles.

As my reader knows very well that I share my views on market in very straight forward manner, with applied strategy, while keeping ambiguity aside (sometimes you can’t do anything when market tells you No to do anything), and I promise to do in same fashion in future also.

What is Pullback and Throwback?

If you are often confused with this terminology, than read it further, your confusion will get clear.

According to classical book – Technical Analysis of Stock Trends By Edward, Magee.

PULLBACK

PULLBACK

Pullback is refereed as return of prices to the boundary of the pattern after a breakout to the downside.  Which means after any breakdown from price pattern, prices again come up to retest the boundary line or neckline of pattern, as shown in below attached figure.

 

 

 

 

 

THROWBACK

THROWBACK

 

Throwback is referred as return of prices to the boundary line of the pattern after a breakout to the upside.  Which means after any upside breakout from price pattern, prices again come back to retest the support or neck line of pattern, as you can see in below attached figure.

 

 

 

Over and above, John Bollinger in his book Bollinger on Bollinger Bands mentioned and depicted exactly opposite to what we said above.  According to him, Pullback is referred to price movement against the primary trend that does not interrupt that trend.  And in all shown example he has mentioned accordingly.  We respect author and his work, but we like to go with native definition and application.

Best Trading Strategy

Dear Friend if you are in search of best trading strategy which can earn you 100% returns in any market condition, than your search does not end here.  I am saying this because, you are in search of Holy Grail, and if I say straight forward than the word is myth.  Let me explain you what is Holy Grail – in simple words, for every trade you are certain about outcome, so you are expecting 100% accuracy in all trades you take.  That is why I am saying if you are search of Holy Grail of trading technique than you are fooling around with yourself.

In last couple of days, I received mails regarding;

  • What is the best trading setup, which can assure me best of returns?
  • How to improve my performance and take it toward 100%?
  • Is there any method, where I don’t have to put stop loss?

Above question are my understandings of their questions, which directly, indirectly ask me the same question.  Here, I try to answer above questions, and let me confess, I answer according to my little understanding of Technical Analysis, there can be much more intricacies involved in it, which I may not be able to answer.

Trading setup:-

It is nothing but the prefix methodology to Buy, Sell or Hold the stock.  As a basic principle, trader should know in advance where to enter and where to exit, if you don’t follow this simple rule than for sure you are out of the game very soon, if not today and than for guarantee tomorrow.  Defining this entry and exit is nothing but defining trading setup.  With any method you can pre-define your entry and exit; it all depends on your knowledge, experience & comfort.  There are number tools and methods are available, you can choose according to your understanding.  Let me take you through some most common methods,

  • Based on Moving Averages like Simple, Weighted & Exponential
  • Based on Trendline, Pitchfork line
  • Based on Momentum Oscillators like RSI, Stochastic, MACD, ROC, KST and many others
  • Based on Gann Square of Nine, Gann Angles & Gann price forecasting methodology.
  • Based on Elliot Wave Analysis or Glenn Nelly’s method
  • Based Statistical calculations, which are most commonly known as Algorithmic Trading.
  • Based on Price Behavior like Candlestick Study, Chaos Theory

Above is just broad outline on trading methods, each topic requires elaborate description, which I will try to cover in subsequent articles for sure.  From above, you can take any one method of combination from it, and just back study the outcome.  Whichever method gives you confidence can be Holy Grail for you.

Let me tell you very clearly, there is no method I came across which assure you 100% return in all market scenario and I am sure with this prominent technical analyst will agree with me.  Any method can give you best returns but you have to understand its limitation too.

And to answer last question, as such there is no method in which you don’t have to keep stop loss, but yes there are methods with which you can certainly increase your risk reward ratio.  For detailed explanation about Stop loss, you can read my article  Most Hated but Most Desired part of a Trade: – Stop Loss

Stop This Crap!!!

If you are in search of good article to read on technical analysis, than your search will end with grief.  Because as I have mentioned in my previous article all blog marketers have turned technical analyst, and giving their gyaan.  And, few others who know technical analysis are in run of popularizing their blog or services, leaving main course behind and using cheap tactics to propagate them.  Most famous techniques by them are, using full literature from some of the famous books of technical, not giving any credit to original writer, and marketer in such a fashion that they themselves have written that entire thing. And seriously if your reading is not vast than it is bound to happen that you will feel that this writer has vast knowledge and what a thought he/she has.  But reality it something different, it is very cheap and bad practice to use somebody else work as your own.  Please stop these.

Another simple tactic to popularize your blog is, write all fundamental bullishit in your blog, give links of famous news sites, and quote word by word famous speeches of governors, and many others.  In this they are doing nothing, but just cut, copy and paste last meetings manuscript.  Please stop these.

One of the crucial parts of technical analysis is behavioral finance, and there is whole of articles and books available to mention for.  Blog marketers are just finding out any old books and reprint them on their blog, like; they have written this entire thing. Please stop these.

I was going through one famous blog, month on month basis they have good number of hits on their blog; if you go and read their blog, than their you find out pictures of famous bollywood heroine, and some famous personality, which has nothing to do with write up of the blog.  Do you have any explanation why they are posting such photos on their blog, who has no correlation with write up?  Please stop these.

In fact, yesterday I was going through one famous newsletter, where I was reading an interview, and to my surprise on the photo of that interviewee I saw a tag of Dr. CK Narayan.  Now what to say, this is the height of cheap publicity.

Dear friends, here I have purposely avoided writing name of such blogs & newsletter, otherwise they would argue that I am using their techniques.  But I would urge such blog writers, that Please Stop this crap, and come real; if your article has strength or your research has strength than for sure you will get good hits, don’t run for it.