Monday, December 27, 2010
Wednesday, December 15, 2010
Thursday, December 9, 2010
Monday, December 6, 2010
Sunday, October 17, 2010
Thursday, October 7, 2010
Friday, September 17, 2010
Thursday, September 16, 2010
NIFTY hasn't been moving much over last few weeks and sort of stagnated, before making a new high around 5900 on 16th September. My view on India markets is that we have interesting times ahead and we will see HIGH volatility (TRADERS LOVE VOLATILITY) over next 6-8 weeks.
With my analysis and experience of NIFTY, September second half, full October and Nov 1st Half have always been exciting time for me. These 2 months had always been very kind and generous in rewarding me. I don't know if astrology has any connection with it as I start a new year in my life around this time, being a Virgo :)
Some pointers:
* From 25th May (4786), NIFTY has moved 1115 points in 115 days as on 16th Sep (5901). This is 150% of the Feb 8th to April 7th Range (724 in 58 days) in points and 200% in time.
* 5350 seems to be a strong support level. It has been tested 3 times: 20 July, 30 July, 31 Aug. Interestingly, it is very close to 50% point between 4786 and 5901.
* Based on the First Range out of bear market from 6 March 2009 (2539) to 12 June 2009 (4693), the next price target is 6100 (give or take 1% from this).
Conclusion (my view only):
NIFTY is expected to run down to 5625 by 22/23 September 2010 and it should trade around 6170 on 19th October 2010.
We should then expect it to run down to 5350 in 14 CALENDAR days i.e. till 2nd November 2010.
And then the big upmove to see NIFTY around 7600 level around Diwali of 2011.
With my analysis and experience of NIFTY, September second half, full October and Nov 1st Half have always been exciting time for me. These 2 months had always been very kind and generous in rewarding me. I don't know if astrology has any connection with it as I start a new year in my life around this time, being a Virgo :)
Some pointers:
* From 25th May (4786), NIFTY has moved 1115 points in 115 days as on 16th Sep (5901). This is 150% of the Feb 8th to April 7th Range (724 in 58 days) in points and 200% in time.
* 5350 seems to be a strong support level. It has been tested 3 times: 20 July, 30 July, 31 Aug. Interestingly, it is very close to 50% point between 4786 and 5901.
* Based on the First Range out of bear market from 6 March 2009 (2539) to 12 June 2009 (4693), the next price target is 6100 (give or take 1% from this).
Conclusion (my view only):
NIFTY is expected to run down to 5625 by 22/23 September 2010 and it should trade around 6170 on 19th October 2010.
We should then expect it to run down to 5350 in 14 CALENDAR days i.e. till 2nd November 2010.
And then the big upmove to see NIFTY around 7600 level around Diwali of 2011.
Tuesday, August 3, 2010
Sunday, July 25, 2010
Canara bank example....
www.sumitkgupta.com
We will note the Low and HIGH of each day and ‘anticipate’ the Low of that day to be Point 3.
21st July (first LOW day after 19 Jul 2010), the stock’s High and Low prices were 495 and 484.10. We anticipate 484.10 to be Point 3. This will get confirmed only once we see first HIGH day. However, we will not wait for the confirmation but prepare our trading plan on ‘anticipation’. Hence, our entry price would be 495.05 for 22nd July. However, on 22nd July, this stock did not cross 495 (High of previous day). So we did not enter the trade.
High and Low of 22nd July were Rs. 491.5 and 476.10. Now our new ‘anticipated’ Point 3 is 476.10. We draw our trading plan based on this. Entry price – 491.55, Stop Loss – 476.05 and Target is 575.10 (476.10 + 99).
On 23rd July, again the stock did not cross 491.50 and the High of the day was Rs. 490.55. In our trading plan, only Entry price would change to 490.60 and nothing else will change since this stock did not make any further Low. The Low of 23rd July was 481.70 which is higher than the Low of 22 July i.e. 476.10. So, our Point 3 will still be at 476.10 ‘unless’ we see a price lower than this on 26th July.
On 26th July, it hasn’t crossed 490.55 yet. On the lower side, it has made a new low at 473.50. So, we will not enter the trade today either. We will re-visit the trading plan after the close of the day today and draw up a new trading plan based on the High and Low of today i.e. 26th July 2010.
www.sumitkgupta.com
We will note the Low and HIGH of each day and ‘anticipate’ the Low of that day to be Point 3.
21st July (first LOW day after 19 Jul 2010), the stock’s High and Low prices were 495 and 484.10. We anticipate 484.10 to be Point 3. This will get confirmed only once we see first HIGH day. However, we will not wait for the confirmation but prepare our trading plan on ‘anticipation’. Hence, our entry price would be 495.05 for 22nd July. However, on 22nd July, this stock did not cross 495 (High of previous day). So we did not enter the trade.
High and Low of 22nd July were Rs. 491.5 and 476.10. Now our new ‘anticipated’ Point 3 is 476.10. We draw our trading plan based on this. Entry price – 491.55, Stop Loss – 476.05 and Target is 575.10 (476.10 + 99).
On 23rd July, again the stock did not cross 491.50 and the High of the day was Rs. 490.55. In our trading plan, only Entry price would change to 490.60 and nothing else will change since this stock did not make any further Low. The Low of 23rd July was 481.70 which is higher than the Low of 22 July i.e. 476.10. So, our Point 3 will still be at 476.10 ‘unless’ we see a price lower than this on 26th July.
On 26th July, it hasn’t crossed 490.55 yet. On the lower side, it has made a new low at 473.50. So, we will not enter the trade today either. We will re-visit the trading plan after the close of the day today and draw up a new trading plan based on the High and Low of today i.e. 26th July 2010.
Let’s look at couple of more examples, one by one on identifying trading opportunities:
Canara Bank:
In the above chart, Canara Bank Future made a Low on 7th Jun at 401.50. It then made a High at 434.50 on 15 Jun, making a range of 33 points. Instead of trying to get in, we start looking for it to retrace (i.e. go down) and mark our points 1 and point 2 at Rs. 401.50 and 434.50 respectively. Now we wait for Point 3.
We get our Point 3 on 18th June 2010 at 415.50. This is the time we prepare our trading plan as under:
Point 1 : 401.50 – 7 Jun
Point 2 : 434.50 – 15 Jun
Point 3 : 415.50 – 18 Jun
Entry Price : High of Point 3 Day + .05 = 424 + .05 = 424.05
STOP LOSS : Point 3 – 0.05 = 415.50 – 0.05 = 415.45
Target : Point 3 + Range = 415.50 + 33 = 448.50
Let’s see what happened next day:
Canara Bank futures crossed 424.05 and we enter the trade. What happened in next few days:
Target of 448.60 achieved on 28th June 2010. WoW !!!!
Profit of Rs. 24 (approx.) in about 10 days. In % – 5.5% of Stock price and in Futures, a profit of about 25%…
Good or GREAT!! you decide
Now a practice / opportunity for you. There is a Long trading opportunity in Canara Bank Futures recently thrown. I will give you Point 1 and Point 2 dates only. Point 1 – 14 Jul @ 466 and Point 2 – 19 Jul @ 565.25
You figure out the rest of the trading plan. If you want me to check it, you can send the same to me :
sumit@sumprati.com
Canara Bank:
In the above chart, Canara Bank Future made a Low on 7th Jun at 401.50. It then made a High at 434.50 on 15 Jun, making a range of 33 points. Instead of trying to get in, we start looking for it to retrace (i.e. go down) and mark our points 1 and point 2 at Rs. 401.50 and 434.50 respectively. Now we wait for Point 3.
We get our Point 3 on 18th June 2010 at 415.50. This is the time we prepare our trading plan as under:
Point 1 : 401.50 – 7 Jun
Point 2 : 434.50 – 15 Jun
Point 3 : 415.50 – 18 Jun
Entry Price : High of Point 3 Day + .05 = 424 + .05 = 424.05
STOP LOSS : Point 3 – 0.05 = 415.50 – 0.05 = 415.45
Target : Point 3 + Range = 415.50 + 33 = 448.50
Let’s see what happened next day:
Canara Bank futures crossed 424.05 and we enter the trade. What happened in next few days:
Target of 448.60 achieved on 28th June 2010. WoW !!!!
Profit of Rs. 24 (approx.) in about 10 days. In % – 5.5% of Stock price and in Futures, a profit of about 25%…
Good or GREAT!! you decide
Now a practice / opportunity for you. There is a Long trading opportunity in Canara Bank Futures recently thrown. I will give you Point 1 and Point 2 dates only. Point 1 – 14 Jul @ 466 and Point 2 – 19 Jul @ 565.25
You figure out the rest of the trading plan. If you want me to check it, you can send the same to me :
sumit@sumprati.com
Friday, July 23, 2010
BACHPAN KA ZAMANA HOTA THA,
Khushiyo ka khzana hota tha,
Chahat chaand ko pane ki,
Dil titli ka diwana hota tha,
Khabar na thi kuch subah ki,
...Na shamo ka thikana hota tha,
Thak-haar ke school se aana,
Per khelne bhi jana hota tha,
Dadi ki kahani hoti thi
Pariyo ka fsana hota tha,
Barish me kagaz ki kashti thi,
Har mausam suhana hota tha,
Har khel me sathi hote the,
...Har rishta nibhana hota tha,
Papa ki wo dant galti par,
Mummy ka manana hota tha,
Gam ki juban na hoti thi,
Na jakhmo ka paimana hota tha,
Rone ki wajah na hoti thi,
Na hasne ka bahana hota tha,
Ab nahin rahi wo zindgi.
JAISA BACHPAN KA ZAMANA HOTA THA
Khushiyo ka khzana hota tha,
Chahat chaand ko pane ki,
Dil titli ka diwana hota tha,
Khabar na thi kuch subah ki,
...Na shamo ka thikana hota tha,
Thak-haar ke school se aana,
Per khelne bhi jana hota tha,
Dadi ki kahani hoti thi
Pariyo ka fsana hota tha,
Barish me kagaz ki kashti thi,
Har mausam suhana hota tha,
Har khel me sathi hote the,
...Har rishta nibhana hota tha,
Papa ki wo dant galti par,
Mummy ka manana hota tha,
Gam ki juban na hoti thi,
Na jakhmo ka paimana hota tha,
Rone ki wajah na hoti thi,
Na hasne ka bahana hota tha,
Ab nahin rahi wo zindgi.
JAISA BACHPAN KA ZAMANA HOTA THA
Thursday, July 22, 2010
kabhi kabhi dil chahta hai... kuch aisa ho jae;
paper ho par result na aye,
picnic jaye aur wapis na aye,
hafte mein 3 din ho aur fir sunday aa jae,
sote rahe dinbhar, sham ko ghumne jae,
...sab dost saath rahe aur chuttiyan manaye,
jise chahte hain dil se vo apna ho jae,
barish mein bheege aur zor se gaye,
duniya ko bhool fir bachhe ban jae,
bheed se durr ek duniya banaye,
sari zindagi bus yuhi kat jae,
kabi kabi dil.....
paper ho par result na aye,
picnic jaye aur wapis na aye,
hafte mein 3 din ho aur fir sunday aa jae,
sote rahe dinbhar, sham ko ghumne jae,
...sab dost saath rahe aur chuttiyan manaye,
jise chahte hain dil se vo apna ho jae,
barish mein bheege aur zor se gaye,
duniya ko bhool fir bachhe ban jae,
bheed se durr ek duniya banaye,
sari zindagi bus yuhi kat jae,
kabi kabi dil.....
Sunday, July 18, 2010
Sharing the research outcome for binoculars that I did and might be useful for others.
Suggested features that should be there in the binoculars:
- 8 X 40 (8 X 25 is a little lighter)
- Exit pupil – 5mm
- BAK – 4 lenses
- Prefer Roof prism, though it will make it little expensive. (Porro prism, less expensive, but a little heavier)
- Fully multi coated lenses preferred (fully coated are a NO, multi-coated acceptable)
- Diopter adjustment is sort of essential
- Eye relief – 14 / 15mm, more the better, upto around 17 mm
- Weight – upto 30 ounces is good to carry on neck, else shoulder straps should be used
- waterproof - just desirable, helps in rain, if accidentally falls in water etc.
- Armoring helps as it provides more protection to the body (it is rubber cover)
Link is:
http://ping.fm/E8jPf
Suggested features that should be there in the binoculars:
- 8 X 40 (8 X 25 is a little lighter)
- Exit pupil – 5mm
- BAK – 4 lenses
- Prefer Roof prism, though it will make it little expensive. (Porro prism, less expensive, but a little heavier)
- Fully multi coated lenses preferred (fully coated are a NO, multi-coated acceptable)
- Diopter adjustment is sort of essential
- Eye relief – 14 / 15mm, more the better, upto around 17 mm
- Weight – upto 30 ounces is good to carry on neck, else shoulder straps should be used
- waterproof - just desirable, helps in rain, if accidentally falls in water etc.
- Armoring helps as it provides more protection to the body (it is rubber cover)
Link is:
http://ping.fm/E8jPf
Buying a Binocular - Mid level
just sharing the research outcome for binoculars, may be useful if you want to buy one in future.
8 X 40 (8 X 25 is a little lighter)
Exit pupil – 5mm
BAK – 4 lenses
Prefer Roof prism, though it will make it little expensive. Porro prism, less expensive, but a little heavier
Fully multi coated lenses preferred (fully coated are a NO, multi-coated acceptable)
Diopter adjustment is sort of essential
Eye relief – 14 / 15mm, more the better, upto around 17 mm
Weight – upto 30 ounces is good to carry on nect, else shoulder straps should be used
waterproof - just desirable, helps in rain, if accidentally falls in water etc.
Armoring helps as it provides more protection to the body (it is rubber cover)
Link is:
http://www.opticsplanet.net/how-to-buy-binoculars.html
Cheers!
8 X 40 (8 X 25 is a little lighter)
Exit pupil – 5mm
BAK – 4 lenses
Prefer Roof prism, though it will make it little expensive. Porro prism, less expensive, but a little heavier
Fully multi coated lenses preferred (fully coated are a NO, multi-coated acceptable)
Diopter adjustment is sort of essential
Eye relief – 14 / 15mm, more the better, upto around 17 mm
Weight – upto 30 ounces is good to carry on nect, else shoulder straps should be used
waterproof - just desirable, helps in rain, if accidentally falls in water etc.
Armoring helps as it provides more protection to the body (it is rubber cover)
Link is:
http://www.opticsplanet.net/how-to-buy-binoculars.html
Cheers!
Saturday, July 10, 2010
I Believe...
That just because two people argue,
It doesn't mean they don't love each other.
And just because they don't argue,
It doesn't mean they do love each other.
I Believe...
That we don't have to change friends if
We understand that friends change.
I Believe....
That no matter how good a friend is,
they're going to hurt you every once in a while
and you must forgive them for that.
I Believe...
That true friendship continues to grow,
even over the longest distance.
Same goes for true love.
I Believe...
That you can do something in an instant
That will give you heartache for life.
I Believe....
That we are responsible for what
We do, no matter how we feel.
I Believe...
That either you control your attitude or it controls you.
I Believe...
That heroes are the people who do what has to be done when it needs
to be done, regardless of the consequences.
I Believe....
That my best friend and I can do anything or nothing and have the best time.
I Believe....
That sometimes the people you expect to kick you when you're down
will be the ones to help you get back up.
I Believe...
That sometimes when I'm angry
I have the right to be angry,
But that doesn't give me the right to be cruel.
I Believe....
That maturity has more to do with what types of experiences you've had
And what you've learned from them and less to do with how many
birthdays you've celebrated.
I Believe....
That it isn't always enough,
to be forgiven by others.
Sometimes, you have to learn to forgive yourself.
I Believe...
That no matter how bad your heart is broken
the world doesn't stop for your grief.
I Believe....
That our background and circumstances
may have influenced who we are,
But, we are responsible for who we become.
That just because two people argue,
It doesn't mean they don't love each other.
And just because they don't argue,
It doesn't mean they do love each other.
I Believe...
That we don't have to change friends if
We understand that friends change.
I Believe....
That no matter how good a friend is,
they're going to hurt you every once in a while
and you must forgive them for that.
I Believe...
That true friendship continues to grow,
even over the longest distance.
Same goes for true love.
I Believe...
That you can do something in an instant
That will give you heartache for life.
I Believe....
That we are responsible for what
We do, no matter how we feel.
I Believe...
That either you control your attitude or it controls you.
I Believe...
That heroes are the people who do what has to be done when it needs
to be done, regardless of the consequences.
I Believe....
That my best friend and I can do anything or nothing and have the best time.
I Believe....
That sometimes the people you expect to kick you when you're down
will be the ones to help you get back up.
I Believe...
That sometimes when I'm angry
I have the right to be angry,
But that doesn't give me the right to be cruel.
I Believe....
That maturity has more to do with what types of experiences you've had
And what you've learned from them and less to do with how many
birthdays you've celebrated.
I Believe....
That it isn't always enough,
to be forgiven by others.
Sometimes, you have to learn to forgive yourself.
I Believe...
That no matter how bad your heart is broken
the world doesn't stop for your grief.
I Believe....
That our background and circumstances
may have influenced who we are,
But, we are responsible for who we become.
Friday, July 9, 2010
Wednesday, July 7, 2010
My strong advice would be to stay away from creating any Long positions in Indian markets. Unless of course, you have done your home work well and spot any GREAT opportunity in any specific stock as of now.
On the fundamental side, it's results season and the results would impact the stock markets. I am not saying that results will be bad, but generally, market builds in the good news in few sessions and when the good news actually comes or becomess available to everyone, usually a Top is made. We might see it happening today, as I write this.
Technically, NIFTY is in very weak position and we may see start of a down trend here. I would just reproduce .......
visit www.sumitkgupta.com
On the fundamental side, it's results season and the results would impact the stock markets. I am not saying that results will be bad, but generally, market builds in the good news in few sessions and when the good news actually comes or becomess available to everyone, usually a Top is made. We might see it happening today, as I write this.
Technically, NIFTY is in very weak position and we may see start of a down trend here. I would just reproduce .......
visit www.sumitkgupta.com
Saturday, July 3, 2010
The following paragraph appeared in the December 1909 issue of “Ticker†Magzine, written by its owner:
“One of the most astonishing calculations made by Mr. Gann was during last summer (1909) when he predicted that September wheat would sell at $1.20. This meant that it must touch that figure before the end of the month of September. At twelve o’ clock, Chicago time, on September 30th (the last day), the option was selling below $1.08 and it looked as though his prediction would not be fulfilled. Mr. Gann said, ‘if it does not touch $ 1.20 by the close of the market, it will prove that there is something wrong with my whole method of calculations. I do not care what the price is now, it must go there’. It is common history that September wheat surprised the whole country by selling at $1.20 and no higher in the very last hour of trading, closing at that figureâ€.
“One of the most astonishing calculations made by Mr. Gann was during last summer (1909) when he predicted that September wheat would sell at $1.20. This meant that it must touch that figure before the end of the month of September. At twelve o’ clock, Chicago time, on September 30th (the last day), the option was selling below $1.08 and it looked as though his prediction would not be fulfilled. Mr. Gann said, ‘if it does not touch $ 1.20 by the close of the market, it will prove that there is something wrong with my whole method of calculations. I do not care what the price is now, it must go there’. It is common history that September wheat surprised the whole country by selling at $1.20 and no higher in the very last hour of trading, closing at that figureâ€.
The following paragraph appeared in the December 1909 issue of "Ticker" Magzine, written by its owner:
"One of the most astonishing calculations made by Mr. Gann was during last summer (1909) when he predicted that September wheat would sell at $1.20. This meant that it must touch that figure before the end of the month of September. At twelve o' clock, Chicago time, on September 30th (the last day), the option was selling below $1.08 and it looked as though his prediction would not be fulfilled. Mr. Gann said, 'if it does not touch $ 1.20 by the close of the market, it will prove that there is something wrong with my whole method of calculations. I do not care what the price is now, it must go there'. It is common history that September wheat surprised the whole country by selling at $1.20 and no higher in the very last hour of trading, closing at that figure".
"One of the most astonishing calculations made by Mr. Gann was during last summer (1909) when he predicted that September wheat would sell at $1.20. This meant that it must touch that figure before the end of the month of September. At twelve o' clock, Chicago time, on September 30th (the last day), the option was selling below $1.08 and it looked as though his prediction would not be fulfilled. Mr. Gann said, 'if it does not touch $ 1.20 by the close of the market, it will prove that there is something wrong with my whole method of calculations. I do not care what the price is now, it must go there'. It is common history that September wheat surprised the whole country by selling at $1.20 and no higher in the very last hour of trading, closing at that figure".
Thursday, July 1, 2010
Tuesday, June 29, 2010
Monday, June 28, 2010
Sunday, June 27, 2010
NIFTY is expected to run down till 6th / 7th July (14 calendar days) to 5080 / 5008.
It is then expected to run up about 600 points in next 29 to 43 calendar days, making a top around 8th August.
The LONG trading opportunities for today are not being posted in view of above position of NIFTY. In this kind of market, only strong Trades should be undertaken because if the overall market moves down, it drags along with it the good trading opportunities as well.
It is then expected to run up about 600 points in next 29 to 43 calendar days, making a top around 8th August.
The LONG trading opportunities for today are not being posted in view of above position of NIFTY. In this kind of market, only strong Trades should be undertaken because if the overall market moves down, it drags along with it the good trading opportunities as well.
Thursday, June 24, 2010
new post at www.sumitkgupta.com
Identifying trading Opportunities
We have covered good ground in terms of basic understanding and learning of stock markets. We have reached the level where we can draw up Swing charts and determine the trend using the Swing Charts.
It’s time to get into the identification of trading opportunities in a stock market i.e. a particular stock, index or commodity. We need to have.......
Identifying trading Opportunities
We have covered good ground in terms of basic understanding and learning of stock markets. We have reached the level where we can draw up Swing charts and determine the trend using the Swing Charts.
It’s time to get into the identification of trading opportunities in a stock market i.e. a particular stock, index or commodity. We need to have.......
Wednesday, June 23, 2010
Monday, June 14, 2010
Saturday, June 12, 2010
Thursday, June 10, 2010
New post at: www.sumitkgupta.com
Charts – Support and Resistance
Let’s look at few charts to understand Support and Resistance and cement the concept clearly in our minds.
If it looks like heavy stuff, it may be. That’s why we are breaking it into various pieces. When you start a thousand mile journey, you don’t expect to complete it in one straight go. You break it into various parts and complete it. How can an elephant be eaten??
more at www.sumitkgupta.com
Charts – Support and Resistance
Let’s look at few charts to understand Support and Resistance and cement the concept clearly in our minds.
If it looks like heavy stuff, it may be. That’s why we are breaking it into various pieces. When you start a thousand mile journey, you don’t expect to complete it in one straight go. You break it into various parts and complete it. How can an elephant be eaten??
more at www.sumitkgupta.com
Wednesday, June 9, 2010
Glass Floors and Ceilings
We keep hearing the stock analysts using the terms support and resistance, everywhere and every now and then. When I heard those terms, I always wondered what these terms mean. Believe me, even after 6 months into the trading, I didn’t EXACTLY understood, what the heck Support and Resistance were.
One day I read an article some where in a trading newsletter. I don’t remember the name of the author of the article so it’s difficult to give a credit. It was an interesting articlle with the same heading “Glass Floors and Ceilingsâ€. The author used the words Glass Floors and Ceilings to explain the meaning of Support and Resistance.
Support means a price level at which buying is strong enough to pull the prices UP. Resistance is just opposite of it, means, a price level where selling is strong enough to push the prices down.
Let’s look at a Support level as a Glass Floor. If you throw a ball at a floor, what does it do. It bounces UP. It comes down and then bounces again. And again. And when it has bounced enough, it rests on the floor. You might say it’s because of law of gravity. I would say it found SUPPORT on the floor level and hence, it bounced back.
In stock market, when prices of a stock or commodity are falling down, they hit a floor i.e. the prices would either hold there for some time or just hit and bounce back. Hence, SUPPORT is sort of a floor.
Now, consider Resistance as a ceiling. Leave a gas baloon in a room and till where can it go. To the roof or CEILING. The pressure of gas inside it, pushes it up but is not strong enough to push it through the Ceiling. It faces ‘resistance’ at the roof. In case of stocks, the Buying pressure or the Demand of that share or stock or commodity, pushes the prices up but only to a certain level.
Why the term GLASS?
Because glass can be broken.
Similarly, when stock prices hit a Support level multiple times, the glass Floor becomes weaker. Generally, if a Support level is hit 4th time, the support breaks and prices go further below. It might happen on 5th time. But if it doesn’t, then you can be sure, that is very very very….. strong support. So, any time when a stock price comes near that Support level, you can be more confident to buy it.
Reverse is true for Resistance!
But then, how come each analyst comes up with multiple Supports and Resistances. They say, if it breaks below 5000, it will find support at 4800. If it breaks that level, then next level will be 4500. If it holds at 4500 (support), then it will resistance at 4800 and then at 5000.
Once a stock breaks through a Support level, then that Support level becomes a Resistance. And if breaks above a Resistance, that Resistance level becomes a Support.
You can look at stock market as a building of multiple glass floors. Let’s say a building has 4 floors. Ground Floor(GF), First Floor, Second Floor and Third Floor. When you are at GF, the GF floor is your support and its ceiling is your Resistance. When you move up to First Floor, the ceiling (resistance) of Ground Floor becomes the floor (or your support) on Fisrt Floor. When you further move up to Second floor, first floor ceiling (resistance) will become your support (or floor) on second floor.
Now, think of above when you are moving down from the top floor to second floor to first floor and ground floor.
It’s that simple. Isn’t it!!!
We keep hearing the stock analysts using the terms support and resistance, everywhere and every now and then. When I heard those terms, I always wondered what these terms mean. Believe me, even after 6 months into the trading, I didn’t EXACTLY understood, what the heck Support and Resistance were.
One day I read an article some where in a trading newsletter. I don’t remember the name of the author of the article so it’s difficult to give a credit. It was an interesting articlle with the same heading “Glass Floors and Ceilingsâ€. The author used the words Glass Floors and Ceilings to explain the meaning of Support and Resistance.
Support means a price level at which buying is strong enough to pull the prices UP. Resistance is just opposite of it, means, a price level where selling is strong enough to push the prices down.
Let’s look at a Support level as a Glass Floor. If you throw a ball at a floor, what does it do. It bounces UP. It comes down and then bounces again. And again. And when it has bounced enough, it rests on the floor. You might say it’s because of law of gravity. I would say it found SUPPORT on the floor level and hence, it bounced back.
In stock market, when prices of a stock or commodity are falling down, they hit a floor i.e. the prices would either hold there for some time or just hit and bounce back. Hence, SUPPORT is sort of a floor.
Now, consider Resistance as a ceiling. Leave a gas baloon in a room and till where can it go. To the roof or CEILING. The pressure of gas inside it, pushes it up but is not strong enough to push it through the Ceiling. It faces ‘resistance’ at the roof. In case of stocks, the Buying pressure or the Demand of that share or stock or commodity, pushes the prices up but only to a certain level.
Why the term GLASS?
Because glass can be broken.
Similarly, when stock prices hit a Support level multiple times, the glass Floor becomes weaker. Generally, if a Support level is hit 4th time, the support breaks and prices go further below. It might happen on 5th time. But if it doesn’t, then you can be sure, that is very very very….. strong support. So, any time when a stock price comes near that Support level, you can be more confident to buy it.
Reverse is true for Resistance!
But then, how come each analyst comes up with multiple Supports and Resistances. They say, if it breaks below 5000, it will find support at 4800. If it breaks that level, then next level will be 4500. If it holds at 4500 (support), then it will resistance at 4800 and then at 5000.
Once a stock breaks through a Support level, then that Support level becomes a Resistance. And if breaks above a Resistance, that Resistance level becomes a Support.
You can look at stock market as a building of multiple glass floors. Let’s say a building has 4 floors. Ground Floor(GF), First Floor, Second Floor and Third Floor. When you are at GF, the GF floor is your support and its ceiling is your Resistance. When you move up to First Floor, the ceiling (resistance) of Ground Floor becomes the floor (or your support) on Fisrt Floor. When you further move up to Second floor, first floor ceiling (resistance) will become your support (or floor) on second floor.
Now, think of above when you are moving down from the top floor to second floor to first floor and ground floor.
It’s that simple. Isn’t it!!!
Tuesday, June 8, 2010
Trading Plan
(www.sumitkgupta.com)
By now, I believe we are a bit comfortable with bar and swing charts construction and trend determination. We also understand few important stock market terms like support and resistance (or glass floors and ceilings J), bull and bear market, long and short trades, STOP LOSS etc.
When you are an investor, you need to have an investment plan. Similarly, traders need to have a trading plan. We need to remember that our aim in this journey is to become an advanced trader with an ability to forecast the movement of stock or markets. There are few differences in investor and trader.
An investor seeks returns from the financial instruments of a company, primarily dividend and capital appreciation. A trader is interested in making profits from price movements (either side, UP or DOWN).
An investor has a longer term time frame (more than 6 month) and a trader has a short term time frame of upto 3 months.
An investor generally takes a lower risk, and hence his returns are lower. A trader takes a higher risk (though calculated and limited) looking for higher returns. My target from my trading is generally to get at least 5%-7% returns per month on the capital that I trade with. I also look at a Reward : Risk ratio of minimum 2 : 1. The higher, the better. In other words, if I am risking Rs. 10 on a share, my reward or profit on that trade should be minimum Rs. 20 per share. This was explained in an earlier post http://sumitkgupta.com/2010/05/05/risk-vs-risky
Whenever you are going to take a trade, on either side, Long or Short, a trading plan is a must. A trading plan has 4 essential components which are:
Entry Price – price at which you will get in the trade
Exit Price – target price or price at which you will exit making a profit
STOP LOSS – your life jacket – a price at which you will exit if the stock / market goes against you
Maximum risk that you will take – we will cover this later when we review the money management rules to keep alive in the market. As of now, let’s understand, mathematically it is :
(Entry Price – STOP LOSS Price) X Number of shares traded
Your maximum risk should not exceed 5% – 10% of your trading capital, depending upon your risk appetite.
The benefits of trading plan are that before you take the trade, you know how much amount you would lose if stock / market moves against you i.e. you were wrong in selecting the trade. You would also know your target when to take profits. Prices can go beyond your target price, but that’s the price point where you take your profits.
Remember, in stock markets, the profit is not yours unless you have booked it. It’s only a notional profit.
We will review few trading plans to increase our understanding of the trading plan over next couple of days.
Till then,……. keep determining the trend
www.sumitkgupta.com
(www.sumitkgupta.com)
By now, I believe we are a bit comfortable with bar and swing charts construction and trend determination. We also understand few important stock market terms like support and resistance (or glass floors and ceilings J), bull and bear market, long and short trades, STOP LOSS etc.
When you are an investor, you need to have an investment plan. Similarly, traders need to have a trading plan. We need to remember that our aim in this journey is to become an advanced trader with an ability to forecast the movement of stock or markets. There are few differences in investor and trader.
An investor seeks returns from the financial instruments of a company, primarily dividend and capital appreciation. A trader is interested in making profits from price movements (either side, UP or DOWN).
An investor has a longer term time frame (more than 6 month) and a trader has a short term time frame of upto 3 months.
An investor generally takes a lower risk, and hence his returns are lower. A trader takes a higher risk (though calculated and limited) looking for higher returns. My target from my trading is generally to get at least 5%-7% returns per month on the capital that I trade with. I also look at a Reward : Risk ratio of minimum 2 : 1. The higher, the better. In other words, if I am risking Rs. 10 on a share, my reward or profit on that trade should be minimum Rs. 20 per share. This was explained in an earlier post http://sumitkgupta.com/2010/05/05/risk-vs-risky
Whenever you are going to take a trade, on either side, Long or Short, a trading plan is a must. A trading plan has 4 essential components which are:
Entry Price – price at which you will get in the trade
Exit Price – target price or price at which you will exit making a profit
STOP LOSS – your life jacket – a price at which you will exit if the stock / market goes against you
Maximum risk that you will take – we will cover this later when we review the money management rules to keep alive in the market. As of now, let’s understand, mathematically it is :
(Entry Price – STOP LOSS Price) X Number of shares traded
Your maximum risk should not exceed 5% – 10% of your trading capital, depending upon your risk appetite.
The benefits of trading plan are that before you take the trade, you know how much amount you would lose if stock / market moves against you i.e. you were wrong in selecting the trade. You would also know your target when to take profits. Prices can go beyond your target price, but that’s the price point where you take your profits.
Remember, in stock markets, the profit is not yours unless you have booked it. It’s only a notional profit.
We will review few trading plans to increase our understanding of the trading plan over next couple of days.
Till then,……. keep determining the trend
www.sumitkgupta.com
Sunday, June 6, 2010
NIFTY has been moving up for last 3 days and closed higher than previous day. However, in my view, there is little strength in the UP move as of now.
Let’s look at the chart below to see how the market has been moving.
Please see the first circle marked at 50% – 5092.25. This is the 50% of the last range down which was 7th April – 5398 to 25 May 4786 or in other words, half way retracement in this range. According to GANN, 50% of a price movement is a major milestone in any stock movement and it either acts a support or resistance.
I was looking at 5092 level to understand which way NIFTY is expected to move. If it broke through this level, It would be headed up to 5500-6000 level in next few weeks. Breaking through a level means that the market or stock should CLOSE above the resistance level for 2 consecutive days, SUPPORTED by STRONG Volumes.
Now go back to the chart and see what’s happening to the volumes when NIFTY is moving higher. I have marked them in circle. Volumes are declining. This is a sign of weakness in the market. It shows, in a way, that the professionals are not interested in this UP move or the market at the moment.
So, it could be a false break out. It may still move higher, but I would not take a chance.
Now let’s look at weekly and 3 Day Swing Charts:
As is evident from above chart, both WEEKLY and 3 DAY SWING charts show the TREND as being DOWN. In fact, I am getting SELL signal on 3 DAY SWING chart. Target is 4590.
If NIFTY trades below 5090 on Monday, June 7, I will go SHORT on NIFTY with targets of 4730 and 4592. STOP LOSS at 5150.
Happy trading
Be profitable!
www.sumitkgupta.com
Let’s look at the chart below to see how the market has been moving.
Please see the first circle marked at 50% – 5092.25. This is the 50% of the last range down which was 7th April – 5398 to 25 May 4786 or in other words, half way retracement in this range. According to GANN, 50% of a price movement is a major milestone in any stock movement and it either acts a support or resistance.
I was looking at 5092 level to understand which way NIFTY is expected to move. If it broke through this level, It would be headed up to 5500-6000 level in next few weeks. Breaking through a level means that the market or stock should CLOSE above the resistance level for 2 consecutive days, SUPPORTED by STRONG Volumes.
Now go back to the chart and see what’s happening to the volumes when NIFTY is moving higher. I have marked them in circle. Volumes are declining. This is a sign of weakness in the market. It shows, in a way, that the professionals are not interested in this UP move or the market at the moment.
So, it could be a false break out. It may still move higher, but I would not take a chance.
Now let’s look at weekly and 3 Day Swing Charts:
As is evident from above chart, both WEEKLY and 3 DAY SWING charts show the TREND as being DOWN. In fact, I am getting SELL signal on 3 DAY SWING chart. Target is 4590.
If NIFTY trades below 5090 on Monday, June 7, I will go SHORT on NIFTY with targets of 4730 and 4592. STOP LOSS at 5150.
Happy trading
Be profitable!
www.sumitkgupta.com
Fundamental Analysis Vs Technical Analysis
Some of you have asked me as to why I don’t include an analysis of the current or expected economic environment, for example European crisis, corporate results etc. The simple reason to that is, we use Technical Analysis and NOT Fundamental Analysis. Fundamental Analysis focuses on the fundamentals of the company, economy and industry that it operates in.
Attempting to provide difference in Fundamental and Technical analysis, let’s review both-
Fundamental Analysis:
• Based on economic, industry and company information. Examples:
- What industry or business the company is in
- Financial information i.e. profits, revenue, operating margins
- Government regulations and changes
- Competition
- Dividend pay out
- Cash reserves and situation
• Picking stocks that are best performing in their industry or sector
• Brokers, fund managers have many specialists studying fundamentals
Technical Analysis:
• Use of price history to identify common patterns or change in trends
• Charting the primary tool
• Price action and reaction, support and resistance
• Indicators are used to forecast price movements
Technical analysis is based on the premise that all the information related to any stock or market is reflected or inbuilt in its current price. Technical charts can give you early warning / indications of any change in direction of price movement.
While both analysis may be good and I don’t advocate using any one of them, I prefer to use Technical analysis for various reasons.
Firstly, industry knowledge is required for Fundamental analysis. So, if you want to trade in 10 stocks from 10 different industries, you need to know all the industry.
Then, it is very time consuming because there are piles and piles and piles of information. I don’t have access to most Company’s information. By the time it is known to me or general public, it’s too late. All said and done about stopping Insider Trading, it still happens. One can always trade in a friend’s account who is not barred due to insider trading regulations applicable to you.
The information available is subjective to a lot of factors and may not be reliable. Information can be outdated too.
There are different styles of management for different companies and that might have an impact on the operations of the company, which may again be known to me post it has happened.
Technical charts can provide you advance information about a company. You can see it all on charts. I would just share a real example from my trading.
It was an early morning of July 2007. I had been a student of Technical analysis for less than 9 months. Around 8 am, I was scanning various stocks and came across the chart for GMR Infra. I don’t read newspaper (though at that time I had subscribed to Economic Times, most of which were never unfolded!) I checked with my wife as to where the ET for the day was. She was surprised “Aaj to ET ki kismat khul gayee. By the way, why do you need a newspaperâ€. I said, “there is some big news on GMR Infraâ€.
I couldn’t believe it! There was this news of GMR Infra bagging a $2.7 billion deal for Istanbul airport. Eureka!
How did I know this from chart?
I noticed an unusual spike in volumes of GMR Infra without much significant move in the stock. That day, the chart were providing a Buy signal (on my trading system). I went ahead and bought one lot of GMR Infra (1000 shares) @ Rs. 757 putting up Rs. 1.2 lakhs as margin money on July 10. I sold the lot @ Rs. 940 2 days later i.e. on 12th July, making a profit of Rs. 1.8 lakhs.
A whopping return of 150% on my investment in 2 days.
The point of sharing above example is not to brag about my ability to see a great profit making opportunity or how much money did I make or that it can be done every time. Idea is to demonstrate what technical charts / analysis can tell you in advance which you may come to know much later in Fundamental Analysis.
That was the day, when technical analysis became my preferred way to stock analysis, and I knew, it was my vehicle to acquiring unlimited wealth!
www.sumitkgupta.com
Some of you have asked me as to why I don’t include an analysis of the current or expected economic environment, for example European crisis, corporate results etc. The simple reason to that is, we use Technical Analysis and NOT Fundamental Analysis. Fundamental Analysis focuses on the fundamentals of the company, economy and industry that it operates in.
Attempting to provide difference in Fundamental and Technical analysis, let’s review both-
Fundamental Analysis:
• Based on economic, industry and company information. Examples:
- What industry or business the company is in
- Financial information i.e. profits, revenue, operating margins
- Government regulations and changes
- Competition
- Dividend pay out
- Cash reserves and situation
• Picking stocks that are best performing in their industry or sector
• Brokers, fund managers have many specialists studying fundamentals
Technical Analysis:
• Use of price history to identify common patterns or change in trends
• Charting the primary tool
• Price action and reaction, support and resistance
• Indicators are used to forecast price movements
Technical analysis is based on the premise that all the information related to any stock or market is reflected or inbuilt in its current price. Technical charts can give you early warning / indications of any change in direction of price movement.
While both analysis may be good and I don’t advocate using any one of them, I prefer to use Technical analysis for various reasons.
Firstly, industry knowledge is required for Fundamental analysis. So, if you want to trade in 10 stocks from 10 different industries, you need to know all the industry.
Then, it is very time consuming because there are piles and piles and piles of information. I don’t have access to most Company’s information. By the time it is known to me or general public, it’s too late. All said and done about stopping Insider Trading, it still happens. One can always trade in a friend’s account who is not barred due to insider trading regulations applicable to you.
The information available is subjective to a lot of factors and may not be reliable. Information can be outdated too.
There are different styles of management for different companies and that might have an impact on the operations of the company, which may again be known to me post it has happened.
Technical charts can provide you advance information about a company. You can see it all on charts. I would just share a real example from my trading.
It was an early morning of July 2007. I had been a student of Technical analysis for less than 9 months. Around 8 am, I was scanning various stocks and came across the chart for GMR Infra. I don’t read newspaper (though at that time I had subscribed to Economic Times, most of which were never unfolded!) I checked with my wife as to where the ET for the day was. She was surprised “Aaj to ET ki kismat khul gayee. By the way, why do you need a newspaperâ€. I said, “there is some big news on GMR Infraâ€.
I couldn’t believe it! There was this news of GMR Infra bagging a $2.7 billion deal for Istanbul airport. Eureka!
How did I know this from chart?
I noticed an unusual spike in volumes of GMR Infra without much significant move in the stock. That day, the chart were providing a Buy signal (on my trading system). I went ahead and bought one lot of GMR Infra (1000 shares) @ Rs. 757 putting up Rs. 1.2 lakhs as margin money on July 10. I sold the lot @ Rs. 940 2 days later i.e. on 12th July, making a profit of Rs. 1.8 lakhs.
A whopping return of 150% on my investment in 2 days.
The point of sharing above example is not to brag about my ability to see a great profit making opportunity or how much money did I make or that it can be done every time. Idea is to demonstrate what technical charts / analysis can tell you in advance which you may come to know much later in Fundamental Analysis.
That was the day, when technical analysis became my preferred way to stock analysis, and I knew, it was my vehicle to acquiring unlimited wealth!
www.sumitkgupta.com
Thursday, June 3, 2010
Trend Determination – contd…
by Sumit Gupta on June 2, 2010
--------------------------------------------------------------------------------
Trend determination is a very important topic in stock trading. As discussed earlier, one should always trade with the trend and hence, one needs to know what is the trend.
The trend may be UP, DOWN or UNCERTAIN. If trend is UP, we BUY (go LONG) to make profit. If trend is DOWN, we sell first (go SHORT) and then buy later to make profit. If trend is UNCERTAIN, we do nothing. We wait for a change in trend and once trend change confirms, we get in market again.
I would re-iterate at this time once again (and I will keep repeating again and again in our journey together), that our first objective in the market is to survive and then make money. By this I mean, protect our capital by taking limited risk and make money when the opportunity arrives.
Let me compare it with batting in crickt test match. You are on crease and the fielding side is bowling well. You defend on good balls (to save your wicket) and when a loose ball comes, you go for the big hit. Same in the stock market. Uncertain trend is one where the pitch in not condusive to batting but favors bowlers. In UP and DOWN trend, you need to play the right shot in the right direction
Obviously, how you trade will depend on your risk apetite as well as whether you are in for a Test match, one day or 20:20. I am in for a never ending series of TEST MATCHES. 20:20 is good for entertainment, but then entertainment doesn’t make money for every one!!!
I intend to get into charts now for next couple of posts so that we get ourselves familiar with trend determination. We will also discuss Strong and Weak trends and how to measure the strength (or weakness) of the trend.
Let’s look at some charts. This is Real Stufff ……..
ICICI Bank Daily Swing Chart
In the chart above, please see the LOWs and HIGH marked by circles. The trend is clearly DOWN. Not a good time to Buy. Is it good time to hold or sell out? I have an answer but …..
Let’s look at ICICI Bank weekly swing chart now :-
ICICI BANK WEEKLY SWING CHART
Weekly trend is also down. When both Daily and Weekly charts show a DOWN trend, stay away from buying. Whether you sell or hold, that would depend on Resistance and Support levels which we will study together at a later time.
INFOSYS DAILY SWING CHART
Please see the direction of the arrows . TREND is UP. Now look at the Weekly SWING chart for Infosys below:
INFOSYS WEEKLY SWING CHART
Trend is UNCERTAIN. However, from my analysis, it may be a good time to Buy for targets 2786 or 2842, once it trades above 2652 on Thursday, 3rd June 2010. STOP LOSS – 2617.
RELIANCE DAILY SWING CHART
This is a little interesting. The trend is UNCERTAIN but as of NOW. The previous TOP is at 1048.95. SO, the moment Reliance trades at 1049 on Thursday (or without making a LOW day), Trend will turn UP. Look at Weekly chart:
RELIANCE WEEKLY SWING CHART
UNCERTAIN trend, just as Daily chart. Interestingly, the Weekly trend will turn UP once Reliance crosses 1093.50
I guess, it’s enough practice for one day. Revise and absorb the learning contained herein.
by Sumit Gupta on June 2, 2010
--------------------------------------------------------------------------------
Trend determination is a very important topic in stock trading. As discussed earlier, one should always trade with the trend and hence, one needs to know what is the trend.
The trend may be UP, DOWN or UNCERTAIN. If trend is UP, we BUY (go LONG) to make profit. If trend is DOWN, we sell first (go SHORT) and then buy later to make profit. If trend is UNCERTAIN, we do nothing. We wait for a change in trend and once trend change confirms, we get in market again.
I would re-iterate at this time once again (and I will keep repeating again and again in our journey together), that our first objective in the market is to survive and then make money. By this I mean, protect our capital by taking limited risk and make money when the opportunity arrives.
Let me compare it with batting in crickt test match. You are on crease and the fielding side is bowling well. You defend on good balls (to save your wicket) and when a loose ball comes, you go for the big hit. Same in the stock market. Uncertain trend is one where the pitch in not condusive to batting but favors bowlers. In UP and DOWN trend, you need to play the right shot in the right direction
Obviously, how you trade will depend on your risk apetite as well as whether you are in for a Test match, one day or 20:20. I am in for a never ending series of TEST MATCHES. 20:20 is good for entertainment, but then entertainment doesn’t make money for every one!!!
I intend to get into charts now for next couple of posts so that we get ourselves familiar with trend determination. We will also discuss Strong and Weak trends and how to measure the strength (or weakness) of the trend.
Let’s look at some charts. This is Real Stufff ……..
ICICI Bank Daily Swing Chart
In the chart above, please see the LOWs and HIGH marked by circles. The trend is clearly DOWN. Not a good time to Buy. Is it good time to hold or sell out? I have an answer but …..
Let’s look at ICICI Bank weekly swing chart now :-
ICICI BANK WEEKLY SWING CHART
Weekly trend is also down. When both Daily and Weekly charts show a DOWN trend, stay away from buying. Whether you sell or hold, that would depend on Resistance and Support levels which we will study together at a later time.
INFOSYS DAILY SWING CHART
Please see the direction of the arrows . TREND is UP. Now look at the Weekly SWING chart for Infosys below:
INFOSYS WEEKLY SWING CHART
Trend is UNCERTAIN. However, from my analysis, it may be a good time to Buy for targets 2786 or 2842, once it trades above 2652 on Thursday, 3rd June 2010. STOP LOSS – 2617.
RELIANCE DAILY SWING CHART
This is a little interesting. The trend is UNCERTAIN but as of NOW. The previous TOP is at 1048.95. SO, the moment Reliance trades at 1049 on Thursday (or without making a LOW day), Trend will turn UP. Look at Weekly chart:
RELIANCE WEEKLY SWING CHART
UNCERTAIN trend, just as Daily chart. Interestingly, the Weekly trend will turn UP once Reliance crosses 1093.50
I guess, it’s enough practice for one day. Revise and absorb the learning contained herein.
Monday, May 31, 2010
Trading Goals
Recently, I received an email from a dear friend who had asked couple of questions on trading. I thought it might be useful to all of us as we all, at some point of time, keep asking these questions, especially when we are starting out.
I am reproducing some extract from that email communication (with few changes to maintain confidentiality), just in case it is helpful to some or all of us.
1) I read what was referred by you on Wiki for GANN theory. I am impressed with the theory but again there are enough cases against it as well. I mean there is no certainity in the theory as per the case studies. What are your thoughts on that? Arent the odds too high? May be i am missing something.
Response: To your first question, I would just use example of someone starting any business. It is not that a particular business model that fails, it is the people who fail. Why? Because they give up. They want immediate results. One has to decide whether it is a business (part time or full time) OR just a hobby OR just a wish to make money. So, there may be lot of examples against GANN’s success, it doesn’t prove that his techniques do not work. The fact that GANN made lot of money, tells us that there was something that he knew about the market movements.
Later, from 1985 to 2000, David Bowden from Australia (pls visit www.sitm.com.au ) also made lots of money using GANN techniques. So, my take is that if anyone can make money using a particular technique, we ALL can also do the same, if we are willing to learn and duplicate what they did.
David did a great work by simplifying GANN techniques which can be understood by any one, even a layman, provided the person is willing to put in work required as per their goal from trading. He made it ‘simple’ and simple doesn’t mean ‘easy’.
There are no free lunches. You have to put in the time, work and efforts required. It is no get rich quick funda. As David put it, “I don’t do extra-ordinary things, but I do ordinary things extra-ordinarily well.†Anyone who wants to become an expert has to learn and practice, in any field. You would have put in 4 years in engineering before becoming an engineer and then few years working to become better at what you do. That’s with any education or learning, and it’s the same here. I have learnt and used these techniques over last 4 years (since Oct 2006). If one devotes about 2 hours a day, and put in the work required, he/she would be in a position to forecast the stock/market movements with precision.
2) How do we trade? I mean what should i do? Buy/Sell a Particular SHARE and sell/buy it at a date/day recommended by you? Or should i do call/put on the actual Index? (If you feel i am jumping the gun too much just SAY SO – Or just reply will be answered on my blog or something on those lines)
Response : I would advise not to jump in straight away. To be able to advise you, I would need some more information like:
- whether you have a long term horizon or short term
- whether you want to learn trading or just trade. In other words, do you want a fish or want to learn fishing
- how much money do you want to make from stock markets (a target, may be every month, every year, in 2 years, 3 years, 5 years)
- Do you see it as a business, hobby or just checking
If the horizon is long term, then first just learn some simple concepts that I am sharing on www.sumitkgupta.com . These are applicable to all stocks and any market. Pick up one stock (any market) and one index (say NIFTY). You can find charts on them on Yahoo Finance. Here is a link to NIFTY bar chart on yahoo finance. It is an intra day chart i.e. for 1 day at 5 minutes interval. (http://ping.fm/SyFVu )
Start looking at Bar charts. Have a daily routine (1-2 hours daily, if you are serious). Don’t worry if you don’t understand anything. You didn’t learn walking, riding a bike or driving a car in first attempt. Believe me, effort is worth putting in. (I have a target to become a billionaire in 5 years trading in stock markets. August, 2015 And it’s done. Period. )
Once you respond, I will come back to you with a broad plan.
3) While answering above question – please note that my initial trading budget is only Rs. 25000. So i have no idea what and where to start with? I mean what is your advice shold i start with Indian markets or Oz Land?
Response: Capital is not an issue. You can start with any amount good enough to buy 1 (one) share.
I will cover more on this as well as few other techniques that one can use to learn trading, by trading without putting in any money, when we reach that stage.
Recently, I received an email from a dear friend who had asked couple of questions on trading. I thought it might be useful to all of us as we all, at some point of time, keep asking these questions, especially when we are starting out.
I am reproducing some extract from that email communication (with few changes to maintain confidentiality), just in case it is helpful to some or all of us.
1) I read what was referred by you on Wiki for GANN theory. I am impressed with the theory but again there are enough cases against it as well. I mean there is no certainity in the theory as per the case studies. What are your thoughts on that? Arent the odds too high? May be i am missing something.
Response: To your first question, I would just use example of someone starting any business. It is not that a particular business model that fails, it is the people who fail. Why? Because they give up. They want immediate results. One has to decide whether it is a business (part time or full time) OR just a hobby OR just a wish to make money. So, there may be lot of examples against GANN’s success, it doesn’t prove that his techniques do not work. The fact that GANN made lot of money, tells us that there was something that he knew about the market movements.
Later, from 1985 to 2000, David Bowden from Australia (pls visit www.sitm.com.au ) also made lots of money using GANN techniques. So, my take is that if anyone can make money using a particular technique, we ALL can also do the same, if we are willing to learn and duplicate what they did.
David did a great work by simplifying GANN techniques which can be understood by any one, even a layman, provided the person is willing to put in work required as per their goal from trading. He made it ‘simple’ and simple doesn’t mean ‘easy’.
There are no free lunches. You have to put in the time, work and efforts required. It is no get rich quick funda. As David put it, “I don’t do extra-ordinary things, but I do ordinary things extra-ordinarily well.†Anyone who wants to become an expert has to learn and practice, in any field. You would have put in 4 years in engineering before becoming an engineer and then few years working to become better at what you do. That’s with any education or learning, and it’s the same here. I have learnt and used these techniques over last 4 years (since Oct 2006). If one devotes about 2 hours a day, and put in the work required, he/she would be in a position to forecast the stock/market movements with precision.
2) How do we trade? I mean what should i do? Buy/Sell a Particular SHARE and sell/buy it at a date/day recommended by you? Or should i do call/put on the actual Index? (If you feel i am jumping the gun too much just SAY SO – Or just reply will be answered on my blog or something on those lines)
Response : I would advise not to jump in straight away. To be able to advise you, I would need some more information like:
- whether you have a long term horizon or short term
- whether you want to learn trading or just trade. In other words, do you want a fish or want to learn fishing
- how much money do you want to make from stock markets (a target, may be every month, every year, in 2 years, 3 years, 5 years)
- Do you see it as a business, hobby or just checking
If the horizon is long term, then first just learn some simple concepts that I am sharing on www.sumitkgupta.com . These are applicable to all stocks and any market. Pick up one stock (any market) and one index (say NIFTY). You can find charts on them on Yahoo Finance. Here is a link to NIFTY bar chart on yahoo finance. It is an intra day chart i.e. for 1 day at 5 minutes interval. (http://ping.fm/SyFVu )
Start looking at Bar charts. Have a daily routine (1-2 hours daily, if you are serious). Don’t worry if you don’t understand anything. You didn’t learn walking, riding a bike or driving a car in first attempt. Believe me, effort is worth putting in. (I have a target to become a billionaire in 5 years trading in stock markets. August, 2015 And it’s done. Period. )
Once you respond, I will come back to you with a broad plan.
3) While answering above question – please note that my initial trading budget is only Rs. 25000. So i have no idea what and where to start with? I mean what is your advice shold i start with Indian markets or Oz Land?
Response: Capital is not an issue. You can start with any amount good enough to buy 1 (one) share.
I will cover more on this as well as few other techniques that one can use to learn trading, by trading without putting in any money, when we reach that stage.
Our education journey so far...
Last week had been pretty hectic and had to meet lots of personal commitments. A week with sense of achievment on personal front, but, had not been able to keep up with my PASSION, stock markets.
Let’s just recap the topics that we have covered thus far once to just refresh our memory.
We started with understanding the difference between Risk and Risky (http://ping.fm/DczTT). We primarily covered all the major, and most important rules of trading in that one topic. It is one of the most important post and the learning covered there under, which will form the basis of your trading as well trading psychology. It’s a great idea to keep re-visiting that post again, and again, and again….
We then covered some important Stock market terms. I use the word ’some’ because there are so many of them that one could write a full book covering all of these terms. (http://ping.fm/Uvuse)
We covered the importance and relevance of GANN techniques in our trading and stock market education. All my trading is based on GANN techniques. http://ping.fm/YhGXO We also learnt how valuable it is to use STOP LOSSes in your trading. STOP LOSSes are your LIFE JACKET in the stock market ocean. http://ping.fm/24kuH
We deviated a little to put in the post on Mayannaise Jar post (a MUST read), however, was a refresher that we should never forget to live life. Enjoy every moment that comes. http://ping.fm/bjE0O
We learnt constructing Bar chart, meanings of HIGH day, LOW day and how to construct a SWING chart using Bar chart. http://ping.fm/FWkar and http://ping.fm/wDtVn
Finally, we looked at Trading with the Trend http://ping.fm/cFIwX and Trend Determination http://ping.fm/Ml5j8
You might feel that I overemphasising on re-visiting above topics. However, in my opinion, if one were to understand and learn trading, analysing stock markets using technicals, then no one can ever over-emphasize on the above. These are basics and will go a long way in our getting trading education together. We learnt basic maths (addition, substraction, division, multiplication) and a language in primary school, very basic, looks like child’s play, which it is, BUT only once you have learnt it. Today, most of you would agree, these are the most used learning from 12 – 14 years of formal school education!!!!
That’s how it is with trading or technical analysis, or anything else in life!
Last week had been pretty hectic and had to meet lots of personal commitments. A week with sense of achievment on personal front, but, had not been able to keep up with my PASSION, stock markets.
Let’s just recap the topics that we have covered thus far once to just refresh our memory.
We started with understanding the difference between Risk and Risky (http://ping.fm/DczTT). We primarily covered all the major, and most important rules of trading in that one topic. It is one of the most important post and the learning covered there under, which will form the basis of your trading as well trading psychology. It’s a great idea to keep re-visiting that post again, and again, and again….
We then covered some important Stock market terms. I use the word ’some’ because there are so many of them that one could write a full book covering all of these terms. (http://ping.fm/Uvuse)
We covered the importance and relevance of GANN techniques in our trading and stock market education. All my trading is based on GANN techniques. http://ping.fm/YhGXO We also learnt how valuable it is to use STOP LOSSes in your trading. STOP LOSSes are your LIFE JACKET in the stock market ocean. http://ping.fm/24kuH
We deviated a little to put in the post on Mayannaise Jar post (a MUST read), however, was a refresher that we should never forget to live life. Enjoy every moment that comes. http://ping.fm/bjE0O
We learnt constructing Bar chart, meanings of HIGH day, LOW day and how to construct a SWING chart using Bar chart. http://ping.fm/FWkar and http://ping.fm/wDtVn
Finally, we looked at Trading with the Trend http://ping.fm/cFIwX and Trend Determination http://ping.fm/Ml5j8
You might feel that I overemphasising on re-visiting above topics. However, in my opinion, if one were to understand and learn trading, analysing stock markets using technicals, then no one can ever over-emphasize on the above. These are basics and will go a long way in our getting trading education together. We learnt basic maths (addition, substraction, division, multiplication) and a language in primary school, very basic, looks like child’s play, which it is, BUT only once you have learnt it. Today, most of you would agree, these are the most used learning from 12 – 14 years of formal school education!!!!
That’s how it is with trading or technical analysis, or anything else in life!
Tuesday, May 25, 2010
In 19 May post, I had mentioned few dates and price levels to watch on NIFTY. I expected NIFTY to touch 4812 (by 7th June) before it could resume its upward journey. Today, NIFTY touched a Low of 4786 breaching my target of 4812.
NIFTY is in weak position now. Next few support levels that I would look for are 4767 (very strong support), 4675 and then 4538.
Looking at recent market movement, the possibilities are that NIFTY makes a Double Bottom at 4675 on 4th June 2010. Bear in mind, 4th June is a Friday.
How I am working out this date?
It went up 724 points in 58 days to 5399.7 on 7th April, 2010 from 4675 on 8th Feb 2010. 50% of this range in points and days is 362 points and 29 days (@ 12.50 per day). This gave us a target of 5037.50 on 6th May 2010 (calcualting from April 7 2010 Top). NIFTY day LOW for May 6, 2010 was 5037.75. Pretty close, isn’t it.
Adding 58 days to 7th April and reducing 724 points, gives us 4 June 2010 and 4675 price target.
If you check the days today from 7th April, 2010, it comes to 48 days and 614 points. A rate of 12.75 per day! Pretty close.
All above calculations may be confusing. And may be a little overwhelming. But these are aimed at demonstrating one point. HISTORY REPEATS, The fundamental belief on which Gann techniques and calculations are based.
I have proved these to my satisfaction many times. You may want to prove it to yourself, to your satisfaction.
Please also note, 5037 is now a resistance. Floor has now become the ceiling (refer to a previous post on Stock market terms which has information on Supports/Resistance).
Stay away from Buying for long term in this market, at least till 4th June, 2010. I may be wrong, but remember, it is better being profitable, than being right……….
NIFTY is in weak position now. Next few support levels that I would look for are 4767 (very strong support), 4675 and then 4538.
Looking at recent market movement, the possibilities are that NIFTY makes a Double Bottom at 4675 on 4th June 2010. Bear in mind, 4th June is a Friday.
How I am working out this date?
It went up 724 points in 58 days to 5399.7 on 7th April, 2010 from 4675 on 8th Feb 2010. 50% of this range in points and days is 362 points and 29 days (@ 12.50 per day). This gave us a target of 5037.50 on 6th May 2010 (calcualting from April 7 2010 Top). NIFTY day LOW for May 6, 2010 was 5037.75. Pretty close, isn’t it.
Adding 58 days to 7th April and reducing 724 points, gives us 4 June 2010 and 4675 price target.
If you check the days today from 7th April, 2010, it comes to 48 days and 614 points. A rate of 12.75 per day! Pretty close.
All above calculations may be confusing. And may be a little overwhelming. But these are aimed at demonstrating one point. HISTORY REPEATS, The fundamental belief on which Gann techniques and calculations are based.
I have proved these to my satisfaction many times. You may want to prove it to yourself, to your satisfaction.
Please also note, 5037 is now a resistance. Floor has now become the ceiling (refer to a previous post on Stock market terms which has information on Supports/Resistance).
Stay away from Buying for long term in this market, at least till 4th June, 2010. I may be wrong, but remember, it is better being profitable, than being right……….
Sunday, May 23, 2010
GANN used SWING charts to trade and applied his techniques on Swing charts to come up with his forecasts which were correct over 90% of the time. If we are even 60% correct in forecasting the market movements, we will be billionaires, whether in Rupee terms or $, I leave it to you :)
In last post, I had completed how to construct Swing charts. While I covered constructing only Daily swing charts using Daily bar charts, you can construct Swing charts in the same manner for Weekly, Monthly, Quarterly or Yearly Bar charts. It all depends on which Bar chart are you using for construction of Swing Chart.
You may have heard the term, Trade with the Trend. If not, then you have come across it now. Why to trade with the trend?
Have you ever tried swimming or rowing the boat against the flow of the river?? It is tough, tiring, exhausting, risky and sometimes fatal. Same with Stock markets. If you have taken a Short position in BULL market, you know what happens! Similarly, Buy stocks when the market is going down, you know what your feelings are. You may emerge as a winner or profit even trading against the trend, but that will be exhausting, tough, take away your sleep at night and is RISKY as well.
Remember, our first resolve is to survive in the market. Objective is to “make big profits and keep losses small”. We will cover this piece in detail when we discuss the Money Management rules.
So, if we want to buy a stock but see that the Trend is down on that stock, what do we do. We do, NOTHING. Just wait for the trend to turn UP. Most people lose money because they were trading against the trend. And, irony is that they don’t even know what the trend is!! They just trade on TIPs, or GUT feel. You may work on TIPs given by someone, but you should use TIPs only as an additional information for your analysis. These TIPs may be correct sometimes and make you money, but then a dead wall clock (or any watch/clock) is also right twice every day!!
Before we trade, we need to know what the TREND is. And Swing charts help us in identifying the trend.
Meaning of Trend : Direction of the movement of the market or stock at a particular time.
Trend may be:
1. UP - when the market is moving in UP direction
2. DOWN – when the market is moving DOWN direction, or
3. Uncertain – when it is doesn’t have a direction. This is also called “Sideways movement” or “Range Bound”.
I will cover the trend determination in the next post.
Till then, I advise you to go back to the earlier articles and review them once again. Keep constructing Swing charts and keep reviewing more and more Bar charts that you can lay your hands on. You can find Bar charts online. Some places are Yahoo Finance, MoneyControl, NSE, Money.cnn, ICICIDirect.com, Commsec.com.au, MFGLobal.com.au, futuresource.com.
In last post, I had completed how to construct Swing charts. While I covered constructing only Daily swing charts using Daily bar charts, you can construct Swing charts in the same manner for Weekly, Monthly, Quarterly or Yearly Bar charts. It all depends on which Bar chart are you using for construction of Swing Chart.
You may have heard the term, Trade with the Trend. If not, then you have come across it now. Why to trade with the trend?
Have you ever tried swimming or rowing the boat against the flow of the river?? It is tough, tiring, exhausting, risky and sometimes fatal. Same with Stock markets. If you have taken a Short position in BULL market, you know what happens! Similarly, Buy stocks when the market is going down, you know what your feelings are. You may emerge as a winner or profit even trading against the trend, but that will be exhausting, tough, take away your sleep at night and is RISKY as well.
Remember, our first resolve is to survive in the market. Objective is to “make big profits and keep losses small”. We will cover this piece in detail when we discuss the Money Management rules.
So, if we want to buy a stock but see that the Trend is down on that stock, what do we do. We do, NOTHING. Just wait for the trend to turn UP. Most people lose money because they were trading against the trend. And, irony is that they don’t even know what the trend is!! They just trade on TIPs, or GUT feel. You may work on TIPs given by someone, but you should use TIPs only as an additional information for your analysis. These TIPs may be correct sometimes and make you money, but then a dead wall clock (or any watch/clock) is also right twice every day!!
Before we trade, we need to know what the TREND is. And Swing charts help us in identifying the trend.
Meaning of Trend : Direction of the movement of the market or stock at a particular time.
Trend may be:
1. UP - when the market is moving in UP direction
2. DOWN – when the market is moving DOWN direction, or
3. Uncertain – when it is doesn’t have a direction. This is also called “Sideways movement” or “Range Bound”.
I will cover the trend determination in the next post.
Till then, I advise you to go back to the earlier articles and review them once again. Keep constructing Swing charts and keep reviewing more and more Bar charts that you can lay your hands on. You can find Bar charts online. Some places are Yahoo Finance, MoneyControl, NSE, Money.cnn, ICICIDirect.com, Commsec.com.au, MFGLobal.com.au, futuresource.com.
Saturday, May 22, 2010
Taking forward from last post on Swing Charts…..
In swing charts, we draw up the swings that a market is making or the direction in which market is moving. [I use the word market more often. You may replace it with stock, contract, commodity, forex or any other instrument. It works on all]. If it was an UP day on bar chart, we will move up the line on SWING chart. Please see pictures below with explanations below them.
In the pic above, there are 2 charts, Bar Chart on the left hand side and Swing Chart on the right hand side. Swing chart is constructed based on Bar Chart. In the bar chart above, there are 5 bars drawn for 5 days with each chart numbered from 1 to 5 for each day.
In the Swing chart, there are 5 points numbered from 1 to 5. Each of these points represent the HIGH point of the corresponding day.
Please note the blue line drawn on Swing chart ending at point 1. What we have done is, we have drawn a straight line up, till the High of the Day 1 on Bar Chart.
Now see the red line in SWING chart ending at point 2. This line is drawn up to the HIGH of Day 2. We have moved up the same line on SWING chart because Day 2 was an UP day. We have not drawn an other line on SWING chart but extended the same line UP. Different color has been used to illustrate the extension of the line on SWING chart.
Points 3, 4 and 5 represent the HIGHs of corresponding days and colors of the line represent the movement of the line UP to the HIGH of corresponding day on SWING CHART.
Point 0 to Point 5 on SWING chart is ONE swing because the market has not witnessed a LOW day yet.
Now look at Pic 2 below:
We observe that Day 6 was a LOW day, because the HIGH AND LOW of Day 6, were lower than the HIGH AND LOW of Day 5 respectively. We now move down our SWING chart down from point 5 to point 6.
Point 6 and 7 represent the LOW of Day 6 and Day 7 respectively.
Similarly, since Day 7 was a LOW day as well, we move down the SWING chart to point 7. Point 5 to point 7 represent another SWING, this time DOWN Swing.
You may go through the Bar Chart and Swing Chart for NIFTY for last couple of months provided below and notice how the Bar and SWING chart look for the same period.
In swing charts, we draw up the swings that a market is making or the direction in which market is moving. [I use the word market more often. You may replace it with stock, contract, commodity, forex or any other instrument. It works on all]. If it was an UP day on bar chart, we will move up the line on SWING chart. Please see pictures below with explanations below them.
In the pic above, there are 2 charts, Bar Chart on the left hand side and Swing Chart on the right hand side. Swing chart is constructed based on Bar Chart. In the bar chart above, there are 5 bars drawn for 5 days with each chart numbered from 1 to 5 for each day.
In the Swing chart, there are 5 points numbered from 1 to 5. Each of these points represent the HIGH point of the corresponding day.
Please note the blue line drawn on Swing chart ending at point 1. What we have done is, we have drawn a straight line up, till the High of the Day 1 on Bar Chart.
Now see the red line in SWING chart ending at point 2. This line is drawn up to the HIGH of Day 2. We have moved up the same line on SWING chart because Day 2 was an UP day. We have not drawn an other line on SWING chart but extended the same line UP. Different color has been used to illustrate the extension of the line on SWING chart.
Points 3, 4 and 5 represent the HIGHs of corresponding days and colors of the line represent the movement of the line UP to the HIGH of corresponding day on SWING CHART.
Point 0 to Point 5 on SWING chart is ONE swing because the market has not witnessed a LOW day yet.
Now look at Pic 2 below:
We observe that Day 6 was a LOW day, because the HIGH AND LOW of Day 6, were lower than the HIGH AND LOW of Day 5 respectively. We now move down our SWING chart down from point 5 to point 6.
Point 6 and 7 represent the LOW of Day 6 and Day 7 respectively.
Similarly, since Day 7 was a LOW day as well, we move down the SWING chart to point 7. Point 5 to point 7 represent another SWING, this time DOWN Swing.
You may go through the Bar Chart and Swing Chart for NIFTY for last couple of months provided below and notice how the Bar and SWING chart look for the same period.
Thursday, May 20, 2010
When I started this blog, I thought I would also share regular trading opportunities that come up on Indian and Australian stock markets.
I plan to do that and it’s not that there are not many opportunities coming up. However, in past 5-6 weeks, the market sentiment has been weak and only good Short Trading opportunities have come up. There were couple of good Buy opportunities, but if the general overall trend of the market is weak, one should avoid taking long trades in such markets.
Based on the response that I have received from regular visitors to this blog, I understand that (barring a couple of them) all of them deal only in the Cash market. In India, we can not trade short in cash market (as far as I know, unless there is any recent change). Hence, I have restricted my posts only to market/index outlook rather than specific stocks.
As mentioned in a post 2 days ago, NIFTY is expected to test 4800 level by 7th June. Looking at the global markets, this level may even be tested today, though I am not sure, but the possibility can not be ruled out.
In broader words or sense, it is likely to remain sideways as of now and keep range bound between 4800 to 5000 till 7th June. It is expected to make a LOW on 7th June and unless the trend turns UP, it is expected trade in this range.
I am sharing a weekly chart of NIFTY here which clearly shows the trend as down. Don’t worry if you don’t understand or get the chart. Just note the circles which show lower LOW and lower TOP/HIGH marked by arrows.
http://ping.fm/mOZIl
So, my advice is to keep away from buying. My forecast may be wrong but our first objective is to survive. We don’t drive or jump a red signal. And need to be careful on Yellow signal. But, we will move forward only when the signal turns green. And that’s not the case as of now, as far as the technical charts suggest.
Wait and watch for 7th June.
I plan to do that and it’s not that there are not many opportunities coming up. However, in past 5-6 weeks, the market sentiment has been weak and only good Short Trading opportunities have come up. There were couple of good Buy opportunities, but if the general overall trend of the market is weak, one should avoid taking long trades in such markets.
Based on the response that I have received from regular visitors to this blog, I understand that (barring a couple of them) all of them deal only in the Cash market. In India, we can not trade short in cash market (as far as I know, unless there is any recent change). Hence, I have restricted my posts only to market/index outlook rather than specific stocks.
As mentioned in a post 2 days ago, NIFTY is expected to test 4800 level by 7th June. Looking at the global markets, this level may even be tested today, though I am not sure, but the possibility can not be ruled out.
In broader words or sense, it is likely to remain sideways as of now and keep range bound between 4800 to 5000 till 7th June. It is expected to make a LOW on 7th June and unless the trend turns UP, it is expected trade in this range.
I am sharing a weekly chart of NIFTY here which clearly shows the trend as down. Don’t worry if you don’t understand or get the chart. Just note the circles which show lower LOW and lower TOP/HIGH marked by arrows.
http://ping.fm/mOZIl
So, my advice is to keep away from buying. My forecast may be wrong but our first objective is to survive. We don’t drive or jump a red signal. And need to be careful on Yellow signal. But, we will move forward only when the signal turns green. And that’s not the case as of now, as far as the technical charts suggest.
Wait and watch for 7th June.
Wednesday, May 19, 2010
NIFTY – Dates to watch
Based on my recent analysis on NIFTY using GANN’s Time and Price techniques/tools for forecasting, I am looking at following important dates and price points over next 5 months:
Date Scenario 1 Scenario 2
7-Jun-10 4,812 4,767
8-Jul-10 5,537 5,083
8-Aug-10 5,162 4,925
19-Oct-10 6,062 5,558
Let’s wait for the markets to tell its own story and watch out for these levels and dates.
Based on my recent analysis on NIFTY using GANN’s Time and Price techniques/tools for forecasting, I am looking at following important dates and price points over next 5 months:
Date Scenario 1 Scenario 2
7-Jun-10 4,812 4,767
8-Jul-10 5,537 5,083
8-Aug-10 5,162 4,925
19-Oct-10 6,062 5,558
Let’s wait for the markets to tell its own story and watch out for these levels and dates.
Tuesday, May 18, 2010
GANN used to trade based on Swing Charts. He described swing charts as the best way of making maximum money from stock markets.
I trade swings that are identified as trading opprotunities in market and for identification of these trades comes from reading swing charts.
[Bear in mind that these articles on this blog are in a particular sequence and aimed at providing basic understanding of stock markets leading to advanced techniques and ability to forecast the markets.
Thus far we have covered basic psychology required for trading (Risk Vs Risky), basic terminology of stock markets (including bar charts), effectiveness of GANN techniques, and importance of using STOP LOSS. Understanding of these basic concepts are crucial for studying the stock markets.
I would recommend you to go through these articles once now (again if you have already gone thru them) to have a better understanding of these basics.
Please write to me at sumit@sumprati.com if you need any further help on topics already covered]
The term Swing has the same meaning as is generally understood. Movement from one position to another or one point to another. We see markets / stocks moving up and down and each such movement may be termed as a SWING.
Gann believed that there are swings in the market and if one studies these swings, then he / she can make lots of money trading stock and commodities. Gann did!
According to him these swings are caused due to law of vibrations. If you look at a pendulum, it swings from one end to another. The principles of law of vibrations are used in the pendulum clocks. I am no scientist or technical person (at least as far as clocks are concerned) but know this from Gann’s study.
Our aim in trading is to identify a swing before it starts and take maximum advantage of the swing. How we can identify a swing before it starts? For this, we will presume that history repeats. so, once we see a swing in the market, we will presume that the same swing shall be repeated again.
For calculating the value of a swing, we need to learn how to prepare a Swing chart. I will cover construction of a swing chart in the later articles. Here I will cover only some of the basic terms that are required to understand construction of Swing charts.
We first need to learn what a bar chart is and how it is constructed. We then need to learn the terms UP DAY and LOW DAY.
In the bar chart pic given below, note the HIGH and LOW of the day.
Bar Chart pic
The difference between HIGH and LOW is called the Range of this bar. The bar can be for any period day, week, or month.
In next article, I will cover the terms UP day, LOW day and construction of a
I trade swings that are identified as trading opprotunities in market and for identification of these trades comes from reading swing charts.
[Bear in mind that these articles on this blog are in a particular sequence and aimed at providing basic understanding of stock markets leading to advanced techniques and ability to forecast the markets.
Thus far we have covered basic psychology required for trading (Risk Vs Risky), basic terminology of stock markets (including bar charts), effectiveness of GANN techniques, and importance of using STOP LOSS. Understanding of these basic concepts are crucial for studying the stock markets.
I would recommend you to go through these articles once now (again if you have already gone thru them) to have a better understanding of these basics.
Please write to me at sumit@sumprati.com if you need any further help on topics already covered]
The term Swing has the same meaning as is generally understood. Movement from one position to another or one point to another. We see markets / stocks moving up and down and each such movement may be termed as a SWING.
Gann believed that there are swings in the market and if one studies these swings, then he / she can make lots of money trading stock and commodities. Gann did!
According to him these swings are caused due to law of vibrations. If you look at a pendulum, it swings from one end to another. The principles of law of vibrations are used in the pendulum clocks. I am no scientist or technical person (at least as far as clocks are concerned) but know this from Gann’s study.
Our aim in trading is to identify a swing before it starts and take maximum advantage of the swing. How we can identify a swing before it starts? For this, we will presume that history repeats. so, once we see a swing in the market, we will presume that the same swing shall be repeated again.
For calculating the value of a swing, we need to learn how to prepare a Swing chart. I will cover construction of a swing chart in the later articles. Here I will cover only some of the basic terms that are required to understand construction of Swing charts.
We first need to learn what a bar chart is and how it is constructed. We then need to learn the terms UP DAY and LOW DAY.
In the bar chart pic given below, note the HIGH and LOW of the day.
Bar Chart pic
The difference between HIGH and LOW is called the Range of this bar. The bar can be for any period day, week, or month.
In next article, I will cover the terms UP day, LOW day and construction of a
Sunday, May 16, 2010
We are seeing a down trend on majority of charts. Markets are expected to remain weak during the coming week.
17/18 May are important dates to watch as these are around anniversary date. Last year, Indian markets opened on 18 May with huge gap up due to election results. 5 years prior to that on 17 May 2004, the Indian markets witnessed a LOW.
I recommend not to BUY any stocks as of now and just wait for the trend to change. Those who trade futures / options, can take short trades.
I won’t be surprised if we see NIFTY trading around 4550 level on 17 / 18 May 2010.
17/18 May are important dates to watch as these are around anniversary date. Last year, Indian markets opened on 18 May with huge gap up due to election results. 5 years prior to that on 17 May 2004, the Indian markets witnessed a LOW.
I recommend not to BUY any stocks as of now and just wait for the trend to change. Those who trade futures / options, can take short trades.
I won’t be surprised if we see NIFTY trading around 4550 level on 17 / 18 May 2010.
Thursday, May 13, 2010
The Mayonnaise Jar
When things in your life seem, almost too much to handle,
When 24 Hours in a day is not enough,
Remember the mayonnaise jar and 2 cups of coffee.
A professor stood before his philosophy class
and had some items in front of him.
When the class began, wordlessly,
He picked up a very large and empty mayonnaise jar
And proceeded to fill it with golf balls.
He then asked the students, if the jar was full.
They agreed that it was.
The professor then picked up a box of pebbles and poured
them into the jar. He shook the jar lightly.
The pebbles rolled into the open Areas between the golf balls.
He then asked the students again if the jar was full. They agreed it was.
The professor next picked up a box of sand and poured it into the jar.
Of course, the sand filled up everything else.
He asked once more if the jar was full. The students responded with a unanimous 'yes.'
The professor then produced two cups of coffee from under the table and poured the entire contents into the jar, effectively
filling the empty space between the sand. The students laughed.
'Now,' said the professor, as the laughter subsided,
'I want you to recognize that this jar represents your life.
The golf balls are the important things - family,
children, health, Friends, and Favorite passions –
Things that if everything else was lost and only they remained, Your life would still be full.
The pebbles are the other things that matter like your job, house, and car.
The sand is everything else --The small stuff.
'If you put the sand into the jar first,' He continued,
there is no room for the pebbles or the golf balls.
The same goes for life.
If you spend all your time and energy on the small stuff,
You will never have room for the things that are important to you.
So...
Pay attention to the things that are critical to your happiness.
Play With your children.
Take time to get medical checkups.
Take your partner out to dinner.
There will always be time to clean the house and fix the disposal.
'Take care of the golf balls first --
The things that really matter.
Set your priorities. The rest is just sand.'
One of the students raised her hand and inquired what the coffee represented.
The professor smiled.
'I'm glad you asked'.
It just goes to show you that no matter how full your life may seem,
there's always room for a couple of cups of coffee with a friend.'
Please share this with other "Golf Balls"
I just did......
When things in your life seem, almost too much to handle,
When 24 Hours in a day is not enough,
Remember the mayonnaise jar and 2 cups of coffee.
A professor stood before his philosophy class
and had some items in front of him.
When the class began, wordlessly,
He picked up a very large and empty mayonnaise jar
And proceeded to fill it with golf balls.
He then asked the students, if the jar was full.
They agreed that it was.
The professor then picked up a box of pebbles and poured
them into the jar. He shook the jar lightly.
The pebbles rolled into the open Areas between the golf balls.
He then asked the students again if the jar was full. They agreed it was.
The professor next picked up a box of sand and poured it into the jar.
Of course, the sand filled up everything else.
He asked once more if the jar was full. The students responded with a unanimous 'yes.'
The professor then produced two cups of coffee from under the table and poured the entire contents into the jar, effectively
filling the empty space between the sand. The students laughed.
'Now,' said the professor, as the laughter subsided,
'I want you to recognize that this jar represents your life.
The golf balls are the important things - family,
children, health, Friends, and Favorite passions –
Things that if everything else was lost and only they remained, Your life would still be full.
The pebbles are the other things that matter like your job, house, and car.
The sand is everything else --The small stuff.
'If you put the sand into the jar first,' He continued,
there is no room for the pebbles or the golf balls.
The same goes for life.
If you spend all your time and energy on the small stuff,
You will never have room for the things that are important to you.
So...
Pay attention to the things that are critical to your happiness.
Play With your children.
Take time to get medical checkups.
Take your partner out to dinner.
There will always be time to clean the house and fix the disposal.
'Take care of the golf balls first --
The things that really matter.
Set your priorities. The rest is just sand.'
One of the students raised her hand and inquired what the coffee represented.
The professor smiled.
'I'm glad you asked'.
It just goes to show you that no matter how full your life may seem,
there's always room for a couple of cups of coffee with a friend.'
Please share this with other "Golf Balls"
I just did......
It is better being profitable than being right, in the stock markets or your trading.
Ultimately, what demonstrates or determines your success in stock markets is how much money did your trading put in your bank account. Some of you might even be wondering, how can one be profitable if he/she is not right. You have to be right to make money, isn’t it? Yes, that’s correct as well.
Let me explain this. Most of the traders that I have met, do not use STOP LOSS for one reason or the other. I have seen, when they take a trade, and it goes against them (i.e. trade turns out in a loss), most people generally keep holding the position in the ‘hope’ that it would come back. They suddenly turn ‘investors’ from ‘traders’. You would have come across many of them since January or October 2008. The reason they keep holding is that they do not accept the fact that they were WRONG. It is against their ego to accept it. Instead of accepting that they were wrong in that particular trade and close the position, they keep praying and hoping for that trade to become profitable. How? No one knows.
I have been in such situations many times before and still do. And then, I remind myself “It is better being profitable than being right”. I have to be alive first, and then make a move forward. So what, if I am wrong in this trade? If I get rid of it quickly, I can cut my losses quickly and make money in another trade on next opportunity. If I keep holding on to the wrong position and do not correct, I will keep incurring further losses. Stock markets don’t show any mercy on any one. They will take all your money and leave you gasping, IF YOU DO NOT USE A SAFETY NET which is STOP LOSS for such situations.
One can not be correct all the time. Even GANN was wrong 7% times (they say he had over 92% success rate) but then he used STOP LOSSes to keep himself alive in the market.
Anytime that you are wrong in predicting the move of the stock or index, just remind yourself “It is better being profitable than being right” and ALWAYS, use STOP LOSS, ALWAYS.
Ultimately, what demonstrates or determines your success in stock markets is how much money did your trading put in your bank account. Some of you might even be wondering, how can one be profitable if he/she is not right. You have to be right to make money, isn’t it? Yes, that’s correct as well.
Let me explain this. Most of the traders that I have met, do not use STOP LOSS for one reason or the other. I have seen, when they take a trade, and it goes against them (i.e. trade turns out in a loss), most people generally keep holding the position in the ‘hope’ that it would come back. They suddenly turn ‘investors’ from ‘traders’. You would have come across many of them since January or October 2008. The reason they keep holding is that they do not accept the fact that they were WRONG. It is against their ego to accept it. Instead of accepting that they were wrong in that particular trade and close the position, they keep praying and hoping for that trade to become profitable. How? No one knows.
I have been in such situations many times before and still do. And then, I remind myself “It is better being profitable than being right”. I have to be alive first, and then make a move forward. So what, if I am wrong in this trade? If I get rid of it quickly, I can cut my losses quickly and make money in another trade on next opportunity. If I keep holding on to the wrong position and do not correct, I will keep incurring further losses. Stock markets don’t show any mercy on any one. They will take all your money and leave you gasping, IF YOU DO NOT USE A SAFETY NET which is STOP LOSS for such situations.
One can not be correct all the time. Even GANN was wrong 7% times (they say he had over 92% success rate) but then he used STOP LOSSes to keep himself alive in the market.
Anytime that you are wrong in predicting the move of the stock or index, just remind yourself “It is better being profitable than being right” and ALWAYS, use STOP LOSS, ALWAYS.
Tuesday, May 11, 2010
Spot / Cash: This is the normal market, also known as delivery based. In this case, the buy and sell of the Share/stock happens in cash or at spot. Hence, the terms.
Trade : A transaction in which one buys and other sells.
Position : Number of shares or contracts that you hold at a given point of time. For example, if you bought 10 shares of Infosys, you would have a Long position in Infosys stock.
Entry: Price at which you enter the trade, whether Long or Short Trade.
Exit: Price at which you Exit the trade, whether Long or Short Trade.
Stop Loss: a PRE-DETERMINED price below which we would close our position at a loss. The difference between Entry price and Stop Loss price is the maximum RISK that you are willing to take. One MUST ALWAYS USE STOP LOSS. It is your SAFETY NET or LIFE JACKET in Stock markets.
Ask Price: Price which a seller is asking to sell a stock or share or contract.
Bid Price: Price which a buyer is offering to buy a stock or share or contract.
Trade : A transaction in which one buys and other sells.
Position : Number of shares or contracts that you hold at a given point of time. For example, if you bought 10 shares of Infosys, you would have a Long position in Infosys stock.
Entry: Price at which you enter the trade, whether Long or Short Trade.
Exit: Price at which you Exit the trade, whether Long or Short Trade.
Stop Loss: a PRE-DETERMINED price below which we would close our position at a loss. The difference between Entry price and Stop Loss price is the maximum RISK that you are willing to take. One MUST ALWAYS USE STOP LOSS. It is your SAFETY NET or LIFE JACKET in Stock markets.
Ask Price: Price which a seller is asking to sell a stock or share or contract.
Bid Price: Price which a buyer is offering to buy a stock or share or contract.
Sunday, May 9, 2010
Saturday, May 8, 2010
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