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.
Monday, May 31, 2010
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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