RSS

Monthly Archives: October 2011

5 Simple Rules to Trading (One day at a time)

5 Simple Rules to Trading (One day at a time)

Always remember this line– If you want to be successful at trading then you have to be DISCIPLINED. There is no other way around it. You can be lucky a few times but not always. 

Never lose hope. Always have faith, belief and confidence in your self and your abilities.

Remember that there is always the Next Trade.
There are always going to be winners and losers in a trading career. The people who win are those that lose a small amount when they are wrong and gain a big amount when they are correct.

When you are wrongAccept that you are wrong, exit your trade and move on to the next trade where you can use your capital to put on profitable trades.
Be objective– Don’t have any opinion about the market, trade what you see.

Be on the right side– There are 3 sides in a market, Bull side, Bear side and right side. 
 

5 Simple Rules to Trading (One day at a time)
  1. Discipline (Its as simple as it sounds. Rules just need to be followed)
  2. Charting Techniques
  3. Homework on setups
  4. Stop loss rules
  5. Market Direction

Explained in detail:-

  1. Discipline– A+ setups only, Dont chase, Wait for pullbacks, be Patient, Follow your rules. R/R strategy. Do not hope that a losing trade will turn into a winner. Cut your losses and run.
  2. Charting Techniques– Look for breakout trades, support and resistance areas, MA’s pullbacks, 30 week MA, Important patterns like H&S, DB, DT, TB, TT, AT, DT, Wedges etc. Price and Volume confirmation.Try to find Swing setups since they are most profitable.
  3. Homework on setups– Work atleast 1 hour everyday to find good setups to trade. No A+ setups means no trade.Wake up at 5 AM on all weekdays. Write down your trading plan for the day.
  4. Stop loss rules– If the stock goes below your stop loss point, exit it and buy if it comes back over to your buy point again. Let your winners run.
  5. Market Direction– McClellan Oscillator, A/D line, Support and resistance areas. Dont resist the market. Flow with it and make profits. 

All the above rules are simple and can be very profitable, if followed on a daily basis.

Advertisements
 
Leave a comment

Posted by on October 25, 2011 in Uncategorized

 

7 Characteristics of an Obective Person by Mark Douglas

  1. You feel no pressure to do anything.
  2. You have no feeling of fear.
  3. You feel no sense of rejection.
  4. There is no right or wrong.
  5. You recognize that this is what the market is telling me, this is what I do.
  6. You can observe the market from the perspective as if you were not in a position, even where you are.
  7. You are not focused on money, but on the structure of the market.
 
Leave a comment

Posted by on October 23, 2011 in Uncategorized

 

My Trading Edge

I have been trading since May 2011 and it seems like the more I trade, the more I learn about trading. However, some things that I have learned as a trader is that its a lot easier to think of buying supports and selling resistance than it actually is. When I go back and look at the charts, it always seems easy and you can see that most of the times supports get bought and resistance areas get sold into.

What I have also noticed is that it is not that easy to correct your mistakes even if you know that you are making one. Cutting your losses sounds so easy but when an actual trade is going against you, it seems like the toughest decision to sell and take that small loss. I have probably made that error about 10 times now in this short period in which I have been trading. Realizing that you are making an error is one thing, however, having the discipline and mind set to actually correct it is another.

Taking into mind these things, I have tried to develop my own trading edge based on probabilities that if followed over a long period of time will work for me. There will be losses in the way, however losses can always be cut short and winners can be allowed to run.

  1.  Risk/Reward strategy– Before entering into any trade, you should be able to define your entry point on that trade, the exit point if the trade doesn’t go your way and the point at which you will take your profits when its going your way. For example, if the stock is currently trading at $115 and it falls down to its support line at $100 then your best entry would be to buy the stock at around $100-$102 area and put the stop loss as around $99. If the stock moves in your direction than keep raising your mental stops and book the profits. Also make sure that there is not much overhead resistance which will stop the move for the stock. Put your money in A+ setups only. One good stock run can make your week or month. Let your profits run when you have found a winner.
  2. Do your homework–  1-2 hours homework everyday working on the charts. Find support and resistance areas. Look at RS, trendlines, make notes on the entry and exit points. Look at the weekly and daily chart. Over the weekend, find atleast 15 good setups on long and short side to play for the next week.
  3. Follow the trend (Market Indicators and Direction)– As easy as it sounds, this is one of the most profitable strategy that can be employed. Always follow the market. If the market is going up, you buy and if its going down, you sell. When you are fighting your inner instinct and hoping that the stock goes up or down when the trade is going against you, close the stock and cut your losses short.
  4. Chart reading– Chart reading is one of the essential part of trading. You should be able to point out the support areas, resistance areas, draw the trendlines, look at the RS line. Look at the 30 week MA and also which stage the stock is in along with the whole group.As can be noted based on history, that patterns repeat themselves over and over.
  5. Price and Volume– Price and volume are important in defining the move of the stock in a particular direction. Volume should rise when stock moves higher. 
  6. Psychological factors– Do not judge the market by the last trade you made.  Each trade is independent of the last one. Each trade has its own probabilities that are well defined. Market is there to give you money when you start moving with it rather than resisting it. Whenever you take a trade, remember that market is full of uncertainties and its better not to have any opinions about it. If you have your risk/reward strategy in place, then you wouldnt be scared of trades and exit when the trade is not working for you.
 
Leave a comment

Posted by on October 14, 2011 in Trading edge

 

Trading Rules

Some simple trading rules to be followed on a daily basis :-

  1. Don’t go against the market trend. Follow the market trend.
  2. Stop loss rule– Follow your stop loss rules and cut your losses short. Save your capital and invest it in some other stock.
  3. Be patient and wait for the stock to pullback or set up for you to trade. Dont chase the stock. 
  4. Review all your trades on a weekly basis. Ask questions like Why you are losing money on a certain trade or what kind of trades are working for you?
  5. Look at the Price action, RS, Volume, Technicals and direction of the overall market before making a trade. 
  6. Take the emotions out of trading by following your entry and exit rules.
 
Leave a comment

Posted by on October 8, 2011 in Rules

 

Daytrading Strategy (TVPNDP)

Daytrading Strategy
Steps to be followed during the day
  1. What direction is the market moving in? Where is the support and resistance for the market indices?
  2. What direction is the stock trending in
  3. Do you have the confirmation to get into the trade- RS, RSI, pullback to 20 EMA, Stochastics. 
  4. Does the Volume confirm the move in price?
  5. Support and resistance level for the stock.
  6. There should be a slow and steady pullback to the 20 pd. EMA where you should put your position. If the trade is not working then exit the trade.

P&L Spreadsheet 

 
Leave a comment

Posted by on October 8, 2011 in Daytrading

 

Rules for finding the best trades

Some of the things that you should consider when scanning for stocks:-

  1. First thing that you should worry about is whether the market is bearish or bullish. Look at the McClellan Oscillator, the 30 week MA, 200 day MA, positive divergences and other indicators in your system along with the Support and Resistance lines.
  2.  Four stages- Basing stage, Advancing Phase. Top area and declining phase.
  3.  Volume and price action. Check the volume on the breakout. If volume does not confirm the breakout then sell the stock and close your position.
  4. 30 week MA- Look for the price to be over the 30 week MA when buying and below the 30 week MA when selling.
  5. Check the Relative strength of the stock.
  6. Stocks with least overhead resistance are the ones that keep on moving up. Find those stocks. 
  7. Make sure to check for the Industry chart as well. If it is in stage 2 then its the best time to find leaders in that industry and buy those stocks.
 
Leave a comment

Posted by on October 5, 2011 in Rules

 

Stock Setups Oct. 5th

 Today, the market bounced off from the new lows that were set in August 2011. There was strong up volume at the end of the day. The market was extremely oversold and right now its very tough to go either long or short in this market with the way it reverses any minute. Looking for a long play tomorrow.

  1. Do follow your stop loss rules. If the stock is not moving in your direction then exit the trade. You can always buy back at lower prices. 
  2. Be patient. Let the market settle down for the first half an hour. 
  3. Follow the trend of the market. Its no good going against the market and praying that you get even. 

Stock setups for October 5th 2011:-

  1. BIDU- Finding support at 100. Resistance at 115. If it clears 115, then its a buy. 
  2. VFC- Acting strongly with increasing volume and RS line trending higher. 
  3. AAPL- Bounced off of the support line @ 255. Resistance @ 380.00
  4. ISRG- Resistance @ 376.00 and support @ 342.00
  5. AMZN- Lagged the market today. Look to add if the market moves higher tomorrow. 
  6. LULU- Found support @42 and bounced. Resistance @51.10. 
  7. SHLD- Clearing descending trendline on good volume. RS line treding higher. 
  8. WYNN- Resistance @119.00
  9. JWN- Moving higher. Resistance $49.33
  10. AZO- Strong Stock. Resistance @335.00

 
Leave a comment

Posted by on October 5, 2011 in Uncategorized