Tuesday, August 5, 2008

Coming Soon: Resistance ?

The Nifty continued its up move today closing at 4502, with an impressive gain of 107 points.
What Next ?
My software gives a target range of 4480 to 4610 for this up move. We have already touched 4480, thus we may be looking at 4610 approximately. Now, these numbers are just targets. They are not a definitive future event. We can build two scenarios based on these target numbers.
First, the Nifty does touch 4600+ and faces resistance. This is a likely scenario since there is a lot of previous resistance around the 4600 number. Second, the Nifty touches 4600 then continues to move up. This is an overshoot - prices going beyond the target. Such an event tells us that the trend is stronger than what is 'normal'.
Of Course, a third, less likely scenario is for the Nifty to suddenly fall, not touching 4600 at all. If this happens, we will have to wait for the index to go below 4400 to confirm a short term down move.
How do you trade such moves ? Analysis is just one part of the trading business. Much more important is tactics (when to enter, how to manage the stops, exit rules), position sizing (increase volumes when trading with the trend), stock selection (Buying Hindalco in a bull market still loses money). Reading, learning and education is also an important part of trading.
The rewards from trading are (a) An independent business (b) pursuit of an intellectually satisfying work, and, (c) money to do something that you always wanted to do. (How many people have work that they enjoy ?).

2 comments:

rahul said...

sir,
just want to tell u that u r doing a great job..i have been in this market for last 2 years and read more then a dozen books on trading..the way u always come up for every possible scenarios is remarkable..any trader can learn bout patterns,ranges but few act on time.i was also the one..i dont know wat it is in your posts but just reading it for few minutes a day makes me clear and has improved my trading remarkably..its really helping sir....now i know,when to trade and when not to trade.i have read it in many books that protecting capital is our first priority,some times the best trade is not to trade..but i finally learned it through ur blog,it has become an integral part of my trading now..keep it up....

improved trader

Shashank Jogi said...

By all means do read this blog and more.

But eventually, you will have to find for yourself a way to trade rather than relying on others' views and ideas.

Contrary to popular belief, trading methods and techniques are the least important part of trading.

In the long run, you would be better served by finding a method that suits your personality and your goals.