Monday, November 2, 2009

Conversations Nov2

All of us have enjoyed a well deserved rest for almost three days. Tomorrow will be markets, once again. I wish you the best for the coming weeks.

StopLosses

afzala.com has this problem : two days ago you described about stoplosses as per that i bought cropmton at 337 putting stop loss below 330 that was 2 weeks low . my stoploss triggered and at the same time it shoot up now at 375

My Notes: Sometimes, no matter where you place the stop, the market will stop you out and resume the original trend. That's the way markets work. My suggestion is not to worry about one trade. Follow your rules consistently and you will get the rewards.

MACD

Vikas writes from Ludhiana: the default settings for MACD is 12,26,9..Suppose i use EMA crossovers of 5 & 40..then



1. Shud i change the settings of MACD for my purpose?


2. Wat shall be the substitute number for 9.( for 5/40).& how do you arrive at ? Pl explain so that settings can be altered for different set of EMA combinations.


My Notes: If you are using EMA crossover of 5 and 40 then change the MACD settings to 5 and 40. The result will be the same as the EMA crossover. Usually 9 is the accepted value for trigger. There is no need to change it, since one value used for all stocks is more robust as compared to adjusting the value for each stock seperately. You can use a software to optimize the values for the MACD. But I do not recommend doing this.

Shazia says "When we were going up 4700 acted as strong resistance thrice, would it not act as support now?"

My Notes: Yes, it should. There was minor support and then resistance at 4700. Therefore, if the Nifty does move towards the larger support area of 4550- 4500, even then it should pause around 4700.

Going long
Nitin Damle says "I think it will bounce from this level and a retracement level of 50% will be achived it comes around 4934



Going short at this level is not at all a good trade but can we go long?"

My Notes: I will modify your comments to formulate a trading system for you. Here it is: I will go with the primary trend. I will buy a dip. My initial target will be a retracement level. I will exit part of my position at the target, and continue with the balance so far as the trend is in my favor. My initial stop will be 50 points below the low of the dip. A higher low will be my signal to go long.

Now, once you have a method in writing, you can follow it. If you consistently follow such a plan (any plan with an edge), you make money in the long run.

My trading system on Friday
men asks: 'would it be possible to put up how your trading system was set up for Friday, I am requesting this as the market was very volatile'

My Notes: My intraday systems were ready to go long in the morning since the gap open changed the short term trend to up. Our systems require a thrust in the trend direction to enter the trade. If we want to go long, then our entry price will  high for the day + an additional number. This level was not touched and we did not go long. Then we went short at 4803 which ws covered at close around 4730. In fact, after the first 10 minutes, the trend was down throughout the day.

men also asks: "Also in such volatile conditions how should a positional person trade, this is beginning to hurt now. "

My Notes: we are in a correction. You have to wait for the decline to be over. Why should you want to catch the absolute low anyway. The first sign that the market has bottomed out will come when w have a higher low, bullish candles, for more than one day. You have to wait.

Pi has a number of questions / points which I hope to reply with some leisure.

manoj bansal from pitampura. "on friday morning news has just come that bajaj hindustan can take over balrampur chini.but share prices fall."

My Notes: Friday's downbeat market may also have influenced this decline. Remember the saying "buy on rumor, sell on the news". The rally in Balrampur prior to this news, probably discounted the beenficial impact.

Certified Technical Analyst

kk says that he is keen to do CeTA. Well, a willing student is the best reward for the Association of Technical Analysts. Please contact taindia.com. I think the exam commitee should look into this issue, hopefuly in your favor.

Buying with the primary trend

Krishna asks if it is wise to buy since the primary trend is up.

My Notes: For a positional trader, buying is the correct appraoch since we are in an uptrend. Instead of thinking about a stop, the trader should determine the situation in which the primary trend will no longer be up. That will be the signal to exit this trade. I have discussed how 4500 - 4550 is a zone acting like a magnet. Then, the trend changes from up to down if the Nifty closes below this zone. A second signal comes if the Nifty clsoes below 4300, which will confirm a pattern of lower lows. Depending on your risk, you can choose on of these points to determine if the trend has changed. Wider stops lead to more profits, but increase risk.

13 comments:

Devv said...

Sudarshan Sir, I attended your seminar in Bangalore and have immense respect for you. Sir, can you please tell me how i can go about learning technical analysis. Is there any course in India that i can take up ?? Your advise would be of immense help.

Maneesh041 said...

Dear Sir,
I took your advise on the H&S i was reading on maruti how should i place my trailing stops if i am short on maruti at 1425.
please explain the theory of trailing stops

sunny said...

eod, 5 day 5 mint 15 mint time frames, everthing saying is sell nifty, im shorting almost everyday frm 5049, even today it was sell on highs at 4730 n up to 4755, i dont knw how u been saying for many days buy its dip, amazing

prannyyyyyy said...

sir i followed one of your tip few weeks ago i purchsed Rpower @168 i am suffering a loss at this point of time i follow your suggestions regularly so i just want to know that what should i do at this point of time bcoz market is also looking risky these dayz so plz tell that whether i should be holding it or not

Jazz said...

hello sir,

plz let me know the merits of becoming a member of Association of Technical Analysts. why should i choose this and not something like MTA or CFT ????

dineshrishi said...

dineshrishi said...
, , Sir any Article on Arbitrage, ,

October 31, 2009 7:30 PM


Sir you replied to all my reply missing!!!!!!!!!!!!!!!

amar said...

Dear sir i want to be your one of your clientinrespect trading in Nifty F&O And Shares. Pl advise what i should do.If possible be kind enough call at8081004333 so that we can talk at the earliest.idonot have your contact no. so i have bothered u sir,with humble regards. A N SAHU

tushki said...

sir plzz guide me on unitech..i have 22000 shares at rs 100 avg..what should i do now??hold for sumtime or sell and get out of it..

men said...

Mr. Sudarshan, "Go with the trend" is what people say. Now today we MAY BE UP (SGX is up ) but the trend since the last 10 days is down, what should be the preferred choice, buy and sell or sell and buy? Also on cnbc you have GIVEN the importance of 4550, BUT PURELY ON INTRADAY you have been successful on shorting, so could you please explain.

kk said...

RESPECTED SIR,
I HAVE BEEN ALLOWED TO SIT IN THE CeTA EXAMINATIONS. IT'S ALL BECAUSE OF YOUR EFFORTS AND BLESSINGS. TECHNICAL ANALYSIS IS MY LIFE AND I AM VERY THANKFUL TO YOU AND TAINDIA FOR GIVING ME SUCH AN OPPORTUNITY TO FLOURISH MYSELF.
WITH REGARDS,KK

Krishna said...

Sir,
You had wrote in the last article

"The first sign that the market has bottomed out will come when w have a higher low, bullish candles, for more than one day. You have to wait."

We have got two green candles..is it a sign of market bottoming out?

men said...

Why no updates, hope everything is ok.

rajesh said...

sir,

whats your call on current market.
do you think we should book all our profits and leave market for few months or you still think that it could still move at higher levels.

Regards
Rajesh goel