Reader Ashok uses five minute charts with the Parabolic SAR system. His problem is: "Also, for a beginner, SAR is the best indicator or he should simultaneously learn to watch multiple indicators ? Or, in other words, for a beginner, which minimum indicators DO YOU suggest, which maybe JUST ENOUGH to do the job and yet not be too engrossing."
My Notes: The parabolic SAR will not make money if used blindly. Neither will any other indicator. Since you are a day trader, having a view on the market + on the day, is the starting point for analysis. When you take a trade, the SAR will allow you to ride the trend and stop you out when the trend finally turns around. Therefore, you can use the SAR for exits, but the entries will still have to be determined by you.
What do I suggest?
First, establish a bias. Decide the direction in which you wish to trade. This will normally be the intermediate trend of the market.
Second, before market open, determine the rules to be used to trade the market on that day. Examples: Opening range breakout, MACD, Using stochastics to buy dips or sell rallies, buying pullbacks to the 20 MA, .....
Then, when the trading day starts, follow your rule for that day. As you get experience, you could really use more than one rule.
More important, there will be many days with whipsaws when you feel that nothing is going right. That is part of trading. You will end up as a winner since your discipline ensures that probability will be on your side.
Reader Arun writes: ".i m great fan of you.Trading at 9:00 am gives people like me more time to trade.i can only trade 9:00 to 9:30 and 2:30 to 3:30.Every morning i search for you in CNBC.Most of your recommendations turn out to be right but unfortunately for me
i shorted one lot each patel engineering @ Rs-455/-and educom @ Rs-737/- and suffered huge losses.Would you plz tell how to decide correct stoploss?"
My Notes: Welcome, dear fan. Whenever I suggest a short selling candidate (about 1 in 20 suggestion is for short selling, rest are for bying because this is an uptrend) I always give the warning that short selling is only for professional traders. Since you work in a PSU, you are NOT a professional trader. You should NEVER take any short positions in the market. I feel extremely distressed when I read about experiences that cause such losses. The issue is not about putting proper stop losses. The issue is: you are doing something which you have no business to do.
I am giving a story I read in New Market Wizards:
A group of Doctors deided to invest in buying a Stallion. Well bred stallions cost a lot of money. When their stallion arrived, eventually they discovered that the animal was a female. Their friends teased them, and the doctors said "next time we will inspect the horse thoroughly before buying".
But that is not their mistake. Their mistake is in trying to do a business in which they have no expertise. If they start trading futures, they will fall in the same problem of not knowing the job. It is like a trader deciding to become a neurosurgeon after reading medical books over a weekend. He is doomed to fail.