Monday, June 28, 2010

An Interesting Presentation

Saturday was ATA meeting day. S.K. Sukhija, Trader and Elliot Wave Expert came to Delhi for a presentation on terminal waves. Attendees were treated to a delightful afternoon of knowledge. The grand finale came when Mr Sukhija showed a roadmap for the Nifty. Outstation members will get the slides, so they will be sharing in the presentation. Readers who live around Delhi should become members of the ATA and attend each monthly meeting. Readers away from Delhi should become members to take advantage of the wealth of knowledge that the ATA is developing.  Please contact Vivek at www.ataindia.org

Monday was a cheerful day for the Indian stock market. But it does seem that each trading day comes on its own, without any link with the previous day. My point is: the market action appears to be increasingly random. Trying to make money in this environment is a lot of fun. Just take it easy. Trade only when you have a setup that you understand. Do not overstay your welcome.

Every day is not Sunday

I have written about the 15 minute breakout rule, a number of times. This is a favorite day trading strategy for me. But, it is NOT a blind, mechanical method. Trading discretion is neccessary. Today was one day which was a big whipsaw for this rule.

Nifty Futures opened higher, then built a 15 minute range between 5295 and 5314. Price traded above the high of 5314, went on to 5322 then saw a sudden decline to 5291. Finally a rally saw the day end at 5339. While the day's trend as up, the 15 minute rule created two losses. The trader who bought above 5314 was stopped out below 5295. A short taken below 5295 would be stopped out at 5314 or 5322, depending on where you put your stop. I doubt if the trader would have the energy to take the third trade - to buy.

This is why, I advocate the concept of a 'view'. Traders should enter the market with a view - an awareness of the trend. Today morning, on CNBC, Udayan asked me before the open, what was my view on the short term trend. I said, I am bullish, since we have seen a four day correction of some sort. This was my view. This helped me take two trades today. First, a buy at the open (5298), which was closed at 5312 in about 15 minutes. Second, a buy at 5316 when the 15 minute high was taken out. Since my view was to look for an upswing, I did not use the 15 minute low as a stop. My stop was: 5273 which was the pivot made on Friday. This was lucky. This enabled me to close the trade at the end of the day.

Why did I not use the low? Because a sharp sudden move can go below the low only to recover quickly. If my view on the trend is wrong, then I will lose money, but I should not lose even when I am right! Think about it.

No comments: