Monday, November 15, 2010

Questions on Stop Loss

Anas Elias Batla uses three different MACD indicators, each with a different set of inputs. He located lower highs in the MACD while the Nifty was making higher highs. He asks:

1) Can the whole movement be considered as A NEGATIVE DIVERGANCE on the daily charts , (of nifty with macd indicator)

My Answer:  Yes. When the Indicator makes lower highs while price makes higher highs, we get a negative divergence. But do not rush into conclusions, read the answer to the next question.

2) if yes, than does that mean , that there is further downside in store for the NIFTY INDEX.

My Answer: A negative divergence does not automatically mean downside for prices. A negative divergence warns of the possibility of a decline in prices. But, remember, a possiibility is just that - it may or may not come about. So, you still end up watching prices - support, resistance, lower lows candlesticks and so on to get a sense of the trend. Therefore it makes sense to listen to indicator divergences when they are in the direction of the intermediate trend. Then, they have strong possibility of actually working out.
3) Can the divergence fail, and when it is possible to confirm the failure.
My Answer: I have answered this quesion above. Divergences will fail, more often than not. When price makes a higher high, that is a sign that the divergence failed to work out.

Murali says:

I was also facing the same issue with stochastics for day trading with on one minute average chart for Nifty. But I found that all oscillators have this disadvantage with water fall decline.

So i used MACD to complete it. In the macd when the divergence bar is lower / smaller than the previous one, I go short. The reverse holds for going long.

Please suggest me on this method.

My Notes:
Well, Murali, you have a decent intraday method. I find it difficult to watch one minute bars, leave alone trade with it. But, if you are managing to use one minute bars, good for you. My advice is: focus on price action more. Slowly, you should be able to trade intraday without much help from indicators. That should be your objective.
Pankaj asks: Where do you get your live feed for stocks and commodities?

My Notes:  Ask for Santosh, at 011-26466090, 26496091, 26464544.


Tushar said...

I have invested in jain irrigation @ 235.. now it's down more than 10%.
But I haven't yet stopped out.
I am waiting for 13ema cross 26ema on downside on weekly basis..
At that time, it's mostly waterfall..
what do you suggest, how should I play this?
Where should I stop..?

stoxtrends said...

Hi,for past few days i have been using Heiken-ashi candles with market profile charts.they give me good results