Sunday, November 21, 2010

Something Special

Trading with consistency is something special! Markets give profits and losses, so that is not within our control. But we can control the process of our analysis. We can keep this consistent. Here is an example.

In Trend Analyzer (http://www.technicaltrends.com/) , there is an indicator called TA-Stoch. The indicator identifies buying opportunities in uptrend, and selling opportunities in downtrends. This imples that the trader needs to be aware of the trend using independent analysis, but that is a requirement for many discretionary methods.

The chart below is for ACC. I selected the stock at random. The trend is assumed to be up. TA-Stoch gives a buy signal when it falls below 20. Actual buying is done using (a) Bullish candle, (b) Cross above previous high. Once inside a trade, previous lows are used as trailing stops. Since this is a plan for a swing trade, exits are also made with minor trendline breaks, bearish candles. This is a simple strategy. It Works! You can modify this method to work with your favorite momentum indicator.

3 comments:

Publicum said...

Regarding "Something Special". Could you please clarify whether buying is done only when both conditions are fulfilled - namely, (a) bullish candle; and, (b) cross above previous high. I feel only the first condition is sufficient. Also, can it work without any "favourite indicator" or must the buy be coupled with some other indicator -- if so, what would be a good indicator to couple it with?

sidgopal said...

Sir,Kindly update your views for nifty. As the settlement nears, it brings anxiety all over place. However, nifty recovered fantastically from friday's closing. ( I remember you gave in 5937 as the level to watch out for in your earlier posts).I await your reply.

men said...

Dear Mr. Sudarshan,
I would be happy if you could clarify on the following and your marked area on the chart.
"Actual buying is done using (a) Bullish candle, (b) Cross above previous high. "
In the BUY AREA, the candles are forming lower lows, while you have given that on a bullish candle one should buy, so price should get precedence over the buy signal so hence it is not a buy in the marked area. Could you please be kind enough to clarify this doubt. Also which indicator in your view has a higher success rate.
Regards,