Tuesday, August 30, 2011

response to comments August 30

RS writes: Today you said on ET you went long at 4845 however it was around 4865 when it was said on TV. Also you said you are short in intermediate account. Can you tell how to manage / what quantity should be traded for such 1-2 day moves and for short term?

My Notes: I speak when I am asked to do so. Therefore, my positions were taken when the setup was complete, while I disclosed it when I was asked to speak. I have a bearish ratio spread in my intermediate trade account. I use different instruments for short term trading and intermediate positions otherwise it could become very confusing. Usually my volumes for short term trades are less than the intermediate positions.

RS also asks: Have 2 queries a) How to trade the White Marubozu (well almost) in this scenario and in your trading experience, what's the high probability setup following the same b) Sometime back u had sugegsted Street Smarts and Marc Rivalland's book. Could you please tell a few more good books on Swing trades with strategies et al.

My Notes:
a. the White Marubozo is a price bar which opens at the low and closes at the high of the day. This is what the Nifty did on Monday. It also made a wide range bar, so we can call it a long white marubozo. A Marubozo is a signal that bulls are strong. We should expect follow through after such a pattern. In my previous post I explained that traders should look to buy on dips / consolidation.

b. An interesting book is 'The Wallaby Trade' which discusses divergence trades. Another excellent book is: Mechanical Trading Systems by Richard Weissman.

Sudhin asks: Under the next step you have used 55sma as your basic moving average for your bull and bear set up, why 55? is it because it is a fibonacci no. or this gave your the minimum whipsaws? Could you add 5highema which could given an early indication but off course there will be some whipsaws?

My Notes: I used 55 periods because it was a fibonacci number and seemed to fir the Nifty chart fairly well. You can use an average of 5 period Highs, but this is a method of identifying short term swings, not bull and bear markets.


RS said...

Sir, Thanks a bunch for the reply..

SInce u wrote "RS also asks" ....just a clarification...Both the "RS" are different persons....I only asked the Marubozu and book related query.

That "4845" and intermediate term query wasn't mine :)

Thanks again

Anshul The Maniac Finance Kid said...

Sudarshan Bhaiyya I think nifty and minifty are great tools for managing short term and long term trades,using one for mediumterm and one for short term. Now it might well happen you have taken a positional long on nifty but short intraday through mininifty. I think this approach is best or in case of more then 2 setups for same instrument say nifty,use two different trading accounts.What is your opinion?

RS said...

Thank You Mr. Sudarshan. This is Rigel Securities msg.