Trend Determination Methodolgy

Some stuff from the web:

Trend Determination Methodolgy

I use this simple method to find the trend of the market, be it Nifty or stocks. I use this simple statistical output as an additional tool to my Chart Analysis to find likely Support and Resistance Levels and its not Grail.

I use End of the day data for daily trading and use weekly and Monthly datas for Swing trading.

Let me explain below, an example for Day Trading and same method can be used for Weekly and Monthly, for Swing Trading:

I take Previous Day Open / High / Low / Close of officially announced figure from Exchange.

Weighted Average = (HIGH + LOW+ CLOSE +CLOSE ) DIVIDED by 4.

Spread : High Minus Low.

To calculate,likely Support and Resistance Levels, the following ratios of Fibonacci to be used.

13 / 23.60 / 38.20 / 50 /61.80 / 78.60 / 88.60 / 1.00 / 1.130 / 1.236 / 1.382 / 1.500 / 1.618 / 2 / 2.236 / 2.618 / 3.140 / 3.618 / 4.236


Calculation:

Spread multiplied by all the above ratios and added to Weighted Average. This will give different Levels of Resistance and when deducted from Weighted Average it will give Various Support levels of above ratios.

How to use the above Levels:

Nifty or Stock has the tendency to face stiff resistance around 23.60% and by stretching it can move to 38.2% and 50%. So also, will try taking Support at these levels on downside. The trend of the day will be determined when it breaks 61.80%.

If it breaks 61.80% of Resistance Level, then wait for the market to pullback to 38.20% and make Long entry with Stop placed a few ticks below 23.60%. and look for Targets of 1 to 1.382 and 1.618 of Expansion Levels. If the day, happens to be very bullish/ bearish, it can move to 2 and above ratios.

Same is exactly true for Shorting the Nifty or Stocks when it breaks 61.80% with the above mentioned method for long entry.

What if Stop of 23.60% stop is takenout:

I quit the trade once if Stop is takenout, and look for bounce to 50% ratio, to takeup reversal trade and go along with the flow of market, taking stop at few ticks above 61.8% or look at chart to keep Stop.

Once when stop of 23.60% is takenout, Market has the tendency to bounce once again closer to 50% and move to test Weighted Average Price and the levels on the otherside.

When you have these levels along with Chart, you will invariably find market facing resistance and Support at 38.2% and it will not be so easy to clear 61.80% so easily, as one of the breeds “BULL or BEAR” need to wrest control for the direction of trend.

During the day, if market doesn’t break 61.80% on anyside, then I assume market is in sideways and whenever it happened like this, I have only incurred loss on that in my trading as my trades get locked in stops.

I use 5 minutes chart with 125 SMA and 30 minutes chart with 34 EMA. I invariably find the Support or Resistance coming closer to 38.2% and wait for breakout.

Spread is a vast subject and fairly very accurate methodologies can be derived and no Professional trader across the Globe speak about this in any public domain and their Spread methodologies are kept close to their heart.

I have explained to you a simple methodology using the Spread, and there are very powerful methods using the Spread can be done.

I use the above method for Day Trading and I use weekly and Monthly data for Swing Trading.

Trade Well and follow the trend !!

about indicators

http://www.asiapacfinance.com/blog/2011/12/27/list-of-technical-analysis-trading-indicators-for-stocks-and-forex/

List of Technical Analysis Trading Indicators for Stocks and Forex

There are two principles of analysis used to forecast price movements in the financial markets -- fundamental analysis and technical analysis. Fundamental analysis, depending on the market being analyzed, can deal with economic factors that focus mainly on supply and demand (commodities) or valuing a company based upon its financial strength (equities). Fundamental analysis helps to determine what to buy or sell. Technical analysis is the study of market action through the use of charts to forecast future trends. Technical analysis helps to determine when to buy and sell.

Technical analysis has been used for hundreds of years. It can be applied to any market, an advantage over fundamental analysis. Technicians believe that the study of market action will tell all and that each and every fundamental aspect will be revealed through the actions of investors entering or exiting positions. Market action includes many sources of information -- price, volume, open interest, and volatility.

Technical analysis is based upon three main premises;

1) Market action discounts everything 2) Prices move in trends 3) History repeats itself

Technical analysis has been proven to be an effective tool for investors and is constantly becoming more accepted by market participants. When used in conjunction with fundamental analysis, technical analysis can offer a more complete valuation, which can make the difference in executing profitable trades.

For a deeper understanding on technical analysis, do check out our E-Learning Programs.

Trend Indicators

Trend indicators reflect three tendencies in price movements: Up moves, Down moves and Sideways price moves. These indicators help define prevailing directions/ trends of the price moves by smoothing price data over a certain period of time. In simple words, Trend indicators allow us to visualize Trends in the market.

Ichimoku Kinko Hyo

Advance Decline Line (ADL)

Average Directional Index (ADX)

Average Directional Movement Index Rating (ADXR)

Commodity Selection Index (CSI)

Directional Movement Index (DMI)

Double Exponential Moving Average (DEMA)

Heiken Ashi

Moving Average Convergence and Divergence (MACD)

Moving Averages: EMA, SMA and WMA

Parabolic SAR

Percentage Price Oscillator (PPO)

Point & Figure

Triple Exponential Moving Average (TEMA)

Triple Exponential Moving Average (TRIX)

Momentum Indicators

Momentum indicators show the strength of trends by recording the speed of prices moving over certain time period. At the same time, Momentum indicators track strength and weakness of a trend as it progresses over a given period of time: the highest momentum is always registered at the beginning of a trend, the lowest - at its end point.

Accumulative Swing Index (ASI)

Advance Decline Ratio (ADR)

Aroon Indicator

Aroon Oscillator

Chande Momentum Oscillator

Commodity Channel Index (CCI)

Intraday Momentum Index

Centre of Gravity

Linear Regression Slope

Mass Index

Momentum Indicator

Price Oscillator

Qstick

Random Walk Index

Rate of Change (ROC)

Relative Momentum Index (RMI)

Relative Strength Index (RSI)

Smoothed Indexed Rate of Change (SIROC)

Stochastics

Stochastic RSI

Stochastic Momentum Index

Ultimate Oscillator

Williams %R

Williams' Accumulation-Distribution

Volatility Indicators

Volatility indicators show the size and the magnitude of price fluctuations. In any market there are periods of high volatility (high intensity) and low volatility (low intensity). These periods come in waves: low volatility is replaced by increasing volatility, while after a period of high volatility there comes a period of low volatility and so on. Volatility indicators measure the intensity of price fluctuations, providing an insight into the market activity level.

Average True Range (ATR)

Bollinger Bands (BB)

Chaikin Volatility (CHV)

Donchian Channel

Keltner Bands

McGinley Dynamic indicator (MDI)

Moving Average Envelopes

Starc Bands

Volume Indicators

Volume indicators are used to determine investors' interest in the market. High volume, especially near important market levels, suggests a possible start of a new trend, while low volume suggests traders uncertainty and/or no interest in a particular market.

Acceleration Bands

Market Facilitation Index

Chaikin Money Flow (CMF)

Chaikin Oscillator

Accumulation Distribution Oscillator (ADO)

Volume Oscillator (PVO)

Demand Index

On Balance Volume (OBV)

Money Flow

Cycle Indicators

A cycle in the market is determined by a series of repeating patterns. These patterns are, as a rule, dedicated to certain market events, such as seasons, simple day counts, event-to-event sequence, market theories and formulas and so on.

Detrended Price Oscillator (DPO)

Elliott waves

Schaff Trend Cycle

Fibonacci

Fourier Transform

MESA Sine Wave Indicator

Other Indicators

Andrew's Pitchfork

Auto Regression Bands

Candlesticks

Coppock Indicator

Erlanger Put / Call Ratio

McClellan Oscillator

Pivot Points

Projection Oscillator

Renko Charts

Rex Oscillator

Trend Lines

Zig Zag

http://www.asiapacfinance.com/trading-strategies/technicalindicators

Do's & Dont's...

 

1. Divide your capital into more equal risk parts.
2. Never over trade.
3. Never place order for BUY/SELL without stop loss conditions.
4. Never let profit turn into loss.
5. Trade with the trend.
6. Never take lead you may loose heavily.
7. Never try to be over smart.
8. Don't trade if trend not clear
9. Don't follow tips only.
10. Use the right orders only.
11. Withdraw portion of profits.
12. Don't be whimsical about closing your trades.
13. Never buy a stock to get dividend.
14. Never average your losses.
15. Take big profits and small losses.
16. Sell short as often as you go long.
17. Never buy any stock just it is low priced.
18. Pyramid your trades correctly.
19. Decrease your trading after a series of successful trades.
20. Don't change your opinions during market hours.
21. Don't follow the crowd - they are usually wrong.
22. Buy on rumor and sell on news.
23. Take windfall gains when you get.
24. Keep your charts up to date.
25. Preserve your capital.
26. Nothing ever new occurs in market.
27. Markets are never wrong opinion may be.
28. Never permit speculative ventures to turn into investments.
29. Never try to predetermine your profits.
30. Never buy a stock just because it is low priced or don't sell just because it is high priced.
31. Look for reasonable profits.
32. Buy as soon as a stock makes new highs after a normal reaction.
33. Ban wishful thinking in the market.
34. Leaders of today may not be leaders of tomorrow.
35. Don't be too cautious about reasons behind the moves.
36. Trade only the active stocks.
37. Bear markets have no support and bull markets have no resistance.
38. The smarter you are the longer it takes.
39. It is very hard to get out of a trade than to get in.
40. Don't talk about what you are doing in the market.
41. When time is up, markets must reverse.
42. Control what you can; manage what you can not.
43. Big movements take time to develop.
44. A good trade is profitable right from the start.
45. If you can not make money trading the leading issues you can not make it trading the overall market.
46. Avoid partnership in trading accounts.
47. The human side of every person is the greatest enemy of Successful Trading
48. Money can not be made every day in the market.
49. As long as market is acting right don't rush to take profits.
50. Never buy a stock just because it has fallen from a great high, nor sell a stock because it is high priced.

We request you to follow above rules strictly and religiously to maximize your profits in the stock market.

Definitions used in Share market

 

Share Trading - Buying and selling of shares is called as share trading.

Open - The first price at which the stock opens in the morning when the market opens at 9:00 AM.

High - The stock price reached at the highest level through out the trading day

Low - The stock price reached the lowest level through out the trading day

.

Close - The final price of the stock when the market closes for a day or the stock price at which it remains at the time of closing the market at 3:30 PM

Volume - Volume is nothing but quantity of shares.

Bid - The Buying price is called as Bid price.

Offer - The selling price is called as offer price.

Bid Quantity - The total number of shares available for buying is called as Bid Quantity.

Offer Quantity - The total number of shares available for selling is called as Offer Quantity.

Short selling - First selling and then buying (this only happens in day trading) is called as short sell or shorting of sell.

Transaction - One complete cycle of buying and selling of shares is considered as one Transaction.

Squaring off - This term is used to complete one transaction. Means if you buy then have to sell (means square off) and if you short sell then you have to buy (means square off).

Limit Order - In limit order, the buying or selling price has to be mentioned and when the share price comes to that price then the order will get executed with the price mentioned by the trader.

Market Order - When you put buy or sell price at market rate then the price get executes at the current rate of market. The market order get immediately executed at the current available price.

Stop Loss Orders - As the name indicates the stop loss orders are used to stop or limit the losses in the share market. Stop loss orders are limit price set by traders at which the order will automatically enter or exit the trade. The stop loss order is placed below the current market price of the stock to stop the loss in buy position and above the current market price to stop the loss in short sell position.

Margin Trading - Margin amount is the amount given by broker for day trading. The trading done using margin amount is called as margin trading. If you use margin amount then the trades has to be closed on the same day.

Alpha stock - A weighted measure of how much a stock has risen or fallen over a certain period, usually a year. Generally, more emphasis is placed on recent activity by assigning higher weights to it than those assigned to earlier movements. This helps to give a return figure that has a greater focus on the most current period and is a more relevant measure for short-term analysis.for the stock was up over the period, it will have a positively weighted alpha. An unchanged stock price has a small weighted alpha. A stock whose price has fallen over the period will have a negatively weighted alpha. Technical analysts use this measure to identify companies that have shown a strong trend over the past year and, more specifically, to focus their attention on companies whose momentum is building.

Beta Stock - Beta is a measure of a stock's volatility in relation to the market. By definition, the market has a beta of 1.0, and individual stocks are ranked according to how much they deviate from the market. A stock that swings more than the market over time has a beta above 1.0. If a stock moves less than the market, the stock's beta is less than 1.0. High-beta stocks are supposed to be riskier but provide a potential for higher returns; low-beta stocks pose less risk but also lower returns.

Bull Phase - when the market keeps going up it is called as Bull phase or cycle.

Bear Phase - when the market keeps going down it is called as Bear phase or cycle.

Forex Trading - Trading done in currency is called as Forex trading

Online Share Trading - Buying and selling of shares through internet during market hours is called as online share trading

Offline Share Trading - Buying and selling of shares through broker and placing orders through telephone is called as offline share trading. The offline share trading can be done during live market hours and also when the market is closed by placing order through telephone to broker. Mutual Fund - It is a financial instrument which collects money from all investor and then invests in financial instruments like stocks, bonds, etc. It is managed by fund manager.

Investor - The person investing the money in stocks for long term based on the fundamentals of the company is called as investor. Long term like 2 to 5 years or even for 10 years.

Trader - The person who trades to make quick money in share market is called as trader. The trader is not concerned about the company's fundamentals. The trader waits for any type of news which gives an opportunity to make money in a day or in a week or in a month.

Penny stock - The stock price less then Rs 1 is called as penny stock.

Large Cap stocks - Shares of those companies with a market capitalization over Rs. 1000 crores is called as large cap stocks

Mid Cap stocks - Shares of those companies with a market capitalization between Rs. 100 crores and Rs. 1000 crores is called as Mid cap stocks

Small cap stocks - Shares of those companies with a market capitalization less then Rs. 100 crores is called as Small cap stocks

Short Selling - Selling of shares and then buying them at lower price to generate profits is called as short selling.

Short selling of shares is done only during day trading.

Futures and options can also be short selled

Buy Back of shares - The buying of shares by a company from open market in order to reduce the number of shares in the market. Companies will buy back shares to increase the value of shares whenever company feel the share price is undervalued in the open market. Day trading - Buy and selling of shares in a day is called as day trading. Day trading can also be done in futures and in options.

Volatility in Share market - When the share price moves up and down without proper direction is called as volatility.

Volume - Volume is nothing but quantity in share market.

Stock Broker - The person or company authorized by stock exchange like NSE and or BSE to carry out buying and selling of shares on behalf of others.

Stock Sub Broker - The broker assigns sub broker. The sub broker also performs same tasks like broker but he communicates with broker and not with stock exchanges

About Share market

SHARE MARKET

What is share?

The public limited companies have shares.A Share represents an ownership in a Company. For example - If you buy a share of any company then you are the owner of that company. "The ownership depends on the number of shares you hold or the percentage of shares you hold". A founder, chairman or board of directors hold, mostly, majority of the shares of the Company so they are considered as major decision makers.

What is Share market?

A Share market is the place where buying and selling of shares takes place. Now days due to internet and advanced technology there is no need to present physically in exchanges like NSE and BSE but in fact the buying and selling of shares can be done from anywhere, where there is a computer with internet connection. One should have a demat and trading account, computer and internet connection and he/she can start the share trading or investing from anywhere.

Some facts about share market

i) Share market can be considered as business or job, either part time or full time job. ii) Its all about learning and experience. iii) It requires consistency in learning. iv) Requires full dedication v) Don't misunderstand that Share market will make you millionaire in one night.

What Share market is not ?

i) Overnight rich scheme or business. ii) It is not a magic or quick money maker. iii) It is not for seasonal earning but once experienced can make it seasonal activity. iv) It is not for them who totally want to depend on tips.

Day Trading..

Day trading

Paper trading Practice for successful day trading

Daily we get lots emails asking for any technique for day trading, any specific calculation for day trading, any fixed procedures to follow, I am new comer and want to earn in day trading, I want to start the day trading, I made losses in day trading please tell me how to recover and so many questions we get on day to day basis.

Broadly speaking there is no any fixed calculation or technique to earn money in day trading. Also there is no any specific technical indicator or charting with the help of which you can do successful day trading.

For successful day trading you have to combine couple of indicators to analyze the trend and strength of the market and specific stock.
So the bottom line is you need to have experience to do successful (profitable) day trading and earn money in share market.

But how it is possible to practice day trading without using actual money?

YES, it is possible using a method called "Paper Trading Practice".
By doing paper trading practice you will get experience of doing day trading without actual using your money.
So do paper trading practice and continue doing it till you start making profits and then you can plan to do actual day trading by using your money.

Paper Trading Requirements

1. You need to open the demat and trading account. Try to get very low brokerage charges account.
2. A computer with internet connection. Initially working in internet café will also do.
3. A notebook (called as paper trading practice notebook) and a pen.
4. Mind readiness ( be patient , get ready to learn, do concentration only on trading).

Day trading

Buying and selling of shares on daily basis is called day trading this is also called as Intra day trading. Whatever you buy today you have to sell it today OR whatever you sell today you have to buy it today and very importantly during market hours that is 9.55 am to 3.30 pm (Indian time).

Advantages of Day Trading

. Margin trading -

In Day trading you get margin on your balance amount means you get more leverages (amount) on your available balance amount to do day trading this concept is called margin trading. Margin trading is only possible in day trading and not in delivery trading. How much extra amount (margin) you are going to get that totally depends on your broker, or your online trading system brokers.
Some broker provides 3, 4, 5, and 6 times extra margin.
If you do margin trading then you have to square off your open trades on the same day (means if you bought shares then you have to sell and if you sold shares then you have to buy)before market time (that is 3:30 PM) finishes.
. Second important advantage is that you have to pay is less brokerage (commissions) on day trading (Intraday) as compared to delivery trading. This brokerage again depends from broker to broker (or on your online trading system).
. In day trading you can sell and then buy this is called short sell which you cant do in delivery trading. You can sell shares when prices are falling and then buy when price falls further.

Disadvantage of Day Trading

. As you are benefited to get more extra amount to trade (that is margin trading) and get more extra profit it is also equally true that you are also taking more risk of loss.
. At any cost you have to square off the open transaction before 3:30 PM (especially if you are doing margin trading) at that time the price may not be in your favor.

Day trading rules for Indian share market

It's important to do practice or paper trading before you starts actual trading. Following are the few reasons,
. Very importantly you will come to know how to place buy/sell orders, and will become familiar and perfect about using your trading system.
. You will gain confidence in yourself.
. The fear of trading will vanish. It is very important to keep fear away while doing day trading.
. You will become active to enter and exit the trade. It's vital important that you must be pretty fast to enter and exit the trade (i.e.open positions).

Day traders secrets

Never invest all your money in same sector this method is called as diversification of shares.
This will protect your money from downtrends of any particular sector as you can make money from other sector.
There are various sectors like IT, Pharmacy, Banking, Steel, Petrol and Oil, construction and infrastructure, auto etc.

Day trading tips

Prepare your Trading Plan
Strictly maintain stop loss
Control your Emotions
Don't try to get big profits in single trade
Accept and Limit Losses
Check out volumes before buying
Don't Over-Trading

Avoid Emotions in Day Trading

Have control on two greatest enemies of day trading. Fear and Greed. Please visit below link to read more about these enemies

Accept your mistakes

If you feel that your trade has went wrong then you should come out of the trade either by accepting small profit or even by accepting small loss. It happens many times with most of the traders (even with experience one) that their trades goes wrong due to change in market direction immediately and giving no time for you to cancel your trade.

Free trading ebooks

Here is a list of free trading eBooks and free trading courses to aid you in your trading. These free trading eBooks and free trading courses will be updated regularly and more will be added as they come available. The resources below are believed to be freely available (although not necessarily easy to find). If you are the copyright owner and wish to have a trading ebook or trading course removed from this page please contact us and we will remove it.
The views expressed in these books are not necessarily those of this Site and no warranty is provided.
Right click on a link and hit “save link as…” to save the free trading eBooks to your computer.
Reminiscences of a Stock Operator - A true classic. A must read for every trader, and one of my favorite books of all time.
The Original Turtle Trading Rules - Rules of the “Turtle Traders;” one of the greatest trading experiments conducted.
Trend Determination-a Quick, Accurate and Effective Methodology using RSI - A great guide for using the RSI in ways not commonly taught.
Forex Seasonal Patterns eBook - The seasonal patterns of the EUR/USD, GBP/USD, USD/JPY, AUD/USD, USD/CAD and Dollar Index by Cory Mitchell, CMT.
A Six Part Study Guide to Market Profile - The Chicago Board of Trade’s (CBOT) six part guide to using Market Profile.
Core Point and Figure Chart Patterns - An introduction to Point and Figure charting and patterns.
How I Made $2,000,000 in the Stock Market by Nicholas Darvas – Darvas Box is a fairly well known indicator now, but here is the book by the man who started it, and made millions from the method.
How George Soros Knows What He Knows - Towards a General Theory of Reflexivity by Flavia Cymbalista, Ph.D. – An academic paper which looks at George Soros, his ideas and his success.
Calming The Mind So The Body Can Perform by Robert M. Nideffer, Ph.D. – A 9 page eBook on getting into “the zone” for peak mental and physical performance. The article used athletes in the examples, but it is also applicable to traders.
Day Traders Bible – My Secrets of Day Trading by Richard D. Wyckoff – Written in 1919 this is one of my favorite stock trading books next to Reminiscences of a Stock Operator. While the book is old it is loaded with usable and applicable information for today’s trader.
Technical Analysis from A to Z - This is great resource for understanding the basic interpretation and calculation methods for technical analysis indicators. It is compiled in the form of an HTML help menu (.chm file, although I have put it in a .zip file for easier downloading) which means when you open the file you can click on anything in the index and it will instantly take you to your point of interest, making it a quick and easy resource to use.
Extraordinary Popular Delusions and the Madness of Crowds by Charles Mackay – A classic, and extensive, book on bubbles and the irrationality of crowds first published in 1841. This was the precursor to more recent books such as Irrational Exuberance.
Elliott Wave Principle eBook – The classic guide by Prechter and Frost for learning and understanding the Elliott Wave Principles.
18 Trading Champions Share Their Keys_to Top Trading Profits
Coders Guru Full Course - MetaTrader 4 Code Guide by Coder’s Guru
Market Profile Basics - Jayanthi Gopalakrishnan
War/Strategy
Sun Tzu on the Art of War - Here is the classic book on military strategy in .pfd format.
Hagakure-Book of the Samurai - Written by Yamamoto Tsunetomo, a Samurai in the early 1700s.
The Trading Parables eBook - A collection of short trading parables based on the lessons of history. Articles written and compiled by Cory Mitchell, CMT.
The Complete Strategyst: By John D. Williams. When The Compleat Strategyst was originally published in 1954, game theory was an esoteric and mysterious subject, familiar only to specialized researchers, particularly in the military. Its popularity today can be traced at least in part to this book, which popularized the subject for amateurs, professionals, and students throughout the world. (You’ll be redirected to a straight forward download page for a .pdf copy)
The Strategy of the Indirect Approach – By B.H. Liddell Hart. 343 pages originally written about 1929, this is great study into strategy, delving into the Greek Wars right up to WW I. (There are about 7 blank pages the beginning of the document,scroll page those to reach the material).

Free Trading Movies

Cancel Crash – Documentary about the 1987 stock market crash, told by the traders who were there, and arguably halted an even further meltdown.
Nova – Mind Over Money - an entertaining and penetrating exploration of why mainstream economists failed to predict the crash of 2008 and why we so often make irrational financial decisions. The program reveals how our emotions interfere with our decision-making and explores controversial new arguments about the world of finance.
Ascent of Money – 4 hour documentary on the history of money, credit and banking. Quite interesting.
Floored: Into the Pit (documentary) – A fantastic look at the Chicago trading pits, and the traders who made their livings there.
Quants: The Alchemists of Wall Street - Interesting documentary on trading and quantitative analysts/programmers–or “quants” who are behind the mathematical and financial models used today.