The golden keyword here is TRADING WHIPSAWS. I can’t emphasise it enough. Out of 10 trades that trigger (on small timeframes say 30 minute charts), 7 are whipsaws. How in the world do you intend to make profit if you have 7 whipsaws? All the confidence and more importantly all the MONEY is gone by the time you get a good trend.
So here’s how we deal with it. I backtested Banknifty for reversal points and came up with an average point after which the reversals happen. This will help us minimise our losses in cases of whipsaws and help us make more money. I found three cut-off points for Coalindia. One lot to be sold for a profit of 2 points, 2nd for a profit of 5 points and 3rd one for the profit of 9 points.
So let us begin.
Using 3 ema and 15 ema, a positive crossover has taken place on 30 minute chart on 18th April 2014.
Buy 2 lots @ 289.90 spot price
Sell 1st lot @ 291.90 (2 points) – sell triggered on 18th April 2014 (2 x 1000 = 2000 rupees)
Sell 2nd lot @ 294.90 (5 points) – sell triggered on 21st April 2014 (5 x 1000 = 5000 rupees)
Sell 3rd lot @ 298.9 (9 points or if it doesn’t hit 9 points, sell on reversal) – sell triggered on 22nd April 2014
I am going to post trades on a daily basis and update the current trades. This is using a trading technique that will allow us to minimise our trading losses if not completely eliminate them. As traders we all know that we cannot avoid whipsaws. So with this strategy, we will learn how to trade whipsaws. In my opinion, this is very important. The nature of market movement has changed a lot in the past few years. We don’t have swift and clean long or short trends. We have a number of whipsaws and it is very difficult for small time traders with small capital to trade using technical indicators. The reason being the risk taking capacity is low and that whipsaws suck away all the money they are willing to invest. Before we even get a good trending trade, all the money is eaten up by the whipsaws. This technique is specifically for Banknifty and requires a capital of 80,000 rupees for trading.
The trade triggered on the 17th April 2014.
Using 3 ema and 15 ema for identifying the negative and positive crossover.
The positive crossover is seen on a 30 minute chart.
Trades initiated on 17th April 2014
Buy 2 lots of BNF @ 12653
Setting 1 lot BNF @ 12688 (35 points)
This is only to reduce the risk on the capital traded.
Sell 2nd lot BNF @ 12753 (100 points)
It has already hit 12753 and we have made a total of 135 pointsprofit.
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It is clearly evident that Nifty is on a downward trend on 30 minute chart.
Nifty is moving in a downward trending channel since May 2013. It still remains in the channel and hasn’t been able to break the upper boundary of the downward trend channel and continues to remain in the channel. There is a high probability of Nifty touching the lower trend line before receiving a small bounce.
Hindalco Industries Ltd. is one of the world’s largest aluminium companies and one of the biggest producers of primary aluminium in Asia. It is a subsidiary of Aditya Birla Group. The company is run by Kumar Mangalam Birla who is considered to be amongst the world’s youngest billionaires.
BSE SENSEX Constituent
Founded in the year: 1958
Company’s annual sales: US$5 billion
Number of people employed: 13,675
Turnover: US$14 billion
Fundamentally, the company is an excellent bet for the future.
With respect to the present condition, the technicals seem a little weak because of the bad results in this quarter. But this will not really affect the stock prices of the company for long. It will catch speed in the coming few months.
Have a look at the charts below.
Hindalco broke the bullish channel and entered the bearish zone solely because of the quarterly bad results. But it is expected to recover soon.
Although it might not be a good time to be bullish on intraday but with a perspective towards long term investment, it is still an excellent bet and I would say this is the right time to buy. It might just not get such an excellent chance to buy. It is a sure BUY ON DIPS.
In this article, I will teach how we can use EXCEL to correlate data of two different stocks or indices.
Here we will take an example of something apart from stocks and indices.
VIX correlation with Nifty
How do you think this helps? Well this could be very useful if used intelligently. Whenever you have a look at the historical data of your stocks you can correlate the price of the stock to Nifty. THis will help you give an idea of how much strength the stock has shown in weaker as well as stronger markets and how well it is moving in the current condition of the market.
Selecting “CLOSE” date from VIX and Nifty.
Here’s a snapshot of the example. I have selected the data dated 23rd July 2012 to 16th August 2012. Select the same range from both the files as follows.
You will learn this after you understand “When to invest?”
When to invest in the Stock Market?
After you have studied enough to understand the system of how the market works.
Why to invest in the Stock Market?
Stock Market is no gambling but it can still make you rich if you choose to get it right. Because market is the only place where you are not paid to work for a specified period of time but you are paid to do the right thing at the right time.
What people don’t do before investing?
This is a very common story. Probably you are all aware of it. You must have experienced this with your parents or your relatives and most probably yourself.
Here are a few questions that I feel you should ask yourself to figure out if you are really investing in the right way and in the right place:
On what basis do you select stocks for investments?
Are you just selecting stocks randomly without any study just on the basis of what analysts on Television say?
How do you know which stocks are good for long term/short term investment?
Are you aware of terms “Fundamental Analysis” and “Technical Analysis”?
Have you bothered studying these before investing?
These are the questions that I ask myself too before investing. Unless you are able to answer these, don’t bother investing.
I have always noticed that whenver people get into stock market, they just want to get rich overnight. I don’t understand this logic. When you are studying engineering or medicine or any other course for that matter, do you achieve what you want to be overnight? I don’t think so… You spend years to complete the course with good marks with no practical knowledge and yet having spent lakhs of rupees by the time you graduate. Then how could anyone just assume that you could make money without taking any trouble to learn the system of markets???