Over Trading

30032012

Some of the readers have asked me what is my pre-market analysis routine. Frankly I do not do any such analysis.I let the market open and negotiate the price action as it unfolds.I only pay attention to the immediate trader decision points above and below the open and try to trade these levels
Let me explain today's trades

Nifty gaps up just above previous two days range. Now previous day levels have no relevance.Opening price is just above 28-03 High. If the price breaks below it, Nifty may drift further down to 28-03 close..Nifty is in no mood to come down . Goes up and make a BPB of 27-03 close level.A signal to go long.Another BPB at 27-03 High level.gives a second signal.

My trading revolves around decision points. Acceptance and rejection of price in these areas decides the direction of trade. Always there will be a decision point  above and below current price and always market will be creating new levels.

Decision points are where fierce battles are fought.Sooner or later somebody has to win. Then you join the winning team.

It is very simple but not easy. Need a lot of experience. Slowly I am gaining it. 

29032012

Nifty Gaped down and traded in a range for a long time. BOF of the day low gave a long signal. A scratch trade. BOF of PDL gave a with the trend short signal. This one also failed to follow through. Another breakeven trade.

Emotional Baggages

One of the most difficult aspect of successful trading is dealing with the emotions.it is almost impossible to be emotionless as a human being. But if you experience extremely unpleasant emotions during setbacks and euphoric emotions on a big gain,be careful.

pleasant emotions are motivating at a moderate level,but extremes can be harmful.Extreme positive emotions will lead to impulsive decisions and abandoning of risk control methods. Likewise If you are frustrated and worried, you will not be able to concentrate and this will lead to incorrect and costly trading decisions.

If you search the web , you can find thousands of articles written about emotions in trading.Read some and You can find the root cause of all emotion related problems is "Living in the past".We carry the memories of past actions and experiences.Only solution is to start "Living in the present"

Stop worrying about what happened.If you have a good trading strategy,stick to it.Ignore the outcome of individual trades, Ignore CNBC, ignore the experts, ignore the gurus.

Leave your "Emotional Baggages" behind ,Trade your plan and strategy.It will take care of itself.

28032012

Nifty opened within previous day range. BOF of swing low gave a long signal. BOF of PDO gave another trade signal. A retest of this level also failed. One can skip the next two signals as the FTA was too close.

27032012

When the market opens within previous day range ,look to trade the trend of the previous day.Market was trading in a range yesterday..Nifty opened just above the range and sold. First trade is a BOF of range. Target low of the range.Market gave three other good opportunities today at good locations with good profit potential

26032012

Nifty opened within previous day range and sold. PDL failed to hold., 22-03 low gave a short signal.Second signal was short . BOF of DT.. Did not attempt the CT trades as there were no space for the price to move. Two scratch trades.

Catch-22

 Catch-22 is a satirical,historical novel by the American author Joseph Heller. The Novel was published in 1961.Within the book, "Catch-22" is a military rule, the self-contradictory circular logic that, for example, prevents anyone from avoiding combat missions. "Catch-22" later became an idiomatic usage.

Catch-22  is a paradoxical situation in which an individual cannot avoid a problem because of contradictory constraints or rules^.Often these situations are such that solving one part of a problem only creates another problem, which ultimately leads back to the original problem.

Confidence in your method makes all the difference in trading.You will not be able to make money unless you have total confidence in your methods. But the problem is that you will not have confidence in your methods if you are not making money with it.

To become a consistently profitable trader, you need to develop a method that suits your personality. When developing a trading plan , you should know and understand the logic behind each step. This will boost your confidence and will give you the discipline to follow the plan. Confidence is believing in your ability to do something.
 
All the knowledge to become a profitable trader is not owned or controlled by any one. They are in public domain. Many methods that are available over the net and books can be traded very profitably.

But this is not possible without hard work, determination and a lot of tweaking.

First Trouble Area

FTA ( First Trouble Area) is the first area that price is likely to stop and revers.It is the nearest price level where one can expect some opposing order flow.

We need some space for our trade to move and take our position to profit. Better to ensure that there is some space between our entry and the  first point of interest that can give our trade some  trouble. Price may not always reverse at FTA. Price often will just stall for a bit before carrying on. It depends on how strong the level it is heading into.Strength of the trend and the price action trigger also matters.If we really think about it, the FTA is also a RR ratio.

FTA could be a recent swing High/Low, a round number, a, price flip zone. or a consolidation border. It is best to try to define these areas from situation to situation rather then one such thing.

Pay attention to FTA so that we can be more logical in our trade planning and management.

23032012

Opened in previous day range. Failure to continue north gave a short signal. Expectation was a retest of PDL and PDC. .But nifty reversed before that. Retest of this low gave a long signal. Missed the breakout. exited at HOD.before the breakout.

We are Traders

22032012

BOF of PDH gave the signal to go short. Second signal was the BOF of swing high..
Both the BOF of A and B were CT.. Short at location A and skip the trade at B.
The difference is LOCATION

21032012

Nifty opened within previous day range. Failed to break below yesterdays swing low. Long signal. Those who missed this could enter at the BPB of PDH. Type 1 trend day

Layer Over Layer

LOL, An abbreviation of Laugh out Lound is a very common internet slang.Historically it was used on Usenet and now it is widely used on electronic communication like Email and SMS.LOL secured its place on Oxford English Dictionary in March 2011.

Here LOL means Layer Over Layer.I use this to denote two or more important Support or Resistance levels positioned very close.A lot of traders will get trapped in these areas. Usually the price will break the first level and the break of second level will fail.

Trapped breakout traders of these levels will panic and start to exit initiating  a move in  the opposite direction.Then momentum traders join them and fuel the move further.30 to 50 point moves are very common from LOL areas.

Watch "LOL" and laugh all the way to the bank

Wish you all "LOL"(Lots Of Luck) with "LOL"(Lots Of Love).

20032012

Nifty opened near PDC. Expectation is continuation of previous day evening trend. Hammer rejection of PDC gave first signal. Second signal is the BPB of previous swing low. BOF of PDL gave third signal.Fourth one is BOF of HOD

Knack of Trading

I am a member of many trading forums and I do frequent these forums . I have interacted with many members on these forums who have read a lot  and  who are very familiar with the theoretical side of trading.They can also recognize many high probability patterns.But when comes to real trading these people are mediocre.

I have noticed that some of them  have  the  knack of picking profitable trades.They know nothing more than the other forum members.But somehow these traders have a knack for knowing which set up to take and which set up to avoid.

I don't think it is natural intuition. The knack of doing something well is generally acquired through prolonged exposure and practice.Theoretical knowledge and pattern recognition are just a part of the picture. The skill of assimilating price action information and the ability to take decisive action is also required

This skill is developed only through experience, Reading charts and trading.

“Repetitio est mater studiorium.”
 This ancient Latin phrase translates as “Repetition is the mother of all  learning.”

15032012

Gap down within the previous day range.Sold and found support at PDL. Short on TST and fail of HOD and DO.Another entry short at the pullback also gave good profit. BOF of LOD did not move as expected. A scratch trade.

Trouble Areas

This is a concept I learned from James16 of Forex Factory. Trouble areas are potential barriers to price movement. They are implied support and resistance points obstructing price moves.When we enter a trade, it is very important to know where price can potentially have a bounce. There is no way to know for sure what can happen but still we can have some precautions to turn the odds in our favour.

While entering trades better to make sure that the First trouble area is within our Risk Reward rules.If we find a trouble area just beyond our entry be prepared for a quick reversal that could give us a loss.At the trouble area you can 

1.Exit the trade taking a small profit

2.Exit part and move your stop loss of the remaining position to breakeven if you are trading multiple lots.

3.Hold on to the position hoping for the break of Trouble area moving your stop to breakeven

4.If the level is too close enter the trade only after the level has been broken. 

Always think  FTA ( First Trouble Area )  as your first target

14032012

Nifty gaped up and sold. First bar itself was a WR bearish bar. Sell 1PB. Target Gap closure .BOF of PDH,PDC, Gap Close gave a long signal. BOF of range marked "A" may give good profit sometimes.BOF of a range extreme can cause a successful break of the other side which did not happen today.

13032012

Nifty gaped up above PDH. Bias is bullish . Buy the 1PB and watch the paint dry till close.

12032012

Nifty gaped up above PDH and sold .It found support at PDH. Better avoid a CT trade as there was no retest of the level. BOF above previous swing high was a sure short. Selling climax and the retest of level gave a long entry.

Perfection !

Are you a perfectionist ?

If yes , Trading is not for you.

Perfectionism is one of the cardinal sins of trading and can be fatal.A Perfectionist cant accept the probabilistic nature of market and he will be always searching for the "Holy Grail" of trading which does not exist.

He will flirt from system to system,Indicator to indicator in search of perfection.Eventually this will demoralize the trader and will take away the fun of being in the market.

As traders we must strive for the excellence in trading and not for perfection.

09032012

 After gap open Nifty moved in a range. Only 2 good opportunities to go long at 1PB and BOF at DB.

07032012

A Day of consolidation Nifty opened within previous days range and refused to go down.  3 good opportunities one with the trend and 2 CT. . All the trades gave confirmation within the risk tolerance level by forming HL and LH..

06032012

Today's chart once again reminds me the importance of trading with the trend.One could have made decent gains if he has taken only trend trades. Levels A,B,C and D will tempt you.If you avoided the temptation to go CT, you will only lose at B.Closing negative on a day  Nifty moved more than 300 points is tragedy.

Notice how the price respects the decision points

There is really no need to buck the trend.

System Hopping

I remember a story from Kerala folklore  "Parayi Petta Panthirukulam".
The story is about  12 children abandoned by the parents and adopted by people from 12 different castes

In this story, "Pakkanar" calls at his elder brother "Agnihotri's" house. He was told to wait because the latter was doing his daily Pujas. Rather than waiting idly, Pakkanar started digging a pit in the courtyard; every now and then, Pakkanar would take a break and ask for his brother - and was told "he is now doing the Homam for Ganapati", "he is performing Siva Puja", "he is doing 'Salagrama Pushpanjali" and so on. For each different answer, Pakkanar dug a fresh pit. This went on for a long time.

 Finally Agnihotri finished his rituals and came out to meet Pakkanar - and found his courtyard riddled with several small pits. Pakkanar remarked: "I did a lot of hard work, but no luck; rather than digging so many pits, I should have dug just one pit persistently, I would have found water by now!".

Agnihotri got the message.

 Have You ?

05032012

No good opportunities today. One could have made some money in the first trade. the other two CT trades did not move. Breakeven day.
Notice the absorption at 5340 level

Before He Trades- A Parody

Mind Your Words

Words have incredible powers.They create impressions and mental images. Simple normal words like "Loss" can create psychological problems.They influence how we think and these thoughts determine our actions.

Now .Relax and close your eyes.Just think about"Loss".What do you see ?

A theft ? an accident ? a flood ? something burning down? or a pauper begging on the street?. I am sure You will see many unpleasant images.These feelings can kill your enthusiasm,impact your self esteem,lower your expectations and hold you back.No wonder traders find it hard to take losses.

Let us call "loss" something else, say "Expense".Now it feels better. Something business like.Trading is a business where our "wins" are our income and our losses are our expenses.

Treat trading losses just like any other expenses like brokerage,telephone bill,data feed charges and internet charges. As in any other business try to increase income and reduce expenses to become more profitable.Once we realize this we are much likely to be better, profitable traders.

So, mind your words.

02032012

Market opened within previous day range. Tested the previous swing high and sold. Wide range bar failed to extend and the BOF gave a long signal. Second trade BOF of HOD was a scratch. BOF of PDH gave an excellent opportunity. Last DB trade went to the range high as expected.

Watch layers of S/R . Breakout failure of these levels usually start a new trend.

01032012

Nifty opened within previous day range and sold off immediately. Breakout pullback trade did not move and stalled at day before yesterday low. BPB trade at the range low might have trapped many. and I am sure those who shorted might have missed the BOF trade which was profitable.Best to avoid the last BOF trade Usually the BOF of an extreme  will lead to a breakout of the other extreme.

Watch the volume at crucial levels .