Trading

Technical analysis masterclass

Forecasting the future price movements based on the examination of past price movements

3 basic assumptions

• Price discounts everything
  • Buy when Fear is at its extreme
  • Sell when Greed is at its extreme
• Price moves in trends
  • if a trend is set, future price movements are more likely to follow that trend
  • If the current trend ios high, we can buy at the bottoms and sell at the highs
  • If the current trend is downwards, we can short sell the security at the highs and make profit in the fall also. NNT
• History tends to repeat itself
  • Charts and patterns found in the past often repeat themselves

Types of Charts

• Line Chart : connecting the closing price of a Stock over a period
• Bar Chart : should be used to predict the evaluating trends on a longer timeframes
  • top is the highest price,
  • bottom at lowest price of the period usually a day
  • tick to the left is the opening price of the period
  • right tickt is the closing price of the period
• Candlestick chart : provides visual insights to current market psychology
  • can be applied to (5M, 15M, 1H, 1D, 1W etc)
    • red candle - stock closes lower than its opening price - bearish sentiments or selling pressure
    • green candle - stock closes higher than the opening price - bullish sentiments or buying pressure

Trends

• Up trend
  • Peaks and Troughs are higher then the previous
  • We should buy *
• Down trend
  • opposite of up trend
  • supply is more than the demand and is bearish trait
  • Can’t make profit by buying stocks - in short term basis
  • Withdraw the position at the starting of the down trend
  • Can make profit in down trend in derivative markets only, by selling futures and options
• Sideways trend
  • sddsf

Secular Trend

• 5 to 10 years basis
• Major or long term trend - usually a year or more - Best for investors
• Intermediate - 1 to 3 months - for positional traders
  • focus on the daily timeframe charts
• Short terms or minor trends
  • Short term traders

Trading in direction or major trend gives more profit than trading in direction or intermediate or minor trend

Trend Lines

After a down trend, market tries to move to Accumulation phase, where positions and me made by observing the initial few positive diversions

Stage 2 : Uptrend - public participation, driving the trend high, with profit making

Stage 3 : distribution phase

Stage 4 : Down trend

Back to stage 1 : Accumulation phase

Trading perspectives

• Intraday Trading : no overnight
  • Scalping - few seconds to few minutes - 5 minute chart
  • Keep 15 minutes chart otherwise
• Positional Trading
  • Intermediate - few weeks to few months
  • Short term (Swing Trading) - few days to few weeks
  • Keep Daily chart
  • one hour chart only investing for 3 to 7 days
• Long term investing - Long term positional trading
  • hold trades for more than a year
  • Weekly chart - find the trends using weekly charts *

Timeframes to be chosen

• Intraday trading - 15 mins chart
• Positional trading - Daily chart
• Long term investment - Weekly chart