When pyramiding (adding positions), follow these guidelines.-
Each successive layer should be smaller than before.-
Add only to winning positions.-
Never add to a losing position. One of the few trade management rules that we can state we never break is ‘Never add to a losing trade’. Trades are split into winners and losers, and if a trade is a loser, the chances of it turning right around and becoming a winner are too small to risk more money on. If indeed it is a winner disguised as a loser, why not wait until it shows it’s true colors (and becomes a winner)before you add to it. If you do this you will notice that nearly always the trade ends up hitting your stop loss and does not look back. Sometimes the trade turns around before it hits your stop and becomes a winner and you can count yourself very fortunate. Sometimes the trade hits your stop loss and then turns around and becomes a winner and you can count yourself unlucky. Whatever the result, it is never worth adding to a loser, hoping that it will become a winner. The odds of success are just too low to risk more capital in addition to the initial risk. -
Adjust protective stops to the breakeven point.
Risk Control -
Never risk more than 3-4 percent of your capital on any trade-
Predetermine your exit point before you get into a trade -
If you lose a certain predetermined amount of your starting capital, stop trading, analyze what went wrong, and wait until you feel confident before you begin trading
Know why you are in the markets. To relieve boredom? To hit it big? When you can honestly answer this question, you may be on your way to successful stock market trading
Never meet a margin call; don’t throw good money after bad.
Close out losing positions before the winning ones,
Except for very short term trading, make decisions away from the market, preferably when the markets are closed.
Work from the long term to the short term.
Use intraday charts to fine-tune entry and exit.
Don't trade the time frame. Trade the pattern. Reversal patterns, hesitation patterns and breakout patterns appear often. Learn to look for the pattern in any time frame.
Try to ignore conventional wisdom; don’t take anything said in the financial media too seriously.
Always do your homework and stay current on global events. You never know what's going to set off a particular currency on any given day.
Learn to be comfortable being in the minority. If you are right on the market, most people will disagree with you. (90% losers,10% winners).
Technical analysis is a skill that improves with experience and study. Always be a student and keep learning.
Beware of all tips and inside information. Wait for the market's action to tell you if the information you've obtained is accurate, then take a position with the developing trend.
Buy the rumor, sell the news.
Carry a notebook with you, and jot down interesting market information. Write down the market openings, price ranges, your fills, stop orders, and your own personal observations. Re-read your notes from time to time; use them to help analyze your performance.
Don't count profits in your first 20 trades. Keep track of the percentage of wins. Once you know you can pick direction, profits can be increased with multi-plot trading and variations in using your stops. In other words, now is the time to get serious about money management.
"Rome was not built in a day," and no real movement of importance takes place in one day.
Do not overtrade.
Patience is important not only in waiting for the right trades,but also in staying with trades that are working.
You are superstitious; don't trade if something bothers you.
Technical analysis is the study of market action through the use of charts,for the purpose of forecasting future price trends.
The charts reflect the bullish or bearish psychology of the marketplace.
The whole purpose of charting the price action of a market is to identify trends in early stages of their development for the purpose of trading in the direction of those trends
The fundamentalist studies the cause of market movement, while the technician studies the effect.
Rising commodity prices generally hint at a stronger economy and rising inflationary pressure. Falling commodity prices usually warn that the economy is slowing along with inflation.
The larger the Pattern ,the Great the potential. When we use the term “larger” ,we are referring to the the height and the width of the price pattern. The height measures the volatility of the pattern. The width is the amount of time required to build and complete the pattern. The greater the size of the pattern-that is ,the wider the price swings within the pattern (the volatility ) and the longer it takes to build –the more important the pattern becomes and the greater the potential for the ensuing price move.
The breaking of important trendlines . The first sign of an impending trend reversal is often the breaking of an important trendline. Remember however ,that the violation of a major trendline does not necessarily signal a trend reversal.The breaking of a major up trendline might signal the beginning of a sideways price pattern ,which later would be intedified as either the reversal or consolidation type.Sometimes the breaking of the major trendline coincides with the completion of the price pattern.
The minimum requirement for a triangle is four reversal points. Remember that it always takes two points to draw a trendline.
The moving average is a follower , not a leader. It never anticipates;it only reacts. The moving average follows a market and tells us that a trend has begun, but only after the fact.
Shorter term averages are more sensitive to the price action ,whereas longer range averages are less sensitive.In certain types of markets ,it is more advantageous to use a shorter average and ,at other times , a longer and less sensitive average proves more useful.
When the closing price moves above the moving average , a buy signal is generated. A sell signal is given when prices move below the moving average.
A buying signal on a two-moving average combination occurs when the shorter term of two consecutive averages intersects the longer one upward. A selling signal occurs when the reverse happens, and the longer of two consecutive averages intersects the shorter one downward.
Shorter average generates more false signals ,it has the advantage of giving trend signals earlier in the move .The trick is to find the average that is sensitive enough to generate early signals, but insensitive enough to avoid most of the random “noise”.
Cutting losses is painful for every trader.The ability to cut one’s losses in time is the sign of a seasoned trader.
Long term charts provide important information regarding long-terms or cycles. The trader can get a correct perspective regarding the real direction of the market in the long run, the strength or direction of the current trend occurring within that trend, or the possibility of a breakout from the long-term trend.
Common Points All Of Reversal Patterms - - The first signal of an impending trend reversal is often the breaking of an important trendline.
- The larger the pattern,the greater the subsequent move - Topping patterns are usually shorter in duration and more volatile than bottoms.
- Bottoms usually have smaller price ranges and take longer to build
The head-and-shoulders formation is confirmed only when the completion of the three rallies and their reversals is followed by a breach of the neckline. The failure of the price to break through the neckline on closing prices basis puts on hold or negates the validity of the formation.
Keep It Simple Stupid, more complicated isn’t always better.
The double-top formation is confirmed only when the full completion of the two rallies and their respective reversals is followed by a breach of the neckline (the closing price is outside the neckline ).The failure of the price to break through the neckline puts on hold or negates the validity of the formation.
The flag formation is a reliable chart pattern that provides two vital signals: direction and price objective. This formation consists of a brief consolidation period within a solid and steep upward trend or downward trend. The consolidation itself tends to be sloped in the opposite direction from the slope of the original trend, or simply flat.
A Breakaway gap provides the direction of the market.
The runaway or measurement gap provides the direction of the market. This gap confirms the health and velocity of the trend.
The runaway or measurement gap is the only type of gap that provides a price objective. The price objective is the previous length of the trend, measured from the runaway gap, in the same direction as the original trend.
The exhaustion gap provides the direction of the market.
Near the beginning of important moves, oscillator analysis isn’t that helpful and can be misleading. Toward the end of market moves ,however ,oscillators become extremely valuable.
When the oscillator reaches an extreme value in either the upper or lower end of the band, this suggest that the current price move have gone too far too fast and is due for a correction of some type.
The oscillator is most useful when its value reaches an extreme reading near the upper or lower end of its boundaries.
The market is said to be overbought when it is near the upper extreme and oversold when it is near the lower extreme. This warns that the price trend is overextended and vulnerable.
A divergence between the oscillator and the price action when the oscillator is in an extreme position is usually an important warning..
Oscillator-The crossing of the zero line can give important trading signals in the direction of the price trend.
Because of the way it is constructed, the momentum line is always a step ahead of the price movement. It leads the advance or decline in prices , then levels off while the current price trend is still in effect. It then begins to move in the opposite direction as prices begin to level off.
The best way to combine technical indicators is use weekly signals to determine market direction and the daily signals to fine-tune entry and exit points. A daily signal is followed only when it agrees with the weekly signal. (daily-weekly, 4 hour-daily,4 hour-1 hour).
The failure of prices to react to bullish news in an overbought area is a clear warning that a turn may be near. The failure of prices in an oversold area to react to bearish news can be taken as a warning that all the bad news has been fully discounted in the current low price. Any bullish news will push prices higher.
Elliot Wave Theory- A complete bull market cycle is made up of eight waves, five up waves followed by three down waves.
Support and resistance are the most effective chart tools to use for entry and exit points. For purposes of placing stop loss, support and resistance levels are most valuable.
Don't use the markets to feed your need for excitement.
Don't try to buy at the bottom and sell at the top. It can't be done except by liars."
Emotions are your worst enemy in the stock market.
If you hear that everybody is buying a certain stock, ask who is selling.
If Investmens are keeping you awake at night-Sell down to sleeping points.
A stock does not know that you own it.
Experienced traders control risk, inexperienced traders chase gains.
When speculation has done its worst, two and two still make four.
There are two times in a man's life when he should not speculate: when he can't afford it, and when he can.
From : JinvaniAdvisors
