August 15, 2013

Same pattern different implication

Very often similar candlestick patterns or formation have completely different implications. The keyword here is "context". So a pattern which is bullish in one context can be bearish in another context.

August 13, 2013

Which type of a trader are you?

Greedy Traders: They trade too big and risk too much because their only goal is the easy money. They usually end up blowing up their account.

New Traders: They have no idea how the markets work so their only goal should be knowledge. New Traders do well to stay students until they have done their homework. Rushing in to make money without risk management, a winning method, the right mind set, and a trading plan will result eventually in failure 100% of the time.

Position sizing and risk management

Position sizing answers the question - how much quantity should you buy of a stock. The answer is crucial to risk management.

Determining how much of a currency, stock or commodity to accumulate on a trade is an often overlooked aspect of trading. Traders frequently take a random position size; they may take more if they feel "really sure" about a trade, or they may take less if they feel unsure. These are not valid ways to determine trade size. A trader should also not take a set position size for all circumstances. Many traders take the same position size regardless of how the trade sets up, and this style of trading will likely lead to losses over the long run.

August 11, 2013

Dark pools

Dark pools: The trading volume created by institutional orders that are unavailable to the public. The bulk of dark pool liquidity is represented by block trades facilitated away from the central exchanges.

Effect of heavy weight stocks on nifty

We know that a stock having a higher weight in the index can cause a bigger move in nifty as compared to a stock having low weight.

August 8, 2013

Start investing in NIFTYBEES

I am a big fan of investing in index based funds. There are some reasons for this:

1.It is very difficult for a fund manager to outperform the market on a consistent basis (hence the mandatory disclosure that past performance is not indicative of future performance). With an index fund, all the manager has to do is invest in the index stocks in same ratio and let the market do the rest.

August 5, 2013

Examples of morning star pattern

This is a three day bullish reversal pattern consisting of three candlesticks - a long-bodied black candle extending the current downtrend, a short middle candle that gapped down on the open, and a long-bodied white candle that gapped up on the open and closed above the midpoint of the body of the first day.

The opposite of this pattern is the "evening star"... this indicates bearishness and is reliable when formed after a strong uptrend.

August 4, 2013

Jesse Livermore quotes

245px-Jesse_Livermore.gif (245×188)Jesse Livermore was a highly visible stock trader and speculator for almost fifty years. He was famous for making and losing several multimillion dollar fortunes during his professional career.

He is most famous for his book "Reminiscences of a Stock Operator"... this is often considered to be a trader's bible and has been a must read for all traders and investors over the many decades.

August 3, 2013

Attitude and self confidence

A Businessman was deep in debt and could not see any way out.

Creditors and Suppliers were demanding payments. He sat in the park, deep in thought, wondering if anything could save his company from bankruptcy.

Suddenly an old man appeared before him and asked,
"I can see that something is troubling you seriously".

After listening patiently the old man said,
"I believe I can help you".

He asked the man his name, wrote out a cheque and put it into his hands saying,

"Take this money, meet me here exactly one year from today... and you can pay me back at that time".

Then he turned and disappeared as quickly as he had come.