Rahul's Road to Recovery: Battling Overtrading"Rahul's Redemption: Overcoming the Pitfalls of Overtrading"
Once upon a time, in the bustling city of Mumbai, there lived a man named Rahul. Passionate about trading, Rahul was determined to make a fortune in the stock market. However, as the saying goes, "Too much of a good thing can be bad," Rahul found himself entangled in the web of overtrading.
Rahul's journey began with zeal and promise, but his desire for quick gains led him down a perilous path. He succumbed to the allure of constant market action, making trades impulsively and without a solid strategy. The euphoria of potential profits clouded his judgment, and soon, the losses began to accumulate.
In the depths of despair, Rahul realized he needed help. He turned to a mentor, an experienced trader named Aman, who empathized with his predicament. Aman had walked a similar path in his early days and understood the challenges Rahul faced.
The Turning Point:
Aman became Rahul's guiding light. He emphasized the importance of discipline and the dangers of overtrading. Together, they analyzed Rahul's past mistakes, identifying the triggers that led to impulsive decisions.
Problem and Solution for Overtrading:
- Problem: Overtrading occurs when a trader executes excessive transactions, often driven by emotions or the need to be constantly active in the market.
- Solution:
1. Establish a Trading Plan: Define clear entry and exit points, risk tolerance, and profit targets before entering a trade.
2. Set Realistic Goals: Avoid the temptation of unrealistic profit expectations. Focus on consistent, sustainable growth.
3. Use Stop-Loss Orders: Implementing stop-loss orders helps limit potential losses and prevents emotional decision-making.
4. Regularly Review Trades: Analyze past trades to identify patterns and learn from mistakes. Keep a trading journal for self-reflection.
With Aman's guidance, Rahul began to put these solutions into practice. He committed to sticking to his trading plan, embracing patience, and avoiding the impulsive urge to trade excessively.
The Moral of the Story:
Rahul's journey teaches us that setbacks are a part of the trading game, but learning from mistakes and seeking guidance can lead to redemption. The moral of the story is that discipline, a well-defined strategy, and mentorship are invaluable tools for overcoming the pitfalls of overtrading.
As days turned into weeks and weeks into months, Rahul's efforts bore fruit. His trading approach became more disciplined, and he started to see consistent profits. The story of Rahul's redemption serves as an inspiration for every trader navigating the turbulent waters of the stock market.
Remember, in the world of trading, it's not about the frequency of trades; it's about making the right trades at the right time.
Community ideas
Stock Selection Based on Relative StrengthHello,
Here i will be talking about the process for picking up the stocks based upon the Relative Strength. As this is known to everyone but only few are getting benefitted by applying it in real trading. Most of the gains are made with the stocks having greater RSI. If RSI having > 75 those are the ones which create maximum wealth in Short time. Now, Question comes at what time frame it will apply and this depend upon the individual trading style. It works well on Daily, Weekly, and Monthly TF. The higher the timeframe the better the reward. This can be combined with the Price and Volume, It Can do wonder in your trading Journey.
Screener for Stock Selection in Trading View:-
- Go to Stock Screener Tab at bottom in the Tradingview.
- Go to Filters
- Symbol Type - Common Stock
- Select New 52 Week High
- Select Relative Strength Index (14) >=75
The above will filter out stocks on Daily Timeframe. You can add more filters according to your requirements and make your stock list more refine such as All Time High, New 6 Months high etc. and Make a list and look for opportunity.
As i am a Price Sction trader i mix this with Price and Volume and ride the momentum.
Few examples - Cupid, Glaxo
You can try it and submit your feedback to me. Also, Tell me if you find something else which can be useful to the community. Together we can help eachother in Learing and excel in profession.
Remember: I am a Price Action Trader and use Price and Volume together with different Timeframes, including RSI, and market conditions. To get best result always wait for confirmation. Focus on Risk Management and Position sizing.
Treat trading like a business and it will pay you like a business…..!!
Hope this post is helpful to community
Thanks
RastogiG
Understanding Options Trading Terminology: An In-Depth GuideUnderstanding Options Trading Terminology: An In-Depth Guide
Embarking on the journey of options trading requires a solid grasp of key terms. Let's delve into the intricacies of these terms to equip you for successful trading.
# Call Options (CE) and Put Options (PE)
**Call Options (CE):**
- When you buy a Call option (going Long), you're betting on the stock's upward movement.
- Selling a Call option (going Short) means you're betting on the stock's downward movement.
**Put Options (PE):**
- Selling a Put option (going Short) is a bet on the stock's upward movement.
- Buying a Put option (going Long) means you're betting on the stock's downward movement.
# Expiration Date
The expiration date is when the option owner must exercise their right to buy or sell the underlying asset. After this date, the option becomes worthless. Indian markets usually see monthly expiries on the last Thursday, though weekly or daily expiries exist.
# Options Premium
The options premium is the price paid by the buyer to the seller for the right to buy or sell the underlying asset. Influenced by market price, strike price, time until expiration, and asset volatility, it represents the cost of the option contract.
*Example:* Buying a call option on Reliance Industries with a strike price of 2,200 INR and a premium of 50 INR means paying 50 INR per share for the right to buy Reliance Industries shares at 2,200 INR before expiration.
# Lot Size
Lot size refers to the number of contracts traded in a single order. For NIFTY 50 index options in India, the lot size is typically 50 contracts. Understanding lot size is crucial, impacting trading costs and potential profitability.
# Strike Price
The strike price is where the option buyer can buy or sell the underlying asset. In India, NIFTY index options often have strike prices set at regular intervals, like every 50 points.
*Example:* If the NIFTY index is at 21,000, strike prices may include 20,950, 21,000, and 21,050. Buying a call option with a strike of 21,050 bets on the index rising above that level.
# Spot Price
The spot price is the current market price of the underlying asset. It's essential in determining the intrinsic value of an option, which is the difference between the spot price and the strike price.
# Breakeven Points
Breakeven points are critical for traders. Let's illustrate:
- Selling a BN 6th Dec. 47400 CE (call option) with an expiry on 6th December.
- If BN closes at 47400 on expiry, the contract is valued at 0.
- If BN closes below 47400, it's valued at 0.
- If BN closes at 47401, it's priced at 1, and so on.
Understanding breakeven points is key to managing trades effectively.
Armed with this terminology, you're better prepared to navigate the dynamic landscape of options trading. Stay tuned for more insights into mastering this exciting financial realm!"
Risk, reward, and our absolutely EPIC Black Friday dealWorld-class climbers require the best equipment, gear, and preparation - they can't scale the most difficult mountains without anything else. For the world' best traders, they too must have access to the best tools and features. To climb to the top of modern markets, great research is a prerequisite.
Our sponsored athlete, Alex Honnold, is the best free solo climber on Earth, known for scaling Yosemite's 3200-foot El Capitan without a rope. He once told us the following :
"One way to de-risk my climbing is to practice on similar climbs until I have a high degree of confidence that I can successfully do whatever I've set out for. If I have a proven track record on very similar climbs then I know that the risk can't be too high. I guess the other way to say that is just to practice until a climb feels easy. If it's well within my comfort zone then it's no longer very risky."
This Black Friday, we want to give traders, investors and anyone interested in markets the tools they need to get to their goals. That means practice, it means getting out there, testing new ideas, and finding the perfect trading strategy. All of you can get up to 70% OFF one of our paid plans from now until the end of the week.
That's right... our epic Black Friday deal has begun. Now's your time to get the tools required to summit markets, to become the glorious trader you've always wanted to be with one of our paid plans, which offers the following:
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Remember: Our deal won’t last long, the clock is ticking. If you have any additional questions, check out the FAQ on our official Black Friday page .
Treat yourself to a plan and keep following us as we publish educational posts throughout the week. We'll show you several tips about using your new plan as each post will be designed to help you take full advantage of our epic Black Friday sale.
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Risk and Opportunity . . .Risk in simple term means possibility of unexpected outcome ie "Something happens as A Surprise..!". Surprises are positive as well as negative.
Negative surprises are known as risk. However, positive surprises are opportunities
So we must always speak our risk and opportunities at same time when discussing risk.
We invest in risky assets for positive surprises, but we can not rule out occurrence of negative surprises.
So, how can individual investor deal with this situation?
To deal with risk we need to understand " what can possibly happen to our portfolio/investment? ".
Some of outcome of risk can be
a. Temporary decrease in value of portfolio.
b. Not able to sell (liquidate) portfolio when needed.
c. Delayed return on portfolio.
d. Total loss of capital.
e. Returns lower than expectation(inflation)
Once this is known, we can take relevant actions to deal with these outcome.
Actions are of two types:
1. Action taken before surprise has happened. These may be one of many of following
- Limiting amount to 5% in any of the stock
- Diversification of portfolio among debt/equity/gold/Real estate
- buying put option against our long position
- buying medical insurance to avoid untimely selling of portfolio in case of medical emergency
- invest in income generating asset (rental / high dividend yield stock)
2. Action taken when the surprise event has occurred. Such as
- Booking minor loss at SL to avoid higher losses on wrong decision
- Rebalancing portfolio allocation when there is major down/up movement in one of asset class
We need to understand and accept that: we can not know how much return will be made on equity/risky investment, also we do not know when this return will come.
Chart I have put here is of 4 very robust investible instruments. This shows how multiple robust assets behave over longer periods.
By rebalancing among such diversified instruments in portfolio can help generate returns while mitigating risk and taking advantage of opportunities.
Hope after reading this post you will have better insight on risk.
Mastering Trade Setup with simplicity of dow theorySimplifying Trade Strategies with Dow Theory Wisdom
Welcome to the world of trading, where the Dow Theory can be your trusty guide. Let's break down an easy trade strategy that suits different market situations.
Dow Theory Insights
Dow Theory, a key tool in technical analysis, says understanding trends is crucial. Figuring out the trend is where we start, setting the stage for smart trade decisions.
Bullish View
If we're feeling positive
Higher Lows: Check if prices keep going up.
Near Support: Make sure prices are close to a support zone.
Reversal Signs: Look for any candle patterns signaling a turnaround.
Buying Setup:
Stoploss: Think of it like a safety net, set it at the recent lowest point.
Execute a buy trade when these factors line up, always keeping an eye on that stoploss.
Bearish View
If we're feeling negative
Lower Highs: Check if prices keep going down.
Near Resistance: Make sure prices are close to a resistance zone.
Reversal Hints: Look for any candle patterns signaling a potential shift.
Selling Setup:
Stoploss: Your safety measure, set it at the recent highest point.
Execute a sell trade when these conditions come together, always mindful of that stoploss.
Sideways View
For a market that's just hanging out
Draw Lines: Sketch lines above and below the current prices (Support and Resistence Trendlines)
Be Patient: Hang tight until prices break above or below those lines.
Only jump into a trade when the market decides where it's going.
In the lively world of trading, Dow Theory keeps us wise. By using these strategies, along with clever stoploss placements, you can navigate the markets with ease
This post is for educational purposes only. Trading involves risk, and past performance is not indicative of future results. Always do your research and consider consulting a financial advisor before making any investment decisions. I am not sebi registered analyst. My studies are for educational purpose only. Please Consult your financial advisor before trading or investing. I am not responsible for any kinds of your profits and your losses.
Most investors treat trading as a hobby because they have a full-time job doing something else.
However, If you treat trading like a business, it will pay you like a business.
If you treat like a hobby, hobbies don't pay, they cost you...!
Hope this post is helpful to community
Thanks
RK💕
Disclaimer and Risk Warning.
The analysis and discussion provided on in.tradingview.com is intended for educational purposes only and should not be relied upon for trading decisions. RK_Charts is not an investment adviser and the information provided here should not be taken as professional investment advice. Before buying or selling any investments, securities, or precious metals, it is recommended that you conduct your own due diligence. RK_Charts does not share in your profits and will not take responsibility for any losses you may incur. So Please Consult your financial advisor before trading or investing.
Mastering the Art of Diamond Pattern Trading in Crypto and StockWhat is a Diamond Pattern?
The diamond pattern is a unique formation characterized by two converging trend lines, creating a pattern that resembles a diamond or kite. Within this pattern, price movements oscillate, presenting traders with an opportunity to make informed decisions. However, to successfully navigate the diamond pattern, you need to understand its nuances and follow a disciplined trading strategy.
Trading the Diamond Pattern: A Step-by-Step Approach
1. Identifying the Pattern
The first step in diamond pattern trading is identifying the pattern on the price chart. Pay close attention to two converging trend lines between which prices fluctuate. This visual cue is crucial for decision-making.
2. Determining the Trend Direction
Once you've identified the diamond pattern, the next step is to determine the direction of the trend. The diamond pattern's context within the existing trend is essential:
If the diamond pattern forms during an uptrend, it is considered a bearish pattern. This suggests a potential reversal.
If it forms during a downtrend, it indicates a bullish reversal pattern.
3. Opening the Trade
After determining the trend direction, wait for a breakout from the diamond pattern to confirm your trade's direction. Your actions will differ depending on the type of pattern:
For a bearish reversal pattern, open a short trade as soon as the price breaks below the lower trend line.
For a bullish reversal pattern, open a long trade when the price breaks above the upper trend line.
4. Setting a Stop Loss
To limit potential losses, it's essential to set a stop loss order. For a long trade, place your stop loss just below the low of the breakout candle. For a short trade, position your stop loss just above the high of the breakout candle. This ensures that you are protected if the trade goes against your expectations.
5. Setting the Target
Determining the target for a diamond pattern trade is critical for managing your risk-reward ratio. The target can be calculated by measuring the height of the diamond pattern, from the highest to the lowest point, and adding this distance to the breakout point. Remember, the target can be adjusted to align with your risk tolerance and trading style.
6. Managing the Trade
As the trade unfolds, closely monitor price action and adjust your stop loss and take profit orders accordingly. If the trade is moving in your favor, consider taking partial profits or tightening your stop loss to lock in gains.
7. Avoiding False Breakouts
Diamond patterns are susceptible to false breakouts, where the price briefly exits the pattern but then quickly retraces. To minimize this risk, wait for the price to close outside the pattern before entering the trade. This extra confirmation can significantly improve your success rate.
8. Trading with Proper Risk Management
Just like any trading strategy, risk management is paramount. Only risk a small percentage of your trading account on each trade, and never invest more than you can afford to lose. Always use stop loss orders to protect your capital.
Additional Tips for Trading the Diamond Pattern
- Confirm with Other Indicators
While the diamond pattern can be a reliable signal, it's wise to confirm it with other technical indicators, such as moving averages, momentum indicators, or volume indicators. Seek additional signals that support the breakout direction.
- Pay Attention to Multiple Time Frames
To enhance your trade's probability of success, look for the diamond pattern on various time frames, including daily, weekly, and monthly charts. Trade only when it aligns with the larger trend, increasing your chances of a winning trade.
- Be Patient
Diamond patterns take time to develop fully. Rushing into a trade before the pattern matures can lead to false breakouts and unnecessary losses. Exercise patience and wait for the pattern to confirm before making your move.
- Practice with a Demo Account
Before risking real capital, practice trading the diamond pattern on a demo account. This allows you to refine your strategy, identify optimal entry and exit points, and gain confidence in your trading plan.
In conclusion, mastering the diamond pattern in your trading strategy requires a combination of technical analysis skills, a disciplined approach, and a commitment to risk management. The diamond pattern can offer valuable insights into potential trend reversals or continuations, but successful trading relies on careful observation and strategic execution.
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TradingView Masterclass: How To Use The Top ToolbarIn this guide, you’ll learn about all the different tools that are available to you on the chart. Specifically, we’ll be looking at the toolbars that are located at the top, bottom, left and right of the chart:
To summarize the chart above, the breakdown looks like this:
■ Top toolbar: Chart tools
■ Left-side toolbar: Drawing tools
■ Right-side toolbar: Community tools
■ Bottom toolbar: Advanced tools
Now, let’s dive into each one starting with the top toolbar where you’ll find many of the most important chart tools for all your research needs. Keep in mind that we’ve ordered each item below as if we are moving from the furthest point at the top left to the furthest point to the top right. Let’s begin!
⦿ Symbol Search (Keyboard shortcut: type the ticker)
- Open the symbol search at the top left-hand corner to access over 100,000 global assets across equities, forex, crypto, futures, and more.
- You can find them by their ticker (e.g., type RELIANCE for Reliance Industries) or by their description names (e.g., type the name Central to find CENTRALBK stock).
It’s also possible to find your favorite symbols with partial searches, that is, to write part of the ticker or description name and then select the corresponding asset in the search results. If you want to filter by asset type, you can select one of the following: Stocks, Funds, Futures, Forex, Crypto, Indices, Bonds and Economy (economic indicators).
⦿ Time Intervals (Keyboard shortcut: press ,)
- Select the time interval for the chart. For instance, say you’re looking at a candlestick chart and you choose a daily chart. That means each trading day will be represented by 1 candle.
- The most common time intervals are: 1m, 5m, 30m (intraday setups) 1h, 4h (swing trading setups) and 1D, 1W and 1M (long-term trading setups).
- Traders can create custom intervals as well by clicking on the Time Interval arrow and then selecting the specific parameters needed. Don’t forget to add it to your favorites if you want it to be featured in the Quick Access toolbar.
⦿ Chart types
- We have more than 15 chart types available to analyze all price movements, including the new HLC area, Line with markers and Step line.
- Most traders prefer to use Bars, Candles and Area charts, but everyone has a different approach to markets. Be sure to find the chart type that fits your style.
⦿ Indicators, Strategies, and Metrics (Keyboard shortcut: press /)
- Indicators, Strategies, and Metrics are designed to provide additional insight and information that may otherwise be difficult to see.
- We have over 200 technical and financial indicators while also supporting over 100,000 custom scripts coded by our community. The best way to get started here is to start exploring the Indicators, Strategies, and Metrics menu as soon as possible.
⦿ Indicator Templates
Here, you can save your custom indicator setups so that you can load them at any point in time. This tool is essential if you utilize different forms of analysis. For example, if you chart technicals and fundamentals, you can make two separate templates that can be loaded at any point depending on your need.
⦿ Alert (Keyboard shortcut: Alt + A)
Alerts are used to create custom price alerts. Instead of watching markets 24/7, go ahead and create an alert at a precise level and then wait for that alert to trigger. Let our alerts do the heavy lifting. They’re always watching markets for you.
It is also possible to configure them different notifications so that you can be alerted through email, our free app or with a webhook.
⦿ Bar Replay
Bar Replay is a powerful, yet simple tool for backtesting. All experience levels can use Bar Replay for backtesting, practicing or learning about price history. To get started, click the Bar Replay button and then select a historical moment to rewind the chart backward to that point in time. Then, you can press play or pause, and retrade that moment to see how your strategy performs.
⦿ Undo/Redo Scroll (Keyboard shortcut: Ctrl + Z / Ctrl + Y)
Any changes made to the charts such as drawings or indicators can be deleted or recreated. This works just like a Word document you might create on Microsoft or Google. Use the keyboard shortcuts to quickly undo or redo specific actions.
⦿ Multi-chart Layout
If you have an Essential, Plus, Premium, or Ultimate plan, you can analyze multiple charts on your screen at the same time. Simply choose one of the available layouts from the menu to get started. You can also synchronize symbols, intervals, crosshairs, time and data ranges with the selected layout.
⦿ Manage Layouts
Create, rename and load all the layouts that you save. You can also share your layout and enable the autosave option, which is very handy so that all of your work is saved automatically. Managing your layouts is an essential part of your analytical process because it enables multiple different chart layouts to be accessed as quickly and easily as possible.
⦿ Quick Search
Need to find a function or tool on your chart? Open and use Quick Search to do that. The name of the tool is just as it can be used: quickly search for the things you need to edit, add or remove on your chart, and do it in a flash.
⦿ Chart Settings
This is where you can customize all of the fine details about your chart. The Chart Settings menu has everything from the chart color, to the gridlines and labels, the text of the scales, and more.
⦿ Fullscreen Mode (Shift + F)
When this is enabled, you will see only the chart. To exit Full screen mode, click ‘Esc’.
⦿ Snapshot and Publish
Here you can download your charts as images, copy links, share tweets, publish ideas, create live streaming video content, and comment on assets with our latest feature Minds. If you want to share your expert analysis or get feedback from others, you’ll surely want to learn how these social tools work. Go ahead and give it a try - join our community of traders.
Thanks for reading and we hope this post helps all traders and investors. Whether you’re an experienced professional or someone just getting started, we plan to create more guides like this to ensure you know how to maximize the features on our platform.
Next week, we’ll share part two of this series, and cover the drawing tools menu on the left-side of the chart.
- Team TradingView
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Follow Discipline- Be a Better TraderHi traders,
It's been a while since I have written something on trading psychology. So, here is small writeup that may help some traders in conquering their endeavors.
I won't and I can't discuss all the psychological aspects but would like to throw some light upon a few important ones.
You must have heard a lot about What-nots of trading- Do not fear; Don't be greedy; Don't lose your edge; Don't lose patience but there is little on What-should be done to avoid these limitations.
As per my experience, there are two paths that lead to same destination (trading success). Path1 is hit and trial method. I am sure most traders follow this path and suffer. It could be due to lack of awareness or knowledge of the stock market. This ignorance leads to greed >> losses >> fear. Eventually, ignorance develops indiscipline habits if you are not following the cautious approach and learning.
Majority of traders fail to understand the need to learn before they lose their entire capital.
Some of them strive to learn and improve slowly. The latter has good chances to reach their destination but there is no certainty.
On Path2, traders seek help from other. They know that they do not have enough knowledge about the markets and there is someone else who has better knowledge and that someone may help in making the former profitable. Unfortunately, most of the so called knowledgeable are involved in fraudulent activities and it's difficult to filter out good one. Fake Ids, fake PnL screen shots and edited videos are a common practice on social media. There are only a few genuine people and those who are able to find those good mentors or guides are just lucky.
Having a good mentor or knowledge is just primary, the real journey begins after that. Earlier you were fighting with someone else in the stock market but now with all the knowledge that you have, you are fighting with youself. You just realize that the real limitations are within oneself and hence psychological in nature.
I won't delve into those limitations as you all must have read about them at one point or the other. However, I would like to briefly discuss a few solutions to them.
🚀You must have an edge that works. When I say Edge, I mean a strategy or plan. A plan that works means a plan that may not work all the time but most or the time. It could also be a plan that works only 50% of time but with better risk to reward, at least 1:2. The best way is to find/devise such a strategy and backtest off market for its accuracy and intricacies.
Basically, a strategy has three basic elements: Entry, Exit, Stoploss and Trailing stoploss.
🚀You must fix maximum loss per day or maximum number of losing trades per day or maximum profit per day. This is particularly for day traders. If you are in front of the screen all the time, there are higher chances of overtrading. So, you have to learn the habit of discipline yourself with a few trades only. By the end of day you will see that only a couple of trades would fit into your trading plan. If you take a large number of trades per day, you will surely gain nothing by the EoD.
🚀Also its important to book profits when available. You would often notice making good profit in your first trade, losing some part of it in the second, and then closing a third one in a loss. It needs to be realised that the first good trade was enough to call it a day.
🚀Try not to turn a trade in good profit into a losing trade. The problem occurs when you have say, 5000 unrealized profit and then it reduces to 3000. Now you want that 2000 back ignoring that you are still making 3000. This is where trailing stoploss works. Develop a habit of using this locking mechanism so that even if something goes wrong, you still realize gains in a winning trade.
🚀When your trailing stop is hit and stock still resumes in your predicted direction, "do not re-enter". Try to find a second trade later that fits your setup/strategy.
🚀After taking entry, it's important to fix your stoploss as per your strategy. Do not reverse your trade just because your stoploss is hit. This may lead to worst trades in most cases.
🚀Its not bad to buy something that is cheap. You can buy it if it fits into your strategy. Just keep your position within manageable loss limits.
Although these points look simple, yet I am sure that in the beginning you won't be able to follow these few points religiously. It would need a lot of time to follow this discipline. The journey may be difficult but only a strong trading psychology will make you a better trader.
Do boost and share your thoughs in the comment section.
What is Price Action ? Beginners Guide in Easy Steps NSE:NIFTY
What is Price Action Really?
When I started learning I was using a lot of indicators and crap but then I heard about Price action, its meaning is pretty vague and confusing after a lot of effort I get to know that the simplest things work best.
Let's see a structured way to approach Price Action analysis.
1. Chart Reading Bar by Bar.
Studying the Previous candle reflects a lot of important information on the market movement and future direction.
2. Reading the Context and the whole Structure.
*The circles marked on the chart show the best location where certain candlestick formation offers good trading opportunities.
*The reading chart in the overall structure helps to eliminate taking trades in the direction of exhausted trends.
3. Identifying Momentum Increase or decrease.
4. Adding Volume Confirmations.
Volume is the better half of price and without volume analysis can be incomplete.
These are some of the factors that start the price action analysis.
By practice, one can look into the deeper significance of these factors and use them easily.
I hope this has added some new value to your knowledge,
if you like these educational ideas,
Share your views and like.
Will Upload the Next Part with more factors.
Keep Learning,
Happy Trading.
Mastering RSI with 11 StrategiesWhat is RSI indicator:-
RSI is a momentum oscillator which measures the speed and change of price movements. RSI moves up and down (oscillates) between ZERO and 100. Generally RSI above 70 is considered overbought and below 30 is considered oversold. Some traders may use a setting of 20 and 80 for oversold and overbought conditions respectively. However this may reduce the number of signals. You can also use RSI to identify divergences, strength, reversals, general trend etc.
Calculation:-
There are three basic components in the RSI - Avg Gain, Avg Loss & RS.
Avg Gain = Average of Upward Price Change
Avg Loss = Average of Downward Price Change
RS = (Avg Gain)/(Avg Loss)
RSI =
First Calculation:-
RSI calculation is based on default 14 periods.
Average gain and Average loss are simple 14 period averages.
Average Loss equals the sum of the losses divided by 14 for the first calculation.
Average Gain equals the sum of the Gains divided by 14 for the first calculation.
First Average Gain = Sum of Gains over the past 14 periods / 14.
First Average Loss = Sum of Losses over the past 14 periods / 14.
The formula uses a positive value for the average loss.
RS values are smoothed after the first calculation.
Second Calculation:-
Subsequent calculations multiply the prior value by 13, add the most recent value, and divide the total by 14.
Average Gain = / 14.
Average Loss = / 14.
if
Average Loss = 0, RSI = 100 (means there were no losses to measure).
Average Gain = 0, RSI = 0 (means there were no gains to measure).
Logic of this indicator:-
RSI is an oscillator that fluctuates between zero and 100 which makes it easy to use for many traders.
Its easy to identify extremes because RSI is range-bound.
But remember that RSI works best in range bound market and is less trustworthy in trending markets.
A new trader need to be cautious because during strong trends in the market/security, RSI may remain in overbought or oversold for extended periods.
Chart Timeframe:-
RSI indicator works well on all timeframes.
Timeframe depends on which strategy or settings are you using.
Generally a lower timeframe like 1 min, 3 min, 5 min, 15 min, 30 min, 1 Hr etc is used for intraday trades or short duration trades
and higher timeframes like 1 day, 1 week, 1 month are used for positional or long term trades.
//-------------------------------------------------------------------------------------------------------------------
Strategy 1:- (Basis Strategy of Overbought and Oversold)
Overbought:(chart below)
Usually an asset with RSI reading of 70 or above indicates a bullish and an overbought situation.
overbought can be seen as trading at a higher price than it should.
traders may expect a price correction or trend reversal and sell the security.
but RSI indicator can stay in the overbought for a long time when the stock is in uptrend - This may trap an immature trader.
an Immature trader will enter a sell position when RSI become overbought (70), whereas a mature trader will enter sell position when RSI line crosses below the overbought line (70).
Oversold:(charts below)
An asset with RSI reading of 30 or below indicates a bearish and an oversold condition.
oversold can be seen as trading at a lower price than it should.
traders may expect a price correction or trend reversal and buy the security.
but RSI indicator can stay in the oversold for a long time when the stock is in downtrend - This may trap an immature trader.
an Immature trader will enter a buy position when RSI become oversold (30), whereas a mature trader will enter buy position when RSI line crosses above the oversold line (30).
Note:
so its better to wait for reversal signal.
traders may use 20 instead of 30 as oversold level and 80 instead of 70 as overbought level.
new traders may learn to use the indicator as per the prevailing trend to get better results.
false signals may be avoided by using bullish signals in bullish trend and bearish signals in bearish trend.
//-------------------------------------------------------------------------------------------------------------------
Strategy 2:- (RSI strength)
RSI crossing centreline 50 in the below chart showing strength and buy/sell signal.
Centre line is at RSI 50.
if RSI is above 50 its considered bullish trend. (increasing strength)
if RSI is below 50 its considered bearish trend. (decreasing strength)
RSI crossing centre line (50) upside may be a buy signal.
RSI crossing centre line (50) downside may be a sell signal.
//-------------------------------------------------------------------------------------------------------------------
Strategy 3:- (RSI 40 and RSI 60 Support and Resistance )
RSI 40 acting as support in the below chart
In an uptrend RSI tends to remain in the 40 to 90 range with 40 as support (buying opportunity at support).
RSI 60 acting as resistance in the below chart
In a downtrend RSI tends to remain in 10 to 60 range with 60 as resistance (selling opportunity at resistance).
Note:
These ranges may change depending on RSI settings and change in the market trend.
//-------------------------------------------------------------------------------------------------------------------
Strategy 4:- (Divergence)
Below chart shows a simple example of Bullish Divergence and Bearish Divergence.
An RSI divergence occurs when price moves in the opposite direction of the RSI.
A bullish divergence is when price is falling but RSI is rising. which means RSI making higher lows and price making lower lows (buy signal).
A bearish divergence is when price is rising but RSI is falling. which means RSI making lower high and price making higher highs (sell signal).
Divergences are more strong when appear in an overbought or oversold condition.
There may be many false signals during a strong uptrend or strong downtrend.
In a strong uptrend, RSI may show many false bearish divergences before finally reversing down.
same way in a strong downtrend, RSI may show many false bullish divergences before finally reversing up.
//-------------------------------------------------------------------------------------------------------------------
Strategy 5:- (RSI Swing Rejections or Double Top & Double Bottom)
Bullish swing rejection or Double Bottom: (buy signal) (see the chart below)
RSI goes below oversold (30).
RSI comes back above 30.
RSI falls back again towards 30 without going below oversold (30).
RSI comes up back again and breaks above recent high.
Bearish swing rejection or Double Top: (sell signal) (see the chart below)
RSI goes above overbought (70).
RSI comes back below 70.
RSI rises back again towards 70 without going above overbought (70).
RSI comes down again and breaks below recent low.
//-------------------------------------------------------------------------------------------------------------------
Strategy 6:- (Trendline Support and Resistance)
Below chart shows RSI Trendline Resistance:
Connect three or more points on the RSI line as it falls to draw a RSI downtrend line (RSI resistance trendline).
Everytime it takes resistance from a RSI downtrend line its a selling opportunity.
Below chart shows RSI Trendline Support:
Connect three or more points on the RSI line as it rises to draw a RSI uptrend line (RSI support trendline).
Everytime it takes support on a RSI uptrend line its a buying opportunity.
//-------------------------------------------------------------------------------------------------------------------
Strategy 7:- (Trendline Breakout and Breakdown)
Below chart shows RSI Trendline Breakout:
Connect three or more points on the RSI line as it falls to draw a RSI downtrend line (RSI resistance trendline).
Whenever it breakout above RSI resistance trendline its a buying opportunity.
Below chart shows RSI Trendline Breakdown:
Connect three or more points on the RSI line as it rises to draw a RSI uptrend line (RSI support trendline).
Whenever it breakdown below RSI support trendline its a selling opportunity.
Note:
Correlate both the RSI and the closing price to ensure proper breakout or breakdown.
Challenge is to correctly identify if a breakout or breakdown is sustainable or its a false signal.
//-------------------------------------------------------------------------------------------------------------------
Strategy 8:- (RSI Crossover same timeframe)
RSI with two different RSI length crossing each other on same timeframe.
when lower RSI length crossing above higher RSI length its a buy signal.
when lower RSI length crossing below higher RSI length its a sell signal.
for example RSI with length 7 & length 14 on 15 Minutes timeframe.
//-------------------------------------------------------------------------------------------------------------------
Strategy 9:- (RSI Crossover Multi timeframe)
RSI with same RSI length but on two different timeframes crossing each.
when lower timeframe RSI crossing above higher timeframe RSI its a buy signal.
when lower timeframe RSI crossing below higher timeframe RSI its a sell signal.
for example RSI with length 14 on 5 Minutes and 1 Hr timeframes.
//-------------------------------------------------------------------------------------------------------------------
Strategy 10:- (RSI EMA/WMA Crossover)
RSI and EMA chart below:
RSI and WMA chart below:
RSI and SMA chart below:
when RSI crossing above EMA/WMA/SMA its a buy signal.
when RSI crossing below EMA/WMA/SMA its a sell signal.
//-------------------------------------------------------------------------------------------------------------------
Strategy 11:- (RSI with Bollinger bands)
Bollinger bands and RSI complimenting each other and giving a Buy signal in below chart:
Bollinger bands and RSI complimenting each other and giving a Sell signal in below chart:
if a security price reaches upper band of a Bollinger Band channel and also the RSI is above 70 (overbought), a trader can look for selling opportunities (reversal) (sell).
but in case price reaches upper band of a Bollinger Band channel but RSI is not above 70 (overbought), there may be chance that security remains in an uptrend, so a trader may wait before entering a sell position.
if a security price reaches lower band of a Bollinger Band channel and also the RSI is below 30 (oversold), a trader can look for buying opportunities (reversal) (buy).
but in case price reaches lower band of a Bollinger Band channel but RSI is not below 30 (oversold), there may be chance that security remains in an downtrend, so a trader may wait before entering a buy position.
so bollinger band with RSI can give a double confirmation on a reversal.
Note:
In this way you may use stochRSI or RSI with MACD for better accuracy.
RSI can be used with many other indicators to increase accuracy.
//-------------------------------------------------------------------------------------------------------------------
Limitations of the RSI:-
RSI works best in range bound market and is less trustworthy in trending markets.
So new traders may get trapped in an uptrend or a downtrend if they forget to see the overall long term trend of that security.
Traders should set stop loss and take profit levels as per risk reward ratio.
Note:
Don't confuse RSI and relative strength. RSI is changes in the price momentum of a security.
whereas relative strength compares the price performance of two or more securities.
//-------------------------------------------------------------------------------------------------------------------
Like other technical indicators, RSI also is not a holy grail. It can only assist you in building a good strategy. You can only succeed with proper position sizing, risk management and following correct trading Psychology (No overtrade, No greed, No revenge trade etc).
ABOVE SHARED EXPLANATION AND STRATEGIES OF RSI ARE FOR EDUCATIONAL PURPOSE ONLY. YOU MAY PAPER TRADE TO GAIN CONFIDENCE AND BUILD FURTHER ON THESE.
Coding Note:-
//you may do simple coding in tv to make an effective indicator with alerts using RSI/EMA/Bollinger Bands etc.
//I feel Simple strategy or indicator is the best.
//As per me Indicator's are not good or bad. Its the Risk reward where most of the traders fail. Position sizing and Risk Reward can make an indicator effective or ineffective upto an extent.
//Below is a simple code in "version 5" which can be coded.
//Condition (Amend conditions as per your requirement).
Buy= ta.crossover(rsi,X)//Exit Sellposition//X can be EMA, SMA, WMA etc (for example define ema as EMA=ta.ema(close,50))//X=EMA
Sell= ta.crossunder(rsi,X)//Exit Buyposition//X can be EMA, SMA, WMA etc(for example define wma as WMA=ta.wma(close,50))//X=WMA
or
//if want to use different rsi length but same timeframe
rsi1=ta.rsi(close,7)// RSI length 7
rsi2=ta.rsi(close,14)// RSI length 14
or
//if want to use same length on different timeframes
rsi1=request.security(syminfo.tickerid,'5',ta.rsi(close,14))// RSI length 14 on 5 min timeframe
rsi2=request.security(syminfo.tickerid,'60',ta.rsi(close,14))// RSI length 14 on 1 hour timeframe
Buy= ta.crossover(rsi1,rsi2)//Exit Sellposition
Sell= ta.crossunder(rsi1,rsi2)//Exit Buyposition
//Plot
plotshape(Buy,title='Buy',text='Buy',location=location.belowbar,style=shape.labelup,size=size.tiny,color=color.rgb(27, 130, 1),textcolor=color.new(color.white,0))
plotshape(Sell,title='Sell',text='Sell',location=location.abovebar,style=shape.labeldown,size=size.tiny,color=color.rgb(233, 7, 7),textcolor=color.new(color.white,0))
//Alerts
alertcondition(Buy, "Enter Buy Exit Sell", "Buy")
alertcondition(Sell, "Enter Sell Exit Buy", "Sell")
//For NonRepaint :
//you may use previous candle closing. So that indication appears on next candle. for eg. may use close instead of close .
//Soon will be posting strategies on Supertrend, Bollinger Bands etc. which are simple and easy to code.
//Tc Happy Trading and Happy Coding.
Hope you like it
Happy trading :-)
Understanding Impact of Bond Yield Differential on EquitiesOver the past decade the interest rate differential between US and India has been constantly going down. This has largely been due to stronger fiscal position of India and also gradual weakening of US Public Finances.
This has led to the Rupee becoming more stable against the Greenback, thereby reducing the rate of inflation in India.
Further, this has resulted in rising of equity markets over the last decade, and more importantly, the same setup is likely to stay or become better over the next two decades.
Hence long term retail investors in India can benefit from this by placing algo based orders to buy Index ETFs on dips and reduce their cost of buying and stay invested over the long term thereby getting benefit of power of compounding.
---------------------
Trading View Script:
EMA, Envelope & Bollinger bands for Trend Trade with Small SLWhat is an EMA:-
An exponential moving average (EMA) is a moving average that measures the average price of a security and assigns more weight and meaning to the most recent data points. Compared to SMA, EMA responds more effectively to recent price changes and applies equal importance to all observations over the period.
What is an Envelope:-
Envelopes are technical indicators that are typically plotted over a price chart with upper and lower bands. The most common example of an envelope is a moving average envelope or an exponential moving average, which is created using two moving averages that define upper and lower price range levels.
What is an Bollinger Bands:-
A Bollinger Band is a technical analysis tool defined by a set of trendlines. They are plotted as two standard deviations, both positively and negatively, away from a simple moving average or an exponential moving average of a security's price and can be adjusted to user preferences.
Logic:-
We all have heard about Reversal trading based on "Bollinger Bands" and "Envelope" when upper and lower bands are far from the basis centre line. but these upper and lower bands can also be used for Breakout and Breakdown (Trend) trading with small/limited Stoploss.
Chart Timeframe:-
200 EMA is a standard EMA used by many traders and it can be used in any timeframe. 200EMA can be used in Envelope & Bollinger Bands also. I recommended to use it on 5 minute or 15 minutes chart on stocks or indices for intraday trading, on 4Hour or 1 Day chart on stocks for for Swing trading, on 1 Week chart on stocks for positional Trading.
//-------------------------------------------------------------------------------------------------------------------
Strategy 1:- (EMA high/close/low)
Three EMA's can be plotted with Length 200 for all three, but source different for all three high/close/low.
When price close above EMA (high) its a Breakout, Buy - keeping Stoploss as price closing below EMA (low) and Target as per 1:3 or 1:5 risk reward ratio.
When price close below EMA (low) its a Breakdown, Sell - keeping Stoploss as price closing above EMA (high) and Target as per 1:3 or 1:5 risk reward ratio.
//------------------------------------------------------------------------------------------------------------------
Strategy 2:- (Envelope - Upper Band/Basis/Lower Band)
Envelope can be plotted with Length - 200, Percent - 0.05 , Source - close, you may use Percent as per your risk reward and as per the setting which suits you. however i have used percent - 0.05 for 5 min and 15 minutes timeframe for intraday in index here in this idea.
When price close above upper band its a Breakout, Buy - keeping Stoploss as price closing below lower band and Target as per 1:3 or 1:5 risk reward ratio.
When price close below lower band its a Breakdown, Sell - keeping Stoploss as price closing above upper band and Target as per 1:3 or 1:5 risk reward ratio.
//-------------------------------------------------------------------------------------------------------------------
Strategy 3:- (Bollinger Bands - Upper Band/Basis/Lower Band)
Bollinger Bands can be plotted with Length - 200, Basis MA type - EMA , Source - close, StdDev - 0.3 you may use StdDev as per your risk reward and as per the setting which suits you. however i have used StdDev - 0.3 for 5 min and 15 minutes timeframe for intraday in index here in this idea.
When price close above upper band its a Breakout, Buy - keeping Stoploss as price closing below lower band and Target as per 1:3 or 1:5 risk reward ratio.
When price close below lower band its a Breakdown, Sell - keeping Stoploss as price closing above upper band and Target as per 1:3 or 1:5 risk reward ratio.
Note:- You may also keep Basis centre line as Stoploss in both Breakdown or Breakout trades but remember that in this case Stoploss will be smaller but will be more frequent as compare to the above situation when we are keeping upper and lower bands as Stoploss.
//-------------------------------------------------------------------------------------------------------------------
Like other technical indicators, These indicators also are not a holy grail. It can only assist you in building a good strategy. You can only succeed with proper position sizing, risk management and following correct trading Psychology (No overtrade, No greed, No revenge trade etc).
ABOVE SHARED EXPLANATION AND STRATEGIES OF EMA, Envelope, Bollinger Bands ARE ONLY FOR EDUCATIONAL PURPOSE ONLY. YOU MAY PAPER TRADE TO GAIN CONFIDENCE AND BUILD FURTHER ON THESE.
Coding Note:-
//you may do simple coding in tv to make an effective indicator with alerts using EMA/Envelope/Bollinger Bands.
//I feel Simple strategy or indicator is the best.
//As per me Indicator's are not good or bad. Its the Risk reward where most of the traders fail. Position sizing and Risk reward can make an indicator effective or ineffective upto an extent.
//Below is a simple code in "version 5" which can be coded.
//Condition (Amend conditions as per your requirement of Breakout/Breakdown trade).
Buy= ta.crossover(close,upperband)//Exit Sellposition//for Envelope or BB
Sell= ta.crossunder(close,lowerband)//Exit Buyposition//for Envelope or BB
or
Buy= ta.crossover(high,ema)//Exit Sellposition//for EMA
Sell= ta.crossunder(low,ema)//Exit Buyposition//for EMA
//Plot
plotshape(Buy,title='Buy',text='Buy',location=location.belowbar,style=shape.labelup,size=size.tiny,color=color.rgb(27, 130, 1),textcolor=color.new(color.white,0))
plotshape(Sell,title='Sell',text='Sell',location=location.abovebar,style=shape.labeldown,size=size.tiny,color=color.rgb(233, 7, 7),textcolor=color.new(color.white,0))
//Alerts
alertcondition(Buy, "Enter Buy Exit Sell", "Buy")
alertcondition(Sell, "Enter Sell Exit Buy", "Sell")
//For NonRepaint :
//you may use previous candle closing. So that indication appears on next candle. for eg. may use close.
//Soon will be posting strategies on Supertrend, RSI etc. which are simple and easy to code.
//Tc Happy Trading and Happy Coding.
Mastering the Symmetrical Triangle chart patternHello Friends,
Here we had shared Educational purpose post to understand & to master the Symmetrical Triangle chart pattern with real example on chart of the stock MARUTI.
Symmetrical Triangle Chart Pattern
A symmetrical triangle is a common chart pattern used by traders and investors to predict where the price of a stock or asset might go next.
What It Looks Like
Imagine two lines on a chart. One line is sloping up, and the other is sloping down. These lines meet at a point at the top of the chart. It looks like a triangle, where the lines squeeze together.
What It Means
Symmetrical triangles show that traders are unsure about where the price will go. It's like a coiled spring, ready to bounce in one direction.
Why It's Important
When the price breaks out of the triangle, either going up or down, it can be a signal of a big move. If it goes up, it's considered bullish (good for buyers). If it goes down, it's bearish (not so good for buyers).
Trading Tips
Wait for a clear breakout before making a trade. Don't rush.
Watch the volume (how many shares are traded). A big volume increase during the breakout is a good sign.
Be cautious of false breakouts – sometimes the price goes out of the triangle but then comes back in.
If you already own the stock, hold onto it until you see which way the breakout goes.
If you don't own the stock, consider buying after a reliable breakout in the direction of the major trend.
In simple terms, a symmetrical triangle is like a pause in the market where everyone is waiting to see which way it will go next. Traders use it to make decisions about buying or selling stocks or assets.
Setting Stop-Loss and Targets
Stop-Loss
A stop-loss is a predetermined price level at which you decide to sell your position to limit potential losses. When trading a symmetrical triangle pattern:
Place your stop-loss just below the lower trendline if you're buying (bullish breakout).
Place your stop-loss just above the upper trendline if you're selling short (bearish breakout).
The stop-loss helps protect your capital if the breakout goes against your trade.
Price Targets
Price targets help you determine where the price may move after the breakout. You can calculate potential price targets using the triangle's height:
Measure the height of the triangle (the vertical distance from the lowest low to the highest high within the triangle).
After a bullish breakout, add the height to the breakout point for an upside target.
After a bearish breakout, subtract the height from the breakout point for a downside target.
These targets can help you set realistic profit objectives. Keep in mind that they are not guarantees, but rather potential price levels where the asset might move.
Remember that trading involves Risk, and it's important to use risk management tools like stop-loss orders to protect your investments. Additionally, price targets provide guidance but don't guarantee specific outcomes, so it's essential to monitor the market's actual performance after a breakout and adjust your strategy as needed.
I am not sebi registered analyst. My studies are for educational purpose only. Please Consult your financial advisor before trading or investing. I am not responsible for any kinds of your profits and your losses.
Most investors treat trading as a hobby because they have a full-time job doing something else.
However, If you treat trading like a business, it will pay you like a business.
If you treat like a hobby, hobbies don't pay, they cost you...!
Hope this post is helpful to community
Thanks
RK💕
Disclaimer and Risk Warning.
The analysis and discussion provided on in.tradingview.com is intended for educational purposes only and should not be relied upon for trading decisions. RK_Charts is not an investment adviser and the information provided here should not be taken as professional investment advice. Before buying or selling any investments, securities, or precious metals, it is recommended that you conduct your own due diligence. RK_Charts does not share in your profits and will not take responsibility for any losses you may incur. So Please Consult your financial advisor before trading or investing.
Concept Of Support and Resistance & Roles ExchangeDefination Of Support and Resistance levels-:
The support and resistance (S&R) are specific price points on a chart expected to attract the maximum amount of either buying or selling. The support price is a price at which one can expect more buyers than sellers. Likewise, the resistance price is a price at which one can expect more sellers than buyers.
Particular defination-:
Resistance
As the name suggests, resistance is something which stops the price from rising further. The resistance level is a price point on the chart where traders expect maximum supply (in terms of selling) for the stock/index. The resistance level is always above the current market price.
The likelihood of the price rising to the resistance level, consolidating, absorbing all the supply, and declining is high. The resistance is one of the critical technical analysis tools which market participants look at in a rising market. The resistance often acts as a trigger to sell.
Support
understanding the support level should be quite simple and intuitive. As the name suggests, support is something that prevents the price from falling further. The support level is a price point on the chart where the trader expects maximum demand (in terms of buying) coming into the stock/index. Whenever the price falls to the support line, it is likely to bounce back. The support level is always below the current market price.
Reliability of S&R
The support and resistance lines are only indicative of a possible reversal of prices. They by no means should be taken for ascertain. Like anything else in technical analysis, one should weigh the possibility of an event occurring (based on patterns) in terms of probability.
Key takeaways from this chapter
1-S&R are price points on the chart
2-Support is a price point below the current market price that indicate buying interest.
3-Resistance is a price point above the current market price that indicate selling interest.
4-To identify S&R, place a horizontal line in such a way that it connects at least 3 price action zones, well-spaced in time. The more number of price action zones (well spaced in time) the horizontal line connects, the stronger is S&R
5-S&R can be used to identify targets for the trade. For a long trade, look for the immediate resistance level as the target. For a short trade, look for the immediate support level as the target.
6-Lastly, comply with the checklist for optimal trading results
How support and resistance changes their roles-:
If the price falls below a support level, that level will become resistance. If the price rises above a resistance level, it will often become support. As the price moves past a level of support or resistance, it is thought that supply and demand has shifted, causing the breached level to reverse its role.
Examples by Snapshots-:
Support become Resistance
Resistance become Support
Conclusion
Technical analysis is one approach of attempting to determine the future price of a security or market. Some investors may use fundamental analysis and technical analysis together; they’ll use fundamental analysis to determine what to buy and technical analysis to determine when to buy.
Don’t forget that technical analysis is not an exact science and it is subject to interpretation. If you continue your study of technical analysis, you’ll likely hear someone say it is more of an art than a science. As with any discipline, it takes work and dedication to become adept at it.
Best Regards- Amit rajan
Mastering the Double Bottom Chart PatternA double bottom, combined with RSI divergence, can be a powerful signal for a trend reversal.
What's a Double Bottom ?
It's when a stock's price forms two distinct lows on a chart.
The pattern is confirmed when prices rise above the peak between those two lows.
Why Does It Matter?
The double bottom marks the end of a downtrend and the start of an uptrend.
It's one of the most common patterns, but it needs careful analysis.
Adding RSI Divergence:
RSI measures a stock's strength and momentum.
Look for RSI to form higher lows while the price forms lower lows. This is RSI divergence and a strong bullish signal.
Key Points to Remember
Downtrend First: The pattern begins in a downtrend.
Time Gap: The longer the time between the two lows, the stronger the reversal signal.
Price Increase: Look for a significant price increase between the two lows (around 10-20%).
Volume Matters: Usually, volume is higher during the first low and increases as the pattern confirms.
Breakout Confirmation: Don't act until prices break above the confirmation point.
Pullback After Breakout: Expect a pullback after the breakout; it's normal.
Trading the Double Bottom with RSI Divergence:
Calculate a target price by adding the pattern's height to the breakout point.
Confirm the pattern only after prices break through the confirmation point.
Be patient; not all patterns are double bottoms.
Watch for volume during the pattern's development.
Pay attention to RSI divergence for added confirmation.
Remember: Wait for confirmation, and don't rush into trades based solely on patterns. It's wise to use multiple indicators, including RSI, and keep an eye on market conditions.
I am not Sebi registered analyst. My studies are for educational purpose only.
Please Consult your financial advisor before trading or investing. I am not responsible for any kinds of your profits and your losses.
Most investors treat trading as a hobby because they have a full-time job doing something else.
However, If you treat trading like a business, it will pay you like a business.
If you treat like a hobby, hobbies don't pay, they cost you...!
Hope this post is helpful to community
Thanks
RK💕
Disclaimer and Risk Warning.
The analysis and discussion provided on in.tradingview.com is intended for educational purposes only and should not be relied upon for trading decisions. RK_Charts is not an investment adviser and the information provided here should not be taken as professional investment advice. Before buying or selling any investments, securities, or precious metals, it is recommended that you conduct your own due diligence. RK_Charts does not share in your profits and will not take responsibility for any losses you may incur. So Please Consult your financial advisor before trading or investing.
Moving Averages are really powerful. . . !Can you believe they are...
Moving average(MA) is one of the oldest indicator. Lot of people (including me) would reject the idea that such a simple indicator can be of any use in modern day considering availability of advance computer tools.
I came across free training videos of Oliver Velez who explained on how to use it. When I back tested his logic I was really surprised..
Since then I have kept 20SMA and 200SMA as default on my chart. Best part of this concept is, it works on any time frame.!
MA can answer following key questions which helps anyone become good trader/investor..
Q1. Is the stock trending? and What is the direction of trend.?
A1. If 20MA is flat stock is not trending. Direction of 20MA is direction of trend.
Q2. How old is the trend. (if trend has just started I can board it and if it is too old I will not)
A2. If 20MA is not too far from 200MA trend has just started. If 20MA is too far from 200MA be alert trend might be matured.
Q3. Am I buying in value zone so that my SL is small.?
A3. Buy when stock retraces near 20MA.
Q4. Am I exiting at a value where I have got good amount of move. So that my profits are much higher than losses.
A4. Exit when stock is far away from 20MA.
I have marked all above on these chart for easy understanding.
As we can see FAR and NEAR are relative terms. Hence it takes good amount of practice to grasp and trade this concept.
Considering volatility lot of whipsaws can happen in intraday and daily time frame. So I started using it on weekly time frame and started getting good results with holding time of 3~10 weeks.
However once you are confident in your stock selection criteria this is good way to ride a trend.
We can compare trading using MA to flying kite. It is simple but not easy. One need to practice to master the skill.
One need to get feel direction and gust of wind,
Understand behavior of kite and
finally time the action to fly kite.
Hope this post will help you appreciate this oldest indicator...
7 Expert Risk Management Techniques for TradingRisk management refers to the techniques used to identify, evaluate, and mitigate the potential risks associated with trading and investing. Whether you are a day trader, swing trader, or scalper, effective risk management can help you minimize losses and protect your hard-earned money all while maximizing potential profits.
Let's take a look at the top 7 risk management techniques for trading! 👌
Have a Trading Plan
⦿ Many traders jump into the market without a thorough understanding of how it works and what it takes to be successful. You should have a detailed trading plan in place before making any trades. A well-designed trading plan is an essential tool for effective risk management.
⦿ A trading plan acts as a roadmap, laying out a set of guidelines/rules that can help traders avoid impulsive decisions. It is crucial because it requires you to think deeply about your approach before you begin risking real money. Having a plan can help you stay calm under stress as your plan will have specific steps to take for anything the market throws at you.
⦿ It is essential to clearly define your trading goals and objectives. Are you aiming for short-term gains or long-term wealth generation? Are you focused on a specific asset class or trading strategy? Setting specific and measurable goals helps you stay focused and evaluate your progress.
⦿ Another important part is to describe the trading strategy you will employ to enter and exit trades. This includes the types of analysis you will employ (technical, fundamental, or a combination), indicators or patterns you will rely on, and any specific rules for trade execution. Determine your risk tolerance, set appropriate position sizing rules, and establish stop-loss levels to limit potential losses.
The Risk/reward ratio
⦿ When you are planning to open a trade, you should analyze beforehand how much money you are risking in that particular trade and what the expected positive outcome is. Here is a useful chart with some examples to understand this concept:
⦿ As you can see from the data above, a trader with a higher RR (risk-reward ratio) and a low win rate can still be profitable.
⦿ Let’s examine this a little more by looking at a profitable example with a 20% success rate, a RR ratio of 1:5, and a capital of $500. In this example, you would have 1 winning trade with a profit of $500. The losses on the other 4 trades would be a total of $400. So the profit would be $100.
⦿ An unprofitable RR ratio would be to risk, for example, $500 with a success rate of 20% and a risk/reward ratio of 1:1. That is, only 1 out of 5 trades would be successful. So you would make $100 in 1 winning trade but in the other 4, you would have lost a total of -$400.
⦿ As a trader, you need to find the perfect balance between how much money you’re willing to risk, the profits you’ll attempt to make, and the losses you’ll accept. This is not an easy task, but it is the foundation of risk management and the Long & Short Position Tools are essential.
You can use our 'Long Position' and 'Short Position' drawing tools in the Forecasting and measurement tools to determine this ratio.
Stop Loss/Take Profit orders
⦿ Stop Loss and Take Profit work differently depending on whether you are a day trader, swing trader, or long-term trader and the type of asset.
⦿ The most important thing is not to deviate from your strategy as long as you have a good trading strategy. For example, one of the biggest mistakes here is to change your stop loss thinking that the losses will recover... and often they never do.
⦿ The same thing happens with take profits, you may see that the asset is "going to the moon" and you decide to modify your take profit, but the thing about markets is that there are moments of overvaluation and then the price moves sharply against the last trend.
⦿ There is an alternative strategy to this, which is to use exit partials, that is closing half of your position in order to reduce the risk of your losses, or to take some profits during an outstanding run. Also remember that each asset has a different volatility, so while a stop loss of -3% is normal for a swing trading move in one asset, in other more volatile assets the stop loss would be -10%. You do not want to get caught in the middle of a regular price movement.
⦿ Finally, you can use a trailing stop, which essentially secures some profits while still having the potential to capture better performance.
Trade with TP, SL, and Trailing Stop
Selection of Assets and Time intervals
⦿ Choosing the right assets involves careful consideration of various factors such as accessibility, liquidity, volatility, correlation, and your preference in terms of time zones and expertise. Each asset possesses distinct characteristics and behaviors, and understanding these nuances is vital. It is essential to conduct thorough research and analysis to identify assets that align with your trading strategy and risk appetite.
⦿ Equally important is selecting the appropriate time intervals for your trading. Time intervals refer to the duration of your trades, which can span from short-term intraday trades to long-term investments. Each time interval has its own advantages and disadvantages, depending on your trading style and objectives.
⦿ Shorter time intervals, such as minutes or hours, are often associated with more frequent trades and higher volatility. Traders who prefer these intervals are typically looking to capitalize on short-term price fluctuations and execute quick trades. Conversely, longer time intervals, such as days, weeks, or months, prove more suitable for investors and swing traders aiming to capture broader market trends and significant price movements.
⦿ Take into account factors such as your time availability for trading, risk tolerance, and preferred analysis methods. Technical traders often utilize shorter time intervals, focusing on charts, indicators, and patterns, while fundamental investors may opt for longer intervals to account for macroeconomic trends and company fundamentals.
For example, If you are a swing trader with a low knack for volatility, then you can trade in assets such as stocks or Gold and ditch highly volatile assets such as crypto.
⦿ Remember that there is no one-size-fits-all approach, and your choices should align with your trading style, goals, and risk management strategy.
Here is a chart of Tesla from the perspective of a day trader, a swing trader, and an investor:
Backtesting
⦿ Backtesting plays a crucial role in risk management by enabling traders to assess the effectiveness of their trading strategies using historical market data. It involves the application of predefined rules and indicators to past price data, allowing traders to simulate how their trading strategies would have performed in the past.
⦿ During the backtesting process, traders analyze various performance metrics of their strategies, such as profitability, risk-adjusted returns, drawdowns, and win rates. This analysis helps identify the strengths and weaknesses of the strategies, allowing traders to refine them and make necessary adjustments based on the insights gained from the backtesting results.
⦿ The primary objective of backtesting is to evaluate the profitability and feasibility of a trading strategy before implementing it in live market conditions. By utilizing historical data, traders can gain valuable insights into the potential risks and rewards associated with their strategies, enabling them to manage their risk accordingly.
⦿ However, it's important to note the limitations of backtesting. While historical data provides valuable information, it cannot guarantee future performance, as market conditions are subject to change. Market dynamics, liquidity, and unforeseen events can significantly impact the actual performance of a strategy.
⦿ There are plenty of ways to backtest a strategy. You can run a manual test using Bar Replay to trade historical market events or Paper Trading to trade real examples. Those with coding skills can create a strategy using Pine Script and run automated tests on TradingView.
Here is an example of the Moving Averages Crossover strategy using Pine Script:
Margin allocation
We are not fortune tellers, so we cannot predict how assets will be affected by sudden major events. If the worst happens to us and we have all of our capital in a particular trade, the game is over.
There are classic rules such as the maximum allocation percentage of 1% per trade (e.g. in a $20,000 portfolio this means that it cannot be risked +$200 per trade). This can vary depending on your trading strategy, but it will definitely help you manage the risk in your portfolio.
Diversification and hedging
⦿ It is very important not to put all your eggs in one basket. Something you learn over the years in the financial markets is that the unexpected can always happen. Yes, you can make +1000% in one particular trade, but then you can lose everything in the next trade.
⦿ One way to avoid the cold sweats of panic is to diversify and hedge. Some stock traders buy commodities that are negatively correlated with stocks, others have a portfolio of +30 stocks from different sectors with bonds and hedge their stocks during downtrends, and others buy an ETF of the S&P 500 and the top 10 market cap cryptos.
⦿ There are unlimited possible combinations when diversifying your portfolio. At the end of the day, the most important thing to understand is that you need to protect your capital, and using the assets available to you a trader can hedge and/or diversify to avoid letting one trade ruin an entire portfolio.
Thank you for reading this idea on risk management!
We hope it helps new traders plan and prepare for the long run. If you're an expert trader, we hope this was a reminder about the basics.
Join the conversation and leave your comments below with your favorite risk management technique! 🙌
- TradingView Team
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An Analysis in Harmony Top-Down Approach chart studyHello Friends,
Today, we have something special in store as we take a top-down approach to analyze a specific stock - Tata Communications in the world of trading. By employing this multi-time frame method, we'll be diving into various charts, starting from the big picture down to smaller timeframes.
Before we begin, please remember that trading carries risks, and past performance does not guarantee future results. The analysis we're about to discuss is for educational purposes only and not financial advice.
Alright, let's kick off our analysis with the big picture - the monthly chart of Tata Communications. Here, we've identified an exciting Elliott wave count - the third wave of the fifth wave. According to Elliott wave theory, markets move in a series of five waves in the direction of the main trend, followed by three waves in a corrective direction. The third wave is well known for its strength and often the longest in a trending market. So, on the monthly chart of Tata Communications, we're witnessing this powerful third wave within the fifth wave, indicating potential significant moves ahead for the stock.
Next, we'll move down to the weekly chart to gain more insights. On this timeframe, we observed a thrilling development - the "inverted head and shoulders" pattern. This pattern aligns perfectly with the larger Elliott wave count on the monthly chart, supporting the idea of a trend reversal and a potential new uptrend for Tata Communications.
Finally, we'll zoom in even closer to the daily chart. Here, we have another intriguing pattern - a "flag and pole" pattern in the forming stage. This daily pattern further reinforces the notion of an upcoming bullish move for Tata Communications, in line with both the weekly inverted head and shoulders breakout and the monthly Elliott wave count.
On daily time frame Flag and pole chart patterns, flag in formation and still breakout is pending
By utilizing the top-down approach, we've gained a comprehensive understanding of Tata Communications' potential direction. The monthly Elliott wave count provided us with the big picture, the weekly inverted head and shoulders confirmed the trend reversal, and the daily flag and pole pattern hinted at a continuation of the upward movement for the stock.
But remember, trading involves risks, and there are no guarantees. So, it's essential to approach it with caution and use risk management strategies to protect your capital.
In conclusion, we've taken a top-down approach to analyze Tata Communications, considering the monthly Elliott wave count, the weekly inverted head and shoulders breakout, and the daily flag and pole pattern in the forming stage. Keep a close eye on these patterns and the stock's price action, and remember to trade wisely and make well-informed decisions.
I am not Sebi registered analyst. My studies are for educational purpose only.
Please Consult your financial advisor before trading or investing. I am not responsible for any kinds of your profits and your losses.
Thank you for joining us on this exciting trading journey !
Most investors treat trading as a hobby because they have a full-time job doing something else.
However, If you treat trading like a business, it will pay you like a business.
If you treat like a hobby, hobbies don't pay, they cost you...!
Hope this post is helpful to community
Thanks
RK💕
Disclaimer and Risk Warning.
The analysis and discussion provided on in.tradingview.com is intended for educational purposes only and should not be relied upon for trading decisions. RK_Charts is not an investment adviser and the information provided here should not be taken as professional investment advice. Before buying or selling any investments, securities, or precious metals, it is recommended that you conduct your own due diligence. RK_Charts does not share in your profits and will not take responsibility for any losses you may incur. So Please Consult your financial advisor before trading or investing.
