Retracement or Pullback Trading: mrtq13

Retracement or Pullback Trading :


This is the most interesting and profitable trading style! Here I put forward some points on pullback with charts. I hope this will clarify the idea of pullback/retracement trading....................

Known as Retracement/pullback trading,this style has several different ways or techniques to trade. For example,one can buy on pullback to Moving averages,or pullback to Fibonacci retracement levels,or pullback at support level,or pullback at pivot levels etc……….

Stocks don't go straight up or down. Stocks will go up,pause,fall a bit and again go up,pause,fall a bit. That is natural process for a stock!!

When a stock makes higher highs and higher lows,we call it uptrend.

Well,an uptrending stock will see pullback on its way up.

And it is always wise to enter into the pullback of a stock in UPTREND................Trend is our friend..........Remember.........!!

In pullback,the present low can't go below the last low.

When we find that the present low is unwilling to go below the last low,we consider it pullback. 

How do we understand that the present low is unwilling to go below the last low. 

Very simple. We use Pivot indicators for that..............Also,our trading system should be able to give us white/green signal to show that the stock is actually reversing or has stopped its fall..............

Now,let's see a simple example of pullback trading............Below is EHL. As we can clearly see that each time the stock is falling a bit from its high,it is stopping somewhere and rising again...........Also,we can see the Pivot Lows are forming as this stock is going high from pullback...........
Now it is always wise to enter into a stock at its first pullback. 

Pullback can be measured...........Below are some points to note.........

Market corrections,up or down, usually retrace a significant portion of the previous trend. You can measure the corrections in an existing trend in simple percentages :

1. A fifty percent retracement of a prior trend is most common. A minimum retracement is usually one- third of the prior trend. 
2. The maximum retracement is usually two-thirds. 


In stock, a pullback usually takes place like this: "Two steps forward, one step backward”. That means, when pullback starts, the stock price should retrace at least 35% to 50 % of the original trend. 

A pullback should be questioned/ doubted if it retraces more than 60%/ 70% of its original trend. If it does, then the retracement should be treated as reversal not pullback. However, note that a stock can retrace two-thirds of its prior trend. 

It is to be noted that if the stock has suffered 100% retracement, then it is useless to use Pullback method or Fibonacci level. If it has reversed 100%, then look for the support level. There is a high probability that this stock will go upward from its support level or form a base at the support level. For example, Atlas has formed a base at the support level after the 100% price decline on December. 

Shallow pullbacks tend to lead to longer term, smoother continuation moves. Deeper pullbacks tend to lead to much shorter term and much sharper reactions.

Below is a classic example of pullback. I hope this makes sense...............

See that Bxpharma has retraced nearly 50% from its top price. And then,it started to consolidate and show several buy signals and other things...........And this is a good place to enter this stock.

How do we measure a pullback? By Fibonnaci.............Fibonnaci easily shows how much a stock has retraced and that way we can determine,where we should prepare to enter!!

Below is another example of 60% retracement/pullback................

Pullback is a very important thing to learn in trading because of two reasons :

1. If we have missed a stock at its reversal point,we can wait to see if it pullbacks. And then we can enter at its pullback.

2. Second thing is,in an uptrending stock either one should enter into the stock at pullback or at breakout. So,it is always wise to understand and practise pullback trading...........

It is said that pullback is safer method in trading. I agree with it......

Note that there is a difference in Pullback and Reversal............

In pullback,the stock is in uptrend and making Higher Highs and Higher Lows.

But in reversal,the stock has gone below the last low breaking down the support line..............One example is as below :

Reversal trading is a very risky and troubling trading. It is like "catching the falling knife.........." If we try to catch it,our hands may cut............

All banks are in reversal trading setups............

All IT are pullback trading setups.............

DSE itself was in reversal since Jun-July...............

I follow a simple rule :

1. I at first check if DSE Index itself has given any entry(buy) signal :
2. If DSE has given buy signal,then I check individual stocks and sectors.
3. Now,if stocks give buy signals,I enter.........

But the condition always is : DSE at first has to give buy signals. 

This is just my own strategy..........Have a look at the charts below.

You will see when DSE gave buy signal and reversed,Finance sector did the same.............

-----------

Now to your query,stocks mostly follow Index. But it is not that they will surely follow Index pattern. They "may" follow Index patterns,but they may also have their "own pattern". The main point here is whether Index is up or down. If it is up,then we are happy. If it is down,we go to take rest...........

There are always some exceptions. But let's not worry about those!!

Some rules by Ed Seykota : mrtq13

Some rules by Ed Seykota :

1. (So you didn't have a clear exit point) In other words, the only way you could stop trading was by losing.

2. If you can't take a small loss, sooner or later you will take the mother of all losses.

3. There are old traders and there are bold traders, but there are very few old, bold traders.

4. Dramatic and emotional trading experiences tend to be negative. Pride is a great banana peel, as are hope, fear, and greed. My biggest slip-ups occurred shortly after I got emotionally involved with positions.

5. I prefer not to dwell on past situations. I tend to cut bad trades as soon as possible, forget them, and then move on to new opportunities.

6. The elements of good trading are: 1. Cutting losses, 2. Cutting losses, and 3. Cutting losses. If you can follow these three rules, you may have a chance.

7. Trying to trade during a losing streak is emotionally devastating. Trying to play "catch up" is lethal.

8. I set protective stops at the same time I enter a trade. I normally move these stops in to lock in a profit as the trend continues.

9. One evening, while having dinner with a fundamentalist, I accidentally knocked a sharp knife off the edge of the table. He watched the knife twirl through the air, as it came to rest with the pointed end sticking into his shoe. "Why didn't you move your foot?" I exclaimed. "I was waiting for it to come back up," he replied. 

10. Losing a position is aggravating, whereas losing your nerve is devastating.

11. I intend to risk below 5 percent on a trade, allowing for poor executions.

12. The trading rules I live by are: 1. Cut losses. 2. Ride winners. 3. Keep bets small. 4. Follow the rules without question. 5. Know when to break the rules.

13. Be sensitive to subtle differences between 'intuition' and 'into wishing'.

14.Everybody gets what they want out of the market.

4 types of trading-2...... mrtq13

One must use Oscillators to trade in Rangebound. 

Different types of style needs different types of indicators. 

For example,oscillators are very good for Rangebound Trading
One the other hand,Moving averages act like shit in Rangebound zones.
But Moving Averages are very good in Pullback and trend trading.
Again,oscillators are very bad for Breakout trading styles...

Cut Some Losses At Even Less Than 7%-8%


BY PATRICK CAIN

INVESTOR'S BUSINESS DAILY

Posted 6/24/2008
If you were betting on horses and the bookie allowed you to have your money back after you saw your horse stumble out of the gate, what would you do?

You'd get your money back. Sure, the horse might come back and win, but with a bad start, the odds are stacked against it.

Stocks are no different, except that you cut your losses short. The basic rule: Sell any stock that falls 7% or 8% from the price at which you purchased it.

But you don't always need to wait for a 7% loss if a breakout starts acting more like a fake-out.

Don't be afraid to cut losses at 5% or even 2% if a stock isn't acting right within a week or two after its breakout.

Of course, to do this you need to recognize the signs of a faulty breakout.

About 40% of market winners slip back to their buy points but still go on to major gains. But watch out for these signs of a failing breakout:

• The stock starts dropping in heavy volume, perhaps undercutting its 50-day moving average.

• The Relative Strength line lagged the stock price at the breakout.

• Volume on the breakout was less than 50% above the stock's average daily turnover.

• There's bearish action, such as a price reversal, failure to make new highs or a large gap-down in heavy volume.

Don't forget a basic tenant: the market's direction. If the general market is faltering, selling before incurring a 7% loss is often wise.

Any of these red flags takes on greater significance if the base had flaws, such as too much distribution (i.e., more down than up weeks in above-average volume) or a pattern that was too deep (more than 35%, generally).

Investors who could spot such weaknesses would have saved themselves from losses in InnerWorkings (INWK) in July 2007.

The Trader’s Mindset


Bennett McDowell, TradersCoach.com

Developing “The Trader’s Mindset” is a must for trading success and this can take some time. This is not an area where you can take a short cut or learn a formula. You usually develop it by actually trading and the experiences you gain from trading. We will help guide you towards developing “The Trader’s Mindset” and help you handle account draw-downs, losses, and profits. Yes, profits can actually cause you stress!

You can see how powerful psychology in trading is, if you show the same successful trading approach to one hundred different traders. No two of them will trade it exactly the same way. Why? Because each trader has a unique belief system and their beliefs will determine their trading style. That is why even with a profitable and proven trading approach, many traders will fail. They do not have the proper belief system to enable them to trade well. In other words, they lack “The Trader’s Mindset.”

When you encounter psychological issues it is best to recognize the issue, just be aware of it, don’t deny it. In order to “fix” psychological issues we as human beings must first become aware of the problem and issues causing the problem in order to heal and “fix” the problem. This is much of what psychoanalysis is all about. The psychologist or psycho- therapist tries to let the patient first see the problem and then the patient must believe that these issues are causing the problem in order for the patient to heal. The reason this process can take so long, perhaps even years is because the patient needs to not only recognize their problems, but must accept that there truly is a problem. They must take responsibility for their problems to heal.

Success in trading is a direct result of a sound trading system, sound money management, proper capitalization, and sound psychology. All of these must be in sync to be successful in your trading. The “ART” system is designed to focus on all of these areas. The only area where you may need additional help once you have mastered your trading skills, is your psychology.

Psychology is the one area that you may need additional help and can take up to a year or so to resolve personal issues attaining trading success. Our consultation services focus on this aspect and if you find yourself struggling with psychological issues, you owe it to yourself to get help in this area.

Here is a list of common psychological trading issues and their causes:

Fear Of Being Stopped Out Or Fear Of Taking A Loss: The usual reason for this is that the trader fears failure and feels like he or she cannot take another loss. The trader’s ego is at stake.

Getting Out Of Trades Too Early: Relieving anxiety by closing a position. Fear of position reversing and then feeling let down. Need for instant gratification.

Adding On To A Losing Position (Doubling Down): Not wanting to admit your trade is wrong. Hoping it will come back. Again, ego is at stake.

Wishing And Hoping: Not wanting to take control or take responsibility for the trade. Inability to accept the present reality of the market place.

Compulsive Trading: Drawn to the excitement of the markets. Addiction and Gambling issues are present. Needing to feel you are in the game.

Anger After A Losing Trade: The feeling of being a victim of the markets. Unrealistic expectations. Caring too much about a specific trade. Tying your self-worth to your success in the markets. Needing approval from the markets.

Excessive Joy After A Winning Trade: Tying your self-worth to the markets. Feeling unrealistically “in control” of the markets.

Limiting Profits: You don’t deserve to be successful. You don’t deserve money or profits. Usually psychological issues such as poor self-esteem.

Not Following Your Proven Trading System: You don’t believe it really works. You did not test it well. It does not match your personality. You want more excitement in your trading. You don’t trust your own ability to chose a successful system.

Over Thinking The Trade, Second Guessing Your Trading Signals: Fear of loss or being wrong. Wanting a sure thing where sure things don’t exist. Not understanding that loss is a part of trading and the outcome of each trade is unknown. Not accepting there is risk in trading. Not accepting the unknown.

Not Trading The Correct Position Size: Dreaming the trade will be only profitable. Not fully recognizing the risk and not understanding the importance of money management. Refusing to take responsibility for managing your risk.

Trading Too Much: Need to conquer the market. Greed. Trying to get even with the market for a previous loss. The

excitement of trading (similar to Compulsive Trading).
Afraid To Trade: No trading system in place. Not comfortable with risk and the unknown. Fear of total loss. Fear of ridicule.
Need for control.
Irritable after the Trading Day: Emotional roller coaster due to anger, fear, and greed. Putting too much attention on trading
results and not enough on the process and learning the skill of trading. Focusing on the money too much. Unrealistic trading expectations.

Trading With Money You Cannot Afford To Lose Or Trading :With Borrowed Money: Last hope at success. Trying to be successful at something. Fear of losing your chance at
opportunity. No discipline. Greed. Desperation.

These are by no means all the psychological issues but these are the most common. They usually center around the fact that for one reason or another, the trader is not following their chosen trading approach or system. And instead prefers to wing it or trade their emotions which in trading will always get you in trouble. So, I think you can see how psychology is all important in trading.

Our goal as traders in regards to psychology is to maintain an even keel so to speak when trading. Our winning trades and losing trades should not affect us. Obviously we are trading better when we are winning, but emotionally we should strive to maintain an even balance emotionally in regards to our wins and our losses.

It will happen when it happens and when you achieve this level of mental ability; it will come after working long and hard on your problems, but will come without you knowing it. It usually happens when you least expect it.

Below is a list of what one feels after acquiring “The Trader’s Mindset.”

-Sense of calmness
-Ability to focus on the present reality
-Not caring which way the market breaks or moves
-Always aligning trades in the direction of the market, flowing
with the market
-Not caring about the money
-Always looking to improve your skills
-Profits now accumulating and flowing in as your skills improve
-Keeping an open mind, keeping opinions to a minimum
-Accepting the risk in trading
-No Anger
-Learning from every trade
-Winning and losing trades accepted equally from an emotional
standpoint
-Enjoying the process
-Trading your chosen approach or system and not being
influenced by the market or others
-Not feeling a need to conquer or control the “market”
-Feeling confident and feeling in control of “yourself”
-A sense of not forcing the markets or yourself
-Trading with money you can afford to risk
-No feeling of ever being victimized by the markets
-Taking full responsibility for your trading
When you can read the list above and genuinely say that’s me, you have arrived!

15 WAYS TO TRADE MOVING AVERAGES: mrtq13

15 WAYS TO TRADE MOVING AVERAGES

Reading a chart without moving averages is like baking a cake without Butter or eggs. Those simple lines above or below current price tell Many tales and their uses in market interpretation are unparalleled.

Simply stated, they're the most valuable indicators in technical Analysis.

You can trade without moving averages, but you do so at your own risk.

After all, these lines represent median levels where your competition Will make important buying or selling decisions. So it makes sense to Predict what they're going to do before the fact, rather than afterward.

Here are 15 ways you can manage opportunity through moving Averages:

1. The 20-day moving average commonly marks the short-term trend, The 50-day moving average the intermediate trend, and the 200-day Moving average the long-term trend of the market.

2. These three settings represent natural boundaries for price Pullbacks. Two forces empower those averages: First, they define Levels where profit- and loss-taking should ebb following strong price Movement. Second, their common recognition draws a crowd that Perpetrates a self-fulfilling event whenever price approaches.

3. Moving averages generate false signals during range-bound markets Because they're trend-following indicators that measure upward or Downward momentum. They lose their power in any environment that Shows a slow rate of price change.

4. The characteristic of moving averages changes as they flatten and Roll over. The turn of an average toward horizontal signifies a loss of Momentum for that time frame. This increase the odds that price will Cross the average with relative ease. When a set of averages flat line And draw close to one another, price often swivels back and forth Across the axis in a noisy pattern.

5. Moving averages emit continuous signals because they're plotted Right on top of price. Their relative correlation with price development Changes with each bar. They also exhibit active convergence divergence Relationships with all other forms of support and resistance.

6. Use exponential moving averages, or EMAs, for longer time frames But shift down to simple moving averages, or SMAs, for shorter ones.EMAs apply more weight to recent price change, while SMAs view each Data point equally.

7. Short-term SMAs let traders spy on other market participants. The Public uses simple moving average settings because they don't Understand EMAs. Good intraday signals rely more on how the Competition thinks than the technicals of the moment.

8. Place five-, eight- and 13-bar SMAs on intraday charts to measure Short-term trend strength. In strong moves, the averages will line up And point in the same direction. But they flip over one at a time at highs And lows, until price finally surges through in the other direction.

9. Price location in relation to the 200-day moving average determines Long-term investor psychology. Bulls live above the 200-day moving Average, while bears live below it. Sellers eat up rallies below this line In the sand, while buyers come to the rescue above it.

10. When the 50-day moving average pierces the 200-day moving Average in either direction, it predicts a substantial shift in buying and Selling behavior. The 50-day moving average rising above the 200-day Moving average is called a Golden Cross, while the bearish piercing is Called a Death Cross.

11. It's harder for price to break above a declining moving average than A rising moving average. Conversely, it's harder for price to drop Through a rising moving average than a declining moving average.

12. Moving averages set to different time frames reveal trend velocity Through their relationships with each other. Measure this with a classic Moving Average-Convergence-Divergence (MACD) indicator, or apply Multiple averages to your charts and watch how they spread or contract Over different time.

13. Place a 60-day volume moving average across green and red Volume histograms in the lower chart pane to identify when specific Sessions draw unexpected interest. The slope of the average also Identifies hidden buying and selling pressure.

14. Don't use long-term moving averages to make short-term Predictions because they force important data to lag current events. A Trend may already be mature and nearing its end by the time a specific Moving average issues a buy or sell signal.

15. Support and resistance mechanics develop between moving
Averages as they flip and roll. Look for one average to bounce on the Other average, rather than break through it immediately. After a Crossover finally takes place, that level becomes support or resistance For future price movement