Well, my updates are coming once every 2 month now. The reason being that I didn't have many notable trades or great learning experiences in this time.
The markets i.e. both Indian and global were in an intermediate downtrend. "Sell in May and go away" was true even for this year. For some reason, there were not many good entry points for me to short. I tried to force some trades during quarterly results, with pretty disastrous consequences. But now I take my exit decisions a lot more quicker than before and try to head for the exit before it makes a bigger dent in my account.
More about the actual trades a little later.
First, let me talk about a book called, "The Best of Trader's Classroom by Jeffrey Kennedy " that I happened to come across on Elliot Wave International. It's a free book, but you need to sign up with EWI to get access to this book. Even signing up is for free. It's a very good and small book to read, to get new insights on trading. Mind you, since this book comes from a company that has Elliot Wave in its very name, you need to believe in Elliot Wave theory and Fibonacci retracements if you have to appreciate this book.
A lot of traders or wannabe traders don't believe in Elliot Wave theory. But since it has worked for me on most occasions, I use it in my trading setups extensively. But from my experience, I've seen that getting the waves right is very difficult most of the time. To this, the author suggests, "Wait for that trade that shows THE textbook wave pattern."
Here are some things that I learnt from that book.
1. Triangles : In one of my earlier posts I had mentioned about triangles : Symmetric Continuation, Descending, Ascending and so on. In this book, the author gives a very important piece of information.
"Triangles occur just before the last wave of a sequence, which means that triangles are found at Wave 4 or Wave B." And further says, "In your wave count analysis if you encounter triangles, think that the train's coming to the station."
When I back traced it to some of the stocks that I had seen triangles in the past year, I found this theory to be largely correct.
For most part of 2011, I had some bad trades which slowly chewed up my capital. This had me frustrated no ends and almost made me give up trading. In the book, he says triangles represent decay. Decay in time and decay of emotional capital. Now I understand my frustration.
2. Typical trade setup.
For a swing trader like me, this approach seemed very good. The trade entry strategy has 3 steps : Focus, Aim and Pull the Trigger. He says once you enter a trade, logic no longer applies. Everything is defined by two things : Fear and Greed.
He also mentions the 3 basic rules of Elliot Wave counting and how to place protective stops, which can be used to manage an ongoing trade.
Now coming to my trades.
It was a tumultuous period of 2 months. Small profits and equally small losses, almost always cancelling each other out. Once I had to break the primary rule "Let the winner run", by closing a profitable trade in order to cover for slightly large losses in another trade. Ideally one position must be independent of the other. But that's practically possible when a bot that's trading and not a human that's trading.
In one of the trades, I lost a sizable profit to end up with a "No loss, no gain, but a lot of pain" trade simply because I didn't want to be a "Take your money and run" kind of trader.
But the last week changed everything. I had 2 good trades. When I mean good, I mean the really good text book trades. Here are the charts.
SBI: Wave 3 trade.
Ideally I would want to "Let the winner run". But I decided to play it safe due to GDP data news that was due and also F&O expiry.
Tata Motors: Wave C trade.
I was confident of my analysis on this one, but didn't want to take chances on the day of quarterly results. Hence, I took up just one lot before the results so that my risk was manageable. The results were supposedly not good, and was announced after market hours. This led to a gap down opening of 6% the next day. I sold another 2 lots and covered the same intraday with decent profits. The stock ended down by 12% that day.
I completely closed my position, once I saw the stock touching a retracement point on the weekly charts - supposedly a very strong support region.
But overall a great trade, the best trade for me ever - so far.
Hope to get some good trades in for the next update.
Happy trading!
The markets i.e. both Indian and global were in an intermediate downtrend. "Sell in May and go away" was true even for this year. For some reason, there were not many good entry points for me to short. I tried to force some trades during quarterly results, with pretty disastrous consequences. But now I take my exit decisions a lot more quicker than before and try to head for the exit before it makes a bigger dent in my account.
More about the actual trades a little later.
First, let me talk about a book called, "The Best of Trader's Classroom by Jeffrey Kennedy " that I happened to come across on Elliot Wave International. It's a free book, but you need to sign up with EWI to get access to this book. Even signing up is for free. It's a very good and small book to read, to get new insights on trading. Mind you, since this book comes from a company that has Elliot Wave in its very name, you need to believe in Elliot Wave theory and Fibonacci retracements if you have to appreciate this book.
A lot of traders or wannabe traders don't believe in Elliot Wave theory. But since it has worked for me on most occasions, I use it in my trading setups extensively. But from my experience, I've seen that getting the waves right is very difficult most of the time. To this, the author suggests, "Wait for that trade that shows THE textbook wave pattern."
Here are some things that I learnt from that book.
1. Triangles : In one of my earlier posts I had mentioned about triangles : Symmetric Continuation, Descending, Ascending and so on. In this book, the author gives a very important piece of information.
"Triangles occur just before the last wave of a sequence, which means that triangles are found at Wave 4 or Wave B." And further says, "In your wave count analysis if you encounter triangles, think that the train's coming to the station."
When I back traced it to some of the stocks that I had seen triangles in the past year, I found this theory to be largely correct.
For most part of 2011, I had some bad trades which slowly chewed up my capital. This had me frustrated no ends and almost made me give up trading. In the book, he says triangles represent decay. Decay in time and decay of emotional capital. Now I understand my frustration.
2. Typical trade setup.
For a swing trader like me, this approach seemed very good. The trade entry strategy has 3 steps : Focus, Aim and Pull the Trigger. He says once you enter a trade, logic no longer applies. Everything is defined by two things : Fear and Greed.
He also mentions the 3 basic rules of Elliot Wave counting and how to place protective stops, which can be used to manage an ongoing trade.
Now coming to my trades.
It was a tumultuous period of 2 months. Small profits and equally small losses, almost always cancelling each other out. Once I had to break the primary rule "Let the winner run", by closing a profitable trade in order to cover for slightly large losses in another trade. Ideally one position must be independent of the other. But that's practically possible when a bot that's trading and not a human that's trading.
In one of the trades, I lost a sizable profit to end up with a "No loss, no gain, but a lot of pain" trade simply because I didn't want to be a "Take your money and run" kind of trader.
But the last week changed everything. I had 2 good trades. When I mean good, I mean the really good text book trades. Here are the charts.
SBI: Wave 3 trade.
Ideally I would want to "Let the winner run". But I decided to play it safe due to GDP data news that was due and also F&O expiry.
Tata Motors: Wave C trade.
I was confident of my analysis on this one, but didn't want to take chances on the day of quarterly results. Hence, I took up just one lot before the results so that my risk was manageable. The results were supposedly not good, and was announced after market hours. This led to a gap down opening of 6% the next day. I sold another 2 lots and covered the same intraday with decent profits. The stock ended down by 12% that day.
I completely closed my position, once I saw the stock touching a retracement point on the weekly charts - supposedly a very strong support region.
But overall a great trade, the best trade for me ever - so far.
Hope to get some good trades in for the next update.
Happy trading!
